~~NOTES TO FINANCIAL TABLES~~

~~(In Thousands, Except Per-Share Data)~~

2007.

~~(a)~~

FIVE-YEAR SUMMARY

Tredegar Corporation and Subsidiaries


Years Ended December 31	2007			2006			2005			2004			2003

(In Thousands, Except Per-Share Data)

Results of Operations (a):
Sales	$	922,583		$	937,561		$	808,464		$	709,649		$	609,077
Other income (expense), net		1,782	(b)		1,444	(c)		(2,211	) (d)		15,604	(e)		6,468

		924,365			939,005			806,253			725,253			615,545

Cost of goods sold		761,509	(b)		779,376	(c)		672,465	(d)		580,893	(e)		486,065
Freight		19,808			22,602			20,276			18,027			14,330
Selling, general & administrative expenses		68,501			64,082			61,007	(d)		57,221	(e)		50,793
Research and development expenses		8,354			8,088			8,982			15,265			18,774
Amortization of intangibles		149			149			299			330			268
Interest expense		2,721			5,520			4,573			3,171			6,785
Asset impairments and costs associated with exit and disposal activities		4,027	(b)		4,080	(c)		15,782	(d)		12,566	(e)		11,426	(f)
Unusual items		—			—			—			—			1,067	(f)

		865,069			883,897			783,384			687,473			589,508

Income from continuing operations before income taxes		59,296			55,108			22,869			37,780			26,037
Income taxes		24,366			19,791	(c)		9,497			10,201	(e)		9,837

Income from continuing operations (a)		34,930			35,317			13,372			27,579			16,200

Discontinued operations (a):
Income (loss) from aluminum extrusions business in Canada		(19,681	)		2,884			2,857			(1,319	)		3,127
Income (loss) from venture capital investment activities		—			—			—			2,921			(46,569	)
Income from operations of Molecumetics		—			—			—			—			891

Income (loss) from discontinued operations (a)		(19,681	)		2,884			2,857			1,602			(42,551	)

Net income (loss)	$	15,249		$	38,201		$	16,229		$	29,181		$	(26,351	)


Diluted earnings (loss) per share:
Continuing operations (a)	$	.90		$	.91		$	.35		$	.72		$	.42
Discontinued operations (a)		(.51	)		.07			.07			.04			(1.11	)

Net income (loss)	$	.39		$	.98		$	.42		$	.76		$	(.69	)

Refer to notes to financial tables on page 16.

FIVE-YEAR SUMMARY

Tredegar Corporation and Subsidiaries


Years Ended December 31	2007			2006			2005			2004			2003

(In Thousands, Except Per-Share Data)

Share Data:
Equity per share	$	14.13		$	13.15		$	12.53		$	12.45		$	11.72
Cash dividends declared per share		.16			.16			.16			.16			.16
Weighted average common shares outstanding during the period		38,532			38,671			38,471			38,295			38,096
Shares used to compute diluted earnings per share during the period		38,688			38,931			38,597			38,507			38,441
Shares outstanding at end of period		34,765			39,286			38,737			38,598			38,177
Closing market price per share:
High		24.45			23.32			20.19			20.25			16.76
Low		13.33			13.06			11.76			13.00			10.60
End of year		16.08			22.61			12.89			20.21			15.53
Total return to shareholders (g)		(28.2	) %		76.6	%		(35.4	) %		31.2	%		4.6	%

Financial Position:
Total assets		784,478			781,787			781,758			769,474			753,025
Cash and cash equivalents		48,217			40,898			23,434			22,994			19,943
Income taxes recoverable from sale of venture capital portfolio		—			—			—			—			55,000
Debt		82,056			62,520			113,050			103,452			139,629
Shareholders’ equity (net book value)		491,328			516,595			485,362			480,442			447,399
Equity market capitalization (h)		559,021			888,256			499,320			780,066			592,889

Refer to notes to financial tables on page 16.


SEGMENT TABLES
Tredegar Corporation and Subsidiaries

Net Sales (i)


Segment	2007		2006		2005		2004		2003

(In Thousands)

Film Products	$	530,972	$	511,169	$	460,277	$	413,257	$	365,501
Aluminum Extrusions		371,803		403,790		327,659		277,985		229,246
AFBS (formerly Therics)		—		—		252		380		—

Total net sales (j)		902,775		914,959		788,188		691,622		594,747
Add back freight		19,808		22,602		20,276		18,027		14,330

Sales as shown in Consolidated Statements of Income	$	922,583	$	937,561	$	808,464	$	709,649	$	609,077


Identifiable Assets


Segment		2007		2006		2005		2004		2003

(In Thousands)

Film Products	$	488,035	$	498,961	$	479,286	$	472,810	$	422,321
Aluminum Extrusions		115,223		128,967		130,448		126,425		105,753
AFBS (formerly Therics)		2,866		2,420		2,759		8,613		8,917

Subtotal		606,124		630,348		612,493		607,848		536,991
General corporate		74,927		30,113		61,905		54,163		61,508
Income taxes recoverable from sale of venture capital investment portfolio		—		—		—		—		55,000
Cash and cash equivalents		48,217		40,898		23,434		22,994		19,943

Identifiable assets from continuing operations		729,268		701,359		697,832		685,005		673,442
Discontinued operations (a):
Aluminum extrusions business in Canada		55,210		80,428		83,926		84,469		79,583

Total	$	784,478	$	781,787	$	781,758	$	769,474	$	753,025


Refer to notes to financial tables on page 16.


SEGMENT TABLES
Tredegar Corporation and Subsidiaries

Operating Profit


Segment	2007			2006			2005			2004			2003

(In Thousands)

Film Products:
Ongoing operations	$	59,423		$	57,645		$	44,946		$	43,259		$	45,676
Plant shutdowns, asset impairments and restructurings, net of gains on sale of assets and related income from LIFO inventory liquidations		(649	) (b)		221	(c)		(3,955	) (d)		(10,438	) (e)		(5,746	) (f)

Aluminum Extrusions:
Ongoing operations		16,516			18,302			17,084			14,526			12,495
Plant shutdowns, asset impairments and restructurings, net of gains on sale of assets		(634	) (b)		(1,434	) (c)		(993	) (d)		(146	) (e)		(644	) (f)
Other		—			—			—			7,316	(e)		—

AFBS (formerly Therics):
Ongoing operations		—			—			(3,467	)		(9,763	)		(11,651	)
Loss on investment in Therics, LLC		—			(25	)		(145	)		—			—
Plant shutdowns, asset impairments and restructurings		(2,786	) (b)		(637	) (c)		(10,318	) (d)		(2,041	) (e)		(3,855	) (f)
Unusual items		—			—			—			—			(1,067	) (f)

Total		71,870			74,072			43,152			42,713			35,208
Interest income		1,212			1,240			586			350			1,183
Interest expense		2,721			5,520			4,573			3,171			6,785
Gain on sale of corporate assets		2,699			56			61			7,560			5,155
Loss from write-down of investment		2,095	(b)		—	(c)		5,000	(d)		—			—
Stock option-based compensation costs		978			970			—			—			—
Corporate expenses, net		10,691			13,770			11,357	(d)		9,674			8,724	(f)

Income from continuing operations before income taxes		59,296			55,108			22,869			37,778			26,037
Income taxes		24,366	(b)		19,791	(c)		9,497			10,200			9,837

Income from continuing operations		34,930			35,317			13,372			27,578			16,200
Income (loss) from discontinued operations (a)		(19,681	)		2,884			2,857			1,603			(42,551	)


Net income (loss)	$	15,249		$	38,201		$	16,229		$	29,181		$	(26,351	)


Refer to notes to financial tables on page 16.


SEGMENT TABLES
Tredegar Corporation and Subsidiaries

Depreciation and Amortization


Segment		2007		2006		2005		2004		2003

(In Thousands)

Film Products	$	34,092	$	31,847	$	26,673	$	21,967	$	19,828
Aluminum Extrusions		8,472		8,378		7,996		7,474		7,502
AFBS (formerly Therics)		—		—		437		1,300		1,641

Subtotal		42,564		40,225		35,106		30,741		28,971
General corporate		91		111		195		241		270

Total continuing operations		42,655		40,336		35,301		30,982		29,241
Discontinued operations (a):
Aluminum extrusions business in Canada		3,386		3,945		3,488		3,440		3,381

Total	$	46,041	$	44,281	$	38,789	$	34,422	$	32,622


Capital Expenditures, Acquisitions and Investments


Segment		2007		2006		2005		2004		2003

(In Thousands)

Film Products	$	15,304	$	33,168	$	50,466	$	44,797	$	57,203
Aluminum Extrusions		4,391		6,609		5,750		7,263		7,656
AFBS (formerly Therics)		—		—		36		275		219

Subtotal		19,695		39,777		56,252		52,335		65,078
General corporate		6		24		73		572		93

Capital expenditures for continuing operations		19,701		39,801		56,325		52,907		65,171
Discontinued operations (a):
Aluminum extrusions business in Canada		942		772		6,218		2,744		637

Total capital expenditures		20,643		40,573		62,543		55,651		65,808
Acquisitions and other		—		—		—		1,420		1,579
Investments		23,513		542		1,095		5,000		—
Venture capital investments		—		—		—		—		2,807

Total	$	44,156	$	41,115	$	63,638	$	62,071	$	70,194


Refer to notes to financial tables on page 16.

NOTES TO FINANCIAL TABLES

(In Thousands, Except Per-Share Data)


(a)	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 2007, discontinued operations also includes $11,428 in cash income tax benefits from the sale that we expect to realize in 2008. In 2004, discontinued operations include a gain of $2,921 after-taxes primarily related to the reversal of a business and occupancy tax contingency accrual upon favorable resolution. The accrual was originally recorded in connection with our venture capital investment operation. In 2003, we sold substantially all of our venture capital investment portfolio. ~~In 2002, we ceased operations at Molecumetics, one of our biotechnology units, and sold its tangible assets.~~ The operating results associated with the venture capital investment portfolio ~~and Molecumetics~~ have been reported as discontinued operations. In 2003, discontinued operations also include a gain of $891 after-taxes on the sale of intellectual property of Molecumetics and a loss on the divestiture of the venture capital investment portfolio of $46,269 after-taxes. ~~Discontinued~~We ceased operations at Molecumetics, one of our biotechnology units, and sold its tangible assets in ~~2002 also~~2002.

(b)	Plant shutdowns, asset impairments and restructurings for 2007 include a charge of $2,786 related to the estimated loss on the ~~disposal~~sub-lease of ~~Molecumetics~~a portion of ~~$4,875 after-taxes. In 2001, discontinued operations include~~the AFBS (formerly Therics) facility in Princeton, New Jersey, charges of $594 for asset impairments in Film Products, a ~~gain~~charge of ~~$1,396~~$592 for severance and other employee-related costs in Aluminum Extrusions, a charge of $55 related to the ~~reversal~~shutdown of ~~an income tax contingency accrual upon favorable conclusion~~the films manufacturing facility in LaGrange, Georgia, and a charge of ~~IRS examinations through 1997. The accrual was originally recorded in conjunction~~$42 associated with the ~~sale~~expected future environmental costs at the aluminum extrusions facility in Newnan, Georgia (included in “Cost of ~~The Elk Horn Coal Corporation. We divested our coal subsidiary, The Elk Horn Coal Corporation, and our remaining oil and gas properties~~goods sold” in ~~1994. As a result~~the consolidated statements of these events, we report the Energy segment as discontinued operations. On April 10, 2000, we sold Fiberlux. The operating results of Fiberlux were historically reported as part of the Plastics segment on a combined basis with Film Products.income).

~~(b)~~

(c)

Plant shutdowns, asset impairments and restructurings for 2006 include a net gain of $1,454 associated with the shutdown of the films manufacturing facility in LaGrange, Georgia, including a gain of $2,889 for related LIFO inventory liquidations (included in ~~"Cost~~“Cost of goods ~~sold"~~sold” in the consolidated statements of income) and a gain of $261 on the sale of related property and equipment (included in ~~"Other~~“Other income (expense), ~~net"~~net” in the consolidated statements of income), partially offset by severance and other costs of $1,566 and asset impairment charges of $130, charges of $1,020 for asset impairments in Film Products, a charge of $920 related to expected future environmental costs at the aluminum extrusions facility in Newnan, Georgia (included in ~~"Cost~~“Cost of goods ~~sold"~~sold” in the consolidated statements of income), charges of $727 for severance and other employee-related costs in connection with restructurings in Film Products ($213) and Aluminum Extrusions ($514), and charges of $637 related to the estimated loss on the sub-lease of a portion of the AFBS ~~(formerly Therics)~~ facility in Princeton, New Jersey. Income taxes in 2006 include a reversal of a valuation allowance of $577 for deferred tax assets associated with capital loss carry-forwards recorded with the write-down of the investment in Novalux in 2005. Outside appraisal of the value of corporate assets, primarily real estate, performed in December 2006, indicates that realization of related deferred tax assets is more likely than not.

~~(c)~~

(d)

Plant shutdowns, asset impairments and restructurings for 2005 include charges of $10,318 related to the sale or assignment of substantially all of ~~AFBS'~~AFBS’ assets, charges of ~~$2,221~~$2,071 related to severance and other employee-related costs in connection with restructurings in Film Products ($1,118), Aluminum Extrusions ($~~648)~~498) and corporate headquarters ($455, included in ~~"Corporate~~“Corporate expenses, ~~net"~~net” in the operating profit by segment table), a charge of $2,101 related to the planned shutdown of the films manufacturing facility in LaGrange, Georgia, a net gain of $1,667 related to the shutdown of the films manufacturing facility in New Bern, North Carolina, including a gain on the sale of the facility ($1,816, included in ~~"Other~~“Other income (expense), ~~net"~~net” in the consolidated statements of income), partially offset by shutdown-related expenses ($225), a net gain of $1,265 related to the shutdown of the aluminum extrusions facility in Aurora, Ontario, including a gain on the sale of the facility ($1,667, included in "Other income (expense), net" in the consolidated statements of income), shutdown-related costs ($1,111), partially offset by the reversal to income of certain accruals associated with severance and other costs ($709), a charge of $1,019 for process reengineering costs associated with the implementation of a global information system in Film Products (included in ~~"Costs~~“Costs of goods ~~sold"~~sold” in the consolidated statements of income), a net charge of $843 related to severance and other employee-related costs associated with the restructuring of the research and development operations in Film Products (of this amount, $1,363 in charges for employee relocation and recruitment is included in ~~"Selling,~~“Selling, general & administrative ~~expenses"~~expenses” in the consolidated statements of income); a gain of $653 related to the shutdown of the films manufacturing facility in Carbondale, Pennsylvania, including a gain on the sale of the facility ($630, included in ~~"Other~~“Other income (expense), ~~net"~~net” in the consolidated statements of income), and the reversal to income of certain shutdown-related accruals ($23), charges of $583 for asset impairments in Film Products, a gain of $508 for interest receivable on tax refund claims (included in ~~"Corporate~~“Corporate expenses, ~~net"~~net” in the operating profit by segment table and ~~"Other~~“Other income (expense), ~~net"~~net” in the consolidated statements of income), a charge of $495 in Aluminum Extrusions, including an asset impairment ($597), partially offset by the reversal to income of certain shutdown-related accruals ($102), charges of $353 for accelerated depreciation related to restructurings in Film Products, and a charge of $182 in Film Products related to the write-off of an investment. As of December 31, 2005, the investment in Novalux, Inc. of $6,095 was written down to estimated fair value of $1,095. The loss from the write-down, $5,000, is included in ~~"Other~~“Other income (expense), ~~net"~~net” in the consolidated statements of income.

~~(d)~~

(e)

Plant shutdowns, asset impairments and restructurings for 2004 include ~~a charge of $10,127 related to the planned shutdown of the aluminum extrusions plant in Aurora, Ontario,~~ a charge of $3,022 related to the sale of the films business in Argentina, charges of $2,572 related to accelerated depreciation from plant shutdowns and restructurings in Film Products, charges of $2,459 related to severance and other costs associated with plant shutdowns in Film Products, charges of ~~$1,547~~$1,267 for severance and other employee-related costs associated with restructurings in AFBS ($735), and Film Products ($532) ~~and Aluminum Extrusions ($280)~~, a charge of $1,306 related to the estimated loss on the sub-lease of a portion of the AFBS facility in Princeton, New Jersey, a charge of $1,278 (of this amount, $59 for employee relocation is included in ~~"Selling,~~“Selling, general & administrative ~~expenses"~~expenses” in the consolidated statements of income) related to severance and other employee-related costs associated with the restructuring of the research and development operations in Film Products and charges of $575 in Film Products and $146 in Aluminum Extrusions related to asset impairments. Income taxes in 2004 include a tax benefit of $4,000 related to the reversal of income tax contingency accruals upon favorable conclusion of IRS and state examinations through 2000. The other pretax gain of $7,316 included in the Aluminum Extrusions section of the operating profit by segment table is comprised of the present value of an insurance settlement of $8,357 (future value of $8,455) associated with environmental costs related to prior years, partially offset by accruals for expected future environmental costs of $1,041. The company received $5,143 of the $8,455 insurance settlement in 2004 and recognized receivables at present value for future amounts due ($1,497 received in February of 2005 and $1,717 received in February 2006). The gain from the insurance settlement is included in ~~"Other~~“Other income (expense), ~~net"~~net” in the consolidated statements of income, while the accruals for expected future environmental costs are included in ~~"Cost~~“Cost of goods sold."”

~~(e)~~

(f)

Plant shutdowns, asset impairments and restructurings for 2003 include charges of $4,514 for severance costs in connection with restructurings in Film Products ($1,922), Aluminum Extrusions ($256), AFBS ($1,155) and corporate headquarters ($1,181, included in ~~"Corporate~~“Corporate expenses, ~~net"~~net” in the operating profit by segment table), charges of $2,776 for asset impairments in the films business, charges of $2,700 related to the estimated loss on the sub-lease of a portion of the AFBS facility in Princeton, New Jersey, a charge of $611 primarily related to severance costs associated with the shutdown of the films plant in New Bern, North Carolina, a charge of $388 related to an early retirement program in our aluminum business and charges of $437 for additional costs incurred related to plant shutdowns in our films business. Unusual items for 2003 include a charge of $1,067 related to an adjustment for depreciation and amortization at AFBS based on our decision to suspend divestiture efforts.

~~(f)~~

Plant shutdowns, asset impairments and restructurings for 2002 include a charge of $1,457 for asset impairments in the films business, a charge of $1,007 for additional costs related to the shutdown of the films plant in Carbondale, Pennsylvania, a charge of $541 for additional costs related to the shutdown of the films plant in Tacoma, Washington, a charge of $487 for additional costs related to the shutdown of the aluminum extrusions plant in El Campo, Texas, and a charge of $392 for additional costs related to the 2000 shutdown of the films plant in Manchester, Iowa. Unusual items for 2002 include a net gain of $5,618 for payments received from P&G related to terminations and revisions to contracts and related asset writedowns, and a gain of $529 related to the sale of assets.

(g)

Plant shutdowns, asset impairments and restructurings for 2001 include a charge of $7,799 for the shutdown of the aluminum extrusions plant in El Campo, Texas, a charge of $3,386 for the shutdown of the films plant in Tacoma, Washington, a charge of $2,877 for the shutdown of the films plant in Carbondale, Pennsylvania, a charge of $1,505 for severance costs related to further rationalization in the films business, and a charge of $1,368 for impairment of our films business in Argentina. Unusual items in 2001 include a gain of $971 (included in "Corporate expenses, net" in the operating profit by segment table) for interest received on tax overpayments. Income taxes in 2001 include a benefit of $1,904 for the reversal of income tax contingency accruals upon favorable conclusion of IRS examinations through 1997.

~~(h)~~

Plant shutdowns, asset impairments and restructurings for 2000 include a charge of $17,870 related to excess capacity in the films business, a charge of $1,628 related to restructuring at our aluminum extrusions plant in El Campo, Texas, and a charge of $4,293 for the shutdown of the films plant in Manchester, Iowa. Unusual items in 2000 include a gain of $762 for the sale of Fiberlux.

~~(i)~~

Plant shutdowns, asset impairments and restructurings for 1999 include a charge of $3,458 related to a write-off of in-process research and development expenses associated with the AFBS acquisition and a charge of $1,170 for the write-off of excess packaging film capacity.

~~(j)~~

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.

~~(k)~~
(h)	Equity market capitalization is the closing market price per share for the period multiplied by the shares outstanding at the end of the period.

~~(l)~~
(i)	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.

~~(m)~~
(j)	Net sales include sales to P&G totaling $258,602 in 2007, $255,414 in 2006 and $236,554 in ~~2005, and $226,122 in 2004.~~2005. These amounts include plastic film sold to others who converted the film into materials used in products manufactured by P&G.

~~Index~~

Ite~~m 7.~~
Item 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking and Cautionary Statements

From time to time, we may make statements that may constitute “forward-looking statements” within the meaning of the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995. These 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. Some of the risk factors that may cause such a difference are summarized on pages ~~3-5~~4-6 and are incorporated herein.

Executive Summary

General

Tredegar is a manufacturer of plastic films and aluminum extrusions. Descriptions of our businesses are provided on pages ~~1-5.~~

1-6.

Income from continuing operations was ~~$38.2~~$34.9 million ~~(98~~(90 cents per diluted share) in ~~2006~~2007 compared with ~~$16.2~~$35.3 million ~~(42~~(91 cents per diluted share) in ~~2005.~~2006. Gains on the sale of assets, investment write-downs and other items and losses related to plant shutdowns, assets impairments and restructurings are described in results of operations beginning on page ~~20.~~21. The business segment review begins on page 33.

Film Products

In Film Products, net sales were $531.0 million in 2007, up 3.9% versus $511.2 million in ~~2006, up 11.1% versus $460.3 million in 2005.~~2006. Operating profit from ongoing operations was $59.4 million in 2007, up 3.1% compared with $57.6 million in 2006, up 28.3% compared to $44.9 million in 2005. Operating profit from ongoing operations excluding the estimated effects of resin pass-through lag and year-end LIFO adjustments was $53.1 million in 2006, up 8.6% versus $48.9 million in 2005.2006. Volume decreased to 244.3 million pounds in 2007 from 253.5 million pounds in 2006. Volume was down in 2007 compared with 2006 ~~from 261.1 million pounds~~primarily due to a decrease in ~~2005.~~sales of commodity barrier films and packaging films, partially offset by an increase in sales of elastic materials used in baby diapers and adult incontinence products and apertured materials used as topsheet in feminine hygiene products. Certain commodity barrier films were discontinued in conjunction with the shutdown in the second quarter of 2006 of the plant in LaGrange, Georgia. Net sales increased primarily due to appreciation of the U.S. dollar value of currencies for operations outside of the U.S., higher volume of elastic and apertured materials and improved product mix of surface protection films, partially offset by a decline in volume of commodity barrier films and a decline in volume and prices of certain packaging films. We estimate that the growth in net sales excluding the effects of the pass-through of resin price changes and foreign exchange rate changes was approximately 6%3.5% in ~~2006. Sales~~2007.

Operating profit from ongoing operations in Film Products increased in 2007 versus 2006 primarily due to the net changes in sales noted above and appreciation of the U.S. dollar value of currencies for operations outside of the U.S. (the benefit from currency rate changes was approximately $3.0 million), partially offset by an estimated negative impact in 2007 of $2.5 million from the lag in the pass-through of changes in average resin costs and year-end adjustments for LIFO. In 2006, we estimated a favorable impact of $4.5 million from the lag in the pass-through of changes in average resin costs and year-end adjustments for LIFO.

Future operating profit levels in films will depend on our ability to deliver product innovations and cost reductions to support growth in ~~2006 were driven primarily by increased~~the sales of ~~high-value~~higher value surface protection films ~~elastic~~and to address competitive pressures facing our personal care and packaging materials ~~and new apertured topsheets, partially offset by lower sales of certain commodity barrier films that~~businesses.

Capital expenditures in Film Products were ~~dropped in conjunction with the shutdown of the plant in LaGrange, Georgia. The plant was shut down in the first half of 2006 and had sales of commodity barrier films of approximately $20~~$15.3 million in ~~2005.~~

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. Average quarterly prices of low-density polyethylene resin (“LDPE”) in the U.S. have been volatile over the last several years (see the chart on page 29). Resin prices in Europe, Asia and South America have exhibited similar trends.

~~Capital expenditures declined to~~2007, down from $33.2 million in 2006, ~~compared with $50.5 million in 2005. Capital expenditures in 2007~~and are ~~expected~~projected to be approximately $35 million. Approximately half of the capital expenditures in 2006 related to expanding the production capacity for surface protection films. These films are primarily used to protect flat panel display components during fabrication, shipping and handling. Sales of surface protection films used primarily in this application totaled approximately $56$33 million in 2006, $30 million in 2005 and $16 million in 2004. Other capital expenditures in 2006 included capacity additions for elastic materials and a new information system, which was rolled out in U.S. locations.2008. Depreciation expense was $33.9 million in 2007, up from $31.7 million in 2006, ~~compared with $26.5 million 2005,~~ and is projected to be ~~$34~~$33 million in ~~2007.~~

2008.

Aluminum Extrusions

On February 12, 2008, we sold our aluminum extrusions business in Canada for an estimated purchase price of $25.5 million to an affiliate of H.I.G. Capital. The final purchase price is subject to increase or decrease to the extent that actual working capital, cash and indebtedness (as defined) as of February 12, 2008 are above or below the estimated amounts used to determine the estimated purchase price. We expect to realize cash income tax benefits in 2008 from the sale of approximately $11.4 million, which we recognized as a deferred income tax asset in our consolidated balance sheet at December 31, 2007. All historical results for the Canadian business have been reflected as discontinued operations; however, cash flows for discontinued operations have not been separately disclosed in the consolidated statements of cash flows (see Note 17 to the notes to financial statements for more information).

The sale of our aluminum extrusions business in Canada, which was suffering from operating losses driven by lower volume and higher conversion costs from appreciation of the Canadian dollar, allows us to focus on our U.S. aluminum extrusions operations where we have more control over costs and profitability.

Net sales from continuing operations in Aluminum Extrusions ~~net sales~~ were ~~$577.3~~$371.8 million in ~~2006, up 22.4% versus $471.7~~2007, down 7.9% from $403.8 million in ~~2005.~~2006. Operating profit from ongoing U.S. operations ~~was $22.0~~decreased to $16.5 million in ~~2006, up 14.0% compared to $19.3~~2007, down 9.8% from $18.3 million in ~~2005.~~2006. Volume ~~increased~~from continuing operations decreased to ~~259.9~~155.8 million pounds in ~~2006, up 5.5% compared to 246.4~~2007, down 15.9% from 185.2 million pounds in ~~2005. Growth~~2006.

The decreases in ~~shipments~~net sales and ongoing operating profit from continuing operations were mainly due to lower volume, partially offset by higher selling prices. Shipments declined in ~~2006 was driven by demand~~most markets, especially extrusions used in hurricane protection products and residential construction. In addition, we began experiencing a softening of markets for extrusions used in ~~commercial~~non-residential construction ~~and hurricane protection products, partially offset~~in the fourth quarter of 2007. Overall backlog for continuing operations in Aluminum Extrusions at December 31, 2007 was down by a decline in extrusions used in residential construction. The increase in operating profit during 2006 was primarily due to higher volume and selling prices and lower energy costs (energy costs were down $1.1 million), partially offset by appreciation of the Canadian Dollar ($2.8 million) and higher charges for possible uncollectible accounts ($1.4 million).

~~Index~~

approximately 7% compared with December 31, 2006.

Capital expenditures for continuing operations in Aluminum Extrusions were $4.4 million in 2007, down from $6.6 million in 2006, ~~were $7.4 million versus $12 million in 2005~~ and are ~~expected~~projected to be approximately ~~$14~~$21 million in ~~2007.~~2008. In January, we announced plans to spend approximately $24 million over the next 18 months to expand the capacity at our plant in Carthage, Tennessee. Approximately 65% of our sales of aluminum extrusions from our U.S. operations are related to non-residential construction, and this additional capacity will increase our capabilities in this sector. Depreciation expense for continuing operations was ~~$12.3~~$8.5 million in ~~2006 compared with $11.5~~2007, up slightly from $8.4 million in ~~2005,~~2006, and is projected to be ~~$12.8~~$8.5 million in ~~2007.~~

2008.

Other Developments

~~Consolidated net~~

Net pension ~~expense~~income from continuing operations was ~~$2.6~~$2.8 million in ~~2006, an increase~~2007, a favorable change of ~~$5.3~~$4.5 million (9(8 cents per share after taxes) from ~~the net pension income of $2.7 million~~amounts recognized ~~in 2005 (see Note 11 beginning on page 61 for more information).~~2006. Most of ~~this unfavorable change relates~~the favorable changes relate to a pension plan that is reflected in “Corporate expenses, net” in the ~~segment~~ operating profit by segment table presented on page ~~13.~~14. Net pension income from continuing operations is expected to be $5.5 million in 2008. We contributed ~~$1.1 million~~approximately $167,000 to our pension plans for continuing operations in ~~2006~~2007 and expect ~~required contributions of $1.1 million~~to contribute a similar amount in ~~2007.~~

On October 26, 2006, we announced changes to our U.S. defined benefit (pension) and savings plans covering salaried and certain other employees. The changes had no impact on our net income or earnings per share in 2006. The changes relating to the pension plan reduced our projected benefit obligation by approximately $10 million as of December 31, 2006. In 2007, the changes to the pension plan are expected to reduce our service cost, interest cost and amortization of prior service cost components of pension2008.

Interest expense by approximately $600,000, $600,000 and $1.5 million, respectively, and the savings plan changes are expected to increase charges for company matching contributions by approximately $700,000. Based on these changes and other factors, we expect pension income of $2.0was $2.7 million in 2007, a ~~favorable change of $4.6~~decline $2.8 million ~~or 7~~(5 cents per share after taxes) versus 2006 due to lower average debt outstanding.

The effective tax rate used to compute income taxes from continuing operations was 41.1% in 2007 compared with 35.9% in 2006.

~~Effective December 31, 2006, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 158,~~ ~~Employers' Accounting~~ The increase in the effective tax rate for ~~Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No 87, 88, 106 and 132(R)~~~~. In accordance with this new standard we recognized the funded status of our pension and other postretirement plans in our balance sheet as of December 31,~~continuing manufacturing operations for 2007 versus 2006, which ~~included plan assets at fair value in excess~~had an unfavorable impact of ~~benefit obligations of $41.0 million. The adjustments in our balance sheet of our pension~~approximately 8 cents per share, was mainly due to a valuation allowance for possible deferred tax benefits on capital loss carry-forwards and other postretirement plans to recognize their funded status resulted in a decrease in prepaid pension cost of $27.7 million, an increase in related liabilities of $3.3 million, a decrease in non-current deferredlower income tax ~~liabilities of $11.4 million~~benefits expected for the Extraterritorial Income Exclusion and ~~a decrease in shareholders’ equity of $19.6 million. Prepaid pension cost~~Domestic Production Activities Deduction and ~~related liabilities are included in “Other assets~~the research and ~~deferred charges” and “Other noncurrent liabilities” in the consolidated balance sheets.~~

development (“R&D”) tax credit.

During the first quarter of ~~2006,~~2007, we adopted ~~Statement~~new accounting standards for maintenance costs and uncertain income tax positions, neither of ~~Financial Accounting Standards No. 123(R),~~ ~~Share-Based Payment~~which had a material impact on Tredegar’s results of operations or financial condition.

In addition, we adopted new accounting standards on fair value measurements and the fair value option for financial assets and liabilities, neither of which had an impact on historical results at the date of adoption.

On April 2, 2007, we invested $10 million in Harbinger Capital Partners Special Situations Fund, L.P. (“~~SFAS 123(R)”~~Harbinger”), a fund that seeks to achieve superior absolute returns by participating primarily in medium to long-term investments involving distressed/high yield debt securities, special situation equities and private loans and notes. The fund is a highly speculative investment subject to a two-year lock-up and additional limitations on withdrawal. There is no secondary market for interests in the fund. Our investment in Harbinger, which ~~requires all stock-based compensation to be expensed and~~represents less than 2% of Harbinger’s total partnership capital, is accounted for ~~using a fair value-based~~under the cost method. ~~The adoption~~At December 31, 2007, Harbinger reported our capital account value at $23.0 million reflecting $13.0 million of ~~SFAS 123(R) and the granting of stock options in 2006 resulted in pretax charges for stock option-based compensation of $970,000 (2~~unrealized appreciation ($8.3 million or 22 cents per share after taxes) versus the carrying value in ~~2006.~~

~~Strong cash flows from operations after investing activities and dividends~~our consolidated balance sheet of $10 million.

On August 31, 2007, we invested $6.5 million in a privately held drug delivery company representing ownership on a fully diluted basis of approximately ~~$58~~23%. This company is developing and commercializing state of the art drug delivery systems designed to improve patient compliance and outcomes. During 2007, we invested $6.2 million in real estate. At December 31, 2007, the carrying value in Tredegar’s balance sheet of its investments in this real estate and ~~proceeds~~the drug delivery company equaled the respective amounts invested.

During 2007 we used a portion of a standing authorization from our board of directors to repurchase approximately 4.8 million shares of our stock at an average price of $16.00 per share. Despite the ~~exercise of stock options of approximately $10 million resulted in a decline in~~significant funds used for this program, our net debt (total debt less cash and cash equivalents) at December 31, 2007 increased by only $12.2 million to $33.8 million due to strong cash flow from operations and lower capital expenditures (net debt is not intended to represent debt as defined by generally accepted accounting principles, but is utilized by management in evaluating financial leverage and equity valuation and we believe that investors also may find net debt helpful for the same purposes). On January 7, 2008, we announced that our board of ~~cash)~~directors approved a share repurchase program whereby we are authorized at our discretion to purchase, in the open market or in privately negotiated transactions, up to 5 million shares of ~~approximately $68 million in 2006.~~our outstanding common stock. This share repurchase program replaces our previous share repurchase authorization. The authorization has no time limit. Consolidated net capitalization and other credit measures are provided in the financial condition section beginning on page ~~24.~~

25.

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 generally accepted accounting principles. 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.

~~Index~~

Impairment and Useful Lives of Long-lived Identifiable Assets and Goodwill

We regularly 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 1 of each year). We have made determinations as to what our reporting units are and what amounts of goodwill and intangible assets should be allocated to those reporting units.

In assessing the recoverability of long-lived identifiable assets and goodwill, we must make assumptions regarding estimated future cash flows, discount rates and other factors to determine if impairment tests are met or the fair value of the respective assets. If these estimates or their related assumptions change in the future, we may be required to record additional impairment charges. Based upon assessments performed, we recorded asset impairment losses for

continuing operations related to long-lived identifiable assets of $594,000 in 2007, $1.2 million in 2006 ~~$8.6~~and $8.4 million in ~~2005 and $14.1~~2005. For asset impairments relating to discontinued operations, see Note 17 to the notes to financial statements.

Investment Accounted for Under the Fair Value Method

On August 31, 2007, we invested $6.5 million in ~~2004.~~a privately held drug delivery company representing ownership on a fully diluted basis of approximately 23%. This investment is accounted for under the fair value method. We elected the fair value option over the equity method of accounting since our investment objectives are similar to those of venture capitalists, which typically do not have controlling financial interests (venture capital funds use the fair value method to account for their investment portfolios). At December 31, 2007, the fair value of our investment (included in “Other assets and deferred charges” in our consolidated balance sheet) equaled the amount invested.

Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements, 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). On the date of our investment (August 31, 2007), we believe that the amount we paid for our ownership interest and liquidation preferences was based on Level 2 inputs, including investments by other investors. Subsequent to August 31, 2007, and until the next round of financing, we believe fair value estimates drop to Level 3 inputs since there is no secondary market for our ownership interest. In addition, the company currently has no product sales. Accordingly, after the latest financing and until the next round of financing or 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 sales, costs, expenses, capital expenditures and working capital investment) and discounting of these factors for the high degree of risk. As a result, an increase in our estimate of the fair value of our ownership interest is unlikely unless a significant new round of financing, merger or initial public offering indicates a higher value. However, if the company 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 plans as of August 31, 2007, or a new round of financing or other significant financial transaction indicates a lower value, then our estimate of the fair value of our ownership interest in the company is likely to decline.

Pension Benefits

We have noncontributory ~~and contributory~~ defined benefit (pension) plans in our continuing operations that have significant net pension income 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 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. Our weighted average discount rate for continuing operations was ~~5.70%~~6.25% at the end of 2007, 5.75% at the end of 2006 ~~5.70%~~and 5.75% at the end of 2005, ~~and 6.00% at the end of 2004,~~ with changes between periods due to changes in market interest rates. The compensation increase assumption affects the estimate of future payments, and was 4% at the end of 2007, 2006 ~~2005~~ and ~~2004.~~2005. 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. ~~During 2006, 2005, 2004 and~~Since 2003, the value of our plan assets relating to continuing operations has increased due to improved general market conditions after declining ~~in 2002, 2001 and 2000.~~from 2000 to 2002. Our expected long-term return on plan assets relating to continuing operations has been ~~8.4%~~8.5% since 2004 based on market and economic conditions and asset mix (our expected return was ~~8.6%~~8.75% in 2003 and 9% in 2002 and prior years). See page 6564 for more information on expected long-term return on plan assets and asset mix.

See the executive summary beginning on page 17 for further discussion regarding the financial impact of our pension plans.

Income Taxes

Many deductions for tax return purposes cannot be taken until the expenses are actually paid, rather than when the expenses are recorded for book purposes. In these circumstances, we accrue for the tax benefit expected to be received in future years if, in our judgment, it is more likely than not that we will receive such benefits. In addition, the amount and timing of certain current deductions (which reduce taxes currently payable or generate income tax refunds) require interpretation of tax laws. In these circumstances, we estimate and accrue income tax contingencies for differences in interpretation that may exist with tax authorities.

On a quarterly basis, we review our judgments regarding ~~income~~uncertain tax ~~contingency accruals~~positions and the likelihood that the benefits of a deferred tax asset will be realized. During the periodic reviews, we must consider a variety of factors, including the nature and amount of the tax income and expense items, the current tax statutes, the current status of audits performed by tax authorities and the projected future earnings. We believe the realization of our net deferred tax assets is reasonably assured and that our income tax contingency accruals are adequate as measured under existing accounting standards. As circumstances change, ~~our~~we reflect in earnings any adjustments to unrecognized benefits for uncertain tax positions and valuation allowances for deferred tax ~~assets,~~assets.

For financial reporting purposes, we had unrecognized tax benefits on uncertain tax positions of $3.3 million as of December 31, 2007. Included in this amount were $2.3 million for tax positions for which ultimate deductibility is highly certain but for which the timing of deductibility is uncertain. Because of the impact of deferred income tax ~~contingency accruals~~accounting, other than interest, penalties and deductions not related to timing, a longer deductibility period would not affect the total income tax expense or the annual effective tax rate shown for financial reporting purposes, but would accelerate payments to the taxing authority. Tax payments resulting from the successful challenge by the taxing authority for accelerated deductions 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 $1.2 million at December 31, 2007 ($759,000 net ~~earnings~~of corresponding federal and state income tax benefits). Accruals for possible interest and penalties on uncertain tax positions are ~~adjusted accordingly~~reflected in income tax expense for financial reporting purposes.

We anticipate that ~~period.~~

by December 31, 2008, we will settle several disputed issues raised by the Internal Revenue Service (the “IRS”) during its examination of our U.S. income tax returns for 2001-2003, the most significant of which regards the recognition of our captive insurance subsidiary as an insurance company for U.S. income tax purposes. It is reasonably possible that a settlement with the IRS for the disputed issues would cost us $1.4 million, which would be applied against the balance of unrecognized tax benefits and accrued interest and penalties.

Tredegar and its subsidiaries file income tax returns in U.S., state and foreign jurisdictions. Tredegar is no longer subject to U.S. federal income tax examinations by tax authorities for years before 2001. 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 2004.

As of December 31, 2007, we had valuation allowances relating to deferred tax assets of $4.0 million. For more information on deferred income tax assets and liabilities, see Note 14 of the notes to financial statements.

~~Index~~

Recently Issued Accounting Standards

In ~~September 2006,~~December 2007, the Financial Accounting Standards Board ~~(“FASB”)~~ issued ~~FASB Staff Position ("FSP")~~SFAS No. ~~AUG AIR-1,~~ ~~Accounting~~141(R), Business Combinations, and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements. SFAS No. 141 is applied prospectively to business combinations for ~~Planned Major Maintenance Activities.~~ ~~The FSP~~which the acquisition date is ~~effective for~~on or after the beginning of the first ~~fiscal year~~annual reporting period beginning on or after December 15, ~~2006.~~2008. The ~~FSP eliminates the accrual method of~~new accounting standard for ~~major maintenance activities, but continues~~noncontrolling interests (sometimes referred to ~~permit the use of the direct expensing, built-in overhaul~~as minority interests) applies to all fiscal years and ~~deferral methods. The FSP also continues to require accruals or deferrals for~~ interim periods ~~of annual costs that clearly benefit two~~beginning on or ~~more interim periods. We are evaluating the FSP and have not determined whether or not it will have a material effect on our financial position or results of operations.~~

~~In July 2006, the FASB issued FASB Interpretation No. 48,~~ ~~Accounting for Uncertainty in Income Taxes~~, clarifying the accounting for uncertain tax positions. The interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation is effective for fiscal years beginning after December 15, ~~2006 with earlier~~2008. Early application ~~encouraged.~~is prohibited for both standards. We ~~are evaluating~~currently do not have noncontrolling or minority interests in our consolidated financial statements. We will apply the ~~interpretation~~new standards when required and ~~have not determined if it will have a material effect on our financial position or results of operations.~~applicable.

Results of Continuing Operations

2007 versus 2006

Revenues. Overall, sales in 2007 decreased by 1.6% compared with 2006, primarily due to a decline in sales in Aluminum Extrusions. For more information on net sales and volume, see the executive summary beginning on page 17.

Operating Costs and Expenses. Consolidated gross profit (sales minus cost of goods sold and freight) as a percentage of sales was 15.3% in 2007 and 14.5% in 2006. The gross profit margin increased in Film Products but decreased in

Aluminum Extrusions primarily because of the changes in sales and volume. In addition, gross profit improvement in Film Products was partially offset by an estimated negative impact in 2007 of $2.5 million from the lag in the pass-through of changes in average resin costs and year-end adjustments for LIFO. In 2006, we estimated a favorable impact of $4.5 million from the lag in the pass-through of changes in average resin costs and year-end adjustments for LIFO.

As a percentage of sales, selling, general and administrative and R&D expenses were 8.3% in 2007, up from 7.7% in 2006. The increase is primarily due to higher costs in Film Products, including costs associated with a new information system and a reorganization that resulted in the hiring of additional personnel.

Losses associated with plant shutdowns, asset impairments and restructurings in 2007 totaled $4.1 million ($2.8 million after taxes) and included:


•	A fourth quarter charge of $1.2 million ($780,000 after taxes), a third quarter charge of $1.2 million ($793,000 after taxes) and a first quarter charge of $366,000 ($238,000 after taxes) related to the estimated loss on the sublease of a portion of the AFBS (formerly Therics) facility in Princeton, New Jersey;

•	A fourth quarter charge of $256,000 ($256,000 after taxes) and a first quarter charge of $338,000 ($284,000 after taxes) for asset impairments in Film Products;

•	A third quarter charge of $493,000 ($309,000 after taxes) and a second quarter charge of $99,000 ($62,000 after taxes) for severance and other employee-related costs in Aluminum Extrusions;

•	A second quarter charge of $26,000 ($16,000 after taxes) and a first quarter charge of $29,000 ($17,000 after taxes) for costs related to the shutdown of the films manufacturing facility in LaGrange, Georgia; and

•	A third quarter charge of $42,000 ($26,000 after taxes) 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).

Results in 2007 include a fourth-quarter gain of $2.7 million ($1.7 million after taxes) on the sale of corporate real estate (proceeds of $3.8 million) and a third-quarter loss from the write-down of an investment of $2.1 million ($1.3 million after taxes). The pretax amounts for both of these items are included in “Other income (expense), net” in the consolidated statements of income and separately shown in the segment operating profit table on page 14. Income taxes in 2007 include the recognition of a valuation allowance against deferred tax assets of $1.1 million in the third quarter for expected limitations on the utilization of certain assumed capital losses.

For more information on costs and expenses, see the executive summary beginning on page 17.

Interest Income and Expense. Interest income, which is included in “Other income (expense), net” in the consolidated statements of income, was $1.2 million in 2007 and $1.2 million in 2006. 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 decreased to $2.7 million in 2007, a decline of $2.8 million versus 2006 due to lower average debt outstanding. Average debt outstanding and interest rates were as follows:

(In Millions)

2007

2006

Floating-rate debt with interest charged on a rollover
basis at one-month LIBOR plus a credit spread:

Average outstanding debt balance

$
41.5

$
91.0

Average interest rate

6.0
%

5.9
%
Fixed-rate and other debt:

Average outstanding debt balance

$
2.2

$
4.4

Average interest rate

3.8
%

6.5
%
Total debt:

Average outstanding debt balance

$
43.7

$
95.4

Average interest rate

5.9
%

5.9
%

Income Taxes. The effective tax rate increased to 41.1% in 2007 compared with 35.9% in 2006 mainly due to a valuation allowance for possible deferred tax benefits on capital loss carry-forwards and lower income tax benefits expected for the Extraterritorial Income Exclusion and Domestic Production Activities Deduction and the research and development (“R&D”) tax credit. For more information on the variances in our effective tax rate between years, see Note 14 of the notes to financial statements.

2006 versus 2005

Cash provided by operating activities was $95.6 million in 2007 compared with $104.6 million in 2006. The decrease is due primarily to higher income tax payments (income tax payments were approximately $17.0 million

Source: Quarterly averages computed by Tredegar using monthly data provided by Chemical Data Inc. (“CDI”). In January 2005, CDI reflected a 4 cents per pound non-market adjustment based on their estimate of the growth of discounts over the 2000 to 2003 period. The 4th quarter 2004 average rate of 67 cents per pound is shown on a pro forma basis as if the non-market adjustment was made in October 2004.

Resin prices in Europe, Asia and South America have exhibited similar 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.

~~Index~~

Source: Quarterly averages computed by Tredegar using daily closing data provided by Bloomberg.

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 ~~$150,000~~$95,000 impact on the continuing monthly operating profit for our U.S. operations in Aluminum Extrusions. ~~Substantially higher energy costs (primarily natural gas) in 2005 resulted in a reduction in operating profit in Aluminum Extrusions of approximately $7 million in 2005 compared with 2004.~~ In September 2005, we announced an energy surcharge for our aluminum extrusions business in the U.S. to be applied when the previous quarter’s NYMEX natural gas average settlement price is in excess of $8.85 per mmBtu.

Source: Quarterly averages computed by Tredegar using monthly NYMEX settlement prices.

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 continuing manufacturing operations related to foreign markets for ~~2006~~2007 and ~~2005~~2006 are as follows:

Tredegar Corporation - Manufacturing Operations

Percentage of Net Sales and Total Assets Related to Foreign Markets

2006 2005
% of Total % Total % of Total % Total
Net Sales * Assets - Net Sales * Assets -
Exports Foreign Foreign Exports Foreign Foreign
From Oper- Oper- From Oper- Oper-
U.S. ations ations * U.S. ations ations *
Canada 4 16 11 5 16 12
Europe 1 12 14 1 14 14
Latin America - 2 2 1 2 2
Asia 5 4 7 4 4 5
Total % exposure to foreign markets 10 34 34 11 36 33

*The percentages for foreign markets are relative to Tredegar's total net sales and total assets from manufacturing operations (consolidated net sales and total assets from continuing operations excluding cash and cash equivalents and AFBS (formerly Therics)).



Tredegar Corporation - Continuing Manufacturing Operations Percentage of Net Sales and Total Assets Related to Foreign Markets

	2007						2006

	% of Total Net Sales *				% Total Assets- Foreign Oper- ations *		% of Total Net Sales *				% Total Assets - Foreign Oper- ations *
	% of Total Net Sales *						% of Total Net Sales *

	Exports From U.S.		Foreign Oper- ations				Exports From U.S.		Foreign Oper- ations



Canada		5		—		—		5		—		—
Europe		1		17		16		1		15		16
Latin America		—		3		2		—		3		2
Asia		3		6		7		5		5		8

Total % exposure to foreign markets		9		26		25		11		23		26


*		The percentages for foreign markets are relative to Tredegar’s total net sales and total assets from manufacturing operations (consolidated net sales and total assets from continuing operations excluding cash and cash equivalents and AFBS (formerly Therics)).

We attempt to match the pricing and cost of our products in the same currency ~~(except in Canada where about 80% of our sales of aluminum extrusions are U.S. Dollar-based)~~ and generally view the volatility of foreign currencies (see trends for the Euro ~~Canadian Dollar~~ 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 Canadian Dollar,~~ the Euro, the Chinese Yuan, the Hungarian Forint and the Brazilian Real.

~~Index~~

The relatively high percentage of U.S. Dollar-priced sales in Canada is partly due to the shifting of a large portion of the customers previously served by the aluminum extrusions plant in El Campo, Texas, in 2001. The resulting mismatch between the currency denomination of sales and costs causes lower U.S. Dollar translated profits when the Canadian Dollar appreciates since our costs are higher in U.S. Dollar equivalent terms while sales are mostly unaffected (the opposite effect occurs when the Canadian Dollar depreciates in value relative to the U.S. Dollar). We estimate that the appreciation of the Canadian Dollar relative to the U.S. Dollar had an adverse impact on operating profit of about $2.8 million in 2006 compared with 2005, and $3.5 million in 2005 compared with 2004.

In Film Products, where we ~~have been~~are typically able to ~~better~~ match the currency of our sales and costs, we estimate that the change in value of foreign currencies ~~(primarily the Euro and Hungarian Forint and to a lesser extent the Chinese Yuan and Brazilian Real)~~ relative to the U.S. Dollar had a positive impact on operating profit of ~~about~~approximately $3 million in 2007 compared with 2006, $500,000 in 2006 compared with 2005, and $600,000 in 2005 compared with 2004.

~~We continue~~

In 2007, we used currency options to ~~review the loading~~hedge a portion of our ~~aluminum extrusions plants~~exposure to changes in ~~North America~~exchange rates. Results for continuing operations include realized losses of $239,000 on currency hedges of royalties relating to ~~optimize production mix~~our operations in Europe and ~~minimize cost in light~~results from discontinued operations include realized gains of ~~the increase in the U.S. Dollar equivalent cost structure~~$1.3 million on currency hedges of ~~our plants in Canada. In addition, we have partially hedged~~ our exposure to the Canadian ~~Dollar and Euro as shown in the following tables (accounted for as cash flow hedges):~~

(In Thousands Except Exchange Rates)

Notional
Amount as
a % of
Forecasted
USD-Equiv.

USD-Equivalent
Strike Prices of
Options Bought &

Pretax
Unrealized
Gain (Loss)
on Options at

USD-
Equiv.
Average

Cash
(Paid to)
Received
from

Gain (Loss) on
Options Recognized
in Income for Period

Notional CAD- Net Option Sold on CAD/USD 12/31/06 Reference Counter- Portion

Portion
Description of Currency Amount Related Premium Call Put Included in Price of party at Deemed Deemed
Exposure, Options Hedging Strategy of Option Costs for (Paid) Options Options Shareholders' CAD for Expiration Effective Ineffective
Used & Periods Covered Contracts Period Received Bought Sold Equity Period of Options as Hedge as Hedge
Exposure: About 80% of sales of extrusions manufactured in facilities in Canada are denominated or economically priced in U.S. Dollars ("USD") while conversion costs are denominated or economically priced in Canadian Dollars ("CAD").

Hedge Strategy: Bought average rate call options & sold average rate put options on CAD/USD.

Periods Covered by Option Contracts:

5/11/06 to end of second quarter 2006 $ 2,500 38 % $ - $ 0.9500 $ 0.8850 n/a $ 0.8995 $ - $ - $ -
Third quarter 2006 5,000 40 % - 0.9500 0.8749 n/a 0.8919 - - -
Fourth quarter 2006 6,500 53 % - 0.9324 0.8650 n/a 0.8793 - - -
First quarter 2007 3,500 28 % - 0.9100 0.8380 $ (3 ) n/a n/a n/a -
First quarter 2007 3,500 28 % - 0.9000 0.8345 (2 ) n/a n/a n/a -
Second quarter 2007 3,500 28 % - 0.9100 0.8430 (18 ) n/a n/a n/a -
Second quarter 2007 3,500 28 % - 0.9000 0.8364 (8 ) n/a n/a n/a -
Third quarter 2007 3,500 28 % - 0.9100 0.8473 (27 ) n/a n/a n/a -
Third quarter 2007 3,500 28 % - 0.9000 0.8403 (11 ) n/a n/a n/a -
Fourth quarter 2007 3,500 28 % - 0.9100 0.8516 (33 ) n/a n/a n/a -
Fourth quarter 2007 3,500 28 % - 0.9000 0.8446 (14 ) n/a n/a n/a -
$ (116 )

(In Thousands Except Exchange Rates)
Sensitivity Analysis of Amount Tredegar (Pays to) Receives
Average Average from Counterparty in 2007 for Settlement of CAD/USD Options
CAD Per USD Equiv. First Second Third Fourth
USD of CAD Quarter Quarter Quarter Quarter Total
1.21951 $ 0.8200 $ (136 ) $ (164 ) $ (197 ) $ (232 ) $ (729 )
1.20482 0.8300 (52 ) (81 ) (115 ) (149 ) (397 )
1.19048 0.8400 - (12 ) (32 ) (67 ) (111 )
1.17647 0.8500 - - - (7 ) (7 )
1.16279 0.8600 - - - - -
1.14943 0.8700 - - - - -
1.13636 0.8800 - - - - -
1.12360 0.8900 - - - - -
1.11111 0.9000 - - - - -
1.09890 0.9100 39 39 39 39 155
1.08696 0.9200 116 116 116 116 465
1.07527 0.9300 194 194 194 194 774
1.06383 0.9400 271 271 271 271 1,084

Dollar. There were no derivatives outstanding at December 31,

~~Index~~

(In Thousands Except Exchange Rates)
Notional
Amount as Pretax
a % of USD-Equivalent Unrealized
Forecasted Strike Prices of Gain (Loss)
USD-Equiv. Options Bought & on Options at
Notional Royalty Net Option Sold on EUR/USD 12/31/06
Description of Currency Amount from Premium Call Put Included in
Exposure, Options Hedging Strategy of Option Nether- (Paid) Options Options Shareholders'
Used & Periods Covered Contracts lands Sub Received Sold Bought Equity*
Exposure: Significant royalty on sales from film technology licensed to subsidiary in the Netherlands is earned in Euros ("EUR").

Hedge Strategy: Sold average rate call options & bought average rate put options on EUR/USD.

Periods Covered by Option Contracts:

First quarter 2007 $ 3,200 74 % $ - $ 1.3350 $ 1.2800 n/a
Second quarter 2007 3,200 82 % - 1.3480 1.2800 n/a
Third quarter 2007 3,200 75 % - 1.3575 1.2800 n/a
Fourth quarter 2007 3,200 76 % - 1.3640 1.2800 n/a
* Hedge transactions occurred on 1/4/07 and therefore there was no unrealized gain or loss at 12/31/06.

(In Thousands Except Exchange Rates)
Sensitivity Analysis of Amount Tredegar (Pays to) Receives
Average Average from Counterparty in 2007 for Settlement of EUR/USD Options
EUR Per USD Equiv. First Second Third Fourth
USD of EUR Quarter Quarter Quarter Quarter Total
0.84034 $ 1.1900 $ 225 $ 225 $ 225 $ 225 $ 900
0.82645 1.2100 175 175 175 175 700
0.81301 1.2300 125 125 125 125 500
0.80000 1.2500 75 75 75 75 300
0.78740 1.2700 25 25 25 25 100
0.77519 1.2900 - - - - -
0.76336 1.3100 - - - - -
0.75188 1.3300 - - - - -
0.74074 1.3500 (36 ) (5 ) - - (41 )
0.72993 1.3700 (84 ) (52 ) (29 ) (14 ) (180 )
0.71942 1.3900 (132 ) (100 ) (77 ) (61 ) (369 )
0.70922 1.4100 (180 ) (147 ) (124 ) (108 ) (559 )
0.69930 1.4300 (228 ) (195 ) (171 ) (155 ) (748 )

2007 relating to currency hedges. Trends for the Euro ~~Canadian Dollar~~ and ~~Cheinese~~Chinese Yuan are shown in the chart below:

Source: Quarterly averages computed by Tredegar using daily closing data provided by Bloomberg.

~~Index~~

Business Segment Review

Net sales (sales less freight) 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.

Film Products

Net Sales. See the executive summary beginning on page 17 for the discussion of net sales (sales less freight) in Film Products in 2007 compared with 2006.

Net sales in Film Products were $511.2 million in 2006 and $460.3 million in ~~2005 and $413.3 million in 2004.~~2005. The ~~increases~~increase in net sales ~~(sales less freight)~~ in Film Products in ~~the last two years~~2006 is primarily due to growth in higher value-added products, including surface protection films, elastic materials and new apertured materials. Selling price and net sales are also affected by the pass-through of changes in raw material costs and changes in currency exchange rates (see the qualitative and quantitative disclosures about market risks section beginning on page ~~28)~~30). Total volume was 253.5 million pounds in 2006 and 261.1 million pounds in ~~2005 and 278.7 million pounds in 2004. Total volume related to the business in Argentina sold in the third quarter of 2004 was 9.4 million pounds in 2004.~~2005. We estimate that the growth in net sales excluding the effects of the pass-through of resin price changes ~~foreign~~and currency exchange rate changes ~~and the business in Argentina sold~~ was about 6% in 2006 and 7% in ~~2005 and 9% in 2004.~~2005. Volume declines in 2006 compared with 2005 were mainly due to lower sales of certain commodity barrier films that were dropped in conjunction with the shutdown of the plant in LaGrange, Georgia. The plant was shut down in the first half of 2006 and had sales of commodity barrier films of approximately $20 million in 2005.

Operating Profit. See the executive summary beginning on page 17 for the discussion of operating profit in Film Products in 2007 compared with 2006.

Operating profit from ongoing operations in Film Products was $57.6 million in 2006 and $44.9 million in ~~2005 and $43.3 million in 2004.~~2005. Operating profit from ongoing operations excluding the estimated effects of resin pass-through lag and year-end LIFO adjustments was $53.1 million in 2006 and $48.9 million in ~~2005 and $45.8 million in 2004.~~2005. The increase in operating profit in ~~since 2004~~2006 excluding the impact of resin pass-through lag and LIFO adjustments ~~has been~~was driven by growth in the sale of higher value surface protection films, elastic materials and new apertured topsheets.

Identifiable Assets. Identifiable assets in Film Products decreased to $488.0 million at December 31, 2007, from $499.0 million at December 31, 2006, due primarily to depreciation of $33.9 million compared with capital expenditures of $15.3 million and asset impairments during the year totaling $594,000, partially offset by the effects of currency rate changes on property, plant and equipment and goodwill of approximately $11.3 million. See page 25 for further discussion on changes in assets and liabilities.

Identifiable assets in Film Products increased to $499.0 million at December 31, 2006, from $479.3 million at December 31, 2005, due primarily to the effects of ~~foreign exchange~~currency rate changes of $9.0 million, higher accounts receivable (up $6.5 million) due to higher sales and higher inventories (up $3.4 million) and asset impairments during ~~the year~~2006 totaling $1.2 million. ~~See page 24 for further discussion on changes in assets and liabilities.~~

Identifiable assets in Film Products increased to $479.3 million at December 31, 2005, from $472.8 million at December 31, 2004, due primarily to capital expenditures in excess of depreciation of $24.0 million (see the depreciation, amortization and capital expenditures section below for more information) partially offset by lower accounts receivable (down $4.9 million) due to lower days sales outstanding (down about 5 days since the end of 2004), the effects of foreign exchange rate changes of $9.8 million and asset impairments and disposals during 2005 totaling $4.3 million.

Depreciation, Amortization and Capital Expenditures. Depreciation and amortization for Film Products was $34.1 million in 2007, $31.7 million in 2006 and $26.7 million in 2005. The increase in 2007 compared with 2006 is primarily due to capital expenditures in 2006 and 2007 and appreciation of the U.S. Dollar value of currencies for operations outside of the U.S. The increase in 2006 compared with 2005 ~~and $22.0 million in 2004. The increases in each year are~~is mainly due to the relatively high level of capital expenditures from 2003-2005. We expect depreciation and amortization expense for Film Products to ~~increase to about $34~~be approximately $33 million in ~~2007.~~2008.

Capital expenditures declined to $15.3 million in 2007 compared with $33.2 million in 2006. Capital expenditures in 2008 are expected to be approximately $33 million. Capital expenditures in 2007 primarily included the normal replacement of machinery and equipment and continued expansion of capacity for surface protection films and elastic materials.

Capital expenditures declined to $33.2 million in 2006 compared with $50.5 million in 2005. ~~Capital expenditures in 2007 are expected to be approximately $35 million.~~ Approximately half of the capital expenditures in 2006 related to expanding the production capacity for surface protection films. These films are primarily used to protect flat panel display components during fabrication, shipping and handling. Sales of surface protection films used primarily in this application totaled approximately $56 million in 2006, $30 million in 2005 and $16 million in 2004. Other capital expenditures in 2006 included capacity additions for elastic materials and continued costs associated with a new information system, which was rolled out in U.S. locations.

~~Index~~

~~Capital expenditures in Film Products in 2005 totaled $50.5 million and reflect the normal replacement of machinery and equipment and:~~

·	~~Expansion of production capacity at our films plant in Kerkrade, The Netherlands, including capacity for an apertured topsheet product for P&G’s feminine hygiene business;~~

·	~~Expansion of production capacity at our films plant in Lake Zurich, Illinois, including capacity for elastic materials used in baby diapers and adult incontinent products;~~

·	~~Expansion of production capacity at our films plant in Guangzhou, China;~~

·	~~Leasehold improvements and the addition of laminating capacity at our new films plant in Red Springs, North Carolina;~~

·	~~Expansion of production capacity at our plant in Pottsville, Pennsylvania, including capacity for polyethylene film used for packaging and film used for surface protection;~~

·	~~Leasehold improvements and equipment upgrades at our new R&D facility in Richmond, Virginia; and~~

·	~~A new information system.~~

Aluminum Extrusions (Continuing Operations)

Net Sales and Operating Profit. See the executive summary beginning on page 17 for the discussion of net sales (sales less freight) and operating profit for the continuing operations of Aluminum Extrusions in 2007 compared with 2006.

Net sales were ~~$577.3~~$403.8 million in 2006, up ~~22.4%~~23.2% versus ~~$471.7~~$327.7 million in 2005. Operating profit from continuing ongoing operations was ~~$22.0~~$18.3 million in 2006, up ~~14.0%~~7.1% compared to ~~$19.3~~$17.1 million in 2005. Volume increased to ~~259.9~~185.2 million pounds in 2006, up ~~5.5%~~4.6% compared to ~~246.4~~177.0 million pounds in 2005. Growth in shipments in 2006 was driven by demand for extrusions used in commercial construction and hurricane protection products, partially offset by a decline in extrusions used in residential construction. The increase in operating profit during 2006 was primarily due to higher volume and selling prices and lower energy costs, ~~(energy costs were down $1.1 million),~~ partially offset by ~~appreciation of the Canadian Dollar ($2.8 million) and~~ higher charges for possible uncollectible accounts ($1.4 million).

Net sales in Aluminum Extrusions were $471.7 million in 2005, up 11% from $425.1 million in 2004 primarily due to higher selling prices driven by higher raw material and energy costs. Annual volume increased to 246.4 million pounds in 2005 from 243.4 million pounds in 2004, as stronger shipments in commercial construction and hurricane protection products were offset by lower shipments in other end markets. Operating profit from ongoing operations declined 15% to $19.3 million in 2005 from $22.6 million in 2004 due mainly to higher energy costs (approximately $7 million) and strength of the Canadian Dollar (about $3.5 million), partially offset by price increases, higher volume and an energy surcharge.

~~See the qualitative and quantitative disclosures about market risks section beginning on page 28 for discussion on the volatility of aluminum costs, energy costs and currency exchange rates.~~

Identifiable Assets. Identifiable assets in Aluminum Extrusions were ~~$209.4~~$115.2 million at December 31, 2007, $129.0 million at December 31, 2006 ~~$214.4~~and $130.4 million at December 31, ~~2005 and $210.9~~2005. The decline of $13.8 million at ~~December 31, 2004,~~the end of 2007 compared with ~~changes in each year~~2006 is mainly due to lower accounts receivable of $10.4 million (see page 25 for further discussion) and depreciation of $8.5 million compared with capital expenditures of $4.4 million. Changes between 2006 and 2005 are primarily due to sales-driven fluctuations in accounts receivable and inventory levels.

Depreciation, Amortization and Capital Expenditures. Depreciation and amortization for Aluminum Extrusions was ~~$12.3~~$8.5 million in 2007, $8.4 million in 2006 ~~$11.5~~and $8 million in 2005 and $10.9 million in 2004. The increases in 2006 and 2005 are primarily due to the start of depreciation in 2005 of capital expenditures associated with moving and upgrading the largest extrusions press at the facility shut down in Aurora, Ontario to the plant in Pickering, Ontario, and enlargement of the Pickering facility.2005. We expect depreciation and amortization expense for Aluminum Extrusions to ~~increase to about $12.8~~be $8.5 million in ~~2007.~~2008.

Capital expenditures totaled ~~$7.4~~$4.4 million in 2007, $6.6 million in 2006 ~~$12.0~~and $5.8 million in 2005, ~~and $10.0 million in 2004,~~ and reflect the normal replacement of machinery and ~~equipment plus capital expenditures associated with the plant in Pickering, Ontario described above.~~equipment. Capital expenditures are expected to be approximately ~~$14~~$21 million in ~~2007.~~

2008. In January, we announced plans to spend approximately $24 million over the next 18 months to expand the capacity at our plant in Carthage, Tennessee. Approximately 65% of our sales of aluminum extrusions from our U.S. operations are related to non-residential construction, and this additional capacity will increase our capabilities in this sector.

~~Index~~

AFBS

On June 30, 2005, substantially all of the assets of AFBS, Inc. (formerly known as Therics, Inc.), a wholly-owned subsidiary of Tredegar, were sold or assigned to a newly-created limited liability company, Therics, LLC, which is controlled and managed by an individual not affiliated with Tredegar. AFBS received a 17.5% equity interest in Therics, LLC, then valued at $170,000 and a 3.5% interest in Theken Spine, LLC, then valued at $800,000, along with potential future payments based on the sale of certain products by Therics, LLC. AFBS retained substantially all of its liabilities in the transaction, which included customary indemnification provisions for pre-transaction liabilities. Tredegar has no obligation or intent to fund any future losses that may occur at Therics, LLC or Theken Spine, LLC. The ownership interest in Therics, LLC is accounted for under the equity method of accounting with losses limited to its initial carrying value of $170,000. The ownership interest in Theken Spine, LLC is accounted for under the cost method, with an impairment loss recognized and a new cost basis established for any write-down to estimated fair value, if necessary. The payments due from Therics, LLC that are based on the sale of certain products are recognized as income when earned. AFBS had operating losses of $3.5 million during the first six months of 2005 and $9.8 million in 2004. Results of operations for AFBS since June 30, 2005 are immaterial.

~~Venture Capital Investment Activities~~

On March 7, 2003, Tredegar Investments reached definitive agreements to sell substantially all of its portfolio of private equity partnership interests to GS Vintage Funds II, which are investment partnerships managed by Goldman Sachs Asset Management’s Private Equity Group. On the same date and in a separate transaction, Tredegar Investments also agreed to sell to W Capital Partners, an independent private equity manager, the subsidiary funds that hold substantially all of Tredegar Investments’ direct venture capital investments. The sale of these fund interests included the assumption by the buyer of Tredegar Investments’ obligations to make additional capital contributions to those funds in the future.

~~The sale to W Capital Partners of the subsidiary funds that hold the direct investments occurred on March 7, 2003. The sale of the private equity fund interests occurred in a series of closings.~~

Net proceeds from the sales totaled approximately $21.5 million. Additionally, in the first quarter of 2004 we received income tax recoveries of approximately $55 million from the carry-back of 2003 capital losses generated by these sales against gains realized in 2000 by Tredegar Investments.

The agreements governing these transactions contain customary contingent indemnification provisions that Tredegar believes will not have a material effect on its financial position or results of operations.

The operating results from venture capital investment activities have been reported as discontinued operations. Cash flows from venture capital investment activities have not been separately disclosed in the consolidated statements of cash flows. Discontinued operations in 2004 include an after-tax gain associated with venture capital investment activities of $2.9 million primarily related to the reversal of business and occupancy tax contingency accruals upon favorable resolution.

~~Index~~

~~Ite~~m ~~7A.~~
Item 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See discussion of quantitative and qualitative disclosures about market risk beginning on page 2830 in Management’s Discussion and Analysis.

~~Item~~ 8.
Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See the index on page 4039 for references to the report of the independent registered public accounting firm, the consolidated financial statements and selected quarterly financial data.


Item 9.9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.


Item 9A.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 ourprincipal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) under the ~~Securities~~ Exchange ~~Act of 1934)~~Act) as of the end of the period covered by this report. Based upon that evaluation, ourprincipal 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~~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.

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 ~~Exchange Act~~ Rule 13a-15(f) under the ~~Securities~~ Exchange ~~Act of 1934, as amended.~~Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance to the Company’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 generally accepted accounting principles in the United States of America 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 generally accepted accounting principles in the United States of America, 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.

~~Index~~

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. 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, ~~2006.~~2007.

~~Our management’s assessment of the~~

The effectiveness of our internal control over financial reporting as of December 31, ~~2006,~~2007 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included on pages ~~40-41.~~

39-40.

Changes in Internal Control Over Financial Reporting

~~During the fourth quarter of 2006, we completed the installation of a new information system at U.S. locations in Film Products. This was the only~~

There has been no change in our internal control over financial reporting during the quarter ended December 31, ~~2006,~~2007, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


Item 9B.9B.	OTHER INFORMATION

None.

~~None.~~

PART III


Item 10.10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information concerning directors and persons nominated to become directors of Tredegar included in the Proxy Statement under the headings ~~"Election~~“Election of ~~Directors"~~Directors” and “Tredegar’s Board of Directors” is incorporated herein by reference.

The information concerning corporate governance included in the Proxy Statement under the heading “Board Meetings, Meetings of Non-Management Directors and the Board ~~Committees - Audit Committee Matters”~~Committees” is incorporated herein by reference.

The information included in the Proxy Statement under the heading “Section 16(a) Beneficial Ownership Reporting Requirements” is incorporated herein by reference.

~~Index~~

Set forth below are the names, ages and titles of our executive officers:

~~Name~~	~~Age~~		~~Title~~
Name		Age		Title


John D. Gottwald		52 53		President and Chief Executive ~~Officer effective March 1, 2006~~

Nancy M. Taylor		47 48		President, Tredegar Film Products and Corporate Senior Vice President

D. Andrew Edwards		48 49		Vice President, Chief Financial Officer and Treasurer

McAlister C. Marshall, II		37 38		Vice President, General Counsel and Corporate Secretary

Larry J. Scott		56 57		Vice President, Audit

John D. Gottwald. On January 16, 2006, Mr. Gottwald was elected President and Chief Executive Officer effective March 1, 2006. Mr. Gottwald had served as Chairman of the Board of Directors since September 10, 2001. Mr. Gottwald served as President and Chief Executive Officer from July 10, 1989 until September 10, 2001.

Nancy M. Taylor. Ms. Taylor was elected President of Tredegar Film Products 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. Ms. Taylor served as Managing Director, European Operations, of Tredegar Film Products from January 1, 2003 until November 1, 2004. Ms. Taylor served as Vice President, Administration and Corporate Development from September 10, 2001 until February 12, 2003. Ms. Taylor served as Secretary from February 24, 1994 until February 12, 2003. She served as Vice President, Law, from November 18, 1998 until September 10, 2001, and served as General Counsel from May 22, 1997 until July 25, 2000.

D. Andrew Edwards. Mr. Edwards was elected Vice President, Chief Financial Officer and Treasurer on August 28, 2003. Mr. Edwards has served as Vice President, Finance since November 18, 1998. Mr. Edwards has served as Treasurer since May 22, 1997. From October 19, 1992 until July 10, 2000, Mr. Edwards served as Controller.

McAlister C. Marshall, II.Mr. Marshall was elected Vice President, General Counsel and Corporate Secretary on October 1, 2006, the date that he joined Tredegar. From July 2000 until September 2006, he served as Assistant General Counsel at The Brink’s Company. He was an Associate at the law firm of Hunton & Williams LLP from 1996 until 2000.

Larry J. Scott. Mr. Scott was elected Vice President, Audit, on May 24, 2000. Mr. Scott served as Director of Internal Audit from February 24, 1994 until 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 web site. We intend to satisfy the disclosure requirement under Item 10 of Form 8-K relating to amendments to or waivers from any provision of our Code of Conduct applicable to Chief Executive Officer, Chief Financial Officer and principal accounting officer by posting this information on our website. Our Internet address is ~~www.tredegar.com~~.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.

Because our common stock is listed on the NYSE, our chief executive officer is required to make, and he has made, an annual certification to the NYSE stating that he was not aware of any violation by us of the corporate governance listing standards of the NYSE. Our chief executive officer made his annual certification to that effect to the NYSE as of May ~~26, 2006.~~25, 2007. In addition, we have filed, as exhibits to this Annual Report on Form 10-K, the certifications of our principal executive officer and principal financial officer required under Section 302 of the Sarbanes Oxley Act of 2002 to be filed with the SEC regarding the quality of our public disclosure.

~~Index~~

~~Ite~~m ~~11.~~
Item 11.	EXECUTIVE COMPENSATION

The information included in the Proxy Statement under the headings ~~"Compensation~~“Compensation of Directors”, “Board 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"~~Officers” is incorporated herein by reference.

~~Item12.~~
Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information included in the Proxy Statement under the heading ~~"Stock Ownership"~~“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, ~~2006.~~

Column (a) Column (b) Column (c) Column (d)
Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans, Excluding Securities Reflected in Column (b)
Equity compensation plans approved by security holders* 1,247,173 $18.16 1,601,700
Equity compensation plans not approved by security holders - - -
Total 1,247,173 $18.16 1,601,700

2007.



Column (a)	Column (b)		Column (c)			Column (d)

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights		Weighted Average Exercise Price of Outstanding Options, Warrants and Rights			Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans, Excluding Securities Reflected in Column

Equity compensation plans approved by security holders	1,009,858	*		$	17.90	1,412,232

Equity compensation plans not approved by security holders	—				—	—


Total	1,009,858			$	17.90	1,412,232

* Includes performance stock units that give the holder the right to receive shares ~~issuable pursuant to options issued under both~~of Tredegar common stock upon the ~~2004 Equity Incentive Plan and the Directors Stock Plan.~~

satisfaction of certain performance criteria.

Item ~~13.~~
Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information included in the Proxy Statement under the headings ~~"Certain~~“Certain Relationships and Related Transactions” and “Tredegar’s Board of Directors” is incorporated herein by reference.


Item 1414..	PRINCIPAL ACCOUNTING FEES AND SERVICES

The following is incorporated herein by reference:

·
•	Information on accounting fees and services included in the Proxy Statement under the heading ~~"Audit~~“Audit Fees;"” and

·
•	Information on the Audit Committee’s procedures for pre-approving certain audit and non-audit services included in the Proxy Statement under the heading “Board Meetings, Meetings of Non-Management Directors and Board Committees - Audit Committee Matters”.

~~Index~~

PART IV


Item 1515..	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

	~~(a)~~
	(a)	List of documents filed as a part of the report:

~~(1)~~

~~Financial statements:~~

~~Tredegar Corporation~~
~~Index to Financial Statements and Supplementary Data~~
	~~Page~~ (1)	Financial statements:

Tredegar Corporation

Index to Financial Statements and Supplementary Data


		Page

	Report of Independent Registered Public Accounting Firm		~~40-41~~ 39-40
~~Financial Statements:~~
	Financial Statements:

	Consolidated Statements of Income for the Years Ended December 31, 2007, 2006 ~~2005~~ and ~~2004~~2005		42 41

	Consolidated Balance Sheets as of December 31, ~~2006~~ 2007 and ~~2005~~2006		43 42

	Consolidated Statements of Cash Flows for the Years Ended December 31, 2007, 2006 ~~2005~~ and ~~2004~~2005		44 43

	Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2007, 2006 ~~2005~~ and ~~2004~~2005		45 44

	Notes to Financial Statements		~~46-72~~ 45-72

	Selected Quarterly Financial Data (Unaudited)	73
	73

	~~(2)~~
	(2)	Financial statement schedules:

		None.

	(3)	Exhibits:

		See Exhibit Index on pages 80-81.

~~None.~~

~~(3)~~

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

~~Exhibits:~~

~~See Exhibit Index on pages 80-81.~~

~~REPORT~~ ~~OF INDEPENDENT~~ ~~REGISTERED PUBLIC ACCOUNTING FIRM~~

To the Board of Directors and Shareholders of

Tredegar ~~Corporation~~

We have completed integrated audits of Tredegar Corporation’s consolidated financial statements and of its internal control over financial reporting as of December 31, 2006 in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Corporation:

~~Consolidated Financial Statements~~

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Tredegar Corporation and its subsidiaries at December 31, ~~2006~~2007 and ~~2005,~~December 31, 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, ~~2006~~2007 in conformity with accounting principles generally accepted in the United States of America. ~~These~~Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, 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, ~~are the responsibility~~for maintaining effective internal control over financial reporting and for its assessment of the ~~Company’s management.~~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 ~~an opinion~~opinions on these financial statements, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits ~~of these statements~~ in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the ~~audit~~audits to obtain reasonable

assurance about whether the financial statements are free of material ~~misstatement. An audit~~misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements ~~includes~~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 ~~opinion.~~

~~Index~~

As discussed in Note 1 to the consolidated financial statements, the Company changed the method in which it accounts for its defined benefit and other postretirement plans and its share-based compensation in 2006.

~~Internal Control Over Financial Reporting~~

Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of December 31, 2006 based on criteria established in ~~Internal Control - Integrated Framework~~ issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006 based on criteria established in ~~Internal Control - Integrated Framework~~ issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides 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.

As discussed in Note 1 to the consolidated financial statements, the Company changed the way in which it accounts for uncertain tax positions effective January 1, 2007, share-based compensation effective January 1, 2006, and defined benefit pension and other postretirement plans effective December 31, 2006.

PricewaterhouseCoopers LLP
Richmond, Virginia
March 4, 2008

~~PricewaterhouseCoopers LLP~~

~~Richmond, Virginia~~

CONSOLIDATED STATEMENTS OF INCOME

Tredegar Corporation and Subsidiaries


Years Ended December 31	2007			2006		2005

(In Thousands, Except Per-Share Data)

Revenues and other:
Sales	$	922,583		$	937,561	$	808,464
Other income (expense), net		1,782			1,444		(2,211	)

		924,365			939,005		806,253


Costs and expenses:
Cost of goods sold		761,509			779,376		672,465
Freight		19,808			22,602		20,276
Selling, general and administrative		68,501			64,082		61,007
Research and development		8,354			8,088		8,982
Amortization of intangibles		149			149		299
Interest expense		2,721			5,520		4,573
Asset impairments and costs associated with exit and disposal activities		4,027			4,080		15,782

Total		865,069			883,897		783,384

Income from continuing operations before income taxes		59,296			55,108		22,869
Income taxes		24,366			19,791		9,497

Income from continuing operations		34,930			35,317		13,372
Income (loss) from discontinued operations		(19,681	)		2,884		2,857

Net income	$	15,249		$	38,201	$	16,229

Earnings (loss) per share:
Basic:
Continuing operations	$	.91		$	.92	$	.35
Discontinued operations		(.51	)		.07		.07

Net income	$	.40		$	.99	$	.42

Diluted:
Continuing operations	$	.90		$	.91	$	.35
Discontinued operations		(.51	)		.07		.07

Net income	$	.39		$	.98	$	.42

~~March 1, 2007~~See accompanying notes to financial statements.

CONSOLIDATED BALANCE SHEETS

Tredegar Corporation and Subsidiaries


December 31	2007			2006

(In Thousands, Except Share Data)

Assets
Current assets:
Cash and cash equivalents	$	48,217		$	40,898

Accounts and notes receivable, net of allowance for doubtful accounts and sales returns of $5,198 in 2007 and $7,388 in 2006		97,064			106,955
Income taxes recoverable		323			10,975
Inventories		48,666			48,664
Deferred income taxes		9,172			6,055
Prepaid expenses and other		4,077			4,428
Current assets of discontinued operation		37,750			35,275

Total current assets		245,269			253,250

Property, plant and equipment, at cost:
Land and land improvements		7,278			8,497
Buildings		81,449			77,804
Machinery and equipment		548,961			521,650

Total property, plant and equipment		637,688			607,951
Less accumulated depreciation		368,605			320,516

Net property, plant and equipment		269,083			287,435
Other assets and deferred charges		116,759			63,712
Goodwill and other intangibles (other intangibles of $464 in 2007 and $581 in 2006)		135,907			132,237
Noncurrent assets of discontinued operation		17,460			45,153

Total assets	$	784,478		$	781,787


Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	67,161		$	54,020
Accrued expenses		33,676			38,790
Current portion of long-term debt		540			678
Current liabilities of discontinued operation		17,152			18,522

Total current liabilities		118,529			112,010
Long-term debt		81,516			61,842
Deferred income taxes		68,625			65,732
Other noncurrent liabilities		15,662			14,299
Noncurrent liabilities of discontinued operation		8,818			11,309

Total liabilities		293,150			265,192

Commitments and contingencies (Notes 13 and 16)
Shareholders’ equity:
Common stock (no par value):
Authorized 150,000,000 shares;
Issued and outstanding - 34,765,450 shares in 2007 and 39,286,079 in 2006 (including restricted stock)		51,444			120,508
Common stock held in trust for savings restoration plan (59,222 shares in 2007 and 58,632 in 2006)		(1,303	)		(1,291	)
Accumulated other comprehensive income (loss):
Foreign currency translation adjustment		40,610			21,522
Gain (loss) on derivative financial instruments		(1,204	)		654
Pension and other postretirement benefit adjustments		(3,767	)		(21,211	)
Retained earnings		405,548			396,413

Total shareholders’ equity		491,328			516,595

Total liabilities and shareholders’ equity	$	784,478		$	781,787

~~Index~~See accompanying notes to financial statements.

~~CONSOLIDATED~~ ~~STATEMENTS OF INCOME~~

~~Tredegar Corporation and Subsidiaries~~

Years Ended December 31
2006

2005

2004
(In Thousands, Except Per-Share Data)

Revenues and other:

Sales
$
1,116,525
$ 956,969 $ 861,165
Other income (expense), net
1,444
(544 ) 15,604

1,117,969
956,425 876,769

Costs and expenses:

Cost of goods sold
944,839
810,621 717,120
Freight
28,096
24,691 22,398
Selling, general and administrative
68,360
64,723 60,030
Research and development
8,088
8,982 15,265
Amortization of intangibles
149
299 330
Interest
5,520
4,573 3,171
Asset impairments and costs associated with exit and disposal activities

4,080
16,334 22,973
Total
1,059,132
930,223 841,287
Income from continuing operations
before income taxes
58,837
26,202 35,482
Income taxes
20,636
9,973 9,222
Income from continuing operations
38,201
16,229 26,260
Discontinued operations:
Gain from venture capital investment activities (including an after-tax gain on a tax-related item of $2,275 in 2004)
-
- 2,921
Income from discontinued operations
-
- 2,921
Net income

$
38,201
$ 16,229 $ 29,181
Earnings per share:

Basic:
Continuing operations
$
.99
$ .42 $ .69
Discontinued operations
-
- .08
Net income
$
.99
$ .42 $ .77
Diluted:
Continuing operations
$
.98
$ .42 $ .68
Discontinued operations
-
- .08
Net income
$
.98
$ .42 $ .76

See accompanying notes to financial statements.

~~Index~~

~~CONSOLIDATED BALANCE SHEETS~~

~~Tredegar Corporation and Subsidiaries~~

December 31
2006

2005
(In Thousands, Except Share Data)

Assets

Current assets:
Cash and cash equivalents
$
40,898
$ 23,434
Accounts and notes receivable, net of allowance for doubtful accounts and sales returns of $8,559 in 2006 and $5,423 in 2005
121,834
119,330
Income taxes recoverable
10,975
7,163
Inventories
68,930
62,438
Deferred income taxes
6,055
7,778
Prepaid expenses and other
4,558
4,224
Total current assets
253,250
224,367
Property, plant and equipment, at cost:
Land and land improvements
12,540
12,496
Buildings
95,877
91,400
Machinery and equipment
567,989
528,821
Total property, plant and equipment
676,406
632,717
Less accumulated depreciation
350,643
309,841
Net property, plant and equipment
325,763
322,876
Other assets and deferred charges
64,078
96,527
Goodwill and other intangibles (other intangibles of $581 in 2006 and $712 in 2005)
138,696
137,988
Total assets
$
781,787
$ 781,758
Liabilities and Shareholders' Equity

Current liabilities:
Accounts payable $
69,426
$ 61,731
Accrued expenses
41,906
36,031
Current portion of long-term debt
678
-
Total current liabilities
112,010
97,762
Long-term debt
61,842
113,050
Deferred income taxes
75,772
74,287
Other noncurrent liabilities
15,568
11,297
Total liabilities 265,192 296,396
Commitments and contingencies (Notes 13 and 16)
Shareholders' equity:
Common stock (no par value):
Authorized 150,000,000 shares;
Issued and outstanding - 39,286,079 shares in 2006 and 38,737,016 in 2005 (including restricted stock)
120,508
110,706
Common stock held in trust for savings restoration plan (58,632 shares in 2006 and 58,156 in 2005)
(1,291
)
(1,284 )
Unearned compensation on restricted stock (109,000 shares in 2005)
-
(966 )
Accumulated other comprehensive income (loss):
Unrealized gain on available-for-sale securities
-
23
Foreign currency translation adjustment
21,522
14,114
Gain on derivative financial instruments
654
776
Pension and other postretirement benefit adjustments
(21,211
)
(2,434 )
Retained earnings
396,413
364,427
Total shareholders' equity
516,595
485,362
Total liabilities and shareholders' equity
$
781,787
$ 781,758

~~Index~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~Tredegar Corporation and Subsidiaries~~

Years Ended December 31
2006

2005

2004
(In Thousands)

Cash flows from operating activities:

Net income
$
38,201
$ 16,229 $ 29,181
Adjustments for noncash items:
Depreciation
44,132
38,490 34,092
Amortization of intangibles
149
299 330
Deferred income taxes
10,155
9,217 1,947
Accrued pension income and postretirement benefits
3,178
(1,979 ) (3,999 )
Stock option-based compensation expense
970
- -
Loss from write-down of investment in Novalux
-
5,000 -
Gain on sale of assets
(317
)
(4,174 ) (7,560 )
Loss on asset impairments and divestitures
1,150
9,378 13,811
Changes in assets and liabilities, net of effects from acquisitions and divestitures:
Accounts and notes receivable
151
(3,361 ) (31,711 )
Inventories
(5,080
)
2,803 (13,962 )
Income taxes recoverable
1,991
(12,966 ) 61,538
Prepaid expenses and other
(275
)
530 (258 )
Accounts payable and accrued expenses
11,592
(3,590 ) 12,269
Other, net
(1,392
)
(2,173 ) (1,858 )
Net cash provided by operating activities
104,605
53,703 93,820
Cash flows from investing activities:

Capital expenditures
(40,573
)
(62,543 ) (55,651 )
Acquisitions
-
- (1,420 )
Novalux investment
(542
)
(1,095 ) (5,000 )
Proceeds from the sale of assets and property disposals
475
8,018 10,209
Other, net
-
636 (310 )
Net cash used in investing activities
(40,640
)
(54,984 ) (52,172 )
Cash flows from financing activities:

Dividends paid
(6,221
)
(6,190 ) (6,154 )
Debt principal payments and financing costs
(54,530
)
(147,846 ) (72,750 )
Borrowings
4,000
156,500 36,573
Proceeds from exercise of stock options
9,702
1,130 1,871
Net cash (used in) provided by financing activities
(47,049
)
3,594 (40,460 )
Effect of exchange rate changes on cash

548
(1,873 ) 1,863
Increase in cash and cash equivalents

17,464
440 3,051
Cash and cash equivalents at beginning of period

23,434
22,994 19,943
Cash and cash equivalents at end of period

$
40,898
$ 23,434 $ 22,994

Supplemental cash flow information:
Interest payments (net of amount capitalized)
$
5,734
$ 4,388 $ 3,264
Income tax payments (refunds), net
$
7,828
$ 14,915 $ (50,006 )

See accompanying notes to financial statements.

~~Index~~

~~CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY~~

~~Tredegar Corporation and Subsidiaries~~

Accumulated Other
Comprehensive Income (Loss)
Unrealized Gain Pension &
Trust for Unearned Gain on Foreign (Loss) on Other Post- Total
Savings Restricted Available- Currency Derivative retirement Share-
Common Stock Retained Restora- Stock for-Sale Trans- Financial Benefit holders'
Shares Amount Earnings tion Plan Compensation Securities lation Instruments Adjust. Equity
(In Thousands, Except Share and Per-Share Data)

Balance December 31, 2003 38,176,821 $ 104,991 $ 331,289 $ (1,212 ) $ - $ 2,770 $ 9,997 $ 444 $ (880 ) $ 447,399
Comprehensive income (loss):
Net income - - 29,181 - - - - - - 29,181
Other comprehensive income (loss):
Available-for-sale securities adjustment, net of reclassification adjustment (net of tax of $1,556) - - - - - (2,770 ) - - - (2,770 )
Foreign currency translation adjustment (net of tax of $4,500)
- - - - - - 8,404 - - 8,404
Reclassification of foreign currency translation loss realized on the sale of the films business in Argentina (net of tax of $625) - - - - - - 1,161 - - 1,161
Derivative financial instruments adjustment (net of tax of $247)
- - - - - - - 440 - 440
Minimum pension liability adjustment (net of tax of $149) - - - - - - - - (276 ) (276 )
Comprehensive income 36,140
Cash dividends declared ($.16 per share) - - (6,154 ) - - - - - - (6,154 )
Restricted stock grant, net of forfeitures 120,000 1,674 - - (1,674 ) - - - - -
Restricted stock amortization - - - - 272 - - - - 272
Issued upon exercise of stock options (including related income tax benefits of $868) & other
300,701 2,785 - - - - - - - 2,785
Tredegar common stock purchased by trust for savings restoration plan
- - 62 (62 ) - - - - - -
Balance December 31, 2004 38,597,522 109,450 354,378 (1,274 ) (1,402 ) - 19,562 884 (1,156 ) 480,442
Comprehensive income (loss):
Net income - - 16,229 - - - - - - 16,229
Other comprehensive income (loss):
Available-for-sale securities adjustment, net of reclassification adjustment (net of tax of $13)
- - - - - 23 - - - 23
Foreign currency translation adjustment (net of tax of $2,933) - - - - - - (5,448 ) - - (5,448 )
Derivative financial instruments adjustment (net of tax of $60) - - - - - - - (108 ) - (108 )
Minimum pension liability adjustment (net of tax of $630)
- - - - - - - - (1,278 ) (1,278 )
Comprehensive income 9,418
Cash dividends declared ($.16 per share) - - (6,190 ) - - - - - - (6,190 )
Restricted stock grant, net of forfeitures and vested shares (11,000 ) (49 ) - - 49 - - - - -
Restricted stock amortization - - - - 387 - - - - 387
Issued upon exercise of stock options (including related income tax benefits of $175) & other
150,494 1,305 - - - - - - - 1,305
Tredegar common stock purchased by trust for savings restoration plan
- - 10 (10 ) - - - - - -
Balance December 31, 2005 38,737,016 110,706 364,427 (1,284 ) (966 ) 23 14,114 776 (2,434 ) 485,362
Comprehensive income (loss):
Net income - - 38,201 - - - - - - 38,201
Other comprehensive income (loss):
Available-for-sale securities adjustment, net of reclassification adjustment (net of tax of $13) - - - - - (23 ) - - - (23 )
Foreign currency translation adjustment (net of tax of $3,921)
- - - - - - 7,408 - - 7,408
Derivative financial instruments adjustment (net of tax of $60) - - - - - - - (122 ) - (122 )
Minimum pension liability adjustment (net of tax of $422)
- - - - - - - - 821 821
Comprehensive income 46,285
Cumulative adjustment for the adoption of SFAS No. 158 relating to pension and other postretirement benefits (net of tax of $11,354) - - - - - - - - (19,598 ) (19,598 )
Cash dividends declared ($.16 per share) - - (6,221 ) - - - - - - (6,221 )
Stock-based Compensation expense (25,500 ) 1,066 - - - - - - - 1,066
Restricted stock amortization - (966 ) - - 966 - - - - -
Issued upon exercise of stock options (including related income tax benefits of $678) & other 574,563 9,702 - - - - - - - 9,702
Tredegar common stock purchased by trust for savings restoration plan - - 6 (7 ) - - - - - (1 )
Balance December 31, 2006 39,286,079 $ 120,508 $ 396,413 $ (1,291 ) $ - $ - $ 21,522 $ 654 $ (21,211 ) $ 516,595

See accompanying notes to financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Tredegar Corporation and Subsidiaries


Years Ended December 31	2007			2006			2005

(In Thousands)

Cash flows from operating activities:
Net income	$	15,249		$	38,201		$	16,229
Adjustments for noncash items:
Depreciation		45,892			44,132			38,490
Amortization of intangibles		149			149			299
Deferred income taxes		(24,241	)		10,155			9,217
Accrued pension and postretirement benefits		(1,735	)		3,178			(1,979	)
Stock option-based compensation expense		978			970			—
Loss from write-down of investment		2,095			—			5,000
Gain on sale of assets		(2,699	)		(317	)		(4,174	)
Loss on asset impairments and divestitures		32,287			1,150			9,378
Changes in assets and liabilities, net of effects of acquisitions and divestitures:
Accounts and notes receivable		15,786			151			(3,361	)
Inventories		4,099			(5,080	)		2,803
Income taxes recoverable		10,478			1,991			(12,966	)
Prepaid expenses and other		764			(275	)		530
Accounts payable and accrued expenses		(2,932	)		11,592			(3,590	)
Other, net		(616	)		(1,392	)		(2,173	)

Net cash provided by operating activities		95,554			104,605			53,703

Cash flows from investing activities:
Capital expenditures		(20,643	)		(40,573	)		(62,543	)
Investments, including Harbinger ($10 million), a drug delivery company ($6.5 million) and real estate ($6.2 million) in 2007		(23,513	)		(542	)		(1,095	)
Proceeds from the sale of assets and property disposals and reimbursements from customers for purchases of equipment		7,871			475			8,018
Other, net		—			—			636

Net cash used in investing activities		(36,285	)		(40,640	)		(54,984	)

Cash flows from financing activities:
Dividends paid		(6,126	)		(6,221	)		(6,190	)
Debt principal payments		(39,964	)		(54,530	)		(147,846	)
Borrowings		59,500			4,000			156,500
Repurchases of Tredegar common stock, net of settlement payable of $3,368		(73,959	)		—			—
Proceeds from exercise of stock options		6,471			9,702			1,130

Net cash used in financing activities		(54,078	)		(47,049	)		3,594

Effect of exchange rate changes on cash		2,128			548			(1,873	)

Increase in cash and cash equivalents		7,319			17,464			440
Cash and cash equivalents at beginning of period		40,898			23,434			22,994

Cash and cash equivalents at end of period	$	48,217		$	40,898		$	23,434


Supplemental cash flow information:
Interest payments (net of amount capitalized)	$	2,712		$	5,734		$	4,388
Income tax payments (refunds), net		16,989			7,828			14,915

~~Index~~See accompanying notes to financial statements.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Tredegar Corporation and Subsidiaries


																Accumulated Other Comprehensive Income (Loss)
																Accumulated Other Comprehensive Income (Loss)

																Unrealized Gain on Available- for-Sale Securities							Gain (Loss) on Derivative Financial Instruments			Pension & Other Post- retirement Benefit Adjust.
									Trust for Savings Restora- tion Plan			Unearned Restricted Stock Compensation								Foreign Currency Trans- lation									Total Share- holders’ Equity
	Common Stock
						Retained Earnings
	Shares		Amount			Retained Earnings

(In Thousands, Except Share and Per-Share Data)


Balance December 31, 2004	38,597,522		$	109,450		$	354,378		$	(1,274	)		$	(1,402	)		$	—		$	19,562		$	884		$	(1,156	)	$	480,442

Comprehensive income (loss):
Net income	—			—			16,229			—				—				—			—			—			—			16,229
Other comprehensive income (loss):
Available-for-sale securities adjustment, net of reclassification adjustment (net of tax of $13)	—			—			—			—				—				23			—			—			—			23
Foreign currency translation adjustment (net of tax of $2,933)	—			—			—			—				—				—			(5,448	)		—			—			(5,448	)
Derivative financial instruments adjustment (net of tax of $60)	—			—			—			—				—				—			—			(108	)		—			(108	)
Minimum pension liability adjustment (net of tax of $630)	—			—			—			—				—				—			—			—			(1,278	)		(1,278	)

Comprehensive income																														9,418
Cash dividends declared ($.16 per share)	—			—			(6,190	)		—				—				—			—			—			—			(6,190	)
Restricted stock grant, net of forfeitures and vested shares	(11,000	)		(49	)		—			—				49				—			—			—			—			—
Restricted stock amortization	—			—			—			—				387				—			—			—			—			387
Issued upon exercise of stock options (including related income tax benefits of $175) & other	150,494			1,305			—			—				—				—			—			—			—			1,305
Tredegar common stock purchased by trust for savings restoration plan	—			—			10			(10	)			—				—			—			—			—			—

Balance December 31, 2005	38,737,016			110,706			364,427			(1,284	)			(966	)			23			14,114			776			(2,434	)		485,362

Comprehensive income (loss):
Net income	—			—			38,201			—				—				—			—			—			—			38,201
Other comprehensive income (loss):
Available-for-sale securities adjustment, net of reclassification adjustment (net of tax of $13)	—			—			—			—				—				(23	)		—			—			—			(23	)
Foreign currency translation adjustment (net of tax of $3,921)	—			—			—			—				—				—			7,408			—			—			7,408
Derivative financial instruments adjustment (net of tax of $60)	—			—			—			—				—				—			—			(122	)		—			(122	)
Minimum pension liability adjustment (net of tax of $422)	—			—			—			—				—				—			—			—			821			821

Comprehensive income																														46,285
Cumulative adjustment for the adoption of SFAS No. 158 relating to pension and other postretirement benefits (net of tax of $11,354)	—			—			—			—				—				—			—			—			(19,598	)		(19,598	)
Cash dividends declared ($.16 per share)	—			—			(6,221	)		—				—				—			—			—			—			(6,221	)
Stock-based compensation expense	(25,500	)		1,066			—			—				—				—			—			—			—			1,066
Restricted stock amortization	—			(966	)		—			—				966				—			—			—			—			—
Issued upon exercise of stock options (including related income tax benefits of $678) & other	574,563			9,702			—			—				—				—			—			—			—			9,702
Tredegar common stock purchased by trust for savings restoration plan	—			—			6			(7	)			—				—			—			—			—			(1	)

Balance December 31, 2006	39,286,079			120,508			396,413			(1,291	)			—				—			21,522			654			(21,211	)		516,595

Comprehensive income (loss):
Net income	—			—			15,249			—				—				—			—			—			—			15,249
Other comprehensive income (loss):
Foreign currency translation adjustment (net of tax of $10,428)	—			—			—			—				—				—			19,088			—			—			19,088
Derivative financial instruments adjustment (net of tax of $1,166)	—			—			—			—				—				—			—			(1,858	)		—			(1,858	)
Net actuarial gains or losses and prior service costs (net of tax of $10,209)	—			—			—			—				—				—			—			—			16,218			16,218
Amortization of net actuarial gains or losses and prior service costs (net of tax of $702)	—			—			—			—				—				—			—			—			1,226			1,226

Comprehensive income																														49,923
Cash dividends declared ($.16 per share)	—			—			(6,126	)		—				—				—			—			—			—			(6,126	)
Stock-based compensation expense	(10,000	)		1,654			—			—				—				—			—			—			—			1,654
Issued upon exercise of stock options (including related income tax benefits of $491) & other	322,871			6,609			—			—				—				—			—			—			—			6,609
Repurchases of Tredegar common stock	(4,833,500	)		(77,327	)		—			—				—				—			—			—			—			(77,327	)
Tredegar common stock purchased by trust for savings restoration plan	—			—			12			(12	)			—				—			—			—			—			—

Balance December 31, 2007	34,765,450		$	51,444		$	405,548		$	(1,303	)		$	—			$	—		$	40,610		$	(1,204	)	$	(3,767	)	$	491,328

~~NOTES TO FINANCIAL STATEMENTS~~See accompanying notes to financial statements.

~~Tredegar Corporation and Subsidiaries~~

~~(In thousands, except Tredegar share and per-share amounts and unless otherwise stated)~~

NOTES TO FINANCIAL STATEMENTS

Tredegar Corporation and Subsidiaries
(In thousands, except Tredegar share and per-share amounts and unless otherwise stated)


1	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Nature of Operations.Tredegar Corporation and subsidiaries ~~(“Tredegar”~~(collectively “Tredegar,” “we,” “us” or “our”) are engaged in the manufacture of plastic films and aluminum extrusions. See Note 15 regarding restructurings and Note 17 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. Prior periods have been reclassified to conform to the current period presentation of discontinued operations.

The preparation of financial statements in conformity with generally accepted accounting principles 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 foreign subsidiaries, 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 foreign subsidiaries where the U.S. Dollar is the functional currency.

Transaction and remeasurement gains or losses included in income were not material in 2007, 2006 ~~2005~~ and ~~2004.~~2005. These amounts do not include the effects between reporting periods that exchange rate changes have on income of our foreign locations 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, ~~2006~~2007 and ~~2005,~~2006, Tredegar had cash and cash equivalents of ~~$40,898~~$48,217 and ~~$23,434,~~$40,898, respectively, including funds held in foreign locations of $24,559 and $19,118, ~~and $14,890,~~ 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 Notes Receivable. 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 insurance recoveries due within one year and value-added taxes related to certain foreign subsidiaries.

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 accounts, and gains or losses thereon are included in income.

~~Index~~ On January 1, 2007, we adopted Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) No. AUG AIR-1, Accounting for Planned Major Maintenance Activities, which had no impact on our results of operations or financial condition reported in prior periods. The FSP eliminates the accrual method of accounting for major maintenance activities, but continues to permit the use of the direct expensing, built-in overhaul and deferral methods.

Property, plant and equipment include capitalized interest of $577 in 2007, $885 in 2006 ~~$1,387~~and $1,179 in ~~2005 and $762 in 2004.~~

2005.

Depreciation is computed primarily by the straight-line method based on the estimated useful lives of the assets, which range from 15 to 4025 years for buildings and land improvements and 3 to 2511 years for machinery and equipment. The average depreciation period for machinery and equipment is approximately 1310 years in Film Products and ~~15 years~~for the continuing operations of Aluminum Extrusions.

Investments in ~~Aluminum Extrusions.~~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 at the time the investment is made. We are required to account for investments under the consolidation method in situations where we are the primary beneficiary of a variable interest entity (we have no investments that meet this condition). The primary beneficiary is the party in a variable interest entity that will absorb a majority of the entity’s expected losses, receive a majority of the entity’s expected residual returns, or both. If we are not deemed the primary beneficiary in an investment in a private entity then we select either: (i) the fair value method or (ii) either the (a) the cost method if we do not have significant influence over operating and financial policies of the company or (b) the equity method if we do have significant influence.

FASB Statement No. 157, Fair Value Measurements, 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 the carrying value may not be recoverable, or, at a minimum, on an annual basis as of December 1 of each year. Impairment reviews may result in recognition of losses. We have made determinations as to what our reporting units are and what amounts of goodwill, intangible assets, other assets and liabilities should be allocated to those reporting units.

The components of goodwill and other intangibles at December 31, ~~2006~~2007 and ~~2005,~~2006, and related amortization periods for continuing operations are as follows:



December 31	2007		2006		Amortization Periods

Carrying value of goodwill:
Film Products	$	104,507	$	103,562	Not amortized
Aluminum Extrusions		30,935		28,094	Not amortized

Total carrying value of goodwill		135,442		131,656

Carrying value of other intangibles:
Film Products (cost basis of $1,172 in 2007 and 2006)		465		581	Not more than 17 yrs.

Total carrying value of other intangibles		465		581

Total carrying value of goodwill and other intangibles	$	135,907	$	132,237

Excluded from the table above is goodwill for the Aluminum Extrusions reporting unit of $6,459 which was allocated to discontinued aluminum extrusions operations in Canada. This goodwill was allocated using the estimated fair value of the aluminum extrusions business in Canada (the after-tax cash flow expected from disposal of approximately $30,000 when it was classified as held for sale at the end of December 2007), and the estimated fair value of the aluminum extrusions business in the U.S. retained. The fair value of the aluminum extrusions business in the U.S. was estimated at approximately $145,000 using comparable enterprise value-to-EBITDA multiples as of December 31, 2007. See Note 17 for more information on discontinued operations.

December 31
2006
2005 Amortization Periods
Carrying value of goodwill:
Film Products
$
103,562
$ 102,732 Not amortized
Aluminum Extrusions
34,553
34,544 Not amortized
Total carrying value of goodwill
138,115
137,276
Carrying value of other intangibles:
Film Products (cost basis of $1,172 in 2006 and 2005)
581
712 Not more than 17 yrs.
Total carrying value of other intangibles
581
712
Total carrying value of goodwill and other intangibles
$
138,696
$ 137,988

A reconciliation of the beginning and ending balances of goodwill and other intangibles for each of the three years in the period ended December 31, ~~2006~~2007 is as follows:

2006
2005 2004
Goodwill and other intangibles:
Net carrying value, beginning of year
$
137,988
$ 142,983 $ 140,548
Amortization
(149
)
(299 ) (330 )
Decrease due to sale of AFBS (formerly Therics) assets
-
(4,329 ) -
Increase (decrease) due to foreign currency translation and other
857
(367 ) 2,765
Total carrying value of goodwill and other intangibles
$
138,696
$ 137,988 $ 142,983



	2007			2006			2005

Goodwill and other intangibles:
Net carrying value, beginning of year	$	132,237		$	131,529		$	136,524
Amortization		(149	)		(149	)		(299	)
Decrease due to sale of AFBS (formerly Therics) assets		—			—			(4,329	)
Increase (decrease) due to foreign currency translation and other		3,819			857			(367	)

Total carrying value of goodwill and other intangibles	$	135,907		$	132,237		$	131,529

Impairment of Long-Lived Assets.We review long-lived assets for possible impairment when events indicate that 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 recognized. Measurement of the impairment loss is based on the estimated fair value of the asset, generally determined on a discounted after-tax cash flow basis.

Assets to be disposed of are reported at the lower of their carrying amount or estimated fair value less cost to sell, with an impairment loss recognized for any writedown 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 the company. Our policy is to fund our pension plans at amounts not less than the minimum requirements of the Employee Retirement Income Security Act of 1974 and to fund postretirement benefits other than pensions when claims are incurred. In September 2006, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 158, ~~Employers'~~Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No 87, 88, 106 and 132(R),effective forpublic companies for fiscal years ending after December 15, 2006. Accordingly, we were required to recognize the funded status of our pension and other postretirement plans in our December 31, 2006 financial statements, which resulted in a reduction of prepaid pension cost of $27,651, ~~(included in “Other assets and deferred charges” in the consolidated balance sheets),~~ an increase in related liabilities of $3,301, ~~(included in “Other noncurrent liabilities” in the consolidated balance sheets),~~ a decrease in noncurrent deferred income liabilities of $11,354 and a decrease in shareholders’ equity of $19,598. See Note 11 for more information.

~~Index~~

Postemployment Benefits.We periodically provide certain postemployment benefits purely on a discretionary basis. Related costs for these programs are accrued when it is probable that benefits will be paid and amounts can be reasonably estimated. All other postemployment benefits are either accrued under current benefit plans or are not material to our financial position or results of operations.

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 collectibility 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 14). We accrue U.S. federal income taxes on unremitted earnings of our foreign subsidiaries.

On January 1, 2007, we adopted a new accounting standard for uncertain tax positions (FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes), which had no impact on our results of operations or financial condition reported in prior periods. Under the new standard, in order to report the benefit of a tax position in our financial statements, we must 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. The 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:

2006

2005

2004
Weighted average shares outstanding used to compute basic earnings per share
38,670,757
38,471,348 38,294,996
Incremental shares attributable to stock options and restricted stock
260,305
125,356 211,688
Shares used to compute diluted earnings per share
38,931,062
38,596,704 38,506,684



	2007		2006		2005

Weighted average shares outstanding used to compute basic earnings per share		38,532,036		38,670,757		38,471,348
Incremental shares attributable to stock options and restricted stock		156,467		260,305		125,356

Shares used to compute diluted earnings per share		38,688,503		38,931,062		38,596,704

Incremental shares attributable to stock options and restricted stock are computed using the average market price during the related period. During 2007, 2006 and 2005, 184,960, 1,128,393 and ~~2004, 1,128,393,~~ 2,024,690 ~~and 2,073,990~~ of average out-of-the-money options to purchase shares were excluded from the calculation of incremental shares attributable to stock options and restricted stock.

Stock-Based Employee Compensation Plans.Effective January 1, 2006, we adopted SFAS No. 123(R), Share-Based Payment (“SFAS 123(R)”). SFAS 123(R) requires us to record compensation expense for all share-based awards. Because we used the modified prospective method in adopting SFAS 123(R), prior periods have not been restated. In addition, the cumulative adjustment (estimated forfeitures) relating to the adoption of SFAS 123(R) in the first quarter of 2006 of $96,000 has not been separately shown in the income statement due to immateriality.

~~Index~~

For periods presented prior to 2006, we applied Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations and provided the required pro forma disclosures of SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS 123”). Stock options, stock appreciation rights (“SARs”) and restricted stock grants are accounted for using the intrinsic value method under APB Opinion No. 25 and related interpretations whereby:

·
•	No compensation cost is recognized for fixed stock option or restricted stock grants unless the quoted market price of the stock at the measurement date (ordinarily the date of grant or award) is in excess of the amount the employee is required to pay; and

·
•	Compensation cost for SARs is recognized and adjusted up through the date of exercise or forfeiture based on the estimated number of SARs expected to be exercised multiplied by the difference between the market price of our stock and the amount the employee is required to pay (there were no SARs outstanding at December 31, 2005).

Had compensation cost for stock option grants been determined in 2005 ~~and 2004~~ based on the fair value at the grant dates, our income and diluted earnings per share from continuing operations would have been reduced to the pro forma amounts indicated below:

2005

2004
Income from continuing operations:
As reported $ 16,229 $ 26,260
Pro forma for stock option-based employee compensation cost, net of tax, based on the fair value method (1,073 ) (2,133 )
Pro forma income from continuing operations $ 15,156 $ 24,127
Basic earnings per share from continuing operations:
As reported $ .42 $ .69
Pro forma .39 .63
Diluted earnings per share from continuing operations:
As reported $ .42 $ .68
Pro forma .39 .63



	2005

Income from continuing operations:
As reported	$	13,372
Pro forma for stock option-based employee compensation cost, net of tax, based on the fair value method		(1,073	)

Pro forma income from continuing operations	$	12,299

Basic earnings per share from continuing operations:
As reported	$	.35
Pro forma		.32

Diluted earnings per share from continuing operations:
As reported	$	.35
Pro forma		.32

Stock option-based compensation expense included in determining net income ~~in 2006~~ under SFAS 123(R) was $978 ($629 after taxes or 2 cents per share) in 2007 and $970 ($676 after taxes or 2 cents per share). in 2006. Compensation cost related to restricted and ~~phantom stock~~other stock-based awards included in determining net income from continuing operations was $713 in 2007, $188 in 2006 and $386 in ~~2005 and $272 in 2004.~~

2005.

The fair value of each option was estimated as of the grant date using the Black-Scholes options-pricing model. The assumptions used in this model for valuing Tredegar stock options granted in ~~2006~~2007 and ~~2004~~2006 are as follows (there were no Tredegar stock options granted in 2005):

2006
2004
Dividend yield
1.1
%
1.2 %
Weighted average volatility percentage
38.3
%
45.0 %
Weighted average risk-free interest rate
4.7
%
3.1 %
Holding period (years):
Officers
6.0
n/a
Management
5.0
5.0
Other employees
n/a
3.0
Weighted average excercise price at date of grant (also weighted average market price at date of grant):
Officers
$
15.22
n/a
Management
15.32
$ 13.97
Other employees
n/a
13.95

~~Index~~



	2007			2006

Dividend yield		1.1	%		1.1	%
Weighted average volatility percentage		33.1	%		38.3	%
Weighted average risk-free interest rate		3.3	%		4.7	%
Holding period (years):
Officers		n/a			6.0
Management		5.0			5.0
Other employees		n/a			n/a
Weighted average excercise price at date of grant (also weighted average market price at date of grant):
Officers		n/a		$	15.22
Management	$	14.40			15.32
Other employees		n/a			n/a

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 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 ~~2006~~2007 and ~~2004~~2006 (there were no Tredegar stock options granted in 2005), and related estimated fair value at the date of grant, are as follows:

2006
2004
Stock options granted (number of shares):
Officers
107,500
n/a
Management
342,300
176,950
Other employees
n/a
161,675
Total
449,800
338,625
Estimated weighted average fair value of options per share at date of grant:
Officers
$
6.26
n/a
Management
5.69
$ 5.54
Other employees
n/a
4.32
Total estimated fair value of stock options granted (in thousands)

$
2,620
$
1,679

~~The table above excludes stock options granted to a consultant in 2004. The estimated fair value related to that grant of $50 was expensed in 2004 in conjunction with services rendered.~~



	2007	2006

Stock options granted (number of shares):
Officers	n/a	107,500
Management	4,000	342,300
Other employees	n/a	n/a

Total	4,000	449,800

Estimated weighted average fair value of options per share at date of grant:
Officers	n/a	$ 6.26
Management	$ 4.91	5.69
Other employees	n/a	n/a

Total estimated fair value of stock options granted (in thousands)	$ 20	$2,620

Additional disclosure of Tredegar stock options is included in Note 10.

AFBS, Inc. (formerly known as Therics, Inc. - see Note 15 for additional information regarding its restructuring in 2005) stock options granted in 2004 and assumptions used in determining related pro forma compensation expense are as follows (there were no significant grants of AFBS stock options after 2004):

Assumptions Used in Determining Pro Forma Comp. Expense for AFBS Stock Options Granted in 2004 & Other Data
Assumptions used in Black-Scholes Other assumptions and items:
options-pricing model: Vesting period (years) 0.4 - 4
Dividend yield 0.0% AFBS stock options granted:
Volatility percentage (a) 95% 3rd quarter 2004 7,906,149
Weighted average risk-free interest rate 4.1% 1st quarter 2004 30,809,000
Holding period (years) 7.0 Aggregate estimated fair value of options
Weighted average estimated fair value per share at date of grant:
of underlying stock at date of grant (b) $ .090 3rd quarter 2004 $ 584
Weighted average estimated fair value of 1st quarter 2004 $ 2,271
options per share at date of grant $ .074
(a) Volatility estimated for AFBS based on Orthovita, Inc. (NASDAQ: VITA), a comparable company.
(b) Estimated fair value of underlying stock equaled the stock option exercise price at date of grant.

~~Index~~

Financial Instruments.We use derivative financial instruments for the purpose of hedging aluminum price volatility and interest rate and currency exchange rate exposures that exist as part of ongoing business operations. Our derivative financial instruments are designated as and qualify as cash flow hedges and are recognized in the 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 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. 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 was immaterial in 2007, 2006 ~~2005~~ and ~~2004.~~2005.

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.

The cash flows related to financial instruments are classified in the statements of cash flows in a manner consistent with those of the transactions being hedged.

Comprehensive Income.Comprehensive income, which is included in the consolidated statement of shareholders’ equity, is defined as net income and other comprehensive income. Other comprehensive income includes changes in unrealized gains and losses on available-for-sale securities, foreign currency translation adjustments, unrealized gains and losses on derivative financial instruments and minimum pension liability adjustments, all recorded net of deferred income taxes directly in shareholders’ equity.

The available-for-sale securities adjustment included in the consolidated statement of shareholders’ equity is comprised of the following components:

2006

2005

2004
Available-for-sale securities adjustment:
Unrealized net holding gains (losses) arising during the period
$
20
$ 36 $ 1,872
Income taxes
(7
)
(13 ) (655 )
Reclassification adjustment for net losses (gains) realized in income
(56
)
- (6,134 )
Income taxes
20
- 2,147
Available-for-sale securities adjustment
$
(23
)
$ 23 $ (2,770 )



		2006			2005

Available-for-sale securities adjustment:
Unrealized net holding gains (losses) arising during the period	$	20		$	36
Income taxes		(7	)		(13	)
Reclassification adjustment for net losses (gains) realized in income		(56	)		—
Income taxes		20			—

Available-for-sale securities adjustment	$	(23	)	$	23

Recently Issued Accounting Standards. In ~~September 2006,~~December 2007, the FASB issued ~~FASB Staff Position ("FSP")~~SFAS No. ~~AUG AIR-1,~~ ~~Accounting~~141(R), Business Combinations, and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements. SFAS No. 141 is applied prospectively to business combinations for ~~Planned Major Maintenance Activities.~~ ~~The FSP~~which the acquisition date is ~~effective for~~on or after the beginning of the first ~~fiscal year~~annual reporting period beginning on or after December 15, ~~2006.~~2008. The ~~FSP eliminates~~new accounting standard for noncontrolling interests (sometimes referred to as minority interests) applies to all fiscal years and interim periods beginning on or after December 15, 2008. Early application is prohibited for both standards. We currently do not have noncontrolling or minority interests in our consolidated financial statements. We will apply the ~~accrual~~new standards when required and applicable.


2	INVESTMENTS

During the third quarter of 2007, we invested $6,500 in a privately held drug delivery company representing ownership on a fully diluted basis of approximately 23%. The company is developing and commercializing state of the art drug delivery systems designed to improve patient compliance and outcomes. The investment is accounted for under the fair value method. We elected the fair value option over the equity method of accounting since our investment objectives are similar to those of venture capitalists, which typically do not have controlling financial interests (venture capital funds use the fair value method to account for ~~major maintenance activities, but continues~~their investment portfolios). At December 31, 2007, the fair value of our investment (also the carrying value included in “Other assets and deferred charges” in our balance sheet) equaled the amount invested.

On the date of our investment (August 31, 2007), we believe that the amount we paid for our ownership interest and liquidation preferences was based on Level 2 inputs, including investments by other investors. Subsequent to ~~permit~~August 31, 2007, and until the ~~use~~next round of financing, we believe fair value estimates drop to Level 3 inputs since there is no secondary market for our ownership interest. In addition, the company currently has no product sales. Accordingly, after the latest financing and until the next round of financing or 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 sales, costs, expenses, capital expenditures and working capital investment) and discounting of these factors for the high degree of risk. As a result, an increase in our estimate of the ~~direct expensing, built-in overhaul~~fair value of our ownership interest is unlikely unless a significant new round of financing, merger or initial public offering indicates a higher value. However, if the company does not meet its development and ~~deferral methods. The FSP also continues~~commercialization milestones and there are indications that the amount or timing of its projected cash flows or related risks are unfavorable versus plans as of August 31, 2007, or a new round of financing or other significant financial transaction indicates a lower value, then our estimate of the fair value of our ownership interest in the company is likely to ~~require accruals or deferrals~~decline.

Had we not elected to account for ~~interim periods~~our investment under the fair value method, we would have been required to use the equity method of ~~annual~~accounting.

Our valuation of intangibles indicates that there were no in-process research & development costs that ~~clearly benefit two~~would have been written off in applying the purchase accounting and the equity method at August 31, 2007. We would not have been allocated any profits or ~~more interim periods. We are evaluating the FSP and have not determined whether or not it will have a material effect on our financial position or results of operations.~~

~~Index~~

~~In July 2006, the FASB issued FASB Interpretation No. 48,~~ ~~Accounting for Uncertainty in Income Taxes~~~~, clarifying the accounting for uncertain tax positions. The interpretation prescribes a recognition threshold and measurement attribute~~losses for the ~~financial statement recognition and measurement of a tax position taken or expected to be taken~~year ended December 31, 2007 based on the formulas contained in ~~a tax return. This interpretation is effective~~the company’s operating agreement. The condensed balance sheets for ~~fiscal years beginning after December 15, 2006 with earlier application encouraged. We are evaluating~~ the ~~interpretation and have not determined if it will have a material effect on our financial position or results of operations.~~

2	~~ACQUISITIONS AND INVESTMENTS~~

~~On July 23, 2004, a subsidiary of Tredegar purchased the assets of Yaheng Perforated Film Material Co., Ltd. ("Yaheng") for approximately $1,420. Yaheng, based in Shanghai, China, had 21 employees~~drug delivery company at the acquisition date and manufactures apertured nonwovens used primarily in personal care markets. The purchase price was allocated to accounts receivable ($26), inventories ($45), property, plant and equipment ($288), patents ($822), employment agreements ($150), goodwill ($215), deferred income tax liabilities ($56) and accrued expenses ($70). Property, plant and equipment is being depreciatedAugust 31, 2007 (shown on a ~~straight-line~~pro forma basis ~~over approximately 10 years, patents are being amortized on~~for a ~~straight-line basis over approximately 7 years,~~second closing of its recent financing in September 2007) and ~~employment agreements are being amortized on a straight-line basis over approximately 3 years. The operating results for Yaheng have been included in the consolidated~~December 31, 2007 and related condensed statements of income ~~since the date acquired. Pro forma results~~ for the ~~acquisition~~year and four months ended December 31, 2007, adjusted on a purchase accounting basis to the valuation implied by the latest round of financing in August-September 2007, are ~~immaterial.~~

provided below:



(Unaudited)	Pro Forma 8/31/07		12/31/07

Assets
Cash & ownership subscriptions receivables	$	8,557	$	6,781
Other tangible assets		278		1,253
Identifiable intangibles (15 year life)		3,967		3,901
Goodwill		10,194		10,194

Total assets	$	22,996	$	22,129



	Pro Forma 8/31/07			12/31/07

Liabilities & Members’ Equity
Liabilities	$	1,503		$	1,494
Contributed capital		12,233			12,354
Net equity appreciation implied from purchase accounting adjustments		12,805			12,805
Accumulated losses		(3,545	)		(4,524	)

Total liabilities & members’ equity	$	22,996		$	22,129


		2007		Sept.-Dec. ‘07

Revenues & Expenses
Revenues	$	—		$	—
Costs & expenses		2,445			800

Net loss	$	(2,445	)	$	(800	)

On April 2, 2007, we invested $10,000 in Harbinger Capital Partners Special Situations Fund, L.P. (“Harbinger”), a fund that seeks to achieve superior absolute returns by participating primarily in medium to long-term investments involving distressed/high yield debt securities, special situation equities and private loans and notes. The fund is a highly speculative investment subject to a two-year lock-up and additional limitations on withdrawal. There is no secondary market for interests in the fund. Our investment in Harbinger, which represents less than 2% of Harbinger’s total partnership capital, is accounted for under the cost method. At December 31, 2007, Harbinger reported our capital account value at $23,000 reflecting $13,000 of unrealized appreciation versus the carrying value in our balance sheet of $10,000 (included in “Other assets and deferred charges”).

During 2007, we invested approximately $6,200 in real estate. At December 31, 2007, the carrying value in our balance sheet of investments in this real estate (included in “Other assets and deferred charges”) equaled the amount invested.

In August of 2004, we invested $5,000 in Novalux, Inc., a developer of laser technology for potential use in a variety of applications. InWe made additional investments in Novalux based on its prospects at the time of $1,095 in October 2005, ~~we invested an additional $1,095~~$400 in ~~a new convertible secured bridge financing for Novalux bringing~~May 2006, $142 in September 2006, $458 in July 2007 and $404 in November 2007. We wrote down our ~~aggregate investment to $6,095 at December 31, 2005. As of December 31, 2005, the~~ investment in Novalux ~~was written down to estimated fair value~~and recognized losses of ~~$1,095. The reduction~~$5,000 in ~~estimated fair value at~~ the ~~end of~~December 2005 ~~was due to longer than~~and $2,095 in September 2007 based on anticipated delays ~~both~~ in bringing the company’s technology to market and ~~in obtaining key development partnerships as well as~~ liquidity issues. The loss from the write-down in 2005 is included in “Other income (expense), net” in the consolidated statements of income and separately shown in the operating profit by segment table in Note 3. Subsequent to the first quarter of 2006, Novalux prospects improved and we invested an aggregate of $542 in May and September of 2006. As of December 31, 2006, our investment in Novalux was $6,637. Our carrying value in Novalux of ~~$1,637~~$404 and ~~$1,095~~$1,637 at December 31, ~~2006~~2007 and ~~2005,~~2006, respectively, is included in “Other assets and deferred charges” in the consolidated balance sheet. ~~Our voting ownership~~Novalux assets were sold in January 2008 in exchange for certain unrestricted and restricted common shares of a public company in Australia. We expect to recover our remaining carrying value of $404 upon the liquidation by Novalux as of ~~December 31, 2006 is approximately 12% (11% on a fully diluted basis).~~

its remaining assets, which primarily consists of the common shares referred to above.

~~Index~~

3
3	BUSINESS SEGMENTS

Information by business segment and geographic area for the last three years is provided below. There are 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 decision maker for purposes of assessing performance. Film Products’ net sales to The Procter & Gamble Company (“P&G”) totaled $258,602 in 2007, $255,414 in 2006 and $236,554 in ~~2005 and $226,122 in 2004.~~2005. These amounts include plastic film sold to others that convert the film into materials used with products manufactured by P&G.

Net Sales

2006

2005

2004
Film Products
$
511,169
$ 460,277 $ 413,257
Aluminum Extrusions
577,260
471,749 425,130
AFBS (formerly Therics)
-
252 380
Total net sales
1,088,429
932,278 838,767
Add back freight
28,096
24,691 22,398
Sales as shown in consolidated statements of income
$
1,116,525
$ 956,969 $ 861,165

Operating Profit

2006

2005

2004
Film Products:
Ongoing operations
$
57,645
$ 44,946 $ 43,259
Plant shutdowns, asset impairments and restructurings, net of gains on the sale of assets (a)
221
(3,955 ) (10,438 )
Aluminum Extrusions:
Ongoing operations
22,031
19,302 22,637
Plant shutdowns, asset impairments and restructurings, net of gains on the sale of assets (a)
(1,434
)
122 (10,553 )
Other (a)
-
- 7,316
AFBS (formerly Therics):
Ongoing operations
-
(3,467 ) (9,763 )
Loss on investment in Therics, LLC
(25
)
(145 ) -
Restructurings (a)
(637
)
(10,318 ) (2,041 )
Total
77,801
46,485 40,417
Interest income
1,240
586 350
Interest expense
5,520
4,573 3,171
Gain on sale of corporate assets (a)
56
61 7,560
Loss from write-down of investment in Novalux (a)
-
5,000 -
Stock option-based compensation expense
970
- -
Corporate expenses, net (a)
13,770
11,357 9,674
Income from continuing operations before income taxes
58,837
26,202 35,482
Income taxes (a)
20,636
9,973 9,222
Income from continuing operations
38,201
16,229 26,260
Income from discontinued operations (a)
-
- 2,921
Net income
$
38,201
$ 16,229 $ 29,181



	*Net Sales*
		2007		2006		2005

Film Products	$	530,972	$	511,169	$	460,277
Aluminum Extrusions		371,803		403,790		327,659
AFBS (formerly Therics)		—		—		252

Total net sales		902,775		914,959		788,188
Add back freight		19,808		22,602		20,276

Sales as shown in consolidated statements of income	$	922,583	$	937,561	$	808,464



	*Operating Profit*
		2007			2006			2005

Film Products:
Ongoing operations	$	59,423		$	57,645		$	44,946
Plant shutdowns, asset impairments and restructurings, net of gains on the sale of assets (a)		(649	)		221			(3,955	)

Aluminum Extrusions:
Ongoing operations		16,516			18,302			17,084
Plant shutdowns, asset impairments and restructurings, net of gains on the sale of assets (a)		(634	)		(1,434	)		(993	)

AFBS (formerly Therics):
Ongoing operations		—			—			(3,467	)
Loss on investment in Therics, LLC		—			(25	)		(145	)
Restructurings (a)		(2,786	)		(637	)		(10,318	)

Total		71,870			74,072			43,152
Interest income		1,212			1,240			586
Interest expense		2,721			5,520			4,573
Gain on sale of corporate assets (a)		2,699			56			61
Loss from write-down of investment in Novalux (a)		2,095			—			5,000
Stock option-based compensation expense		978			970			—
Corporate expenses, net (a)		10,691			13,770			11,357

Income from continuing operations before income taxes		59,296			55,108			22,869
Income taxes (a)		24,366			19,791			9,497

Income from continuing operations		34,930			35,317			13,372
Income (loss) from discontinued operations (a)		(19,681	)		2,884			2,857

Net income	$	15,249		$	38,201		$	16,229

~~(a)~~
(a)	See Notes 2 and 15 for more information on losses associated with plant shutdowns, asset impairments and restructurings, unusual items, gains from sale of assets, investment write-down and other items, and Note 17 for more information on discontinued operations.

~~(b)~~
(b)	The difference between total consolidated sales as reported in the consolidated statements of income and segment and geographic net sales reported in this note is freight of ~~$28,096~~$19,808 in 2007, $22,602 in 2006, ~~$24,691~~and $20,276 in ~~2005, and $22,398 in 2004.~~2005.

~~(c)~~

(c)

Information on exports and foreign operations are provided on the next page. Cash and cash equivalents includes funds held in foreign locations of $24,559, $19,118 ~~$14,890~~ and ~~$21,410~~$14,890 at December 31, 2007, 2006, ~~2005,~~ and ~~2004,~~2005, respectively. Export sales relate almost entirely to Film Products. Foreign operations in The Netherlands, Hungary, China, Italy ~~Brazil~~ and ~~Argentina (operations in Argentina were sold in the third quarter of 2004)~~Brazil also relate to Film Products. Sales from our locations in The Netherlands, Hungary and Italy are primarily to customers located in Europe. Sales from our locations in China (Guangzhou and Shanghai) are primarily to customers located in China, but also include other customers in Asia. ~~Foreign operations in Canada relate to Aluminum Extrusions. Sales from our locations in Canada are primarily to customers located in the U.S. and Canada.~~

~~Index~~

Identifiable Assets

December 31
2006

2005

2004
Film Products
$
498,961
$ 479,286 $ 472,810
Aluminum Extrusions
209,395
214,374 210,894
AFBS (formerly Therics)
2,420
2,759 8,613
Subtotal
710,776
696,419 692,317
General corporate
30,113
61,905 54,163
Cash and cash equivalents (c)
40,898
23,434 22,994
Total
$
781,787
$ 781,758 $ 769,474


	*Depreciation and Amortization*						*Capital Expenditures*
													*Identifiable Assets*
December 31													2007		2006		2005
	2006		2005		2004		2006		2005		2004
Film Products	$	31,847	$	26,673	$	21,967	$	33,168	$	50,466	$	44,797	$	488,035	$	498,961	$	479,286
Aluminum Extrusions		12,323		11,484		10,914		7,381		11,968		10,007		115,223		128,967		130,448
AFBS (formerly Therics)		-		437		1,300		-		36		275		2,866		2,420		2,759

Subtotal		44,170		38,594		34,181		40,549		62,470		55,079		606,124		630,348		612,493
General corporate		111		195		241		24		73		572		74,927		30,113		61,905
Cash and cash equivalents (c)														48,217		40,898		23,434

Continuing operations														729,268		701,359		697,832
Discontinued aluminum extrusions business in Canada (a)														55,210		80,428		83,926

Total	$	44,281	$	38,789	$	34,422	$	40,573	$	62,543	$	55,651	$	784,478	$	781,787	$	781,758



	*Depreciation and Amortization*						*Capital Expenditures*
	2007		2006		2005		2007		2006		2005

Film Products	$	34,092	$	31,847	$	26,673	$	15,304	$	33,168	$	50,466
Aluminum Extrusions		8,472		8,378		7,996		4,391		6,609		5,750
AFBS (formerly Therics)		—		—		437		—		—		36

Subtotal		42,564		40,225		35,106		19,695		39,777		56,252
General corporate		91		111		195		6		24		73

Continuing operations		42,655		40,336		35,301		19,701		39,801		56,325
Discontinued aluminum extrusions business in Canada (a)		3,386		3,945		3,488		942		772		6,218

Total	$	46,041	$	44,281	$	38,789	$	20,643	$	40,573	$	62,543



	Net Sales by Geographic Area (c)
	2007		2006		2005

United States	$	577,824	$	606,411	$	495,900
Exports from the United States to:
Canada		46,243		42,669		44,870
Latin America		1,188		4,364		9,428
Europe		9,856		8,944		8,311
Asia		31,432		50,096		40,476
Foreign operations:
The Netherlands		104,379		91,476		83,649
Hungary		35,286		29,152		33,573
China		57,252		42,460		36,823
Italy		13,359		14,323		15,866
Brazil		25,956		25,064		19,292

Total (b)	$	902,775	$	914,959	$	788,188



	Identifiable Assets by Geographic Area (c)						Property, Plant & Equipment, Net by Geographic Area (c)
December 31	2007		2006		2005		2007		2006		2005

United States	$	429,376	$	454,931	$	452,546	$	163,130	$	175,983	$	177,956
Foreign operations:
The Netherlands		73,658		70,609		67,683		52,383		53,905		54,331
Hungary		20,178		20,039		18,505		10,952		12,475		12,787
China		49,696		53,633		40,599		33,192		34,671		26,104
Italy		17,378		16,734		17,997		3,580		3,565		3,093
Brazil		15,838		14,402		15,163		5,055		4,892		5,205
General corporate		74,927		30,113		61,905		791		1,944		1,994
Cash and cash equivalents (c)		48,217		40,898		23,434		n/a		n/a		n/a

Continuing operations		729,268		701,359		697,832		269,083		287,435		281,470
Discontinued aluminum extrusions business in Canada (a)		55,210		80,428		83,926		11,001		38,328		41,406

Total	$	784,478	$	781,787	$	781,758	$	280,084	$	325,763	$	322,876

See footnotes on prior page and a reconciliation of net sales to sales as shown in the consolidated statements of income.

Net Sales by Geographic Area (c)

2006

2005

2004
United States
$
606,410
$ 495,900 $ 441,891
Exports from the United States to:
Canada
42,669
44,870 27,663
Latin America
4,364
9,428 16,668
Europe
8,944
8,311 15,768
Asia
50,096
40,476 31,617
Foreign operations:
Canada
173,471
144,090 147,145
The Netherlands
91,476
83,649 66,856
Hungary
29,152
33,573 34,721
China
42,460
36,823 25,291
Italy
14,323
15,866 12,423
Brazil and Argentina (2004)
25,064
19,292 18,724
Total (b)
$
1,088,429
$ 932,278 $ 838,767

Identifiable Assetsby Geographic Area (c)

Property, Plant & Equipment,Net by Geographic Area (c)

December 31
2006

2005

2004

2006

2005

2004
United States
$
446,005
$ 444,144 $ 427,240
$
176,160
$ 178,154 $ 163,383
Foreign operations:
Canada
89,354
92,328 92,290
38,151
41,208 38,610
The Netherlands
70,609
67,683 75,449
53,905
54,331 58,370
Hungary
20,039
18,505 27,308
12,475
12,787 19,371
China
53,633
40,599 38,713
34,671
26,104 25,684
Italy
16,734
17,997 20,785
3,565
3,093 3,991
Brazil
14,402
15,163 10,532
4,892
5,205 5,037
General corporate
30,113
61,905 54,163
1,944
1,994 2,246
Cash and cash equivalents (c)
40,898
23,434 22,994
n/a
n/a n/a
Total
$
781,787
$ 781,758 $ 769,474
$
325,763
$ 322,876 $ 316,692

See footnotes on prior page and a reconciliation of net sales to sales as shown in the consolidated statements of income.

~~Index~~

4
4	ACCOUNTS AND NOTES RECEIVABLE


	Accounts and notes receivable consist of the following:

~~Accounts and notes receivable consist of the following:~~

December 31

2006
2005

Trade, less allowance for doubtful accounts and sales returns of $8,559 in 2006 and $5,423 in 2005
$
116,943
$ 112,968
Other
4,891
6,362
Total
$
121,834
$ 119,330



December 31		2007		2006

Trade, less allowance for doubtful accounts and sales returns of $5,198 in 2007 and $7,388 in 2006	$	94,699	$	102,062
Other		2,365		4,893

Total	$	97,064	$	106,955

The allowance for doubtful accounts and sales returns decreased by $2,190 in 2007 and increased by ~~$3,136~~$2,515 in 2006 ~~$110~~and $164 in ~~2005 and $865 in 2004.~~2005. The changes in 2007, 2006 ~~2005~~ and ~~2004~~2005 were comprised of increases to the allowance for charges to expense of ~~$3,911, $612~~$3,001, $3,236 and ~~$956,~~$366, respectively, decreases in the allowance for income from recoveries of $1,442, $57 ~~$15~~ and ~~$5,~~$15, respectively, decreases in the allowance for write-offs of ~~$696, $403~~$3,780, $680 and ~~$413,~~$62, respectively, and foreign exchange and other adjustments to the allowance of plus $31, plus $16 and minus ~~$22, minus $84 and plus $327,~~$125, respectively.

5
5	INVENTORIES


	Inventories consist of the following:

~~Inventories consist of the following:~~

December 31

2006
2005
Finished goods
$
15,412
$ 12,838
Work-in-process
4,540
3,685
Raw materials
34,185
33,043
Stores, supplies and other
14,793
12,872
Total
$
68,930
$ 62,438



December 31		2007		2006

Finished goods	$	10,004	$	9,182
Work-in-process		3,624		3,495
Raw materials		19,369		21,773
Stores, supplies and other		15,669		14,214

Total	$	48,666	$	48,664

Inventories stated on the LIFO basis amounted to $17,774 at December 31, 2007 and $17,230 at December 31, 2006, ~~and $19,843 at December 31, 2005,~~ which are below replacement costs by approximately $25,845 at December 31, 2007 and $26,139 at December 31, ~~2006 and $29,164 at December 31, 2005.~~2006. During 2006, inventories accounted for on a LIFO basis declined, which resulted in cost of goods sold being stated at below current replacement costs by approximately $5,400 ($5,300 in Film Products, including $2,900 associated with the shutdown of the films manufacturing facility in LaGrange, Georgia, and $100 in Aluminum Extrusions). During 2005, inventories accounted for on a LIFO basis declined, which resulted in cost of goods sold being stated at below current replacement costs by approximately $2,300 ($2,100 in Film Products and $200 in Aluminum Extrusions).

6
6	FINANCIAL INSTRUMENTS

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 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. The futures contracts are designated as and accounted for as cash flow hedges. These contracts involve elements of credit and market risk that are not reflected on our balance sheet, including the risk of dealing with counterparties and their ability to meet the terms of the contracts. The counterparties to our forward purchase commitments are major aluminum brokers and suppliers, and the counterparties to our futures contracts are major financial institutions. Fixed-price forward sales contracts are only made available to our best and most credit-worthy customers. The notional amount of aluminum futures contracts that hedged fixed-price forward sales contracts was $36,369 (32,762 pounds of aluminum) at December 31, 2007 and $15,865 (13,016 pounds of aluminum) at December 31, ~~2006 and $5,367 (6,393 pounds~~2006. Unrealized losses in excess of ~~aluminum)~~gains on aluminum futures contracts that hedge fixed-price forward sales contracts of $1,815 ($1,204 after taxes) at December 31, ~~2005. Unrealized~~2007, and unrealized gains in excess of losses on

aluminum futures contracts that hedge fixed-price forward sales contracts of $1,184 ($728 after taxes) ~~and $1,213 ($776 after taxes)~~ at December 31, 2006, ~~and 2005, respectively,~~ are included as a separate component of shareholders’ ~~equity.~~equity for the respective periods. The portion of aluminum futures contracts that was ineffective in hedging fixed-price forward sales contracts was immaterial in 2007, 2006 ~~2005~~ and ~~2004.~~

~~Index~~

2005.

In the past we have used interest rate swaps with large major financial institutions to manage interest rate exposure, but there have been no interest rate swaps outstanding since 2003.

~~We have partially hedged~~

In 2007, we used zero cost collar currency options to hedge a portion of our exposure to changes in exchange rates. Results for continuing operations include realized losses of $239,000 on currency hedges of royalties relating to our operations in Europe and results from discontinued operations include realized gains of $1,311 on currency hedges of our exposure to the Canadian Dollar ~~(“CAD”) and Euro (“EUR”) as shown in the following tables (accounted~~(see Note 17 for ~~as cash flow hedges):~~

(In Thousands Except Exchange Rates)
Notional Amount as a % of Forecasted USD-Equiv. Net USD-Equivalent Strike Prices of Options Bought & Pretax Unrealized Gain (Loss) on Options at
USD-Equiv.
Average

Cash (Paid to)
Recieved
from

Gain (Loss) on
Options Recognized
in Income for Period

Notional CAD- Option Sold on CAD/USD 12/31/06 Reference Counter- Portion Portion
Description of Currency Amount Related Premium Call Put Included in Price of party at Deemed Deemed
Exposure, Options Hedging Strategy of Option Costs for (Paid) Options Options Shareholders' CAD for Expiration Effective Ineffective
Used & Periods Covered Contracts Period Received Bought Sold Equity Period of Options as Hedge as Hedge
Exposure: About 80% of sales of extrusions manufactured in facilities in Canada are denominated or economically priced in U.S. Dollars ("USD") while conversion costs are denominated or economically priced in Canadian Dollars ("CAD").

Hedge Strategy: Bought average rate call options & sold average rate put options on CAD/USD.

Periods Covered by Option Contracts:

5/11/06 to end of second quarter 2006 $ 2,500 38 % $ - $ 0.9500 $ 0.8850 n/a $ 0.8995 $ - $ - $ -
Third quarter 2006 5,000 40 % - 0.9500 0.8749 n/a 0.8919 - - -
Fourth quarter 2006 6,500 53 % - 0.9324 0.8650 n/a 0.8793 - - -
First quarter 2007 3,500 28 % - 0.9100 0.8380 $ (3 ) n/a n/a n/a -
First quarter 2007 3,500 28 % - 0.9000 0.8345 (2 ) n/a n/a n/a -
Second quarter 2007 3,500 28 % - 0.9100 0.8430 (18 ) n/a n/a n/a -
Second quarter 2007 3,500 28 % - 0.9000 0.8364 (8 ) n/a n/a n/a -
Third quarter 2007 3,500 28 % - 0.9100 0.8473 (27 ) n/a n/a n/a -
Third quarter 2007 3,500 28 % - 0.9000 0.8403 (11 ) n/a n/a n/a -
Fourth quarter 2007 3,500 28 % - 0.9100 0.8516 (33 ) n/a n/a n/a -
Fourth quarter 2007 3,500 28 % - 0.9000 0.8446 (14 ) n/a n/a n/a -
$ (116 )

~~Index~~

more information). There were no derivatives outstanding at December 31, 2007 relating to currency hedges.

After-tax gains of $731 in 2007, $1,104 in 2006 and $939 in 2005 ~~and $1,230 in 2004~~ were reclassified from other comprehensive income to earnings and were offset by losses, respectively, from transactions relating to the underlying hedged item. As of December 31, ~~2006,~~2007, we expect ~~$654~~$1,204 of unrealized after-tax ~~gains~~losses on derivative instruments reported in accumulated other comprehensive income to be reclassified to earnings within the next twelve months. We also expect that these ~~gains~~losses will be offset by ~~losses~~gains from transactions relating to the underlying hedged item.


7	ACCRUED EXPENSES


	Accrued expenses consist of the following:



December 31		2007		2006

Payrolls, related taxes and medical and other benefits	$	7,921	$	8,209
Workmen’s compensation and disabilities		4,159		4,334
Vacation		3,636		3,592
Plant shutdowns and divestitures		6,201		5,058
Incentive compensation		1,880		4,075
Other		9,879		13,522

Total	$	33,676	$	38,790

~~Index~~

7	~~ACCRUED EXPENSES~~

~~Accrued expenses consist of the following:~~

December 31

2006
2005

Payrolls, related taxes and medical and other benefits
$
8,620
$ 6,687
Workmen's compensation and disabilities
4,335
4,226
Vacation
4,875
4,488
Plant shutdowns and divestitures
5,058
6,972
Incentive compensation
4,075
383
Other
14,943
13,275
Total
$
41,906
$ 36,031

A reconciliation of the beginning and ending balances of accrued expenses associated with plant shutdowns and divestitures for each of the three years in the period ended December 31, ~~2006~~2007 is as follows:

Severance

Asset
Impairments

Accelerated
Depreciation (a)

Other (b)

Total
Balance at December 31, 2003 $ 2,106 $ - $ - $ 3,086 $ 5,192
2004:
Charges 6,456 11,554 2,572 2,450 23,032
Cash spent (3,732 ) - - (2,112 ) (5,844 )
Charged against assets - (11,554 ) (2,572 ) - (14,126 )
Foreign currency translation 261 - - - 261
Reversed to income - - - (30 ) (30 )
Balance at December 31, 2004 5,091 - - 3,394 8,485
2005:
Charges 3,620 8,198 353 6,553 18,724
Cash spent (6,182 ) - - (4,290 ) (10,472 )
Charged against assets - (8,198 ) (353 ) - (8,551 )
Foreign currency translation (8 ) - - - (8 )
Reversed to income (1,036 ) - - (170 ) (1,206 )
Balance at December 31, 2005 1,485 - - 5,487 6,972
2006:
Charges 1,371 1,150 - 1,607 4,128
Cash spent (2,420 ) - - (2,472 ) (4,892 )
Charged against assets - (1,150 ) - - (1,150 )
Foreign currency translation - - - - -
Reversed to income - - - - -
Balance at December 31, 2006 $ 436 $ - $ - $ 4,622 $ 5,058
(a) Represents depreciation accelerated due to plant shutdowns based on a remaining useful life of less than one year.
(b) Other includes primarily accrued losses on a sub-lease at a facility in Princeton New, Jersey.

The amount reversed to income in 2005 relates primarily to changes in estimates for severance and shutdown-related costs at our aluminum extrusions facility in Aurora, Ontario and in connection with the restructuring of the research and development operations in Film Products.



	Severance			Asset Impairments			Accelerated Depreciation (a)			Other (b)			Total

Balance at December 31, 2004	$	2,457		$	—		$	—		$	3,394		$	5,851
2005:
Charges		3,470			8,433			353			5,442			17,698
Cash spent		(3,887	)		—			—			(3,179	)		(7,066	)
Charged against assets		—			(8,433	)		(353	)		—			(8,786	)
Foreign currency translation		(8	)		—			—			—			(8	)
Reversed to income		(562	)		—			—			(170	)		(732	)

Balance at December 31, 2005		1,470			—			—			5,487			6,957
2006:
Charges		1,371			1,150			—			1,607			4,128
Cash spent		(2,405	)		—			—			(2,472	)		(4,877	)
Charged against assets		—			(1,150	)		—			—			(1,150	)
Foreign currency translation		—			—			—			—			—
Reversed to income		—			—			—			—			—

Balance at December 31, 2006		436			—			—			4,622			5,058
2007:
Charges		592			594			—			2,841			4,027
Cash spent		(665	)		—			—			(1,625	)		(2,290	)
Charged against assets		—			(594	)		—			—			(594	)
Foreign currency translation		—			—			—			—			—
Reversed to income		—			—			—			—			—

Balance at December 31, 2007	$	363		$	—		$	—		$	5,838		$	6,201


(a)	Represents depreciation accelerated due to plant shutdowns based on a remaining useful life of less than one year.

(b)	Other includes primarily accrued losses on a sub-lease at a facility in Princeton New, Jersey.

See Note 15 for more information on plant shutdowns, asset impairments and ~~restructurings.~~

restructurings of continuing operations.

~~Index~~

8
8	DEBT AND CREDIT AGREEMENTS

On December 15, 2005, we refinanced our debt with a new $300,000, five-year unsecured revolving credit agreement (the “Credit Agreement”). At December 31, ~~2006,~~2007, available credit under the Credit Agreement was approximately ~~$239,000.~~$219,000. Total debt due and outstanding at December 31, ~~2006~~2007 is summarized below:

Debt Due and Outstanding at December 31, 2006
Year
Due

Credit
Agreement
Other
Total Debt
Due

2007 $ - $ 678 $ 678
2008 - 484 484
2009 - 495 495
2010 60,000 415 60,415
2011 - 221 221
Remainder - 227 227
Total $ 60,000 $ 2,520 $ 62,520



Debt Due and Outstanding at December 31, 2007

Year Due	Credit Agreement		Other		Total Debt Due

2008	$	—	$	540	$	540
2009		—		552		552
2010		80,000		463		80,463
2011		—		247		247
2012		—		126		126
Remainder		—		128		128

Total	$	80,000	$	2,056	$	82,056

The credit spread over LIBOR and commitment fees charged on the unused amount under the Credit Agreement at various indebtedness-to-adjusted EBITDA levels are as follows:

Pricing Under Credit Agreement (Basis Points)

Credit Spread
Over LIBOR

Indebtedness-to-
Adjusted EBITDA
Ratio

($60 Million
Outstanding
at 12/31/06)

Commitment
Fee

> 2.50x but <= 3x 125 25
> 1.75x but <= 2.50x 100 20
> 1x but <= 1.75x 87.5 17.5
<= 1x 75 15



Pricing Under Credit Agreement (Basis Points)

	Credit Spread Over LIBOR

Indebtedness-to- Adjusted EBITDA Ratio	($80 Million Outstanding at 12/31/07)	Commitment Fee

> 2.50x but <= 3x	125	25
> 1.75x but <= 2.50x	100	20
> 1x but <= 1.75x	87.5	17.5
<= 1x	75	15

At December 31, ~~2006,~~2007, the interest cost on debt was priced at one-month LIBOR plus the applicable credit spread of 75 basis points.

The most restrictive covenants in the Credit Agreement include:

·
•	Maximum aggregate dividends over the term of the Credit Agreement of $100,000 plus, beginning October 1, 2005, 50% of net income ($~~119,546 million~~127,170 as of December 31, ~~2006)~~2007);

·
•	Minimum shareholders’ equity ($~~371,464~~388,276 as of December 31, ~~2006)~~2007);

·
•	Maximum indebtedness-to-adjusted EBITDA through December 31, 2008 of 3x and 2.75x thereafter (2.5x on a pro forma basis for acquisitions); and

·
•	Minimum adjusted EBIT-to-interest expense of 2.5x.

We believe we were in compliance with all of our debt covenants as of December 31, ~~2006.~~2007. Noncompliance with any one or more 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.

In the past we have used interest rate swaps with large major financial institutions to manage interest rate exposure, but there have been no interest rate swaps outstanding since 2003.

~~Index~~

9
9	SHAREHOLDER RIGHTS AGREEMENT

Pursuant to a Rights Agreement dated as of June 30, 1999 (as amended), between Tredegar and National City Bank as Rights Agent, one ~~Right~~right is attendant to each share of our common ~~stock.~~stock (“Right”). 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 10% or more of the outstanding shares of our common stock or announces a tender offer which would result in ownership by a person or group of 10% or more of our common stock. Any action by a person or group whose beneficial ownership iswas reported on Amendment No. 4 to the Schedule 13D filed with respect to Tredegar on March 20, 1997, cannot 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 will expire on June 30, 2009.

10
10	STOCK OPTION AND STOCK AWARD PLANS

We have two stock option plans 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. One of those option plans is a directors’ stock plan. In addition, we have three other stock option plans under which there are options that remain outstanding, but no future grants can be made. Employee options ordinarily vest one to two years from the date of grant. The ~~outstanding options granted to directors vest over three years. The~~ option plans also permit the grant of stock appreciation rights (“SARs”), stock, restricted stock, stock unit awards and incentive awards. No SARs have been granted since 1992. All SARs outstanding at December 31, 2001, were exercised during 2002.

A summary of our stock options outstanding at December 31, 2007, 2006 ~~2005~~ and ~~2004,~~2005, and changes during those years, is presented below:

Option Exercise Price/Share

Number of
Options
Range
Wgted.
Ave.

Outstanding at 12/31/03 2,722,610 $ 3.37 to 46.63 $ 21.39
Granted 348,425 13.95 to 14.50 13.97
Forfeited and Expired (102,175 ) 7.38 to 46.63 23.28
Exercised (306,870 ) 3.37 to 19.75 6.99
Outstanding at 12/31/04 2,661,990 4.17 to 46.63 22.01
Granted - n/a to n/a n/a
Forfeited and Expired (274,575 ) 13.95 to 46.63 21.90
Exercised (137,075 ) 4.17 to 16.55 7.51
Outstanding at 12/31/05 2,250,340 7.38 to 46.63 22.90
Granted 449,800 15.11 to 19.52 15.30
Forfeited and Expired (874,525 ) 7.38 to 46.63 29.73
Exercised (578,442 ) 7.38 to 19.75 16.47
Outstanding at 12/31/06 1,247,173 $ 13.95 to $ 29.94 $ 18.16



				Option Exercise Price/Share

	Number of Options					Range				Wgted. Ave.

Outstanding at 12/31/04		2,661,990		$	4.17		to	$	46.63	$	22.01
Granted		—			n/a		to		n/a		n/a
Forfeited and Expired		(274,575	)		13.95		to		46.63		21.90
Exercised		(137,075	)		4.17		to		16.55		7.51

Outstanding at 12/31/05		2,250,340			7.38		to		46.63		22.90
Granted		449,800			15.11		to		19.52		15.30
Forfeited and Expired		(874,525	)		7.38		to		46.63		29.73
Exercised		(578,442	)		7.38		to		19.75		16.47

Outstanding at 12/31/06		1,247,173			13.95		to		29.94		18.16
Granted		4,000			14.40		to		14.40		14.40
Forfeited and Expired		(184,065	)		13.95		to		29.94		20.68
Exercised		(364,125	)		13.95		to		22.72		18.58

Outstanding at 12/31/07		702,983		$	13.95		to	$	29.94	$	17.25

~~Index~~

The following table summarizes additional information about stock options outstanding and exercisable and non-vested restricted stock outstanding at December 31, ~~2006:~~2007:



				Options Outstanding at December 31, 2007									Options Exercisable at December 31, 2007

						Weighted Average

Range of Exercise Prices				Shares			Remaining Contract- ual Life (Years)		Exercise Price		Aggregate Intrinsic Value (In Thousands)		Shares		Weighted Average Exercise Price		Aggregate Intrinsic Value (In Thousands)

$ 13.95	to	$	17.88		420,943			4.8	$	14.95	$	781		86,643	$	13.95	$	247
17.89	to		19.75		235,750			1.2		18.91		—		224,250		18.88		—
19.76	and over				46,290			.5		29.78		—		46,290		29.78		—

Total					702,983			3.3	$	17.25	$	781		357,183	$	19.09	$	247

Options Outstanding at Options Exercisable at
December 31, 2006 December 31, 2006
Weighted Average Aggregate Aggregate
Remaining Intrinsic Weighted Intrinsic
Contract- Value Average Value
Range of ual Life Exercise (In Exercise (In
Exercise Prices Shares (Years) Price Thousands) Shares Price Thousands)
$ 13.95 to $ 17.88 627,068 4.6 $ 15.18 $ 4,660 243,268 $ 15.14 $ 1,816
17.89 to 19.75 361,650 1.7 19.06 1,282 350,150 19.05 1,247
19.76 to 25.65 188,300 .2 21.98 131 188,300 21.98 131
25.66 to 29.94 70,155 1.4 29.84 - 70,155 29.84 -
$ 13.95 to $ 29.94 1,247,173 2.9 $ 18.16 $ 6,073 851,873 $ 19.47 $ 3,194

Non-vested Restricted Stock
Number
of Shares

Wgtd. Ave.
Grant Date
Fair Value/Sh.

Grant Date
Fair Value (In
Thousands)

Outstanding at 12/31/03 - $ - $ -
Granted 125,000 13.95 1,744
Vested - - -
Forfeited (5,000 ) 13.95 (70 )
Outstanding at 12/30/04 120,000 13.95 1,674
Granted 7,000 12.92 90
Vested (8,000 ) 13.95 (111 )
Forfeited (10,000 ) 13.95 (140 )
Outstanding at 12/31/05 109,000 13.88 1,513
Granted 2,000 16.31 33
Vested (17,333 ) 13.95 (242 )
Forfeited (24,167 ) 13.80 (333 )
Outstanding at 12/31/06 69,500 $ 13.97 $ 971


	Non-vested Restricted Stock									Maximum Non-vested Restricted Stock Units Issuable Upon Satis- faction of Certain Performance Criteria

	Number of Shares			Wgtd. Ave. Grant Date Fair Value/Sh.		Grant Date Fair Value (In Thousands)				Number of Shares			Wgtd. Ave. Grant Date Fair Value/Sh.		Grant Date Fair Value (In Thousands)

Outstanding at 12/30/04		120,000		$	13.95		$	1,674			—		$	—	$	—
Granted		7,000			12.92			90			—			—		—
Vested		(8,000	)		13.95			(111	)		—			—		—
Forfeited		(10,000	)		13.95			(140	)		—			—		—

Outstanding at 12/30/05		109,000			13.88			1,513			—			—		—
Granted		2,000			16.31			33			—			—		—
Vested		(17,333	)		13.95			(242	)		—			—		—
Forfeited		(24,167	)		13.80			(333	)		—			—		—

Outstanding at 12/31/06		69,500			13.97			971			—			—		—
Granted		—			—			—			233,375			20.80		4,854
Vested		(6,000	)		13.95			(84	)		—			—		—
Forfeited		(4,000	)		13.95			(56	)		(56,500	)		23.00		(1,300)

Outstanding at 12/31/07		59,500		$	13.97		$	831			176,875		$	20.09	$	3,554

The total intrinsic value of stock options exercised ~~during 2006~~ was ~~$2,174.~~$1,455 in 2007 and $2,174 in 2006. The grant-date fair value of stock option-based awards vested ~~during~~was $1,323 in 2006 ~~was $1,323.~~(none in 2007). As of December 31, ~~2006,~~2007, there was ~~$1,300~~$260 and ~~$380~~approximately $1,700 of unrecognized compensation cost related to stock option-based awards and non-vested restricted stock and other stock-based awards, respectively. This cost is expected to be recognized over the remaining weighted average period of ~~1.23~~.26 years for stock option-based awards and ~~2.3~~1.4 years for non-vested restricted ~~stock.~~stock and other stock-based awards. Compensation costs for non-vested restricted stock is subject to accelerated vesting based on meeting certain financial targets.

Stock options exercisable totaled 851,873 shares at December 31, 2006 and 1,983,440 shares at December 31, ~~2005 and 2,316,390 shares at December 31, 2004.~~2005. Stock options available for grant totaled 1,412,232 shares at December 31, 2007, 1,601,700 shares at December 31, 2006 and 1,998,300 shares at December 31, ~~2005 and 2,030,300 shares at December 31, 2004.~~

2005.

11
11	RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS

We have noncontributory ~~and contributory~~ 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.

December 31, 2006. In 2007, the changes to the pension plan ~~are expected to reduce~~reduced our service cost, interest cost and amortization of prior service cost components of pension expense by approximately $600, $600 and $1,500, respectively, and the savings plan changes (see Note 12) ~~are expected to increase~~increased charges for company matching contributions by approximately $700.

~~Index~~

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. On December 8, 2003, the Medicare Prescription Drug Improvement and Modernization Act of 2003 (the “Act”) was signed into law. We eliminated prescription drug coverage for Medicare-eligible retirees as of January 1, 2006. Consequently, we are not eligible for any federal subsidies.

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:

Pension Benefits
Other Post-
Retirement Benefits

2006

2005

2004

2006

2005

2004

Weighted-average assumptions used to determine benefit obligations:
Discount rate
5.70
%
5.70 % 6.00 %
5.70
%
5.70 % 6.00 %
Rate of compensation increases
4.00
%
4.00 % 4.00 %
4.00
%
4.00 % 4.00 %
Weighted-average assumptions used to determine net periodic benefit cost:
Discount rate
5.70
%
6.00 % 6.25 %
5.70
%
6.00 % 6.25 %
Rate of compensation increases
4.00
%
4.00 % 4.00 %
4.00
%
4.00 % 4.00 %
Expected long-term return on plan assets, during the year
8.40
%
8.40 % 8.40 %
n/a
n/a n/a
Rate of increase in per-capita cost of covered health care benefits:
Indemnity plans, end of year
n/a
n/a n/a
6.00
%
6.00 % 6.00 %
Managed care plans, end of year
n/a
n/a n/a
6.00
%
6.00 % 6.00 %
Components of net periodic benefit income (cost):
Service cost
$
(6,327
)
$ (6,469 ) $ (5,519 )
$
(70
)
$ (109 ) $ (115 )
Interest cost
(13,497
)
(12,661 ) (12,283 )
(535
)
(576 ) (562 )
Employee contributions
517
468 443
-
- -
Other
(127
)
12 (212 )
-
- -
Expected return on plan assets
21,583
22,050 22,678
-
- -
Amortization of:
Net transition asset
-
- 7
-
- -
Prior service costs and gains or losses
(4,746
)
(738 ) (491 )
24
2 53
Net periodic benefit income (cost)
$
(2,597
)
$ 2,662 $ 4,623
$
(581
)
$ (683 ) $ (624 )

~~Index~~



	Pension Benefits									Other Post- Retirement Benefits

	2007			2006			2005			2007			2006			2005

Weighted-average assumptions used to determine benefit obligations:
Discount rate		6.25	%		5.75	%		5.75	%		6.25	%		5.75	%		5.75	%
Rate of compensation increases		4.00	%		4.00	%		4.00	%		4.00	%		4.00	%		4.00	%
Weighted-average assumptions used to determine net periodic benefit cost:
Discount rate		5.75	%		5.75	%		6.00	%		5.75	%		5.75	%		6.00	%
Rate of compensation increases		4.00	%		4.00	%		4.00	%		4.00	%		4.00	%		4.00	%
Expected long-term return on plan assets, during the year		8.50	%		8.50	%		8.50	%		n/a			n/a			n/a
Rate of increase in per-capita cost of covered health care benefits:
Indemnity plans, end of year		n/a			n/a			n/a			6.00	%		6.00	%		6.00	%
Managed care plans, end of year		n/a			n/a			n/a			6.00	%		6.00	%		6.00	%
Components of net periodic benefit income (cost):
Service cost	$	(4,232	)	$	(4,933	)	$	(5,334	)	$	(106	)	$	(70	)	$	(90	)
Interest cost		(11,447	)		(12,079	)		(11,377	)		(503	)		(513	)		(556	)
Expected return on plan assets		20,372			19,820			20,564			—			—			—
Amortization of prior service costs and gains or losses		(1,819	)		(4,476	)		(655	)		—			14			(7	)

Net periodic benefit income (cost)	$	2,874		$	(1,668	)	$	3,198		$	(609	)	$	(569	)	$	(653	)

The following tables reconcile the changes in benefit obligations and plan assets in ~~2006~~2007 and ~~2005,~~2006, and reconcile the funded status to prepaid or accrued cost at December 31, ~~2006~~2007 and ~~2005:~~

Pension Benefits
Other Post-
Retirement Benefits

2006

2005

2006

2005
Change in benefit obligation:
Benefit obligation, beginning of year
$
238,533
$ 214,037
$
10,070
$ 9,994
Service cost
6,327
6,469
70
109
Interest cost
13,497
12,661
535
576
Plan amendments
(10,039
)
1,372
-
-
Effect of discount rate change
(985
)
10,424
(4
)
326
Employee contributions
517
468
-
-
Other
(3,615
)
3,500
(329
)
(290 )
Benefits paid
(10,841
)
(10,398 )
(920
)
(645 )
Benefit obligation, end of year
$
233,394
$ 238,533
$
9,422
$ 10,070
Change in plan assets:
Plan assets at fair value, beginning of year
$
257,101
$ 247,505
$
-
$ -
Actual return on plan assets
36,086
18,487
-
-
Employee contributions
517
468
-
-
Employer contributions
1,074
1,158
920
645
Other
(128
)
(119 )
-
-
Benefits paid
(10,841
)
(10,398 )
(920
)
(645 )
Plan assets at fair value, end of year
$
283,809
$ 257,101
$
-
$ -
Reconciliation of prepaid (accrued) cost:
Funded status of the plans
$
50,415
$ 18,568
$
(9,422
)
$ (10,070 )
Unrecognized prior service cost
-
4,303
-
-
Unrecognized net (gain) loss
-
62,776
-
(8 )
Prepaid (accrued) cost, end of year
$
50,415
$ 85,647
$
(9,422
)
$ (10,078 )
Amounts recognized in the consolidated balance sheets:
Prepaid benefit cost
$
54,034
$ 85,647
$
-
$ -
Accrued benefit liability
(3,619
)
(4,832 )
(9,422
)
(10,078 )
Intangible asset
-
1,145
-
-
Decrease in deferred income tax liabilities relating to accumulated other comprehensive loss
-
1,253
-
-
Accumulated other comprehensive loss
-
2,434 - -
Net amount recognized
$
50,415
$ 85,647
$
(9,422
)
$ (10,078 )

2006:



	Pension Benefits						Other Post- Retirement Benefits

	2007			2006			2007			2006

Change in benefit obligation:
Benefit obligation, beginning of year	$	205,588		$	211,701		$	9,366		$	9,623
Service cost		4,232			4,933			106			70
Interest cost		11,447			12,079			503			513
Plan amendments		23			(10,039	)		—			—
Effect of discount rate change		(12,318	)		—			(467	)		—
Other		775			(3,426	)		(377	)		80
Benefits paid		(9,618	)		(9,660	)		(441	)		(920	)

Benefit obligation, end of year	$	200,129		$	205,588		$	8,690		$	9,366

Change in plan assets:
Plan assets at fair value,
beginning of year	$	256,669		$	232,624		$	—		$	—
Actual return on plan assets		36,883			33,538			—			—
Employer contributions		167			167			441			920
Benefits paid		(9,619	)		(9,660	)		(441	)		(920	)

Plan assets at fair value, end of year	$	284,100		$	256,669		$	—		$	—

Funded status of the plans	$	83,971		$	51,081		$	(8,690	)	$	(9,366	)

Amounts recognized in the consolidated
balance sheets:
Prepaid benefit cost	$	86,295		$	53,619		$	—		$	—
Accrued benefit liability		(2,324	)		(2,538	)		(8,690	)		(9,366	)

Net amount recognized	$	83,971		$	51,081		$	(8,690	)	$	(9,366	)

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.

Prepaid pension costs for continuing operations of $86,295 and $53,619 are included in “Other assets and deferred charges” in the consolidated balance sheets at December 31, 2007 and 2006, respectively. Pension and postretirement liabilities for continuing operations of $11,014 and $11,904 are included in “Other noncurrent liabilities” in the consolidated balance sheets at December 31, 2007 and 2006, respectively. The amount of our accumulated benefit obligation is the same as our projected benefit obligation.

At December 31, ~~2006,~~2007, the effect of a 1% change in the health care cost trend rate assumptions would be immaterial.

~~Index~~

Expected benefit payments for continuing operations over the next five years and in the aggregate for ~~2012-2016~~2013-2017 are as follows:

Years
Pension
Benefits

Other
Post-
Retirement
Benefits

2007 11,027 496
2008 11,885 534
2009 12,418 572
2010 12,781 615
2011 13,363 642
2012 - 2016 76,660 3,546



Years	Pension Benefits		Other Post- Retirement Benefits

2008	$	10,621		$	492
2009		11,104			537
2010		11,564			579
2011		12,074			609
2012		12,766			641
2013 - 2017		72,202			3,556

The incremental impact for continuing and discontinued operations of adopting SFAS No. 158 as of December 31, 2006 (see the pension costs and postretirement benefit costs other than pensions section of Note 1 for further information on this new standard) and recognizing an additional minimum liability (the “AML”) is shown in the table below:

As of December 31, 2006
Prior to AML &
SFAS No. 158
Adjustments

AML
Adjustment

SFAS No. 158
Adjustment

Post AML
& SFAS No. 158
Adjustments

Prepaid pension costs $ 80,442 $ 1,243 $ (27,651 ) $ 54,034
Pension liabilities - - 3,619 3,619
Postretirement liabilities 9,740 - (318 ) 9,422
Decrease (increase) in deferred income tax liabilities relating to accumulated other comprehensive loss 1,252 (422 ) 11,354 12,184
Accumulated other comprehensive loss 2,434 (821 ) 19,598 21,211

~~Prepaid pension costs included~~



As of December 31, 2006	Prior to AML & SFAS No. 158 Adjustments			AML Adjustment				SFAS No. 158 Adjustment				Post AML & SFAS No. 158 Adjustments

Prepaid pension costs		$	80,442		$	1,243			$	(27,651	)		$	54,034
Pension liabilities			—			—				3,619				3,619
Postretirement liabilities			9,740			—				(318	)			9,422
Decrease (increase) in deferred income tax liabilities relating to accumulated other comprehensive loss			1,252			(422	)			11,354				12,184
Accumulated other comprehensive loss			2,434			(821	)			19,598				21,211

Amounts recognized in ~~the table above are included~~2007 and 2006 before related deferred income taxes in “Other assets and deferred charges” in the consolidated balance sheet at December 31, 2006. Pension and postretirement liabilities in the table above are included in “Other noncurrent liabilities” in the consolidated balance sheet at December 31, 2006.

accumulated other comprehensive income consist of:



	Pension						Other Post - Retirement

	2007			2006			2007			2006

Continuing operations:
Prior service cost (benefit)	$	(6,140	)	$	(7,200	)	$	—		$	—
Net actuarial (gain) loss		5,194			36,103			(682	)		161
Discontinued operations:
Prior service cost (benefit)		1,108			1,002			—			—
Net actuarial (gain) loss		6,008			3,807			(445	)		(478	)
Total:
Prior service cost (benefit)		(5,032	)		(6,198	)		—			—
Net actuarial (gain) loss		11,202			39,910			(1,127	)		(317	)

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 ~~2007~~2008 are as follows:

Pension
Other Post-
Retirement
Total
Prior service cost $ (967 ) $ - $ (967 )
Net (gain) loss 2,855 (47 ) 2,808

~~Amounts recognized before related deferred income taxes in accumulated other comprehensive income consist of:~~

Pension
Other Post-
Retirement

Prior service cost $ (6,198 ) $ -
Net (gain) loss 39,910 (317 )

Prepaid pension cost at December 31, 2005 of $85,647, are included in “Other assets and deferred charges” in the related consolidated balance sheet. The accrued benefit liability of $4,832 and the intangible asset of $1,145 at December 31, 2005, are also included in “Other assets and deferred charges” in the consolidated balance sheet at December 31, 2005. Accrued postretirement benefit cost at December 31, 2005 of $10,078 is included in “Other noncurrent liabilities” in the related consolidated balance sheet.

~~Index~~



	Pension				Other Post Retirement

Continuing operations:
Prior service cost (benefit)		$	(1,049	)		$	—
Net actuarial (gain) loss			344				(1	)
Discontinued operations:
Prior service cost (benefit)			83				—
Net actuarial (gain) loss			187				(43	)
Total:
Prior service cost (benefit)			(966	)			—
Net actuarial (gain) loss			531				(44	)

The percentage composition of assets held by pension plans for continuing operations at December 31, 2007, 2006 and 2005, and the current expected long-term return on assets are as follows:

% Composition
of Plan Assets

Expected
Long-term

December 31 2006 2005 Return %
Pension plans related to operations in the U.S.:
Low-risk fixed income securities 10.3 % 14.1 % 5.0 %
Large capitalization equity securities 20.2 19.1 9.2
Mid-capitalization equity securities 8.0 7.3 9.8
Small-capitalization equity securities 4.6 4.3 10.4
International equity securities 24.8 22.4 10.4
Total equity securities 57.6 53.1 9.9
Hedge and private equity funds 20.3 21.0 7.0
Other assets 2.2 2.3 3.0
Total for pension plans related to operations in the U.S. 90.4 90.5 8.5
Pension plans related to operations in Canada 9.6 9.5 7.0
Total 100.0 % 100.0 % 8.4 %



	% Composition						Expected Long-term
	of Plan Assets

December 31	2007		2006		2005		Return %

Pension plans related to continuing operations:
Low-risk fixed income securities	8.5	%	11.4	%	15.6	%	4.3	%

Large capitalization equity securities	20.7		22.4		21.1		8.1
Mid-capitalization equity securities	7.4		8.8		8.0		9.1
Small-capitalization equity securities	4.7		5.1		4.7		9.5
International equity securities	22.6		27.4		24.8		10.4

Total equity securities	55.4		63.7		58.6		9.4

Hedge and private equity funds	33.9		22.5		23.3		8.8
Other assets	2.2		2.4		2.5		3.6

Total for continuing operations	100.0	%	100.0	%	100.0	%	8.5	%

Our targeted allocation percentage for pension plan assets is in the range of the percentage composition that existed at December 31, ~~2006.~~2007. 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. ~~For pension plans related to operations in the U.S., the~~The portfolio of fixed income securities is structured with maturities that generally match estimated benefit payments over the next ~~2-3~~1-2 years. We believe that over the long term a diversified portfolio of equity securities, hedge funds and private equity funds have a better risk-return profile than fixed income securities. The average remaining duration of benefit payments for our pension plans is about 12 years. We expect our required contributions to approximate ~~$1,100~~$167 in ~~2007.~~

2008.

The ~~accumulated benefit obligation was $230,025 at December 31, 2006 and $223,821 at December 31, 2005. The projected benefit obligation, accumulated benefit obligation and~~estimate of the fair value of ~~plan~~ assets held by our pension plans is provided by third parties not affiliated with Tredegar. The fair value of low-risk fixed income securities and equity securities are typically based on Level 1 inputs. The fair value of the ownership interests held by our pension plans in hedge and private equity funds is reported by the funds. While the fair value of the underlying assets in these funds may be substantially based on Level 1 and Level 2 inputs, we believe that the ownership interests held by our pension plans in these funds are based on Level 3 inputs since there is no secondary market for ~~plans with accumulated benefit obligations in excess~~the ownership interests and there are restrictions on withdrawals. Other assets are primarily comprised of ~~plan assets were $13,740, $13,740~~cash and ~~$12,658, respectively, at December 31, 2006, and $13,200, $13,200 and $10,607, respectively, at December 31, 2005.~~

insurance contracts.

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 $2,324 at December 31, 2007 and $2,537 at December 31, ~~2006 and $2,655 at December 31, 2005.~~2006. Pension expense recognized was $161 in 2007, $355 in 2006 and $256 in ~~2005 and $275 in 2004.~~2005. This information has been included in the preceding pension benefit tables.

Approximately ~~136~~135 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 $868 in 2007, $807 in 2006 and $364 in ~~2005 and $281 in 2004.~~2005. This information has been excluded from the preceding pension benefit tables.

12
12	SAVINGS PLAN

We have a savings plan that allows eligible employees to voluntarily contribute a percentage ~~(generally~~of their compensation up to ~~15%~~Internal Revenue Service (“IRS”) ~~of their compensation.~~limitations. Under the provisions of the plan on or before December 31, 2006, we matched a portion (generally 50 cents for every $1 of employee contribution, up to a maximum of 10% of base pay) of the employee’s contribution to the plan with shares of our common stock. Effective January 1, 2007, and in conjunction with certain pension plan changes (see Note 11), the following changes were made to the savings plan for salaried and certain hourly employees:

~~Index~~

·
•	The company ~~will make~~makes matching contributions to the savings plan of $1 for every $1 of employee contribution. The maximum matching contribution ~~will be~~is 6% of base pay for ~~2007 and 2008~~2007-2009 and 5% of base pay ~~for 2009 and~~ thereafter.

·
•	The savings plan ~~will include~~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 $2,828 in 2007, $2,770 in 2006 and $1,889 in ~~2005 and $2,716 in 2004.~~2005. The savings plan changes effective January 1, 2007 ~~are expected to increase~~increased charges for company matching contributions by approximately $700. Our liability under the restoration plan was $1,027 at December 31, 2007 (consisting of 63,852 phantom shares of common stock) and $1,332 at December 31, 2006 (consisting of 58,931 ~~phantom shares of common stock) and $782 at December 31, 2005 (consisting of 60,674~~ phantom shares of common stock) valued at the closing market price on those dates.

The Tredegar Corporation Benefits Plan Trust (the “Trust”) purchased 7,200 shares of our common stock in 1998 for $192 and 46,671 shares of our common stock in 1997 for $1,020, 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.

13
13	RENTAL EXPENSE AND CONTRACTUAL COMMITMENTS

Rental expense for continuing operations was ~~$4,302~~$3,873 in 2007, $3,859 in 2006 ~~$4,316~~and $3,811 in ~~2005 and $4,549 in 2004.~~2005. Rental commitments under all non-cancelable operating leases for continuing operations as of December 31, ~~2006,~~2007, are as follows:

Year
Amount
2007 $ 3,652
2008 3,165
2009 2,123
2010 2,120
2011 701
Remainder 818
Total $ 12,579



Year	Amount

2008	$	2,461
2009		2,929
2010		2,959
2011		1,757
2012		1,322
Remainder		595

Total	$	12,023

AFBS, Inc. (formerly known as Therics, Inc. - see Note 15 for additional information regarding its restructuring in 2005), a wholly-owned subsidiary of Tredegar, has future rental commitments under noncancelable

operating leases through 2011 (most of which contain sublease options) totaling ~~$6,800.~~approximately $5,200. These future rental commitments are included in the above table. Sublease rental commitments relating to excess space at AFBS total ~~about $900~~$632 (excluded from the above table).

Contractual obligations for plant construction and purchases of real property and equipment amounted to ~~$6,025~~$2,965 at December 31, ~~2006~~2007 and ~~$14,628~~$5,992 at December 31, ~~2005.~~

~~Index~~

2006.

14
14	INCOME TAXES

Income from continuing operations before income taxes and income taxes are as follows:

2006

2005

2004
Income from continuing operations before income taxes:
Domestic
$
52,408
$ 19,709 $ 27,875
Foreign
6,429
6,493 7,607
Total
$
58,837
$ 26,202 $ 35,482

Current income taxes:
Federal
$
5,584
$ 1,853 $ (2 )
State
840
811 1,105
Foreign
4,057
(1,908 ) 6,996
Total
10,481
756 8,099
Deferred income taxes:
Federal
9,807
7,900 3,385
State
687
600 1,198
Foreign
(339
)
717 (3,460 )
Total
10,155
9,217 1,123
Total income taxes
$
20,636
$ 9,973 $ 9,222





	2007			2006			2005

Income from continuing operations
before income taxes:
Domestic	$	50,942		$	48,850		$	16,031
Foreign		8,354			6,258			6,838

Total	$	59,296		$	55,108		$	22,869

Current income taxes:
Federal	$	24,698		$	5,165		$	1,592
State		856			840			811
Foreign		4,351			4,223			(422	)

Total		29,905			10,228			1,981

Deferred income taxes:
Federal		(4,009	)		9,030			6,928
State		316			687			600
Foreign		(1,846	)		(154	)		(12	)

Total		(5,539	)		9,563			7,516

Total income taxes	$	24,366		$	19,791		$	9,497

The significant differences between the U.S. federal statutory rate and the effective income tax rate for continuing operations are as follows:

Percent of Income Before Income
Taxes for Continuing Operations

2006

2005

2004
Income tax expense at federal statutory rate
35.0
35.0 35.0
State taxes, net of federal income tax benefit
1.7
3.5 4.2
Valuation allowance for foreign operating loss carry-forwards
1.3
1.6 1.7
Unremitted earnings from foreign operations
1.2
2.3 (.1 )
Non-deductible expenses
.7
.6 .8
Foreign rate differences
-
- 1.0
Tax-exempt income
-
(1.6 ) -
Reversal of income tax contingency accruals
-
- (11.3 )
Research and development tax credit
(.9
)
(1.6 ) (1.9 )
Valuation allowance for capital loss carry-forwards

(1.0
)
2.2 -
Extraterritorial Income Exclusion and
Domestic Production Activities Deduction
(1.7
)
(2.4 ) (2.3 )
Other
(1.2
)
(1.5 ) (1.1 )
Effective income tax rate
35.1

38.1
26.0



	Percent of Income Before Income Taxes for Continuing Operations

	2007			2006			2005

Income tax expense at federal statutory rate		35.0			35.0			35.0
State taxes, net of federal income tax benefit		1.3			1.8			4.0
Unremitted earnings from foreign operations		2.2			1.2			2.7
Valuation allowance for capital loss carry-forwards		1.8			(1.1	)		2.5
Valuation allowance for foreign operating loss carry-forwards		1.4			1.9			1.8
Non-deductible expenses		.2			.3			.6
Research and development tax credit		(.1	)		(.9	)		(1.8	)
Extraterritorial Income Exclusion and Domestic Production Activities Deduction		(.5	)		(1.8	)		(2.8	)
Foreign rate differences		(1.1	)		(.3	)		(.9	)
Other		.9			(.2	)		.4

Effective income tax rate		41.1			35.9			41.5

~~Index~~

Deferred tax liabilities and deferred tax assets at December 31, ~~2006~~2007 and ~~2005,~~2006, are as follows:

December 31

2006
2005
Deferred tax liabilities:
Depreciation
$
37,188
$ 37,438
Pensions
19,384
30,595
Amortization of goodwill
14,314
11,627
Foreign currency translation gain adjustment
11,607
7,686
Unrealized gain on available-for-sale securities
-
12
Derivative financial instruments
497
437
Other
1,315
351
Total deferred tax liabilities
84,305
88,146
Deferred tax assets:
Employee benefits
5,987
5,244
Tax in excess of book basis for venture capital and other investments (net of valuation allowance of $577 in 2005)

2,372
1,863
Asset write-offs, divestitures and environmental accruals

1,251

2,602

Allowance for doubtful accounts and sales returns
1,209
1,086
Tax benefit on U.S. foreign and R&D tax credits and
NOL carryforwards
731
7,895
Inventory
640
329
Other (net of valuation allowance of $2,120 in 2006 and $1,020 in 2005)

2,398
2,618
Total deferred tax assets
14,588
21,637
Net deferred tax liability
$
69,717
$ 66,509
Included in the balance sheet:
Noncurrent deferred tax liabilities in excess of assets
$
75,772
$ 74,287
Current deferred tax assets in excess of liabilities
6,055
7,778
Net deferred tax liability
$
69,717
$ 66,509

~~During 2006,~~



December 31	2007		2006

Deferred tax liabilities:
Depreciation	$	29,105	$	30,077
Pensions		31,693		19,584
Amortization of goodwill		18,059		15,318
Foreign currency translation gain adjustment		13,497		7,402
Derivative financial instruments		—		480
Other		1,152		1,490

Total deferred tax liabilities		93,506		74,351

Deferred tax assets:
Excess of tax basis over financial reporting basis for the aluminum extrusions business in Canada		11,428		—
Employee benefits		6,543		5,945
Tax in excess of book basis for venture capital and other investments (net of valuation allowance of $1,066 in 2007)		5,805		2,547
Asset write-offs, divestitures and environmental accruals		3,274		2,851
Timing adjustment for unrecognized tax benefits on uncertain tax positions, including portion relating to interest and penalties		2,761		—
Allowance for doubtful accounts and sales returns		1,237		1,209
Tax benefit on state credits and foreign NOL carryforwards		954		731
Derivative financial instruments		464		—
Inventory		70		640
Other (net of valuation allowance of $2,947 in 2007and $2,120 in 2006)		1,517		750

Total deferred tax assets		34,053		14,673

Net deferred tax liability	$	59,453	$	59,678

Included in the balance sheet:
Noncurrent deferred tax liabilities in excess of assets	$	68,625	$	65,732
Current deferred tax assets in excess of liabilities		9,172		6,055

Net deferred tax liability	$	59,453	$	59,677

Except as noted below, we ~~realized substantially all~~believe that it is more likely than not that future taxable income will exceed future tax deductible amounts thereby resulting in the realization of ~~the~~deferred tax ~~benefits from tax credit and other carry-forwards existing~~assets. A valuation allowance of $2,947 at December 31, 2005. The remaining deferred tax asset associated with tax credit and other carry-forwards of $731 at December 31, 2006, relates to state income taxes and a net operating loss carry-forward for a foreign subsidiary that has no expiration. A valuation allowance at December 31, 2006 of approximately $2,1202007 is included in other deferred tax assets that offsets an amount included in that line item relating to possible future tax benefits on operating losses generated by ~~another~~certain foreign ~~subsidiary~~subsidiaries that may not be recoverable in ~~its~~the carry-forward period. In addition, a valuation allowance of ~~$577~~$1,066 at December 31, 2007 was established in ~~2005 in conjunction with~~ the ~~write-down~~third quarter of ~~our investment in Novalux (see Note 2) for~~2007 due to expected limitations on the utilization of assumed capital losses. In

A reconciliation of our unrecognized uncertain tax positions since January 1, 2007, is shown below:



												Increase (Decrease) Due to Settlements with Taxing Authorities
					Increase (Decrease) Due to Tax Positions Taken in
															Reductions Due to Lapse of Statute of Limitations

	Balance at Jan. 1, 2007																		Balance at Dec. 31, 2007
					Current Period			Prior Period
					Current Period			Prior Period

Gross unrecognized tax benefits on uncertain tax positions (reflected in current income tax and other noncurrent liability accounts in the balance sheet)		$	3,393			$	566		$	(506	)		$	—		$	(185	)		$	3,268
Deferred income tax assets related to unrecognized tax benefits on uncertain tax positions for which ultimate deductibility is highly certain but for which the timing of the deduction is uncertain (reflected in deferred income tax accounts in the balance sheet)			(2,733	)																	(2,325	)

Net unrecognized tax benefits on uncertain tax positions, which would impact the effective tax rate if recognized			660																		943

Interest and penalties accrued on deductions taken relating to uncertain tax positions (approximately $300, $300 and $100 reflected in income tax expense in the income statement in 2007, 2006 and 2005, respectively, with the balance shown in current income tax and other noncurrent liability accounts in the balance sheet)			891																		1,195
Related deferred income tax assets recognized on interest and penalties			(327	)																	(436	)

Interest and penalties accrued on uncertain tax positions net of related deferred income tax benefits, which would impact the effective tax rate if recognized			564																		759

Total net unrecognized tax benefits on uncertain tax positions reflected in the balance sheet, which would impact the effective tax rate if recognized		$	1,224																	$	1,702

We anticipate that by December 31, 2008, we will settle several disputed issues raised by the ~~fourth quarter~~IRS during its examination of ~~2006, we reversed this valuation allowance and reduced~~ our U.S. income tax ~~provision~~returns for 2001-2003, the most significant of which regards the recognition of our captive insurance subsidiary as an insurance company for U.S. income tax purposes. It is reasonably possible that a settlement with the IRS for the disputed issues would cost us $1,400, which would be applied against the balance of unrecognized tax benefits and accrued interest and penalties.

Tredegar and its subsidiaries file income tax returns in U.S., state and foreign jurisdictions. Tredegar is no longer subject to U.S. federal income tax examinations by ~~$577. Outside appraisal of the value of corporate assets, primarily real estate, performed in December 2006, indicates that realization of this deferred~~ tax ~~assets is more likely than not. We had current~~authorities for years before 2001. With few exceptions, Tredegar and ~~non-current~~its subsidiaries are no longer subject to state or non-U.S. income ~~taxes recoverable of $10,975 and zero, respectively, at December 31, 2006, and $7,163 and $5,803, respectively, at December 31, 2005.~~

tax examinations by tax authorities for years before 2004.

15
15	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 and restructurings ~~net of gains on sale of related assets,~~for continuing operations in ~~2006~~2007 totaled ~~$1,850~~$4,069 ($~~1,441~~2,781 after taxes) and ~~include:~~

included:


•	A fourth quarter charge of $1,200 ($780 after taxes), a third quarter charge of $1,220 ($793 after taxes) and a first quarter charge of $366 ($238 after taxes) related to the estimated loss on the sub-lease of a portion of the AFBS (formerly Therics) facility in Princeton, New Jersey;

•	A fourth quarter charge of $256 ($256 after taxes) and a first quarter charge of $338 ($284 after taxes) for asset impairments in Film Products;

·
•	A third quarter charge of $493 ($309 after taxes) and a second quarter charge of $99 ($62 after taxes) for severance and other employee-related costs in Aluminum Extrusions;

•	A second quarter charge of $26 ($16 after taxes) and a first quarter charge of $29 ($17 after taxes) for costs related to the shutdown of the films manufacturing facility in LaGrange, Georgia; and

•	A third quarter charge of $42 ($26 after taxes) 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).

Results in 2007 also include a fourth-quarter gain of $2,699 ($1,737 after taxes) on the sale of corporate real estate (proceeds of approximately $3,800) and a third-quarter loss from the write-down of Novalux of $2,095 ($1,341 after taxes). See Note 2 for more information on Novalux. The pretax amounts for both of these items are included in “Other income (expense), net” in the consolidated statements of income and separately shown in the segment operating profit table in Note 3. Income taxes in 2007 include the recognition of a valuation allowance against deferred tax assets of $1,066 in the third quarter for expected limitations on the utilization of assumed capital losses (see Note 14).

Losses associated with plant shutdowns, asset impairments and restructurings for continuing operations, net of gains on sale of related assets, in 2006 totaled $1,850 ($1,441 after taxes) and include:

•	A fourth quarter net gain of $14 ($8 after taxes), a third-quarter net gain of $1,022 ($615 after taxes), a second-quarter net gain of $822 ($494 after taxes) and a first-quarter pretax charge of $404 ($243 after taxes) associated with the shutdown of the films manufacturing facility in LaGrange, Georgia, including a pretax gain of $2,889 for related LIFO inventory liquidations (included in ~~"Cost~~“Cost of goods ~~sold"~~sold” in the consolidated statements of income), severance and other costs of $1,566, asset impairment charges of $130 and a gain on the disposal of equipment of $261 (included in “Other income (expense), net” in the consolidated statements of income);

~~Index~~

·
•	A third-quarter charge of $920 ($566 after taxes) related to expected future environmental costs at the aluminum extrusions facility in Newnan, Georgia (included in ~~"Cost~~“Cost of goods ~~sold"~~sold” in the consolidated statements of income);

·
•	A fourth quarter charge of $143 ($93 after taxes) and a third quarter charge of $494 ($321 after taxes) related to the estimated loss on the ~~sub-lease~~sublease of a portion of the AFBS facility in Princeton, New Jersey;

·
•	Second-quarter charges of $459 ($289 after taxes) and first-quarter charges of $268 ($170 after taxes) for severance and other employee-related costs in connection with restructurings in Aluminum Extrusions ($514) and Film Products ($213); and

·
•	First-quarter charges of $1,020 ($876 after taxes) for asset impairments relating to machinery & equipment in Film Products.

In 2006, a pretax gain on the sale of public equity securities of $56 (proceeds also of $56) is included in “Other income (expense), net” in the consolidated statements of income and “Gain on the sale of corporate assets” in the segment operating profit table in Note 3. Income taxes in 2006 include a reversal of a valuation allowance of $577 for deferred tax assets associated with capital loss carry-forwards recorded with the write-down of the investment in Novalux (see Notes 2 and 14). Outside appraisal of the value of corporate assets, primarily real estate, performed in December 2006, indicates that realization of related deferred tax assets is more likely than not.

~~Losses associated with plant shutdowns, asset impairments and restructurings, net of gains on sale of related assets, in 2005 totaled $14,606 ($9,372 after taxes) and include:~~

·
In 2006, a pretax gain on the sale of public equity securities of $56 (proceeds also of $56) is included in “Other income (expense), net” in the consolidated statements of income and “Gain on the sale of corporate assets” in the segment operating profit table in Note 3. Income taxes in 2006 include a reversal of a valuation allowance of $577 for deferred tax assets associated with capital loss carry-forwards recorded with the write-down of the investment in Novalux (see Notes 2 and 14).

Losses associated with plant shutdowns, asset impairments and restructurings for continuing operations, net of gains on sale of related assets, in 2005 totaled $15,721 ($10,087 after taxes) and include:

•	A fourth-quarter charge of $269 ($174 after taxes) and a second-quarter charge of $10,049 ($6,532 after taxes) related to the sale or assignment of substantially all of the assets of AFBS, Inc. (formerly known as Therics, Inc. - see below for additional information regarding its restructuring in 2005), including asset impairment charges of $5,638, lease-related losses of $3,326 and severance (31 people) and other transaction-related costs of $1,354 (see below for additional information on the transaction);

•

Fourth-quarter charges of $397 ($256 after taxes), third-quarter charges of ~~$906~~$756 ($~~570~~474 after taxes), second-quarter charges of $500 ($317 after taxes) and first-quarter charges of $418 ($266 after taxes) related to severance and other employee-related costs associated with restructurings in Film Products ($1,118 before taxes) and Aluminum Extrusions ($~~648~~498 before taxes) and at corporate headquarters ($455 before taxes; included in “Corporate expenses, net” in the segment operating profit table in Note 3) (an aggregate of 2119 people were affected by these restructurings);

·
•	A fourth-quarter charge of $2,101 ($1,263 after taxes) related to the shutdown of the films manufacturing facility in LaGrange, Georgia, including asset impairment charges of $1,615 and severance (15 people) and other costs of $486;

A fourth-quarter gain of $1,862 ($1,193 after taxes), a third-quarter charge of $198 ($127 after taxes), a second-quarter net gain of $71 ($46 after taxes) and a first-quarter charge of $470 ($301 after taxes) related to the shutdown of the aluminum extrusions facility in Aurora, Ontario, including a $1,667 gain on the sale of the facility (included in "Other income (expense), net" in the consolidated statements of income) and $1,111 of shutdown-related costs partially offset by the reversal to income of certain accruals associated with severance and other costs of $709;

•

A second-quarter charge of $27 ($16 after taxes) and a first-quarter gain of $1,618 ($973 after taxes) related to the shutdown of the films manufacturing facility in New Bern, North Carolina, including a $1,816 gain on the sale of the facility (included in ~~"Other~~“Other income (expense), ~~net"~~net” in the consolidated statements of income), partially offset by shutdown-related expenses of $225;

·
•	A first-quarter charge of $1,019 ($653 after taxes) for process reengineering costs associated with the implementation of an information system in Film Products (included in ~~"Costs~~“Costs of goods ~~sold"~~sold” in the consolidated statements of income);

•

Fourth-quarter charges of $118 ($72 after taxes), third-quarter charges of $595 ($359 after taxes), second-quarter charges of $250 ($150 after taxes) partially offset by a net first-quarter gain of $120 ($72 after taxes) related to severance and other employee-related accruals associated with the restructuring of the research and development operations in Film Products (of this amount, $1,366 in pretax charges for employee relocation and recruitment is included in SG&A expenses in the consolidated statements of income);

~~Index~~

·
•	A second-quarter gain of $653 ($392 after taxes) related to the shutdown of the films manufacturing facility in Carbondale, Pennsylvania, including a $630 gain on the sale of the facility (included in “Other income (expense), net” in the consolidated statements onof income), and the reversal to income of certain shutdown-related accruals of $23;

·
•	Fourth-quarter charges of $583 ($351 after taxes) for asset impairments in Film Products;

·
•	A net fourth-quarter charge of $495 ($310 after taxes) in Aluminum Extrusions, including an asset impairment of $597, partially offset by the reversal to income of certain shutdown-related accruals of $102;

·
•	Fourth-quarter charges of $31 ($19 after taxes), third-quarter charges of $117 ($70 after taxes), second-quarter charges of $105 ($63 after taxes) and first-quarter charges of $100 ($60 after taxes) for accelerated depreciation related to restructurings in Film Products; and

·
•	A fourth-quarter charge of $182 ($119 after taxes) in Film Products related to the write-off of an investment.

On June 30, 2005, substantially all of the assets of AFBS, Inc. (formerly known as Therics, Inc.), a wholly-owned subsidiary of Tredegar, were sold or assigned to a newly-created limited liability company, Therics, LLC, which is controlled and managed by an individual not affiliated with Tredegar. AFBS received a 17.5% equity interest in Therics, LLC, then valued at $170 and a 3.5% interest in Theken Spine, LLC, then valued at $800, along with potential future payments based on the sale of certain products by Therics, LLC. AFBS retained substantially all of its liabilities in the transaction, which included customary indemnification provisions for pre-transaction liabilities. Tredegar has no obligation or intent to fund any future losses that may occur at Therics, LLC or Theken Spine, LLC. The ownership interest in Therics, LLC is accounted for under the equity method of accounting with losses limited to its initial carrying value of $170. The ownership interest in Theken Spine, LLC is accounted for under the cost method, with an impairment loss recognized and a new cost basis established for any write-down to estimated fair value, if necessary. The payments due from Therics, LLC that are based on the sale of certain products are recognized as income when earned. AFBS had operating losses of $3,467 during the first six months of 2005 and $9,763 in 2004. Results of operations for AFBS since June 30, 2005 are immaterial.

See Note 2 for information regarding the write-down in 2005 of our investment in Novalux, Inc.

Gain on sale of corporate assets in 2005 includes a pretax gain of $61 related to the sale of corporate real estate. This gain is included in “Other income (expense), net” in the consolidated statements of income and separately shown in the operating profit by segment table in Note 3.

During the first quarter of 2005, we recognized a pretax gain for interest receivable on tax refund claims of $508 ($327 after taxes) (included in ~~"Other income (expense), net" in the consolidated statements of income and "Corporate expenses, net" in the segment operating profit table in Note 3).~~

~~Losses associated with plant shutdowns, asset impairments and restructurings in 2004 totaled $23,032 ($15,192 after taxes) and include:~~

·	A fourth-quarter charge of $84 ($56 after taxes), a third-quarter charge of $828 ($537 after taxes), a second-quarter charge of $994 ($647 after taxes) and a first-quarter charge of $666 ($432 after taxes) related to accelerated depreciation from plant shutdowns and restructurings in Film Products;

A fourth-quarter charge of $569 (of this amount, $59 for employee relocation is included in selling, general and administrative expenses in the consolidated statements of income) ($369 after taxes) and a third-quarter charge of $709 ($461 after taxes) related to severance for 30 people and other employee-related costs associated with the restructuring of the R&D operations in Film Products, including costs associated with relocating R&D functions to Richmond, Virginia;

A fourth-quarter charge of $639 ($415 after taxes), a third-quarter charge of $617 ($401 after taxes), a second-quarter charge of $300 ($195 after taxes) and a first-quarter charge of $537 ($349 after taxes) primarily related to severance (63 people) and other employee-related costs associated with the shutdown of the films manufacturing facility in New Bern, North Carolina (the shut down was completed in the fourth quarter of 2004);

·	A third-quarter charge of $357 ($329 after taxes) and a second-quarter charge of $2,665 ($1,858 after taxes) for the loss on the sale of the films business in Argentina (proceeds net of transaction costs were $803 ($401 net of cash included in business sold));

~~Index~~

A fourth-quarter charge of $352 ($228 after taxes), a third-quarter charge of $195 ($127 after taxes) and a first-quarter charge of $9,580 ($6,228 after taxes) related to the planned shutdown of an aluminum extrusions facility in Aurora, Ontario, including asset impairment charges of $7,130 and severance and other employee-related costs of $2,450 (these costs were contractually-related for about 100 people and have been immediately accrued);

·	~~A third-quarter charge of $170 ($111 after taxes) for additional costs incurred related to a plant shutdown in Film Products;~~

·	A second-quarter charge of $300 ($195 after taxes), partially offset by a fourth-quarter gain of $104 ($68 after taxes), related to the loss on the sale of the previously shutdown films manufacturing facility in Manchester, Iowa;

·	A fourth-quarter charge of $427 ($277 after taxes) and a second-quarter charge of $879 ($571 after taxes) related to the estimated loss on the sub-lease of a portion of the AFBS facility in Princeton, New Jersey;

·	~~Second-quarter charges of $575 ($374 after taxes) in Film Products and $146 ($95 after taxes) in Aluminum Extrusions related to asset impairments; and~~

Fourth-quarter charges of $1,402 ($912 after taxes) related to severance and other employee-related costs associated with restructurings in Therics ($590 before taxes), Film Products ($532 before taxes) and Aluminum Extrusions ($280 before taxes) and a second-quarter charge of $145 ($94 after taxes) related to severance at AFBS (an aggregate of 24 people were affected by these restructurings).

Gain on sale of corporate assets in 2004 includes a fourth-quarter gain on the sale of land of $1,013 ($649 after taxes and proceeds of $1,271), a second-quarter gain on the sale of land of $413 ($268 after taxes and proceeds of $647) and a first-quarter gain on the sale of public equity securities of $6,134 ($3,987 after taxes and proceeds of $7,182). These gains are included in “Other income (expense), net” in the consolidated statements of income and ~~separately shown~~“Corporate expenses, net” in the segment operating profit table in Note 3.

~~Income taxes in 2004 include a third-quarter tax benefit of $4,000 related to the reversal of income tax contingency accruals upon the favorable conclusion of IRS and state examinations through 2000.~~

The other gain of $7,316 ($4,756 after taxes) included in the Aluminum Extrusions section of the operating profit by segment table in Note 3 is comprised of the present value of an insurance settlement of $8,357 (future value of $8,455) associated with environmental matters related to prior years, partially offset by accruals for expected future environmental costs of $1,041. The company received $5,143 of the $8,455 insurance settlement in September of 2004 and recognized receivables at present value for future amounts due ($1,497 received in February of 2005 and $1,717 received in February 2006)3). The gain from the insurance settlement is included in "Other income (expense), net" in the consolidated statements of income, while the accruals for expected future environmental costs are included in "Cost of goods sold."

16
16	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 ~~legal counsels’ evaluation of these actions,~~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 sale 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. We disclose contingent liabilities if the probability of loss is reasonably possible and significant.

~~Index~~

17
17	DISCONTINUED OPERATIONS

On ~~March 7, 2003, Tredegar Investments, Inc. (“Tredegar Investments”) reached definitive agreements~~February 12, 2008, and pursuant to ~~sell substantially all~~the terms and conditions of ~~its portfolio~~a purchase agreement dated January 6, 2008, we sold our aluminum extrusions business in Canada for an estimated purchase price of ~~private equity partnership interests~~approximately $25,500 to ~~GS Vintage Funds II, which~~an affiliate of H.I.G. Capital. The final purchase price is subject to increase or decrease to the extent that actual working capital, cash and indebtedness (as defined) as of February 12, 2008 are ~~investment partnerships managed by Goldman Sachs Asset Management’s Private Equity Group. On~~above or below the ~~same date and in a separate transaction, Tredegar Investments also agreed~~estimated amounts used to ~~sell to W Capital Partners, an independent private equity manager,~~determine the ~~subsidiary funds that hold substantially all of Tredegar Investments’ direct venture capital investments.~~estimated purchase price.

The sale of ~~these fund interests included the assumption~~our aluminum extrusions business in Canada, which was suffering from operating losses driven by ~~the buyer of Tredegar Investments’ obligations to make additional capital contributions to those funds in the future.~~

~~The sale to W Capital Partners~~lower volume and higher conversion costs from appreciation of the ~~subsidiary funds~~Canadian dollar, allows us to focus on our U.S. aluminum extrusions operations where we have more control over costs and profitability. The business was classified as held for sale at the end of December 2007 when it became probable that ~~hold~~ the direct investments occurred on March 7, 2003. The sale of the private equity fund interests occurred in a series of closings. Net proceeds from the sales totaled $21,504. Additionally, in the first quarter of 2004 we received income tax recoveries of approximately $55,000 from the carry-back of 2003 capital losses generated by these sales against gains realized in 2000 by Tredegar Investments.

~~The agreements governing these transactions contain customary contingent indemnification provisions that Tredegar believes will not~~business would be sold. All historical results for this business have ~~a material effect on its financial position or results of operations.~~

Discontinued operations in 2004 include an after-tax gain associated with venture capital investment activities of $2,921 primarily related to the reversal of business and occupancy tax contingency accruals upon favorable resolution. Cashbeen reflected as discontinued operations; however, cash flows for discontinued operations have not been separately disclosed in the ~~accompanying~~consolidated statements of cash flows.

During September 2007, we recognized a charge of $27,550 ($22,744 after taxes) for impairment of property, plant and equipment (“PP&E”) related to the aluminum extrusions operations in Canada. The impairment of PP&E was due to deteriorating business conditions and financial results. The combination of lower volume and appreciation of the Canadian dollar, which impacted our costs, caused a shift from overall profitability in 2006 to losses in 2007. In addition, our projections of the future unlevered pretax cash flows for this business indicated that the carrying value of its net assets at September 30, 2007 of approximately $71,700 (tangible assets in excess of liabilities excluding deferred income taxes) before the impairment would not be recovered. As a result, in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, we recognized the impairment charge to write down the individual components of long-lived assets (PP&E) to the lower of their carrying value or estimated fair value. Our estimates of real property values were based on a commonly used valuation methodology in real estate whereby projected net operating income for the property (projected earnings before interest, taxes, depreciation and amortization that could be earned from rent) is divided by a related risk-adjusted expected rate of return (referred to as the capitalization rate). The estimated fair value of machinery and equipment was based on our estimates of the proceeds that we would receive if they were sold. Our estimates of the value of real estate and machinery and equipment were based on Level 2 inputs as defined by SFAS No. 157, Fair Value Measurements.

During December 2007, we recognized an additional impairment charge of $4,143 ($4,143 after taxes) to write down the remaining carrying value of the aluminum extrusions operations in Canada to estimated fair value less cost to sell in accordance with SFAS No. 144. In addition, in December 2007 we recognized income tax benefits of $11,428 relating to a worthless stock deduction for the business that will be recognized in Tredegar’s 2008 consolidated income tax return (included in discontinued operations in the consolidated statement of income in 2007 but reflected as a deferred income tax asset for continuing operations in our consolidated balance sheet at December 31, 2007). This tax benefit is expected to be realized by a reduction of Tredegar’s quarterly estimated income tax payments by the end of the third quarter of 2008.

Goodwill for the Aluminum Extrusions reporting unit of $6,459 has been allocated to the discontinued aluminum extrusions operations in Canada using the estimated fair value of the business sold (the after-tax cash ~~flows.~~flow expected from disposal of approximately $30,000 when it was classified as held for sale at the end of December 2007), and the estimated fair value of the aluminum extrusions business in the U.S. retained. The fair value of the aluminum extrusions business in the U.S. was estimated at approximately $145,000 using comparable enterprise value-to-EBITDA multiples as of December 31, 2007.

The statements of income for 2007, 2006 and 2005 and balance sheets as of December 31, 2007 and 2006 for the aluminum extrusions business in Canada are shown below:

Aluminum Extrusions Business in Canada

Statements of Income


	2007			2006		2005

Revenues and other items:
Sales	$	157,691		$	178,965	$	148,505
Other income (expense), net		—			—		1,667

		157,691			178,965		150,172

Costs and expenses:
Cost of goods sold		156,700			165,465		138,156
Freight		4,969			5,494		4,415
Selling, general and administrative		2,389			4,277		3,716
Asset impairments and costs associated with exit and disposal activities		31,754			—		552

Total		195,812			175,236		146,839

Income (loss) before income taxes		(38,121	)		3,729		3,333
Income taxes		(18,440	)		845		476

Net income (loss)	$	(19,681	)	$	2,884	$	2,857

Aluminum Extrusions Business in Canada
Balance Sheets



December 31	2007		2006


Assets
Current assets:
Accounts and notes receivable, net	$	15,470	$	14,879
Inventories		22,089		20,266
Prepaid expenses and other		191		130

Total current assets		37,750		35,275

Noncurrent assets:
Net property, plant and equipment		11,001		38,328
Other assets and deferred charges		—		366
Goodwill and other intangibles		6,459		6,459

Total noncurrent assets		17,460		45,153



Total assets	$	55,210	$	80,428



December 31	2007			2006

Liabilities and Carrying Value of
Tredegar’s Net Advances & Investment
Current liabilities:
Accounts payable	$	13,528		$	15,406
Accrued expenses		3,624			3,116

Total current liabilities		17,152			18,522

Noncurrent liabilities:
Deferred income taxes		6,048			10,040
Other noncurrent liabilities		2,770			1,269

Total noncurrent liabilities		8,818			11,309

Accumul. other comprehensive income (loss):
Foreign currency translation adjust.		15,700			7,821
Gain (loss) on derivatives		(465	)		47
Pension and other postret. benefit adjust.		(4,871	)		(2,877	)
Carrying value of Tredegar’s net advances & investment		18,876			45,606

Liabilities and carrying value of Tredegar’s net advances & investment	$	55,210		$	80,428

~~Index~~


SELECTED QUARTERLY FINANCIAL DATA

Tredegar Corporation and Subsidiaries
(In thousands, except per-share amounts)
(Unaudited)




	First Quarter			Second Quarter			Third Quarter			Fourth Quarter		Year

2007

Sales	$	244,887		$	234,882		$	234,352		$	208,462	$	922,583
Gross profit		37,180			35,075			36,297			32,714		141,266
Income from continuing operations		11,135			10,564			6,195			7,036		34,930
Income (loss) from discontinued operations		(802	)		(629	)		(24,571	)		6,321		(19,681	)

Net income (loss)		10,333			9,935			(18,376	)		13,357		15,249
Earnings (loss) per share:
Basic
Continuing operations		.28			.27			.16			.19		.91
Discontinued operations		(.02	)		(.02	)		(.63	)		.17		(.51	)

Net income (loss)		.26			.25			(.47	)		.36		.40
Diluted
Continuing operations		.28			.27			.16			.19		.90
Discontinued operations		(.02	)		(.02	)		(.63	)		.17		(.51	)

Net income (loss)		.26			.25			(.47	)		.36		.39
Shares used to compute earnings per share:
Basic		39,272			39,402			38,985			36,494		38,532
Diluted		39,487			39,584			39,119			36,587		38,688

2006

Sales	$	228,518		$	234,491		$	247,557		$	226,995	$	937,561
Gross profit		32,404			33,303			35,800			34,076		135,583
Income from continuing operations		7,104			8,494			9,883			9,836		35,317
Income (loss) from discontinued operations		1,111			756			(193	)		1,210		2,884

Net income (loss)		8,215			9,250			9,690			11,046		38,201
Earnings (loss) per share:
Basic
Continuing operations		.18			.22			.25			.25		.92
Discontinued operations		.03			.02			—			.03		.07

Net income (loss)		.21			.24			.25			.28		.99
Diluted
Continuing operations		.18			.22			.25			.25		.91
Discontinued operations		.03			.02			—			.03		.07

Net income (loss)		.21			.24			.25			.28		.98
Shares used to compute earnings per share:
Basic		38,602			38,632			38,654			38,793		38,671
Diluted		38,664			38,837			39,123			39,092		38,931

~~SELECTED QUARTERLY FINANCIAL DATA~~SIGNATURES

~~Tredegar Corporation and Subsidiaries~~

~~(In thousands, except per-share amounts)~~

~~(Unaudited)~~

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter
Year
2006
Sales $ 267,964 $ 282,491 $ 296,256 $ 269,814 $ 1,116,525
Gross profit 34,852 35,550 36,143 37,045 143,590
Net income 8,215 9,250 9,690 11,046 38,201
Earnings per share:
Basic .21 .24 .25 .28 .99
Diluted .21 .24 .25 .28 .98
Shares used to compute earnings per share:
Basic 38,602 38,632 38,654 38,793 38,671
Diluted 38,664 38,837 39,123 39,092 38,931
2005
Sales $ 232,757 $ 243,724 $ 240,716 $ 239,772 $ 956,969
Gross profit 28,462 33,245 32,518 27,432 121,657
Net income 5,550 2,132 7,657 890 16,229
Earnings per share:
Basic .14 .05 .20 .02 .42
Diluted .14 .05 .20 .02 .42
Shares used to compute earnings per share:
Basic 38,440 38,453 38,465 38,527 38,471
Diluted 38,636 38,592 38,565 38,594 38,597

~~Index~~

~~SIGNATURES~~

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.

	~~TREDEGAR CORPORATION~~ ~~(Registrant)~~
			TREDEGAR CORPORATION (Registrant)

Dated: March ~~2, 2007~~4, 2008	By	/s/ John D. Gottwald

		John D. Gottwald
		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 ~~2, 2007.~~

4, 2008.


	Signature	Title

/s/	John D. Gottwald	President, Chief Executive Officer and Director
		(Principal Executive Officer)
	(John D. Gottwald)	~~(Principal Executive Officer)~~

/s/	D. Andrew Edwards	Vice President, Chief Financial Officer and Treasurer
~~(D. Andrew Edwards)~~		(Principal Financial and Accounting Officer)
	(D. Andrew Edwards)

/s/	Richard L. Morrill	Chairman of the Board of Directors

	(Richard L. Morrill)

/s/	William M. Gottwald	Vice Chairman of the Board of Directors

	(William M. Gottwald)

/s/	N. A. Scher	Vice Chairman of the Board of Directors

	(Norman A. Scher)

/s/	Horst R. Adam	Director

	(Horst R. Adam)

/s/	Austin Brockenbrough, III	Director

	(Austin Brockenbrough, III)

/s/	Donald T. Cowles	Director

	(Donald T. Cowles)

~~Index~~


/s/	Thomas G. Slater, Jr.	Director

	(Thomas G. Slater, Jr.)

/s/	R. Gregory Williams	Director

	(R. Gregory Williams)

~~Index~~

EXHIBIT INDEX

~~3.1~~
3.1	Amended and Restated Articles of Incorporation of Tredegar (filed as Exhibit 3.1 to ~~Tredegar's~~Tredegar’s Annual Report on Form 10-K (File No. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference)

~~3.2~~
3.2	Amended and Restated By-laws of Tredegar (filed as Exhibit ~~3.01~~3.2 to ~~Tredegar's~~Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed ~~January 17, 2006,~~November 6, 2007, and incorporated herein by reference)

~~3.3~~
3.3	Articles of Amendment (filed as Exhibit 3.3 to ~~Tredegar's~~Tredegar’s Annual Report on Form 10-K (File No. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference)

~~4.1~~
4.1	Form of Common Stock Certificate (filed as Exhibit 4.1 to ~~Tredegar's~~Tredegar’s Annual Report on Form 10-K (File No. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference)

~~4.2~~
4.2	Rights Agreement, dated as of June 30, 1999, by and between Tredegar and American Stock Transfer & Trust Company, as Rights Agent (filed as Exhibit 4.2 to ~~Tredegar's~~Tredegar’s Annual Report on Form 10-K (File No. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference)

~~4.2.1~~
4.2.1	Amendment and Substitution Agreement (Rights Agreement) dated as of December 11, 2002, by and among Tredegar, American Stock Transfer and Trust Company and National City Bank (filed as Exhibit 4.2.1 to Tredegar’s Annual Report on Form 10-K (File No. 1-10258) for the year ended December 31, 2002, and incorporated herein by reference)

~~4.3~~

4.3

Credit Agreement among Tredegar Corporation, as borrower, the domestic subsidiaries of Tredegar that from time to time become parties thereto, as guarantors, the several banks and other financial institutions as may from time to time become parties thereto, Wachovia Bank, National Association, as administrative agent, SunTrust Bank, as syndication agent, and Bank of America, N.A., KeyBank National Association, and JPMorgan Chase Bank, N.A., as documentation agents, dated as of December 15, 2005 (filed as Exhibit 10.16 to ~~Tredegar's~~Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed December 20, 2005, and incorporated herein by reference)

~~10.1~~
10.1	Reorganization and Distribution Agreement dated as of June 1, 1989, between Tredegar and Ethyl (filed as Exhibit 10.1 to ~~Tredegar's~~Tredegar’s Annual Report on Form 10-K (File No. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference)


*10.2	Employee Benefits Agreement dated as of June 1, 1989, between Tredegar and Ethyl (filed as Exhibit 10.2 to ~~Tredegar's~~Tredegar’s Annual Report on Form 10-K (File No. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference)

~~10.3~~
10.3	Tax Sharing Agreement dated as of June 1, 1989, between Tredegar and Ethyl (filed as Exhibit 10.3 to ~~Tredegar's~~Tredegar’s Annual Report on Form 10-K (File No. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference)

~~10.4~~
10.4	Indemnification Agreement dated as of June 1, 1989, between Tredegar and Ethyl (filed as Exhibit 10.4 to ~~Tredegar's~~Tredegar’s Annual Report on Form 10-K (File No. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference)


*10.5	Tredegar ~~1989 Incentive Stock Option~~Industries, Inc. Retirement Benefit Restoration Plan (filed as Exhibit ~~10.5~~10.7 to ~~Tredegar's~~Tredegar’s Annual Report on Form 10-K (File No. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference)


*10.5.1	~~Amendment to the Tredegar 1989 Incentive Stock Option Plan (filed as Exhibit 10.5.1 to Tredegar's Annual Report on Form 10-K for the year ended December 31, 2004, and incorporated herein by reference)~~

*10.6

~~Tredegar 1992 Omnibus Stock Incentive Plan (filed as Exhibit 10.6 to Tredegar's Annual Report on Form 10-K for the year ended December 31, 2004, and incorporated herein by reference)~~

*10.6.1

~~Amendment to the Tredegar 1992 Omnibus Incentive Plan (filed as Exhibit 10.6.1 to Tredegar's Annual Report on Form 10-K for the year ended December 31, 2004, and incorporated herein by reference)~~

*10.7

Tredegar Industries, Inc. Retirement Benefit Restoration Plan (filed as Exhibit 10.7 to Tredegar's Annual Report on Form 10-K for the year ended December 31, 2004, and incorporated herein by reference)

*10.7.1

Amendment to the Tredegar Retirement Benefit Restoration Plan (filed as Exhibit 10.7.1 to ~~Tredegar's~~Tredegar’s Annual Report on Form 10-K (File No. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference)

*10.8
*10.6	Tredegar Industries, Inc. Savings Plan Benefit Restoration Plan (filed as Exhibit 10.8 to ~~Tredegar's~~Tredegar’s Annual Report on Form 10-K (File No. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference)

*10.8.1
*10.6.1	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)

~~Index~~

*10.9
*10.7	Tredegar Industries, Inc. 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)

*10.10
*10.8	Tredegar Industries, Inc. Directors’ Stock Plan (filed as Exhibit 10.11 to ~~Tredegar's~~Tredegar’s Annual Report on Form 10-K (File No. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference)

*10.11
*10.9	Tredegar Corporation’s 2004 Equity Incentive Plan (filed as Exhibit 10.13 to the Form S-8 Registration Statement No. 333-115423, filed on May 12, 2004 (incorporating from the Annex to Tredegar Corporation’s Definitive Proxy Statement on Schedule 14A filed on March 4, 2004 ~~(No.~~(File No. 1-10258) and incorporated herein by reference)

*10.12

Leave of Absence, Separation and Non-Competition Agreement, dated May 16, 2005, between Tredegar Film Products Corporation and Thomas G. Cochran (filed as Exhibit 10.16 to Tredegar's Current Report on Form 8-K, filed May 18, 2005, and incorporated herein by reference)

*10.13
*10.10	Transfer Agreement, by and between Old Therics and New Therics, dated as of June 30, 2005 (filed as Exhibit 10.17 to ~~Tredegar's~~Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed July 1, 2005, and incorporated herein by reference)

~~10.14~~
10.11	Intellectual Property Transfer Agreement, by and between Old Therics and New Therics, dated as of June 30, 2005 (filed as Exhibit 10.18 to ~~Tredegar's~~Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed July 1, 2005, and incorporated herein by reference)

~~10.15~~
10.12	Unit Purchase Agreement, by and between Old Therics, New Therics and Randall R. Theken, dated as of June 30, 2005 (filed as Exhibit 10.19 to ~~Tredegar's~~Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed July 1, 2005, and incorporated herein by reference)

~~10.16~~
10.13	Payment Agreement, by and between Old Therics and New Therics, dated as of June 30, 2005 (filed as Exhibit 10.20 to ~~Tredegar's~~Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed July 1, 2005, and incorporated herein by reference)

*10.17

~~Form of Stock Award Agreement (filed as Exhibit 10.21 to Tredegar's Current Report on Form 8-K, filed September 1, 2005, and incorporated herein by reference)~~

*~~10.18~~10.14

~~Description of Cash Incentive Plans for fiscal 2006 (filed as Item 1.01 to Tredegar’s Current Report on Form 8-K, filed on February 22, 2006, and incorporated herein by reference)~~

*10.19

Form of Notice of Nonstatutory Stock Option Grant and Nonstatutory Stock Option Terms and Conditions (filed as Item 1.01 to Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on March 10, 2006, and incorporated herein by reference)

*10.20
*10.15	Form of Notice of Stock Unit Award and Stock Unit Award Terms and Conditions (filed as Exhibit ~~10.22~~10.21 to Tredegar’s ~~Quarterly~~Current Report on Form ~~10-Q,~~8-K (File No. 1-10258), filed on February 27, 2007, and incorporated herein by reference)

*10.21	~~Description of 2007 Long-Term Incentive Award for Chief Executive Officer and~~
*10.16	Form of Notice of Stock Unit Award and Stock Unit Award Terms and Conditions (2007 EPA) (filed as ~~Item 5.02 and~~ Exhibit ~~10.21, respectively,~~10.22 to Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on ~~February 28,~~June 26, 2007, and incorporated herein by reference)

*10.22
*10.17	Form of Notice of Stock Unit Award and Stock Unit Award Terms and Conditions (2008 EPA) (filed as Exhibit 10.23 to Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on June 26, 2007, and incorporated herein by reference)

+*10.18	Summary of Director Compensation for Fiscal ~~2007~~2008


+21	Subsidiaries of Tredegar


+23.1	Consent of Independent Registered Public Accounting Firm


+31.1	Section 302 Certification of Principal Executive Officer


+31.2	Section 302 Certification of Principal Financial Officer


+32.1	Section 906 Certification of Principal Executive Officer


+32.2	Section 906 Certification of Principal Financial Officer

* Denotes compensatory plans or arrangements or management contracts.

+ Filed herewith

~~Virginia~~	~~54-1497771~~
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549



FORM 10-K

FOR ANNUAL AND TRANSACTION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2007
	OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________

	Commission File Number 1-10258


Virginia	54-1497771

(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)


1100 Boulders Parkway, Richmond, Virginia	23225

(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: 804-330-1000

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class		Name of Each Exchange on Which Registered

Common Stock		New York Stock Exchange
Preferred Stock Purchase Rights		New York Stock Exchange


Large accelerated filero	o	Accelerated filer x
Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company o

~~Part I~~				~~Page~~
~~Item 1.~~ Part I		~~Business~~		~~1-3~~ Page

Item 1.		Business	1-3

Item 1A.		Risk Factors		~~3-5~~ 4-6

Item 1B.		Unresolved Staff Comments		None
~~Item 2.~~		~~Properties~~		~~5-6~~
Item 2.		Properties	6

Item 3.		Legal Proceedings		6 None

Item 4.		Submission of Matters to a Vote of Security Holders		None

Part II

Item 5.		Market for ~~Tredegar��s~~Tredegar’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		~~7-8~~ 7-10

Item 6.		Selected Financial Data		~~9-16~~ 10-16

Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		~~17-35~~ 17-34

Item 7A.		Quantitative and Qualitative Disclosures About Market Risk		36 35

Item 8.		Financial Statements and Supplementary Data		~~40-73~~ 39-73

Item 9.		Changes In and Disagreements With Accountants on Accounting and Financial Disclosure		None

Item 9A.		Controls and Procedures		36 35-36

Item 9B.		Other Information		None

Part III

Item 10.		Directors, Executive Officers and Corporate Governance*		~~37-38~~ 36-37

Item 11.		Executive Compensation		*

Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters*		39 38

Item 13.		Certain Relationships and Related Transactions, and Director Independence*		39 38

Item 14.		Principal Accounting Fees and Services		*

Part IV

Item 15.		Exhibits and Financial Statement Schedules	39
	40

·
•	Apertured film and nonwoven materials for use as topsheet in feminine hygiene products, baby diapers and adult incontinent products (including materials sold under the ComfortQuilt^®and ComfortAire^TMbrand names);

·
•	Breathable, embossed and elastic materials for use as components for baby diapers, adult incontinent products and feminine hygiene products (including elastic components sold under the Fabriflex^TM, StretchTab^TMand FlexAire^TMbrand names); and

·
•	Absorbent transfer layers for baby diapers and adult incontinent products sold under the AquiDry^TM and AquiSoft^TM brand names.


% of Aluminum Extrusions Sales Volume
by Market Segment
	2006		2005		2004
Building and construction:
Commercial		48		44		41
Residential		14		18		21
Distribution		19		16		13
Transportation		9		9		10
Machinery and equipment		5		6		7
Electrical		3		4		5
Consumer durables		2		3		3
Total		100		100		100



% of Aluminum Extrusions Sales Volume by Market Segment (Continuing Operations)

	2007		2006		2005

Building and construction:
Commercial		65		55		51
Residential		17		19		25
Distribution		9		18		16
Transportation		4		3		4
Machinery and equipment		2		2		2
Electrical		2		2		1
Consumer durables		1		1		1

Total		100		100		100

·
•	*Our investments (primarily $10 million investment in Harbinger and $6.5 million investment in a drug delivery company) have high risk.* Harbinger Capital Partners Special Situations Fund, L.P. (“Harbinger”) is a fund that seeks to achieve superior absolute returns by participating primarily in medium to long-term investments involving distressed/high yield debt securities, special situation equities and private loans and notes. The fund is a highly speculative investment subject to a two-year lock-up and additional limitations on withdrawal. The drug delivery company may need several more rounds of financing to have the opportunity to complete product development and bring its technology to market, which may never occur. There is no secondary market for selling our interests in Harbinger or the drug delivery company.

Film Products

•	*Film Products is highly dependent on sales associated with one customer, P&G.&G.*** P&G comprised approximately ~~23%~~29% of ~~Tredegar Corporation’s~~our consolidated net sales from continuing operations in 2007, 28% in 2006 ~~25%~~and 30% in ~~2005 and 27% in 2004.~~2005. 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 and (iii) delays in P&G rolling out products utilizing new technologies developed by ~~Tredegar.~~us. 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.

·
•	*As Film Products expands its personal care business, we have greater credit risk that is inherent in broadening our customer base.*

·
Aluminum Extrusions

•	Sales volume and profitability of Aluminum Extrusions is cyclical and highly dependent on economic conditions of end-use markets in the United States, ~~and Canada,~~ particularly in the construction, distribution and transportation industries. Our market segments are also subject to seasonal ~~slowdowns during the winter months.~~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 that usually accompany a downturn. In addition, higher energy costs ~~and the appreciation of the U.S. Dollar equivalent value of the Canadian Dollar~~ can further reduce profits unless offset by price increases or cost reductions and productivity improvements.


	Foreign imports, primarily from China, represent a ~~growing~~ portion of the ~~North American~~U.S. aluminum extrusion market. Foreign competition to date has been primarily large volume, standard extrusion profiles that impact some of our less strategic end-use markets. Market share erosion in other end-use markets remains possible.


Item 1.1.	BUSINESS

~~Item~~ 1A.
Item 1A.	RISK FACTORS

~~Ite~~m ~~1B.~~
Item 1B.	UNRESOLVED STAFF COMMENTS

	None.

Item 2.	PROPERTIES

General


~~Film Products~~ Locations in the United States ~~Lake Zurich, Illinois~~ ~~Pottsville, Pennsylvania~~ ~~Red Springs, North Carolina (leased)~~ ~~Richmond, Virginia (technical center) (leased)~~ ~~Terre Haute, Indiana (technical center and production facility)~~	Locations in Foreign Countries	Principal Operations

Lake Zurich, Illinois	Chieti, Italy (technical center) ~~Guangzhou, China~~ ~~Kerkrade, The Netherlands~~ ~~Rétság, Hungary~~ ~~Roccamontepiano, Italy~~ ~~São Paulo, Brazil~~ ~~Shanghai, China~~	~~Principal Operations~~ Production of plastic films and
Pottsville, Pennsylvania	Guangzhou, China	laminate materials
Red Springs, North Carolina	Kerkrade, The Netherlands
(leased)	Rétság, Hungary
Richmond, Virginia (technical	Roccamontepiano, Italy
center) (leased)	São Paulo, Brazil
Terre Haute, Indiana	Shanghai, China
(technical center and
production facility)


	There can be no assurance that we will be able to maintain current margins and profitability. Our continued success and prospects depend on our ability to retain existing customers and participate in overall industry cross-cycle growth.


~~Aluminum Extrusions~~ Locations in the United States ~~Carthage, Tennessee~~ ~~Kentland, Indiana~~ ~~Newnan, Georgia~~	Locations in Canada ~~Pickering, Ontario~~ ~~Richmond Hill, Ontario~~ ~~Ste Thérèse, Québec~~ ~~Woodbridge, Ontario (leased)~~	Principal Operations

Carthage, Tennessee	All locations in Canada were part	Production of aluminum extrusions,
Kentland, Indiana	of the sale on February 12, 2008,	fabrication and finishing
Newnan, Georgia	of the aluminum extrusions
	business in Canada (see Note 17 to
	the notes to financial statements
	for more information)

~~Ite~~m 4.
Item 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

	None.

~~Ite~~m 5.
Item 5.	MARKET FOR TREDEGAR’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES


	2006				2005
	High		Low		High		Low
First quarter	$	16.65	$	13.06	$	20.19	$	16.08
Second quarter		16.89		13.84		17.56		14.52
Third quarter		16.94		14.39		16.67		12.09
Fourth quarter		23.32		16.31		13.16		11.76



Period	Total Number of Shares Purchased	Average Price Paid Per Share Before Broker Commissions			Total Number of Shares Purchased as Part of Announced Program	Maximum Number of Shares at End of Period That May Yet be Purchased Under Program*

January - July 2007	—		$	—	—	—
August 2007	687,100			17.25	687,100	4,312,900
September 2007	1,005,600			17.03	1,692,700	3,307,300
October 2007	518,800			17.32	2,211,500	2,788,500
November 2007	1,236,900			14.13	3,448,400	1,551,600
December 2007	1,385,100			15.73	4,833,500	166,500


Legal Counsel		Independent Registered Public Accounting Firm

Hunton & Williams LLP		PricewaterhouseCoopers LLP
Richmond, Virginia		~~PricewaterhouseCoopers LLP~~ Richmond, Virginia

EIGHT-YEAR SUMMARY
Tredegar Corporation and Subsidiaries

Years Ended December 31	2006			2005			2004			2003			2002			2001			2000			1999
(In Thousands, Except Per-Share Data)

Results of Operations (a):
Sales	$	1,116,525		$	956,969		$	861,165		$	738,651		$	753,724		$	779,157		$	879,475		$	828,015
Other income (expense), net		1,444	(b)		(544	) (c)		15,604	(d)		7,853			546			1,255			1,914			972
		1,117,969			956,425			876,769			746,504			754,270			780,412			881,389			828,987
Cost of goods sold		944,839	(b)		810,621	(c)		717,120	(d)		606,242			582,658			618,323			706,817			648,254
Freight		28,096			24,691			22,398			18,557			16,319			15,580			17,125			15,221
Selling, general & administrative expenses		68,360	(b)		64,723	(c)		60,030	(d)		53,341			52,252			47,954			47,321			44,675
Research and development expenses		8,088			8,982			15,265			18,774			20,346			20,305			15,305			11,500
Amortization of intangibles		149			299			330			268			100			4,914			5,025			3,430
Interest expense		5,520			4,573			3,171			6,785			9,352			12,671			17,319			9,088
Asset impairments and costs associated with exit and disposal activities		4,080	(b)		16,334	(c)		22,973	(d)		11,426	(e)		3,884	(f)		16,935	(g)		23,791	(h)		4,628	(i)
Unusual items		-			-			-			1,067	(e)		(6,147	) (f)		(971	) (g)		(762	) (h)		-
		1,059,132			930,223			841,287			716,460			678,764			735,711			831,941			736,796
Income from continuing operations before income taxes		58,837			26,202			35,482			30,044			75,506			44,701			49,448			92,191
Income taxes		20,636	(b)		9,973			9,222	(d)		10,717			26,881			13,950	(g)		18,135			32,728
Income from continuing operations (a)		38,201			16,229			26,260			19,327			48,625			30,751			31,313			59,463
Discontinued operations (a):
Income (loss) from venture capital investment activities		-			-			2,921			(46,569	)		(42,428	)		(16,627	)		83,640			(4,626	)
Income (loss) from operations of Molecumetics		-			-			-			891			(8,728	)		(5,768	)		(3,577	)		(2,189	)
Income from discontinued energy segment		-			-			-			-			-			1,396			-			-
Income (loss) from discontinued operations (a)		-			-			2,921			(45,678	)		(51,156	)		(20,999	)		80,063			(6,815	)
Net income (loss)	$	38,201		$	16,229		$	29,181		$	(26,351	)	$	(2,531	)	$	9,752		$	111,376		$	52,648

Diluted earnings (loss) per share:
Continuing operations (a)	$	.98		$	.42		$	.68		$	.50		$	1.25		$	.79		$	.80		$	1.54
Discontinued operations (a)		-			-			.08			(1.19	)		(1.32	)		(.54	)		2.06			(.18	)
Net income (loss)	$	.98		$	.42		$	.76		$	(.69	)	$	(.07	)	$	.25		$	2.86		$	1.36

Refer to notes to financial tables on page 16.

Net Sales (1)

Segment	2006		2005		2004		2003		2002		2001		2000		1999
(In Thousands)

Film Products	$	511,169	$	460,277	$	413,257	$	365,501	$	376,904	$	382,740	$	380,202	$	342,300
Aluminum Extrusions		577,260		471,749		425,130		354,593		360,293		380,387		479,889		461,241
AFBS (formerly Therics)		-		252		380		-		208		450		403		161
Total ongoing operations (m)		1,088,429		932,278		838,767		720,094		737,405		763,577		860,494		803,702
Divested operations (a):
Fiberlux		-		-		-		-		-		-		1,856		9,092
Total net sales		1,088,429		932,278		838,767		720,094		737,405		763,577		862,350		812,794
Add back freight		28,096		24,691		22,398		18,557		16,319		15,580		17,125		15,221

Sales as shown in Consolidated Statements of Income	$	1,116,525	$	956,969	$	861,165	$	738,651	$	753,724	$	779,157	$	879,475	$	828,015

Refer to notes to financial tables on page 16.

Operating Profit

Segment	2006			2005			2004			2003			2002			2001			2000			1999
(In Thousands)

Film Products:
Ongoing operations	$	57,645		$	44,946		$	43,259		$	45,676		$	72,307		$	61,787		$	47,112		$	59,554
Plant shutdowns, asset impairments and restructurings, net of gains on sale of assets and related income from LIFO inventory liquidations		221	(b)		(3,955	) (c)		(10,438	) (d)		(5,746	) (e)		(3,397	) (f)		(9,136	) (g)		(22,163	) (h)		(1,170	) (i)
Unusual items		-			-			-			-			6,147	(f)		-			-			-
Aluminum Extrusions:
Ongoing operations		22,031			19,302			22,637			15,117			27,304			25,407			52,953			56,501
Plant shutdowns, asset impairments and restructurings, net of gains on sale of assets		(1,434	) (b)		122	(c)		(10,553	) (d)		(644	) (e)		(487	) (f)		(7,799	) (g)		(1,628	) (h)		-
Gain on sale of land								-			1,385			-			-			-			-
Other		-			-			7,316	(d)		-			-			-			-			-
AFBS (formerly Therics):
Ongoing operations		-			(3,467	)		(9,763	)		(11,651	)		(13,116	)		(12,861	)		(8,024	)		(5,235	)
Loss on investment in Therics, LLC		(25	)		(145	)		-			-			-			-			-			-
Plant shutdowns, asset impairments and restructurings		(637	) (b)		(10,318	) (c)		(2,041	) (d)		(3,855	) (e)		-			-			-			(3,458	) (i)
Unusual items		-			-			-			(1,067	) (e)		-			-			-			-
Divested operations (a):
Fiberlux		-			-			-			-			-			-			(264	)		57
Unusual items		-			-			-			-			-			-			762	(h)		-
Total		77,801			46,485			40,417			39,215			88,758			57,398			68,748			106,249
Interest income		1,240			586			350			1,183			1,934			2,720			2,578			1,419
Interest expense		5,520			4,573			3,171			6,785			9,352			12,671			17,319			9,088
Gain on sale of corporate assets		56			61			7,560			5,155			-			-			-			712
Loss from write-down of investment in Novalux		-	(b)		5,000	(c)		-			-			-			-			-			-
Stock option-based compensation costs		970			-			-			-			-			-			-			-
Corporate expenses, net		13,770			11,357			9,674			8,724	(e)		5,834			2,746	(g)		4,559			7,101
Income from continuing operations before income taxes		58,837			26,202			35,482			30,044			75,506			44,701			49,448			92,191
Income taxes		20,636	(b)		9,973			9,222			10,717			26,881			13,950	(g)		18,135			32,728
Income from continuing operations		38,201			16,229			26,260			19,327			48,625			30,751			31,313			59,463
Income (loss) from discontinued operations (a)		-			-			2,921			(45,678	)		(51,156	)		(20,999	)		80,063			(6,815	)

Net income (loss)	$	38,201		$	16,229		$	29,181		$	(26,351	)	$	(2,531	)	$	9,752		$	111,376		$	52,648

Refer to notes to financial tables on page 16.

Identifiable Assets

Segment	2006		2005		2004		2003		2002		2001		2000		1999
(In Thousands)

Film Products	$	498,961	$	479,286	$	472,810	$	422,321	$	379,635	$	367,291	$	367,526	$	360,517
Aluminum Extrusions		209,395		214,374		210,894		185,336		176,631		185,927		210,434		216,258
AFBS (formerly Therics)		2,420		2,759		8,613		8,917		10,643		9,931		9,609		9,905
Subtotal		710,776		696,419		692,317		616,574		566,909		563,149		587,569		586,680
General corporate		30,113		61,905		54,163		61,508		52,412		40,577		30,214		22,419
Income taxes recoverable from sale of venture capital investment portfolio		-		-		-		55,000		-		-		-		-
Cash and cash equivalents		40,898		23,434		22,994		19,943		109,928		96,810		44,530		25,752
Identifiable assets from ongoing operations		781,787		781,758		769,474		753,025		729,249		700,536		662,313		634,851
Divested operations (a):
Fiberlux		-		-		-		-		-		-		-		7,859
Discontinued operations (a):
Venture capital		-		-		-		-		108,713		158,887		236,698		145,028
Molecumetics		-		-		-		-		-		5,608		4,757		4,749
Total	$	781,787	$	781,758	$	769,474	$	753,025	$	837,962	$	865,031	$	903,768	$	792,487

Refer to notes to financial tables on page 16.

Depreciation and Amortization

Segment	2006		2005		2004		2003		2002		2001		2000		1999
(In Thousands)

Film Products	$	31,847	$	26,673	$	21,967	$	19,828	$	20,085	$	22,047	$	23,122	$	18,751
Aluminum Extrusions		12,323		11,484		10,914		10,883		10,506		11,216		9,862		9,484
AFBS (formerly Therics)		-		437		1,300		1,641		463		2,262		1,782		1,195
Subtotal		44,170		38,594		34,181		32,352		31,054		35,525		34,766		29,430
General corporate		111		195		241		270		353		329		315		253
Total ongoing operations		44,281		38,789		34,422		32,622		31,407		35,854		35,081		29,683
Divested operations (a):
Fiberlux		-		-		-		-		-		-		151		498
Discontinued operations (a):
Venture capital		-		-		-		-		-		-		18		22
Molecumetics		-		-		-		-		527		2,055		1,734		1,490
Total	$	44,281	$	38,789	$	34,422	$	32,622	$	31,934	$	37,909	$	36,984	$	31,693

Capital Expenditures, Acquisitions and Investments

Segment		2006		2005		2004		2003		2002		2001		2000		1999
(In Thousands)

Film Products	$	33,168	$	50,466	$	44,797	$	57,203	$	24,063	$	24,775	$	53,161	$	25,296
Aluminum Extrusions		7,381		11,968		10,007		8,293		4,799		8,506		21,911		16,388
AFBS (formerly Therics)		-		36		275		219		1,621		2,340		1,730		757
Subtotal		40,549		62,470		55,079		65,715		30,483		35,621		76,802		42,441
General corporate		24		73		572		93		60		519		384		606

Capital expenditures for ongoing operations		40,573		62,543		55,651		65,808		30,543		36,140		77,186		43,047
Divested operations (a):
Fiberlux		-		-		-		-		-		-		425		812
Discontinued operations (a):
Venture capital		-		-		-		-		-		-		86		-
Molecumetics		-		-		-		-		793		2,850		2,133		1,362
Total capital expenditures		40,573		62,543		55,651		65,808		31,336		38,990		79,830		45,221
Acquisitions and other		-		-		1,420		1,579		-		1,918		6,316		215,227
Novalux investment		542		1,095		5,000		-		-		-		-		-
Venture capital investments		-		-		-		2,807		20,373		24,504		93,058		81,747
Total	$	41,115	$	63,638	$	62,071	$	70,194	$	51,709	$	65,412	$	179,204	$	342,195

Refer to notes to financial tables on page 16.



(In Millions)	2007			2006

Floating-rate debt with interest charged on a rollover basis at one-month LIBOR plus a credit spread:
Average outstanding debt balance	$	41.5		$	91.0
Average interest rate		6.0	%		5.9	%
Fixed-rate and other debt:
Average outstanding debt balance	$	2.2		$	4.4
Average interest rate		3.8	%		6.5	%

Total debt:
Average outstanding debt balance	$	43.7		$	95.4
Average interest rate		5.9	%		5.9	%

·
•	A third-quarter charge of $920,000 ($566,000 after taxes) related to expected future environmental costs at the aluminum extrusions facility in Newnan, Georgia (included in ~~"Cost~~“Cost of goods ~~sold"~~sold” in the consolidated statements of income);

·
•	A fourth quarter charge of $143,000 ($93,000 after taxes) and a third quarter charge of $494,000 ($321,000 after taxes) related to the estimated loss on the sub-lease of a portion of the AFBS facility in Princeton, New Jersey;

·
•	Second-quarter charges of $459,000 ($289,000 after taxes) and first-quarter charges of $268,000 ($170,000 after taxes) for severance and other employee-related costs in connection with restructurings in Aluminum Extrusions ($514,000) and Film Products ($213,000); and

·
•	First-quarter charges of $1 million ($876,000 after taxes) for asset impairments relating to machinery & equipment in Film Products.


(In Millions)	2005			2004
Floating-rate debt with interest charged on a rollover basis at one-month LIBOR plus a credit spread:
Average outstanding debt balance	$	110.0		$	105.2
Average interest rate		4.5	%		2.7	%
Fixed-rate and other debt:
Average outstanding debt balance	$	5.9		$	5.6
Average interest rate		5.5	%		6.0	%
Total debt:
Average outstanding debt balance	$	115.9		$	110.8
Average interest rate		4.6	%		2.8	%

·
•	Accounts receivable ~~increased $2.5~~decreased $9.9 million ~~(2.1%~~(9.2%).

	-
	–	Accounts receivable in Film Products increased by ~~$6.5 million~~$510,000 due mainly to higher sales. Days sales outstanding (“DSO”) was 45 at December 31, 2007 compared with 46 at December 31, ~~2006 compared with 45 days at December 31, 2005.~~2006.