UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2017~~March 31, 2019



¨	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

Tredegar Corporation

(Exact Name of Registrant as Specified in Its Charter)



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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	¨	Accelerated filer	x	Smaller reporting company	¨

Non-accelerated filer	¨ ~~(Do not check if a smaller reporting company)~~			Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares of Common Stock, no par value, outstanding as of ~~October 26, 2017: 33,026,931~~May 3, 2019: 33,351,452



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, no par value	TG	New York Stock Exchange

PART I - FINANCIAL INFORMATION


Item 1.	Financial Statements.

Tredegar Corporation

Consolidated Balance Sheets

(In Thousands, Except Share Data)

(Unaudited)


	September 30,			December 31,			March 31,			December 31,
	2017			2016			2019			2018
Assets
Current assets:
Cash and cash equivalents	$	31,850		$	29,511		$	36,302		$	34,397
Accounts and other receivables, net of allowance for doubtful accounts and sales returns of $3,124 in 2017 and $3,102 in 2016	126,964			97,388
Accounts and other receivables, net of allowance for doubtful accounts and sales returns of $3,194 in 2019 and $2,937 in 2018							122,947			124,727
Dividend receivable from investment in kaléo							17,582			—
Income taxes recoverable	8,260			7,518			5,098			6,783
Inventories	82,426			66,069			100,394			93,810
Prepaid expenses and other	8,354			7,738			8,493			9,564
Total current assets	257,854			208,224			290,816			269,281
Property, plant and equipment, at cost	881,139			797,630			797,577			793,072
Less accumulated depreciation	(571,062		)	(536,905		)	(565,236		)	(564,703		)
Net property, plant and equipment	310,077			260,725			232,341			228,369
Goodwill and other intangibles, net	188,334			151,423
Other assets and deferred charges	55,683			30,790
Right-of-use leased assets							19,999			—
Investment in kaléo (cost basis of $7,500)							84,100			84,600
Identifiable intangible assets, net							35,396			36,295
Goodwill							81,404			81,404
Deferred income taxes							1,404			3,412
Other assets							3,917			4,012
Total assets	$	811,948		$	651,162		$	749,377		$	707,373
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	95,684		$	81,342		$	111,202		$	112,758
Accrued expenses	41,776			38,647			40,857			42,495
Lease liability, short-term							2,526			—
Total current liabilities	137,460			119,989			154,585			155,253
Lease liability, long-term							19,073			—
Long-term debt	177,000			95,000			110,000			101,500
Pension and other postretirement benefit obligations, net							86,145			88,124
Deferred income taxes	25,767			21,110			1,092			—
Other noncurrent liabilities	97,807			104,280			5,861			7,639
Total liabilities	438,034			340,379			376,756			352,516
Commitments and contingencies (Notes 1 and 12)
Shareholders’ equity:
Common stock, no par value (issued and outstanding - 33,026,931 at September 30, 2017 and 32,933,807 at December 31, 2016)	34,027			32,007
Common stock held in trust for savings restoration plan (70,884 shares at September 30, 2017 and 69,622 shares at December 31, 2016)	(1,520		)	(1,497		)
Common stock, no par value (issued and outstanding - 33,358,408 shares at March 31, 2019 and 33,176,024 shares at December 31, 2018)							39,587			38,892
Common stock held in trust for savings restoration plan (73,381 shares at March 31, 2019 and 72,883 shares at December 31, 2018)							(1,568		)	(1,559		)
Accumulated other comprehensive income (loss):
Foreign currency translation adjustment	(84,153		)	(93,970		)	(97,730		)	(96,940		)
Gain on derivative financial instruments	1,151			863
Gain (loss) on derivative financial instruments							(1,954		)	(1,601		)
Pension and other post-retirement benefit adjustments	(84,373		)	(90,127		)	(79,367		)	(81,446		)
Retained earnings	508,782			463,507			513,653			497,511
Total shareholders’ equity	373,914			310,783			372,621			354,857
Total liabilities and shareholders’ equity	$	811,948		$	651,162		$	749,377		$	707,373

See accompanying notes to financial statements.

Tredegar Corporation

Consolidated Statements of Income

(In Thousands, Except Per Share Data)

(Unaudited)


	Three Months Ended September 30,					Nine Months Ended September 30,				Three Months Ended March 31,
	2017		2016			2017		2016		2019		2018
Revenues and other items:
Sales	$	247,121	$	207,702		$	715,494	$	623,569	$	248,466	$	258,711
Other income (expense), net	34		388			38,055		1,481		17,110		8,233
	247,155		208,090			753,549		625,050		265,576		266,944
Costs and expenses:
Cost of goods sold	196,393		166,622			575,614		499,504		200,653		203,189
Freight	8,621		7,153			24,840		21,221		9,021		8,790
Selling, general and administrative	21,214		17,383			63,438		57,027		22,012		21,829
Research and development	4,455		4,519			14,028		14,458		4,485		4,311
Amortization of intangibles	1,658		1,019			4,550		2,965
Amortization of identifiable intangibles										891		1,029
Pension and postretirement benefits										2,415		2,578
Interest expense	1,757		886			4,579		2,918		1,232		1,644
Asset impairments and costs associated with exit and disposal activities, net of adjustments	361		1,129			653		2,355		1,056		123
Total	234,459		198,711			687,702		600,448		241,765		243,493
Income before income taxes	12,696		9,379			65,847		24,602		23,811		23,451
Income taxes (benefit)	4,422		(2,669		)	9,667		1,864
Income taxes										4,026		5,287
Net income	$	8,274	$	12,048		$	56,180	$	22,738	$	19,785	$	18,164

Earnings per share:
Basic	$	0.25	$	0.37		$	1.71	$	0.69	$	0.60	$	0.55
Diluted	$	0.25	$	0.37		$	1.70	$	0.69	$	0.60	$	0.55
Shares used to compute earnings per share:
Basic	32,954		32,818			32,945		32,730		33,123		32,982
Diluted	32,954		32,828			32,952		32,733		33,127		32,988
Dividends per share	$	0.11	$	0.11		$	0.33	$	0.33	$	0.11	$	0.11

See accompanying notes to financial statements.

Tredegar Corporation

Consolidated Statements of Comprehensive Income (Loss)

(In Thousands)

(Unaudited)


	Three Months Ended September 30,					Three Months Ended March 31,
	2017		2016			2019			2018
Net income	$	8,274	$	12,048		$	19,785		$	18,164
Other comprehensive income (loss):
Foreign currency translation adjustment (net of tax of $251 in 2017 and tax benefit of $77 in 2016)	7,143		(719		)
Derivative financial instruments adjustment (net of tax of $186 in 2017 and tax benefit of $31 in 2016)	326		(54		)
Amortization of prior service costs and net gains or losses (net of tax of $1,057 in 2017 and tax of $1,120 in 2016)	1,854		1,966
Foreign currency translation adjustment (net of tax of $0 in 2019 and tax of $0 in 2018)						(790		)	1,906
Derivative financial instruments adjustment (net of tax of $83 in 2019 and tax benefit of $144 in 2018)						(353		)	(285		)
Amortization of prior service costs and net gains or losses (net of tax of $592 in 2019 and tax of $762 in 2018)						2,079			2,612
Other comprehensive income (loss)	9,323		1,193			936			4,233
Comprehensive income (loss)	$	17,597	$	13,241		$	20,721		$	22,397

	Nine Months Ended September 30,
	2017		2016
Net income	$	56,180	$	22,738
Other comprehensive income (loss):
Foreign currency translation adjustment (net of tax of $481 in 2017 and tax benefit of $307 in 2016)	9,817		22,929
Derivative financial instruments adjustment (net of tax of $162 in 2017 and tax of $567 in 2016)	288		963
Amortization of prior service costs and net gains or losses (net of tax of $3,279 in 2017 and tax of $3,186 in 2016)	5,754		6,573
Other comprehensive income (loss)	15,859		30,465
Comprehensive income (loss)	$	72,039	$	53,203

See accompanying notes to financial statements.

Tredegar Corporation

Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)


	Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2019			2018
Cash flows from operating activities:
Net income	$	56,180		$	22,738
Net income (loss)							$	19,785		$	18,164
Adjustments for noncash items:
Depreciation	25,072			21,004			7,168			7,490
Amortization of intangibles	4,550			2,965
Amortization of identifiable intangibles							891			1,029
Amortization of right-of-use lease asset							632			—
Deferred income taxes	(104		)	(5,122		)	2,410			4,834
Accrued pension and post-retirement benefits	7,645			8,168			2,415			2,578
(Gain)/loss on investment accounted for under the fair value method	(24,800		)	200
(Gain)/loss on investment in kaléo accounted for under the fair value method							(17,082		)	(8,200		)
(Gain)/loss on asset impairments and divestitures	50			412			421			—
Net (gain)/loss on disposal of assets	412			—			(385		)	—
Gain from insurance recoveries	—			(1,634		)
Changes in assets and liabilities, net of effects of acquisitions and divestitures:
Accounts and other receivables	(16,925		)	(4,919		)	1,595			(14,412		)
Inventories	(4,220		)	(5,188		)	(6,794		)	1,846
Income taxes recoverable/payable	(603		)	(4,095		)	1,664			6,344
Prepaid expenses and other	129			(514		)	1,078			748
Accounts payable and accrued expenses	8,674			4,857			(2,033		)	(4,785		)
Lease liability							(640		)	—
Pension and postretirement benefit plan contributions	(4,642		)	(7,143		)	(1,724		)	(1,187		)
Other, net	2,093			2,818			1,727			560
Net cash provided by operating activities	53,511			34,547			11,128			15,009
Cash flows from investing activities:
Capital expenditures	(37,245		)	(30,912		)	(12,879		)	(5,062		)
Acquisition	(87,110		)	—
Return of escrowed funds relating to acquisition earn-out							—			4,250
Proceeds from the sale of assets and other	121			1,399			22			—
Net cash used in investing activities	(124,234		)	(29,513		)	(12,857		)	(812		)
Cash flows from financing activities:
Borrowings	173,250			61,000			23,750			24,000
Debt principal payments	(91,250		)	(73,250		)	(15,250		)	(35,000		)
Dividends paid	(10,901		)	(10,834		)	(3,652		)	(3,643		)
Debt financing costs	—			(2,509		)
Proceeds from exercise of stock options and other	695			1,948			(815		)	(247		)
Net cash provided by (used in) financing activities	71,794			(23,645		)	4,033			(14,890		)
Effect of exchange rate changes on cash	1,268			2,811			(399		)	337
Increase (decrease) in cash and cash equivalents	2,339			(15,800		)	1,905			(356		)
Cash and cash equivalents at beginning of period	29,511			44,156			34,397			36,491
Cash and cash equivalents at end of period	$	31,850		$	28,356		$	36,302		$	36,135

See accompanying notes to financial statements.

Tredegar Corporation

Consolidated Statement of Shareholders’ Equity

(In Thousands, Except Share and Per Share Data)

(Unaudited)

The following summarizes the changes in shareholders’ equity for the three month period ended March 31, 2019:

Accumulated Other
Comprehensive Income (Loss)

Common
Stock

Retained
Earnings

Trust for
Savings
Restoration
Plan

Foreign
Currency
Translation

Gain
(Loss) on
Derivative
Financial
Instruments

Pension &
Other
Post-retirement
Benefit
Adjust.

Total
Shareholders’
Equity
Balance at January 1, 2017 $ 32,007
$ 463,507
$ (1,497 ) $ (93,970 ) $ 863
$ (90,127 ) $ 310,783
Net income —
56,180
—
—
—
—
56,180
Other comprehensive income (loss):
Foreign currency translation adjustment (net of tax of $481) —
—
—
9,817
—
—
9,817
Derivative financial instruments adjustment (net of tax of $162) —
—
—
—
288
—
288
Amortization of prior service costs and net gains or losses (net of tax of $3,279) —
—
—
—
—
5,754
5,754
Cash dividends declared ($0.33 per share) —
(10,901 ) —
—
—
—
(10,901 )
Stock-based compensation expense 1,298
—
—
—
—
—
1,298
Issued upon exercise of stock options & other 695
—
—
—
—
—
695
Cumulative effect adjustment for adoption of stock-based comp accounting guidance 27
(27 ) —
—
—
—
—
Tredegar common stock purchased by trust for savings restoration plan —
23
(23 ) —
—
—
—
Balance at September 30, 2017 $ 34,027
$ 508,782
$ (1,520 ) $ (84,153 ) $ 1,151
$ (84,373 ) $ 373,914



										Accumulated Other Comprehensive Income (Loss)
	Common Stock			Retained Earnings			Trust for Savings Restoration Plan			Foreign Currency Translation			Gain (Loss) on Derivative Financial Instruments			Pension & Other Post-retirement Benefit Adjustment			Total Shareholders’ Equity
Balance at January 1, 2019	$	38,892		$	497,511		$	(1,559	)	$	(96,940	)	$	(1,601	)	$	(81,446	)	$	354,857
Net income	—			19,785			—			—			—			—			19,785
Other comprehensive income (loss):
Foreign currency translation adjustment (net of tax of $0)	—			—			—			(790		)	—			—			(790		)
Derivative financial instruments adjustment (net of tax of $83)	—			—			—			—			(353		)	—			(353		)
Amortization of prior service costs and net gains or losses (net of tax of $592)	—			—			—			—			—			2,079			2,079
Cash dividends declared ($0.11 per share)	—			(3,652		)	—			—			—			—			(3,652		)
Stock-based compensation expense	1,510			—			—			—			—			—			1,510
Issued upon exercise of stock options & other	(815		)	—			—			—			—			—			(815		)
Tredegar common stock purchased by trust for savings restoration plan	—			9			(9		)	—			—			—			—
Balance at March 31, 2019	$	39,587		$	513,653		$	(1,568	)	$	(97,730	)	$	(1,954	)	$	(79,367	)	$	372,621

The following summarizes the changes in shareholders’ equity for the three month period ended March 31, 2018:



										Accumulated Other Comprehensive Income (Loss)
	Common Stock			Retained Earnings			Trust for Savings Restoration Plan			Foreign Currency Translation			Gain (Loss) on Derivative Financial Instruments			Pension & Other Post-retirement Benefit Adjust.			Total Shareholders’ Equity
Balance at January 1, 2018	$	34,747		$	487,230		$	(1,528	)	$	(86,178	)	$	459		$	(90,950	)	$	343,780
Net income	—			18,164			—			—			—			—			18,164
Other comprehensive income (loss):
Foreign currency translation adjustment (net of tax of $0)	—			—			—			1,906			—			—			1,906
Derivative financial instruments adjustment (net of tax benefit of $144)	—			—			—			—			(285		)	—			(285		)
Amortization of prior service costs and net gains or losses (net of tax of $762)	—			—			—			—			—			2,612			2,612
Cash dividends declared ($0.11 per share)	—			(3,643		)	—			—			—			—			(3,643		)
Stock-based compensation expense	612			—			—			—			—			—			612
Issued upon exercise of stock options & other	(247		)	—			—			—			—			—			(247		)
Tredegar common stock purchased by trust for savings restoration plan	—			8			(8		)	—			—			—			—
Balance at March 31, 2018	$	35,112		$	501,759		$	(1,536	)	$	(84,272	)	$	174		$	(88,338	)	$	362,899

See accompanying notes to financial statements.

TREDEGAR CORPORATION

NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Unaudited)

1.1

In the opinion of management, the accompanying consolidated financial statements of Tredegar Corporation and its subsidiaries (“Tredegar,” “the Company,” “we,” “us” or “our”) contain all adjustments necessary to state fairly, in all material respects, Tredegar’s consolidated financial position as of September 30, 2017, the consolidated results of operations for the three and nine months ended September 30, 2017 and 2016, the consolidated cash flows for the nine months ended September 30, 2017 and 2016, and the consolidated changes in shareholders’ equity for the nine months ended September 30, 2017.BASIS OF PRESENTATION

In the opinion of management, the accompanying consolidated financial statements of Tredegar Corporation and its subsidiaries (“Tredegar,” “the Company,” “we,” “us” or “our”) contain all adjustments necessary to state fairly, in all material respects, Tredegar’s consolidated financial position as of March 31, 2019, the consolidated results of operations for the three months ended March 31, 2019 and 2018, the consolidated cash flows for the three months ended March 31, 2019 and 2018, and the consolidated changes in shareholders’ equity for the three months ended March 31, 2019 in accordance with U.S. generally accepted accounting principles (GAAP). All such adjustments, unless otherwise detailed in the notes to the consolidated interim financial statements, are deemed to be of a normal, recurring nature.

The Company operates on a calendar fiscal year except for the Aluminum Extrusions segment, which operates on a 52/53-week fiscal year basis. As such, the fiscal ~~third~~first quarter for ~~2017~~2019 and ~~2016~~2018 for this segment references 13-week periods ended ~~September 24, 2017~~March 31, 2019 and ~~September~~March 25, ~~2016,~~2018, respectively. The Company does not believe the impact of reporting the results of this segment as stated above is material to the consolidated financial results.

The financial position data as of December 31, ~~2016~~2018 that is included herein was derived from the audited consolidated financial statements provided in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~2018 (“~~2016~~2018 Form 10-K”) but does not include all disclosures required by ~~United States generally accepted accounting principles (“GAAP”).~~GAAP. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in the ~~Company’s 2016~~2018 Form 10-K. The results of operations for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2019, are not necessarily indicative of the results to be expected for the full year. Certain prior year balances have been reclassified to conform with current year presentation (see ~~Note~~Notes 12 & 13 for additional detail).

2.2

On February 15, 2017, Bonnell Aluminum acquired 100% of the stock of Futura Industries Corporation (“Futura”) on a net debt-free basis for approximately $92 million (the “Initial Purchase Price”). The amount actually funded in cash at the transaction date was approximately $87.0 million (the “Initial Cash Funding”), which was the Initial Purchase Price net of preliminary closing adjustments for working capital and seller transaction-related obligations assumed and subsequently paid by Bonnell Aluminum. The acquisition, which was funded using Tredegar’s existing revolving credit facility, was treated as an asset purchase for U.S. federal income tax purposes.REVENUE RECOGNITION

~~Futura, headquartered in Clearfield, Utah, with a national sales presence~~As of March 31, 2019 and ~~particular strength in the western U.S., designs and manufactures a wide range of extruded aluminum products, including branded flooring trims and TSLOTS~~^TM~~, as well as OEM (original equipment manufacturer) components for truck grills, solar panels, fitness equipment~~December 31, 2018, accounts receivable and other ~~applications. As a result of this transaction, Futura is now a wholly-owned subsidiary~~receivables, net, were $122.9 million and $124.7 million, respectively, made up of the ~~William L. Bonnell~~following:



	March 31,			December 31,
(In thousands)	2019			2018
Customer receivables	$	121,949		$	122,182
Other accounts and notes receivable	4,192			5,482
Total accounts and other receivables	126,141			127,664
Less: Allowance for bad debts and sales returns	(3,194		)	(2,937		)
Total accounts and other receivables, net	$	122,947		$	124,727

For the three months ended March 31, 2019, the Company ~~Inc. (which is a wholly-owned subsidiary~~had no material bad-debt expense and there were no material contract assets, contract liabilities or deferred contract costs recorded on the consolidated balance sheets as of ~~Tredegar) and operates as a division of Bonnell Aluminum, and its results of operations are included in Tredegar’s consolidated financial statements~~March 31, 2019. Payment terms start from the date of ~~acquisition.~~

~~Under the terms~~satisfaction of the ~~transaction, $5 million of the Initial Cash Funding was placed~~performance obligation and vary from COD (cash on delivery) to 120 days. The Company’s contracts generally include one performance obligation, which is satisfied at a point in escrow (the “Earnout Escrow”) and will be returned to Bonnell Aluminum if Futura does not achieve a targeted EBITDA level (as defined in the Stock Purchase Agreement) for the last eleven months of the fiscal year ending December 2017. At the acquisition date, the Company performed a probability weighted assessment in order to determine the fair value of this contingent asset. The assessment estimated a fair value of $4.3 million, which would be returned to Bonnell Aluminum in early 2018, and accordingly, a receivable of $4.3 million (“Initial Earnout Receivable”) was recorded by Bonnell Aluminum. In the second quarter of 2017, the Company updated its valuation of this contingent asset, which resulted in a fair value of $5.0 million. The receivable was increased to $5.0 million, and $0.7 million was recognized as income in Other income (expense), net in the Consolidated Statements of Income.

The net purchase price for financial reporting purposes was set at approximately $82.9 million (the “Adjusted Net Purchase Price”), which was the Initial Cash Funding less the Initial Earnout Receivable and the net settlement of certain post-closing adjustments of $0.1 million paid to the seller during the second quarter of 2017. Adjustments to the purchase price were made retrospectively as if the accounting had been completed on the acquisition date. Based upon management’s valuation of the fair value of tangible and intangible assets acquired (net of cash acquired) and liabilities assumed, the allocation of the Adjusted Net Purchase Price is as follows:

(in Thousands)
Accounts receivable $ 6,680
Inventories 10,342
Prepaid expenses and other current assets 240
Property, plant & equipment 32,662
Identifiable intangible assets:
  Customer relationships 24,000
  Trade names 6,700
Trade payables & accrued expenses (8,135 )
      Total identifiable net assets 72,489
      Adjusted Net Purchase Price 82,860
Goodwill $ 10,371

The goodwill and other intangible asset balances associated with this acquisition will be deductible for tax purposes on a straight-line basis over a period of approximately 15 years. For financial reporting purposes, customer relationships are being amortized over 12 years and trade names are being amortized over 13 years. Goodwill is not subject to amortization for financial reporting purposes. Customer relationships were valued using the excess earnings approach. Trade names were valued using a relief-from-royalty approach. The Company does not anticipate marketing Futura’s products under a different brand in light of its strong name recognition and competitive advantage in its target markets.

time.

For the three months ended March 31, 2019, revenue recognized from performance obligations related to prior periods (for example, changes in transaction price), was not material.

Revenue expected to be recognized in any future period related to remaining performance obligations, excluding i) revenue pertaining to contracts that have an original expected duration of one year or less, ii) contracts where revenue is recognized as invoiced and ~~nine month periods ended September 30, 2017 (for Futura, the period from the acquisition on February 15, 2017~~iii) variable consideration related to September 30, 2017), Tredegar’s consolidated results of operations and its Aluminum Extrusions business segment included the following Futura results: sales of $21.2 million and $52.0 million, respectively, operating profit from ongoing operations of $2.4 million and $6.2 million, respectively, depreciation and amortization of $1.7 million and $3.6 million, respectively, and capital expenditures of $0.5 million and $1.3 million, respectively.

The following unaudited supplemental pro forma data presents Tredegar’s consolidated sales, net income and related earnings per share as if the acquisition of Futura had been consummated at the beginning of 2016, andunsatisfied performance obligations, is not ~~necessarily indicative of~~expected to materially impact the Company’s financial performance if the acquisition had actually been consummated as of that date, or of future performance. The supplemental unaudited pro forma measures for the three and nine months ended September 30, 2017 and 2016 are presented below:results.

Tredegar Pro Forma Results with Futura Acquisition Three Months Ended Nine Months Ended
September 30, September 30,
(In Thousands, Except Per Share Data) 2017 2016 2017 2016
Sales $ 247,121
$ 228,176
$ 722,505
$ 681,686
Net income $ 8,274
$ 13,225
$ 55,835
$ 25,559
Earnings per share:
Basic $ 0.25
$ 0.40
$ 1.69
$ 0.78
Diluted $ 0.25
$ 0.40
$ 1.69
$ 0.78

Futura’s pre-acquisition results for the period from January 1 to February 14, 2017, and therefore the pro forma information for 2017 presented above, were adversely impacted by significant disruptions to manufacturing operations and sales caused by the renovation of its anodizing line. The actual accretion to Tredegar’s diluted earnings per share from Futura since the acquisition date was four cents per share for the third quarter of 2017 and nine cents per share for the first nine months of 2017.

The Company’s pro forma net income was computed for the periods shown as: (i) the Company’s reported net income, plus (ii) Futura’s historical pre-acquisition period earnings before interest, taxes, depreciation and amortization and excluding one-time purchase accounting and transaction-related expenses, minus (iii) the pro forma pre-acquisition period depreciation and amortization for Futura under purchase accounting for the Company, minus (iv) the pro forma pre-acquisition period interest expense for the Company applied at an annual rate of 3.0% to the $87.0 million Initial Cash Funding, minus (v) the pro forma pre-acquisition period income taxes applied at a rate of 39.1% to the pro forma pre-acquisition earnings before income taxes computed from items (ii) through (iv).

3.3

Plant shutdowns, asset impairments, restructurings and other items are shown in the net sales and operating profit by segment table in Note 10 and are also included in “Asset impairments and costs associated with exit and disposal activities, net of adjustments” in the consolidated statements of income, unless otherwise noted below.GAINS AND LOSSES ASSOCIATED WITH PLANT SHUTDOWNS, ASSET IMPAIRMENTS AND RESTRUCTURINGS, SALES OF ASSETS AND OTHER ITEMS

Plant shutdowns, asset impairments, restructurings, sales of assets and other items are shown in the net sales and operating profit by segment table in Note 11 and are also included in “Asset impairments and costs associated with exit and disposal activities, net of adjustments” in the consolidated statements of income, unless otherwise noted below.

Plant shutdowns, asset impairments, restructurings and other items in the ~~third~~first quarter of ~~2017~~2019 include:

Pretax charges of ~~$0.7~~$0.9 million for professional fees associated with the implementation of new accounting guidance and analysis and revisions to the Company’s internal control over financial reporting (included in “Selling, R&D and general expenses” in the condensed consolidated statements of income);

Pretax charges of $0.4 million for the write-off of a Personal Care production line at PE Films’ Guangzhou, China facility;

Pretax charges of $0.4 million for severance and other employee-related costs associated with restructurings in PE Films;

Pretax charges of $0.3 million related to estimated excess costs associated with the ramp-up of new product offerings and additional expenses related to strategic capacity expansion projects by PE Films ~~of $0.6 million and by Bonnell of $0.1 million~~ (included in “Cost of goods sold” in the consolidated statements of income);

~~Pretax charges of $0.2 million associated with a business development project (included in “Selling, general~~ and ~~administrative expense” in the consolidated statements of income);~~

Pretax charges of $0.2 million associated with the ~~consolidation~~shutdown of ~~domestic~~ PE Films’ manufacturing ~~facilities (included in “Cost of goods sold” in the consolidated statements of income);~~

~~Pretax charges of $0.2 million associated with the settlement of customer claims and other costs related to the previously shutdown aluminum extrusions manufacturing~~ facility in ~~Kentland, Indiana; and~~

~~Pretax charges~~Shanghai, China, which consists of ~~$0.1 million for severance and~~ other ~~employee-related costs associated with restructurings in PE Films.~~facility-related costs.

Plant shutdowns, asset impairments, restructurings and other items in the first ~~nine~~three months of ~~2017~~2018 include:

Pretax income of $11.9 million related to the settlement of an escrow arrangement established upon the acquisition of Terphane Holdings, LLC in 2011 (included in “Other income (expense), net” in the consolidated statements of income). In settling the escrow arrangement, the Company assumed the risk of the claims (and associated legal fees) against which the escrow previously secured the Company. While the ultimate amount of such claims is unknown, the Company believes that it is reasonably possible that it could be liable for some portion of these claims, and currently estimates the amount of such future claims at approximately $3.5 million;

Pretax charges of $3.3 million related to the acquisition of Futura, i) associated with accounting adjustments of $1.7 million made to the value of inventory sold by Aluminum Extrusions after its acquisition of Futura (included in “Cost of goods sold” in the consolidated statements of income), ii) acquisition costs of $1.5 million and, iii) integration costs of $0.1 million (included in “Selling, general and administrative expenses” in the consolidated statements of income), offset by pretax income of $0.7 million related to the fair valuation of an earnout provision (included in “Other income (expense), net” in the consolidated statements of income);

~~Pretax charges of $3.5~~$1.0 million related to estimated excess costs associated with the ramp-up of new product offerings and additional expenses related to strategic capacity expansion projects by PE Films ~~of $3.0 million and by Aluminum Extrusions of $0.5 million (included in “Cost of goods sold” in the consolidated statements of income);~~

Pretax income of $0.5 million related to the explosion that occurred in the second quarter of 2016 at the aluminum extrusions manufacturing facility in Newnan, Georgia, which includes the expected recovery of excess production costs of $0.6 million incurred in 2016 for which recovery from insurance carriers was not previously considered to be reasonably assured (included in “Cost of goods sold” in the consolidated statements of income), partially offset by legal and consulting fees of $0.1 million (included in “Selling, general and administrative expenses” in the consolidated statements of income).

Pretax charges of $0.8 million associated with the consolidation of domestic PE Films’ manufacturing facilities, which consists of asset impairments of $0.1 million, accelerated depreciation of $0.2 million (included in “Cost of goods sold” in the consolidated statements of income) and other facility consolidation-related expenses of $0.5 million (included in “Cost of goods sold” in the consolidated statements of income),

~~offset by pretax income of $0.1 million related to a reduction of severance and other employee-related accrued costs;~~

~~Pretax charges of $0.4 million related to expected future environmental costs at the aluminum extrusions manufacturing facility in Carthage, Tennessee~~ (included in “Cost of goods sold” in the consolidated statements of income);

Pretax charges of ~~$1.1~~$0.3 million for professional fees associated with ~~a business development project~~the Terphane Limitada worthless stock deduction, the impairment of assets of Flexible Packaging Films and determining the effect of the new U.S. federal income tax law (included in “Selling, general and administrative ~~expense”~~expenses” in the consolidated statements of income);

~~Pretax charges of $0.2 million associated with the settlement of customer claims and other costs related to the previously shutdown aluminum extrusions manufacturing facility in Kentland, Indiana;~~ and

Pretax charges of ~~$0.4~~$0.1 million for severance and other employee-related costs associated with restructurings in PE Films ~~($0.1 million)~~ and ~~Corporate ($0.3 million) (included in “Corporate expenses, net” in the net sales and operating profit by segment table).~~

~~Plant shutdowns, asset impairments, restructurings and other charges in the third quarter of 2016 include:~~

Pretax charges of $1.1 million associated with the consolidation of domestic PE Films’ manufacturing facilities, which includes severance and other employee-related costs of $0.3 million, asset impairments of $0.1 million, accelerated depreciation of $0.1 million (included in “Cost of goods sold” in the consolidated statements of income) and other facility consolidation-related expenses of $0.6 million ($0.4 million is included in “Cost of goods sold” in the consolidated statements of income);

Pretax income of $1.7 million related to an explosion that occurred in the second quarter of 2016 at the aluminum extrusions manufacturing facility in Newnan, Georgia, which includes the recognition of a gain of $1.9 million for a portion of the insurance recoveries approved by the insurer to begin the replacement of capital equipment, offset by the impairment of equipment damaged by the explosion of $0.3 million (net amount included in “Other income (expense), net” in the consolidated statements of income), and the reversal of an accrual for costs related to the explosion of $50,000 (included in “Selling, general and administrative expenses” in the consolidated statements of income);

Pretax charges of $0.3 million for severance and other employee-related costs associated with restructurings in PE Films ($0.1 million) and Corporate ($0.2 million) (included in “Corporate expenses, net” in the statement of net sales and operating profit by segment); and

~~Pretax charges of $0.3 million associated with the shutdown of the aluminum extrusions manufacturing facility in Kentland, Indiana.~~

~~Plant shutdowns, asset impairments, restructurings and other charges in the first nine months of 2016 include:~~

Pretax charges of $3.6 million associated with the consolidation of domestic PE Films’ manufacturing facilities, which includes severance and other employee-related costs of $0.9 million, asset impairments of $0.4 million, accelerated depreciation of $0.4 million (included in “Cost of goods sold” in the consolidated statements of income) and other facility consolidation-related expenses of $1.9 million ($1.4 million is included in “Cost of goods sold” in the consolidated statements of income);

Pretax income of $1.1 million related to an explosion that occurred in the second quarter of 2016 at the aluminum extrusions manufacturing facility in Newnan, Georgia, which includes the recognition of a gain of $1.9 million for a portion of the insurance recoveries approved by the insurer to begin the replacement of capital equipment, offset by the impairment of equipment damaged by the explosion of $0.3 million (net amount included in “Other income (expense), net” in the consolidated statements of income) and other costs related to the explosion not recoverable from insurance of $0.5 million (included in “Selling, general and administrative expenses” in the consolidated statements of income);

~~Pretax charges of $0.4 million associated with a business development project (included in “Selling, general and administrative expense” in the consolidated statements of income);~~

Pretax charges of $0.3 million for severance and other employee-related costs associated with restructurings in PE Films ($0.1 million) and Corporate ($0.2 million) (included in “Corporate expenses, net” in the statements of net sales and operating profit by segment); and

~~Pretax charges of $0.3 million associated with the shutdown of the aluminum extrusions manufacturing facility in Kentland, Indiana.~~

Aluminum Extrusions.

Results in the first nine months of 2017 include an unrealized gain of $24.8 million ($18.2 million after taxes) compared to unrealized losses of $1.3 million ($1.0 million after taxes) and $0.2 million ($0.2 million after taxes), in the third quarter and first nine months of 2016, respectively, on the Company’s investment in ~~kaleo, Inc. (“~~kalé~~o”),~~o, which is accounted for under the fair value method, in the first quarter of 2019 include a gain of $17.1 million ($14.3 million after taxes), which included a $17.6 million dividend declared on March 29, 2019, compared to a gain of $8.2 million ($6.4 million after taxes) in the first quarter of 2018 (included in “Other income (expense), net” in the consolidated statements of income). There was no change in the estimated fair value from June 30, 2017 to September 30, 2017, as appreciation in value from the discount rate for one quarter was offset by a change in the present value of projected cash flows versus prior projections. The change in the first nine months of 2017 in the estimated fair value of the Company’s holding in kaléo was based primarily on changes in projected future cash flows that are discounted at 45% for their high degree of risk. See Note 7 for additional information on investments.

In June 2018, the Company announced plans to close its facility in Shanghai, China, which primarily produced plastic films used as components for personal care products (“Shanghai transition”). Production ceased at this plant during the fourth quarter of 2018. The Company expects to recognize costs associated with exit and disposal activities of $5.0 million from June 2018 to completion, comprised of: (i) retention, severance and related costs ($2.9 million), (ii) customer-related costs ($0.5 million), and (iii) legal, asset disposal and other cash costs ($1.6 million). In addition, the Company expects non-cash asset write-offs and accelerated depreciation of $0.6 million. Net annual cash savings from consolidating operations of $1.7 million is expected. Proceeds from expected property disposals are uncertain. The Company anticipates that these activities, including property disposals, will be completed by the end of 2019.

Total expenses associated with the Shanghai transition were $0.2 million in the three months ended March 31, 2019 and $3.5 million since project inception. Cash expenditures were $0.2 million in the three months ended March 31, 2019 and $2.7 million since project inception.

A reconciliation of the beginning and ending balances of accrued expenses associated with exit and disposal activities and charges associated with asset impairments and reported as “Asset impairments and costs associated with exit and disposal activities, net of adjustments” in the consolidated statements of income for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 is as follows:

(In Thousands) Severance (a) Asset Impairments Other (b) Total
Balance at January 1, 2017 $ 1,854
$ —
$ 554
$ 2,408
Changes in 2017:
Charges 300
50
303
653
Cash spent (1,068 ) —
(307 ) (1,375 )
Charges against assets —
(50 ) —
(50 )
Balance at September 30, 2017 $ 1,086
$ —
$ 550
$ 1,636
(a) Severance primarily includes severance payments associated with the consolidation of North American PE Films manufacturing facilities.
(b) Other primarily includes other shutdown-related costs associated with the shutdown and sale of the Company’s aluminum extrusions manufacturing facility in Kentland, Indiana.

In July 2015, the Company began a consolidation of its domestic production for PE Films by restructuring the operations in its manufacturing facility in Lake Zurich, Illinois. This restructuring was completed in the third quarter of 2017. Total expenses associated with the restructuring were $0.8 million in the first nine months of 2017 (included in “Cost of goods sold” in the consolidated statements of income) and the total expenses for the project since inception were $7.3 million. Cash expenditures for the restructuring were $1.4 million in the first nine months of 2017, which includes capital expenditures of $0.1 million. Total cash expenditures for the project since inception were $15.5 million, which includes $11.2 million for capital expenditures. Additional cash payments for remaining accrued costs of approximately $1 million are expected to be paid within the next 12 months.



(In thousands)	Severance ^(a)			Asset Impairments			Other ^(b)			Total
Balance at January 1, 2019	$	616		$	—		$	160		$	776
Changes in 2019:
Charges	455			404			197			1,056
Cash payments	(242		)	—			(226		)	(468		)
Charges against assets	—			(404		)	—			(404		)
Reversed to income				—						—
Balance at March 31, 2019	$	829		$	—		$	131		$	960
(a) Severance cash spent includes severance payments associated with the Shanghai transition. (b) Other primarily includes other restructuring costs associated with Aluminum Extrusions.


4.4	~~The components of inventories are as follows:~~INVENTORIES

The components of inventories are as follows:


		September 30,		December 31,			March 31,		December 31,
(In Thousands)		2017		2016
(In thousands)						(In thousands)	2019		2018
Finished goods	Finished goods	$	21,442	$	16,215	Finished goods	$	25,100	$	24,938
Work-in-process	Work-in-process	10,695		8,590		Work-in-process	17,192		15,648
Raw materials	Raw materials	32,061		23,733		Raw materials	39,046		33,741
Stores, supplies and other	Stores, supplies and other	18,228		17,531		Stores, supplies and other	19,056		19,483
Total	Total	$	82,426	$	66,069	Total	$	100,394	$	93,810


5.5	Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding. Diluted earnings per share is computed by dividing net income by the weighted average common and potentially dilutive common equivalent shares outstanding, determined as follows:EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding. Diluted earnings per share is computed by dividing net income by the weighted average common and potentially dilutive common equivalent shares outstanding, determined as follows:


	Three Months Ended		Nine Months Ended		Three Months Ended
	September 30,		September 30,		March 31,
(In Thousands)	2017	2016	2017	2016
(In thousands)					2019	2018
Weighted average shares outstanding used to compute basic earnings per share	32,954	32,818	32,945	32,730	33,123	32,982
Incremental dilutive shares attributable to stock options and restricted stock	—	10	7	3	4	6
Shares used to compute diluted earnings per share	32,954	32,828	32,952	32,733	33,127	32,988

Incremental shares attributable to stock options and restricted stock are computed under the treasury stock method using the average market price during the related period. For the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2019, average out-of-the-money options to purchase shares that were excluded from the calculation of incremental shares attributable to stock options and restricted stock were ~~479,651 and 386,729, respectively.~~975,904. For the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2018, average out-of-the-money options to purchase shares that were excluded from the calculation of incremental shares attributable to stock options and restricted stock were ~~493,119 and 643,010, respectively.~~313,834.


6.6	~~The following table summarizes the after-tax changes in accumulated other comprehensive income (loss) for the nine months ended September 30, 2017:~~ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the after-tax changes in accumulated other comprehensive income (loss) for the three months ended March 31, 2019:


(In Thousands)	Foreign currency translation adjustment			Gain (loss) on derivative financial instruments			Pension and other post-retirement benefit adjustments			Total
Beginning balance, January 1, 2017	$	(93,970	)	$	863		$	(90,127	)	$	(183,234	)
(In thousands)													Foreign currency translation adjustment			Gain (loss) on derivative financial instruments			Pension and other post-retirement benefit adjustments			Total
Beginning balance, January 1, 2019													$	(96,940	)	$	(1,601	)	$	(81,446	)	$	(179,987	)
Other comprehensive income (loss) before reclassifications	9,817			817			—			10,634			(790		)	(1,011		)	—			(1,801		)
Amounts reclassified from accumulated other comprehensive income (loss)	—			(529		)	5,754			5,225			—			658			2,079			2,737
Net other comprehensive income (loss) - current period	9,817			288			5,754			15,859			(790		)	(353		)	2,079			936
Ending balance, September 30, 2017	$	(84,153	)	$	1,151		$	(84,373	)	$	(167,375	)
Ending balance, March 31, 2019													$	(97,730	)	$	(1,954	)	$	(79,367	)	$	(179,051	)

The following table summarizes the after-tax changes in accumulated other comprehensive income (loss) for the ~~nine~~three months ended ~~September 30, 2016:~~March 31, 2018:


(In Thousands)	Foreign currency translation adjustment			Gain (loss) on derivative financial instruments			Pension and other post-retirement benefit adjustments			Total			Foreign currency translation adjustment			Gain (loss) on derivative financial instruments			Pension and other post-retirement benefit adjustments			Total
Beginning balance, January 1, 2016	$	(112,807	)	$	(373	)	$	(95,539	)	$	(208,719	)
Beginning balance, January 1, 2018													$	(86,178	)	$	459		$	(90,950	)	$	(176,669	)
Other comprehensive income (loss) before reclassifications	22,929			(60		)	—			22,869			1,906			(132		)	—			1,774
Amounts reclassified from accumulated other comprehensive income (loss)	—			1,023			6,573			7,596			—			(153		)	2,612			2,459
Net other comprehensive income (loss) - current period	22,929			963			6,573			30,465			1,906			(285		)	2,612			4,233
Ending balance, September 30, 2016	$	(89,878	)	$	590		$	(88,966	)	$	(178,254	)
Ending balance, March 31, 2018													$	(84,272	)	$	174		$	(88,338	)	$	(172,436	)

Reclassifications of balances out of accumulated other comprehensive income (loss) into net income (loss) for the three months ended ~~September 30, 2017~~March 31, 2019 are summarized as follows:


(In Thousands)	Amount reclassified from other comprehensive income (loss)			Location of gain (loss) reclassified from accumulated other comprehensive income (loss) to net income (loss)	Amount reclassified from other comprehensive income (loss)			Location of gain (loss) reclassified from accumulated other comprehensive income (loss) to net income (loss)
Gain (loss) on derivative financial instruments:
Aluminum future contracts, before taxes	$	231		Cost of sales	$	(617	)	Cost of sales
Foreign currency forward contracts, before taxes					(191		)	Selling, general & administrative
Foreign currency forward contracts, before taxes	15			Cost of sales	15			Cost of sales
Total, before taxes	246				(793		)
Income tax expense (benefit)	90			Income taxes	(135		)	Income taxes
Total, net of tax	$	156			$	(658	)
Amortization of pension and other post-retirement benefits:
Actuarial gain (loss) and prior service costs, before taxes	$	(2,911	)	(a)	$	(2,671	)	(a)
Income tax expense (benefit)	(1,057		)	Income taxes	(592		)	Income taxes
Total, net of tax	$	(1,854	)		$	(2,079	)


(a)	This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost (see Note 9 for additional detail).

Reclassifications of balances out of accumulated other comprehensive income (loss) into net income ~~(loss)~~ for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2018 are summarized as follows:


(In Thousands)	Amount reclassified from other comprehensive income (loss)			Location of gain (loss) reclassified from accumulated other comprehensive income (loss) to net income (loss)	Amount reclassified from other comprehensive income (loss)			Location of gain (loss) reclassified from accumulated other comprehensive income (loss) to net income (loss)
Gain (loss) on derivative financial instruments:
Aluminum future contracts, before taxes	$	785		Cost of sales	$	232		Cost of sales
Foreign currency forward contracts, before taxes					(41		)	Selling, general & administrative
Foreign currency forward contracts, before taxes	46			Cost of sales	15			Cost of sales
Total, before taxes	831				206
Income tax expense (benefit)	302			Income taxes	53			Income taxes
Total, net of tax	$	529			$	153
Amortization of pension and other post-retirement benefits:
Actuarial gain (loss) and prior service costs, before taxes	$	(9,033	)	(a)	$	(3,374	)	(a)
Income tax expense (benefit)	(3,279		)	Income taxes	(762		)	Income taxes
Total, net of tax	$	(5,754	)		$	(2,612	)


(a)	This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost (see Note 9 for additional detail).

~~Reclassifications of balances out of accumulated other comprehensive income (loss) into net income (loss) for the three months ended September 30, 2016 are summarized as follows:~~

(In Thousands) Amount
reclassified from
other
comprehensive
income (loss) Location of gain
(loss) reclassified
from accumulated
other
comprehensive
income (loss) to net
income (loss)
Gain (loss) on derivative financial instruments:
Aluminum future contracts, before taxes $ (160 ) Cost of sales
Foreign currency forward contracts, before taxes 15
Cost of sales
Total, before taxes (145 )
Income tax expense (benefit) (53 ) Income taxes
Total, net of tax $ (92 )
Amortization of pension and other post-retirement benefits:
Actuarial gain (loss) and prior service costs, before taxes $ (3,086 ) (a)
Income tax expense (benefit) (1,120 ) Income taxes
Total, net of tax $ (1,966 )


~~(a)~~7	~~This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost (see Note 9 for additional detail).~~INVESTMENTS

~~Reclassifications~~In August 2007 and December 2008, the Company made an aggregate investment of ~~balances out~~$7.5 million in kaléo, a privately held specialty pharmaceutical company dedicated to building innovative solutions for serious and life-threatening medical conditions. Tredegar owns Series A-3 Preferred Stock and Series B Preferred Stock in kaléo that, taken together, represents on a fully-diluted basis an approximate 20% interest in kaléo. Tredegar accounts for its investment in kaléo under the fair value option. At the time of ~~accumulated other comprehensive income (loss) into net income (loss) for~~ the ~~nine months ended September 30, 2016 are summarized as follows:~~initial investment, the Company elected the fair value option of accounting since its investment objectives were similar to those of venture capitalists, which typically do not have controlling financial interests.

(In Thousands) Amount
reclassified from
other
comprehensive
income (loss) Location of gain
(loss) reclassified
from accumulated
other
comprehensive
income (loss) to net
income (loss)
Gain (loss) on derivative financial instruments:
Aluminum future contracts, before taxes $ (1,669 ) Cost of sales
Foreign currency forward contracts, before taxes 46
Cost of sales
Total, before taxes (1,623 )
Income tax expense (benefit) (600 ) Income taxes
Total, net of tax $ (1,023 )
Amortization of pension and other post-retirement benefits:
Actuarial gain (loss) and prior service costs, before taxes $ (9,759 ) (a)
Income tax expense (benefit) (3,186 ) Income taxes
Total, net of tax $ (6,573 )


~~(a)~~	~~This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost (see Note 9 for additional detail).~~

In August 2007 and December 2008, the Company made an aggregate investment of $7.5 million in kaléo, a privately held specialty pharmaceutical company dedicated to building innovative solutions for serious and life-threatening medical conditions. Tredegar’s ownership interest on a fully diluted basis was approximately 20% at September 30, 2017, and the investment is accounted for under the fair value method. At the time of the initial investment, the Company elected the fair value option over the equity method of accounting since its investment objectives were similar to those of venture capitalists, which typically do not have controlling financial interests.

The estimated fair value of the Company’s investment was $101.7 million as of March 31, 2019 and $84.6 million as of December 31, 2018. The fair value estimate at March 31, 2019 includes a receivable of $17.6 million for a cash dividend declared by kaléo on March 29, 2019 and paid on April 30, 2019 (“kaléo dividend”). This is the first dividend that the Company has received on its investment in kaléo. Future dividends are subject to the discretion of kaléo’s board of directors. The Company recognized a gain on its investment in kaléo ~~(also~~of $17.1 million ($14.3 million after taxes), which includes the carrying value, which is included in “Other assets and deferred charges” in the consolidated balance sheets) was $45.0 million at September 30, 2017 and $20.2 million at December 31, 2016. An unrealized loss of $1.3 million was recognized in the third quarter of 2016. Unrealized gains of $24.8 million and an unrealized loss of $0.2 million were recognizedkaléo dividend, in the first ~~nine months~~quarter of 2017 and 2016, respectively. There was no change in the estimated fair value from June 30, 2017 to September 30, 2017, as appreciation in value from the discount rate for one quarter was offset by a change in the present value of projected cash flows versus prior projections. Unrealized gains (losses)2019. Gains or losses associated with ~~this~~the Company’s investment in kaléo are included in “Other income (expense), net” in the consolidated statements of income and separately stated in the ~~net sales and~~segment operating profit ~~by segment~~ table in Note 10.

Kaléo transitioned from a company with net losses in 2017 to a company with net income in 2018. Tredegar’s assessment of kaléo’s risk profile has improved during this transition resulting in a lower discount rate versus a year ago that is applied to kaléo’s projected unlevered after-tax cash flows to estimate kaléo’s enterprise value (“EV”) (the “DCF Method”) and the Company’s underlying share of kaléo’s equity value. Moreover, with net income as well as earnings before interest, taxes, depreciation and amortization (“EBITDA”), the EV of kaléo can also be estimated by applying the EV-to-adjusted EBITDA multiple of guideline public companies to kaléo’s most recent trailing 12-month adjusted EBITDA (the “EBITDA Multiple Method”).

The ~~change~~Company estimates the fair value of its investment in kaléo by: (i) computing the weighted average estimated EV utilizing both the DCF Method and EBITDA Multiple Method (including adjustments for any surplus or deficient working capital and estimates of contingent liabilities), (ii) adding cash and cash equivalents, (iii) subtracting interest-bearing debt, (iv) subtracting a private company liquidity discount estimated at 15% of the net result of (i) through (iii) and (v) applying liquidation preferences and fully diluted ownership percentages to the estimated equity value computed in (i) through (iv).

The Company’s estimate of kaléo’s EV as of March 31, 2019 was determined by weighting the EBITDA Multiple Method by 80% and the DCF Method by 20%, which was consistent with the weighting applied at December 31, 2018. The heavier weighting towards the EBITDA Multiple Method was due to its heuristic nature and kaléo’s transition and actual performance in 2018, versus the hypothetical nature of the projections used in the DCF Method. The DCF Method projections rely on numerous assumptions and Level 3 inputs, including estimating market growth, market share, pricing, net margins (after allowances for temporary discounts, prompt pay discounts, product returns, wholesaler fees, chargebacks, rebates and copays), selling expenses, R&D expenses, general and administrative expenses, income taxes on unlevered pretax income, working capital, capital expenditures and the risk-adjusted discount rate. In addition, there are various regulatory and legal enforcement efforts, including an ongoing Department of Justice investigation related to kaléo’s Evzio business, which could have a material adverse effect on kaléo’s business that require assessment in any valuation method applied.

The table below provides a sensitivity analysis of the estimated fair value at March 31, 2019, of the Company’s ~~holding~~investment in kaléo (including the kaléo dividend receivable) for changes in the ~~first nine months~~EBITDA multiple used in applying the EBITDA Multiple Method and the changes in the weighting of ~~2017 primarily related to recent favorable operating results and projections. Kaléo’s stock is not publicly traded. In addition, kaléo has not completed a full year of operations since~~ the ~~re-launch of its Auvi-Q~~^® ~~product during the first quarter of 2017.~~ DCF Method.



($ Millions)			EV-to-Adjusted EBITDA Multiple
			6.4 x		7.4 x		8.4 x		9.4 x		10.4 x
Weighting to DCF Method	50	%	$	90.9	$	97.9	$	105.0	$	112.1	$	119.1
	40	%	$	86.9	$	95.4	$	103.9	$	112.4	$	120.8
	30	%	$	83.0	$	92.9	$	102.8	$	112.7	$	122.5
	20	%	$	79.1	$	90.4	$	101.7	$	113.0	$	124.3
	10	%	$	75.1	$	87.9	$	100.6	$	113.3	$	126.0
	—	%	$	71.2	$	85.3	$	99.5	$	113.6	$	127.7

The valuation estimate in this situation is based on projection assumptions or Level 3 inputs that have a wide range of possible outcomes. Consequently, the present value of kaléo’s projected future cash flows is determined at a discount rate of 45% for their high degree of risk. Ultimately, the trueultimate value of the Company’s ownership interest in kaléo will be determined and realized only if and when a liquidity event occurs, and the ultimate value could be materially different from the ~~$45.0~~$101.7 million estimated fair value reflected in the Company’s financial statements at ~~September 30, 2017.~~

In addition to the impact on valuation of the possible changes in assumptions, Level 3 inputs and projections from changes in business conditions, the fair market valuation of the Company’s interest in kaléo is sensitive to changes in the weighted average cost of capital used to discount cash flow projections. The weighted average cost of capital used in the fair market valuation of Tredegar’s interest in kaléo was 45% at both September 30, 2017 and DecemberMarch 31, 2016. At September 30, 2017, the effect of a 500 basis point decrease in the weighted average cost of capital assumption would have increased the fair value of the Company’s interest in kaléo by approximately $9 million, and a 500 basis point increase in the weighted average cost of capital assumption would have decreased the fair value of the Company’s interest by approximately $8 million.

Had the Company not elected to account for its investment under the fair value method, it would have been required to use the equity method of accounting. The condensed balance sheets for kaléo at September 30, 2017 and December 31, 2016 and condensed statements of operations for the three and nine months ended September 30, 2017 and 2016, as reported to the Company by kaléo, are provided below:

Unaudited (In Thousands) September 30, 2017 December 31, 2016 September 30, 2017 December 31, 2016
Assets: Liabilities & Equity:
Cash & short-term investments $ 104,753
$ 102,329

Restricted cash 31
31
Current liabilities $ 85,086
$ 50,134
Other current assets 39,059
15,391
Long term debt, net 138,305
143,380
Property & equipment 10,399
13,011
Other noncurrent liabilities 807
822
Other long-term assets 494
472
Equity (69,462 ) (63,102 )
Total assets $ 154,736
$ 131,234
Total liabilities & equity $ 154,736
$ 131,234

Three Months Ended September 30, Nine Months Ended September 30,
Unaudited (In Thousands) 2017 2016 2017 2016
Revenues $ 58,822
$ 17,377
$ 148,761
$ 29,347
Cost of goods sold, R&D and SG&A expenses
before depreciation & amortization
(52,072 ) (19,046 ) (137,411 ) (50,442 )
Depreciation & amortization (1,245 ) (1,278 ) (3,723 ) (3,477 )
Operating income (loss) 5,505
(2,947 ) 7,627
(24,572 )
Gain on contract termination —
—
—
18,075
Net interest expense and other net (4,767 ) (4,848 ) (14,408 ) (14,535 )
Income tax benefit (expense) (244 ) —
(734 ) (8 )
Net income (loss) $ 494
$ (7,795 ) $ (7,515 ) $ (21,040 )

The Company’s investment in the Harbinger Capital Partners Special Situations Fund, L.P. (“Harbinger Fund”) had a carrying value (included in “Other assets and deferred charges”) of $1.7 million at September 30, 2017 and

December 31, 2016. The carrying value at September 30, 2017 reflected Tredegar’s cost basis in its investment in the Harbinger Fund, net of total withdrawal proceeds received and unrealized losses. No withdrawal proceeds were received in the first nine months of 2016 or 2017. The timing and amount of future installments of withdrawal proceeds, which commenced in August 2010, were not known as of September 30, 2017. Gains on the Company’s investment in the Harbinger Fund will be recognized when the amounts expected to be collected from any withdrawal from the investment are known, which will likely be when cash in excess of the remaining carrying value is received. Losses will be recognized when management believes it is probable that future withdrawal proceeds will not exceed the remaining carrying value.2019.

8.8

Tredegar uses derivative financial instruments for the purpose of hedging margin exposure from fixed-price forward sales contracts in Aluminum Extrusions and currency exchange rate exposures that exist as part of ongoing PE Films and Flexible Packaging Films business operations. These derivative financial instruments are designated as and qualify as cash flow hedges and are recognized in the consolidated balance sheet at fair value. The fair value of derivative instruments recorded on the consolidated balance sheets are based upon Level 2 inputs. If individual derivative instruments with the same counterparty can be settled on a net basis, the Company records the corresponding derivative fair values as a net asset or net liability.DERIVATIVE FINANCIAL INSTRUMENTS

Tredegar uses derivative financial instruments for the purpose of hedging margin exposure from fixed-price forward sales contracts in Aluminum Extrusions and exposure from currency volatility that exist as part of ongoing business operations (primarily in Flexible Packaging Films). These derivative financial instruments are designated as and qualify as cash flow hedges and are recognized in the consolidated balance sheet at fair value. The fair value of derivative instruments recorded on the consolidated balance sheets are based upon Level 2 inputs. If individual derivative instruments with the same counterparty can be settled on a net basis, the Company records the corresponding derivative fair values as a net asset or net liability.

In the normal course of business, Aluminum Extrusions enters into fixed-price forward sales contracts with certain customers for the future sale of fixed quantities of aluminum extrusions at scheduled intervals. In order to hedge margin exposure created from the fixing of future sales prices relative to volatile raw material (aluminum) costs, Aluminum Extrusions enters into a combination of forward purchase commitments and futures contracts to acquire or hedge aluminum, based on the scheduled purchases for the firm sales commitments. The fixed-price firm sales commitments and related hedging instruments generally have durations of not more than 12 months, and the notional amount of aluminum futures contracts that hedged future purchases of aluminum to meet fixed-price forward sales contract obligations was ~~$7.1~~$24.6 million ~~(7.4~~(22.2 million pounds of aluminum) at ~~September 30, 2017~~March 31, 2019 and ~~$8.0~~$25.4 million ~~(9.6~~(22.5 million pounds of aluminum) at December 31, ~~2016.~~2018.

The table below summarizes the location and gross amounts of aluminum futures contract fair values (Level 2) in the consolidated balance sheets as of ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016:~~2018:


	September 30, 2017				December 31, 2016				March 31, 2019				December 31, 2018
(In Thousands)	Balance Sheet Account	Fair Value			Balance Sheet Account	Fair Value
(In thousands)									Balance Sheet Account	Fair Value			Balance Sheet Account	Fair Value
Derivatives Designated as Hedging Instruments
Asset derivatives: Aluminum futures contracts	Prepaid expenses and other	$	792		Prepaid expenses and other	$	308		Accrued Expenses	$	25		Accrued Expenses	$	20
Liability derivatives: Aluminum futures contracts	Prepaid expenses and other	$	(25	)	Prepaid expenses and other	$	(37	)	Accrued Expenses	(1,284		)	Accrued Expenses	$	(1,650	)
Net asset (liability)		$	767			$	271			$	(1,259	)		$	(1,630	)

In the event that a counterparty to an aluminum fixed-price forward sales contract chooses not to take delivery of its aluminum extrusions, the customer is contractually obligated to compensate Aluminum Extrusions for any losses on the related aluminum futures and/or forward contracts through the date of cancellation.

The table below summarizes the location and gross amounts of foreign currency forward contract fair values (Level 2) in the consolidated balance sheets as of March 31, 2019 and December 31, 2018:



	March 31, 2019				December 31, 2018
(In Thousands)	Balance Sheet Account	Fair Value			Balance Sheet Account	Fair Value
Derivatives Designated as Hedging Instruments
Asset derivatives: Foreign currency forward contracts	Prepaid expenses and other	$	11		Prepaid expenses and other	$	37
Liability derivatives: Foreign currency forward contracts	Accrued Expenses	(1,561		)	Accrued Expenses	(1,090		)
Net asset (liability)		$	(1,550	)		$	(1,053	)



USD Notional Amount (000s)	Average Forward Rate Contracted on USD/BRL	R$ Equivalent Amount (000s)	Applicable Month	Estimated % of Terphane Ltda. R$ Operating Cost Exposure Hedged
$2,025	3.6690	R$7,430	Apr-19	72%
$2,025	3.6795	R$7,451	May-19	73%
$2,025	3.6904	R$7,473	Jun-19	72%
$1,800	3.8826	R$6,989	Jul-19	65%
$1,800	3.8950	R$7,011	Aug-19	68%
$1,800	3.9070	R$7,033	Sep-19	66%
$1,800	3.9203	R$7,056	Oct-19	67%
$1,800	3.9331	R$7,080	Nov-19	67%
$1,800	3.9455	R$7,102	Dec-19	73%
$1,400	3.8256	R$5,356	Jan-20	51%
$1,400	3.8331	R$5,366	Feb-20	52%
$1,400	3.8377	R$5,373	Mar-20	49%
$1,400	3.8456	R$5,384	Apr-20	50%
$1,400	3.8539	R$5,395	May-20	51%
$1,400	3.8621	R$5,407	Jun-20	50%
$1,400	3.8727	R$5,422	Jul-20	48%
$1,400	3.8850	R$5,439	Aug-20	50%
$1,400	3.8964	R$5,455	Sep-20	49%
$1,400	3.9079	R$5,471	Oct-20	50%
$1,400	3.9187	R$5,486	Nov-20	50%
$1,400	3.9306	R$5,503	Dec-20	54%
$33,675	3.8510	R$129,682		58%

These foreign currency exchange contracts have been designated and qualify as cash flow hedges of Terphane Ltda.'s forecasted sales to customers quoted or priced in U.S. Dollars over that period. By changing the currency risk associated with these U.S. Dollar sales, the derivatives have the effect of offsetting operating costs quoted or priced in Brazilian Real and decreasing the net exposure to Brazilian Real in the consolidated statements of income. The aggregate notional amount of open foreign exchange contracts at September 30, 2017 was $18.75 million (R$60.7 million). The forward rates contracted and the related market rates as of September 30, 2017 were the same, and accordingly thenet fair value of ~~all 15~~the open forward contracts ~~were zero at that date.~~was a negative $1.5 million as of March 31, 2019.

These derivative contracts involve elements of market risk that are not reflected on the consolidated balance sheet, including the risk of dealing with counterparties and their ability to meet the terms of the contracts. The counterparties to any forward purchase commitments are major aluminum brokers and suppliers, and the counterparties to any aluminum futures contracts are major financial institutions. Fixed-price forward sales contracts are only made available

to the best and most credit-worthy customers. The counterparties to the Company’s foreign currency cash flow hedge contracts are major financial institutions.

The pretax effect on net income (loss) and other comprehensive income (loss) of derivative instruments classified as cash flow hedges and described in the previous paragraphs for the three ~~and nine~~ month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 is summarized in the table below:

(In Thousands) Cash Flow Derivative Hedges
Aluminum Futures Contracts Foreign Currency Forwards
Three Months Ended September 30,
2017 2016 2017 2016
Amount of pretax gain (loss) recognized in other comprehensive income (loss) $ 757
$ (230 ) $ —
$ —
Location of gain (loss) reclassified from accumulated other comprehensive income (loss) into net income (loss) (effective portion) Cost of
sales
Cost of
sales
Cost of
sales
Cost of
sales
Amount of pretax gain (loss) reclassified from accumulated other comprehensive income (loss) to net income (loss) (effective portion) $ 231
$ (160 ) $ 15
$ 15
Aluminum Futures Contracts Foreign Currency Forwards
Nine Months Ended September 30,
2017 2016 2017 2016
Amount of pre-tax gain (loss) recognized in other comprehensive income (loss) $ 1,281
$ (93 ) $ —
$ —
Location of gain (loss) reclassified from accumulated other comprehensive income (loss) into net income (loss) (effective portion) Cost of
sales
Cost of
sales
Cost of
sales
Cost of
sales
Amount of pre-tax gain (loss) reclassified from accumulated other comprehensive income (loss) to net income (loss) (effective portion) $ 785
$ (1,669 ) $ 46
$ 46



(In thousands)	Cash Flow Derivative Hedges
	Three Months Ended March 31,
	Aluminum Futures Contracts						Foreign Currency Forwards
	2019			2018			2019		2019			2018		2018
Amount of pretax gain (loss) recognized in other comprehensive income (loss)	$	(246	)	$	(392	)	$	—	$	(816	)	$	—	170
Location of gain (loss) reclassified from accumulated other comprehensive income (loss) into net income (effective portion)	Cost of sales			Cost of sales			Cost of sales		Selling, general & admin			Cost of sales		Selling, general & admin
Amount of pretax gain (loss) reclassified from accumulated other comprehensive income (loss) to net income effective portion)	$	(617	)	$	232		$	15	$	(191	)	$	15	(41	)

As of ~~September 30, 2017,~~March 31, 2019, the Company expects ~~$0.5~~$1.2 million of unrealized after-tax ~~gains~~losses on derivative instruments reported in accumulated other comprehensive income (loss) to be reclassified to earnings within the next 12 months. For the three ~~and nine~~ month periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016,~~2018, net gains or losses realized, from previously unrealized net gains or losses on hedges that had been discontinued, were not material.

9.9

The Company sponsors noncontributory defined benefit (pension) plans covering certain current and former employees. The plan for salaried and hourly employees currently in effect is based on a formula using the participant’s years of service and compensation or using the participant’s years of service and a dollar amount. The plan was closed to new participants and pay for active plan participants for benefit calculations was frozen as of December 31, 2007. With the exception of plan participants at one of Tredegar’s U.S. manufacturing facilities, the plan no longer accrues benefits associated with crediting employees for service, thereby freezing future benefits under the plan.PENSION AND OTHER POSTRETIREMENT BENEFITS

Tredegar sponsors a noncontributory defined benefit (pension) plan covering certain current and former U.S. employees. The plan for salaried and hourly employees currently in effect is based on a formula using the participant’s years of service and compensation or using the participant’s years of service and a dollar amount. The plan is closed to new participants and pay for active plan participants for benefit calculations was frozen as of December 31, 2007. As of January 31, 2018, the plan no longer accrued benefits associated with crediting employees for service, thereby freezing all future benefits under the plan.

The components of net periodic benefit cost for the pension and other ~~post-retirement~~postretirement benefit programs reflected in the consolidated ~~results~~statements of income are shown below:


	Pension Benefits						Other Post-Retirement Benefits						Pension Benefits						Other PostRetirement Benefits
	Three Months Ended September 30,						Three Months Ended September 30,						Three Months Ended March 31,						Three Months Ended March 31,
(In Thousands)	2017			2016			2017			2016
Service cost	$	29		$	54		$	7		$	8
Interest cost	3,103			3,263			73			67
Expected return on plan assets	(3,743		)	(4,070		)	—			—
Amortization of prior service costs, gains or losses and net transition asset	2,996			3,135			(84		)	(49		)
Net periodic benefit cost	$	2,385		$	2,382		$	(4	)	$	26
	Pension Benefits						Other Post-Retirement Benefits
	Nine Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
(In thousands)													2019			2018			2019			2018
Service cost	$	145		$	178		$	25		$	29		$	—		$	5		$	8		$	10
Interest cost	9,431			9,993			226			236			3,067			2,882			73			69
Expected return on plan assets	(11,216		)	(12,027		)	—			—			(3,404		)	(3,761		)	—			—
Amortization of prior service costs, (gains) losses and net transition asset	9,241			9,903			(207		)	(144		)	2,729			3,428			(58		)	(54		)
Net periodic benefit cost	$	7,601		$	8,047		$	44		$	121		$	2,392		$	2,554		$	23		$	25

Pension and other ~~post-retirement~~postretirement liabilities were ~~$90.0~~$86.8 million and ~~$96.0~~$88.8 million at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, respectively ($0.6 million included in “Accrued expenses” at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016,~~2018, with the remainder included in ~~“Other noncurrent liabilities”~~“Pension and other postretirement benefit obligations, net” in the consolidated balance sheets). The Company’s required contributions are expected to be ~~approximately $6~~$8.1 million in ~~2017.~~2019. Contributions to the pension plan during the first ~~nine~~three months of ~~2017~~2019 were ~~$4.4~~$1.7 million. Tredegar funds its other ~~post-retirement~~postretirement benefits (life insurance and health benefits) on a claims-made ~~basis, which~~basis; for 2019, the Company anticipates the amount will be consistent with amounts paid for the year ended December 31, ~~2016,~~2018, or $0.3 million.


10	OTHER INCOME (EXPENSE), NET

Other income (expense), net consists of the following:



	Three Months Ended March 31,
(In thousands)	2019		2018
Gain on investment in kaléo accounted for under fair value method	$	17,082	$	8,200
Other	28		33
Total	$	17,110	$	8,233

The gain on investment in kaléo accounted for under fair value method shown above includes a cash dividend of $17.6 million from kaléo. See Note 7 for more details on the investment in kaléo.


~~10.~~11	BUSINESS SEGMENTS

The Company’s business segments are PE Films, Flexible Packaging Films and Aluminum Extrusions. Information by business segment is reported 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.

The following table presents net sales and operating profit by segment for the three months ended March 31, 2019 and ~~nine-month periods ended September 30, 2017 and 2016:~~2018:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
(In Thousands)	2017			2016			2017			2016
(In thousands)													2019			2018
Net Sales
PE Films	$	89,723		$	82,179		$	265,773		$	251,473		$	66,779		$	93,249
Flexible Packaging Films	26,628			27,303			79,925			80,888			33,619			28,437
Aluminum Extrusions	122,149			91,067			344,956			269,987			139,047			128,235
Total net sales	238,500			200,549			690,654			602,348			239,445			249,921
Add back freight	8,621			7,153			24,840			21,221			9,021			8,790
Sales as shown in the Consolidated Statements of Income	$	247,121		$	207,702		$	715,494		$	623,569		$	248,466		$	258,711
Operating Profit (Loss)
PE Films:
Ongoing operations	$	11,251		$	9,011		$	30,965		$	23,564		$	2,951		$	14,034
Plant shutdowns, asset impairments, restructurings and other	(919		)	(1,187		)	(3,890		)	(3,678		)	(1,378		)	(1,052		)
Flexible Packaging Films:
Ongoing operations	(1,074		)	93			(3,392		)	1,184			2,859			1,715
Plant shutdowns, asset impairments, restructurings and other	—			—			11,856			—			—			—
Aluminum Extrusions:
Ongoing operations	12,601			9,427			34,201			27,786			12,085			10,199
Plant shutdowns, asset impairments, restructurings and other	(377		)	1,405			(3,147		)	840			(40		)	(53		)
Total	21,482			18,749			66,593			49,696			16,477			24,843
Interest income	42			70			171			158			59			56
Interest expense	1,757			886			4,579			2,918			1,232			1,644
Gain (loss) on investment accounted for under fair value method	—			(1,300		)	24,800			(200		)
Gain (loss) on investment in kaléo accounted for under fair value method													17,082			8,200
Stock option-based compensation costs	111			31			153			24			415			86
Corporate expenses, net	6,960			7,223			20,985			22,110			8,160			7,918
Income before income taxes	12,696			9,379			65,847			24,602
Income taxes	4,422			(2,669		)	9,667			1,864
Net income	$	8,274		$	12,048		$	56,180		$	22,738
Income (loss) before income taxes													23,811			23,451
Income taxes (benefit)													4,026			5,287
Net income (loss)													$	19,785		$	18,164

The following table presents identifiable assets by segment at ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016:~~2018:


(In Thousands)	September 30, 2017		December 31, 2016
(In thousands)					March 31, 2019		December 31, 2018
PE Films	$	295,181	$	278,558	$	234,301	$	231,720
Flexible Packaging Films	153,488		156,836		59,550		58,964
Aluminum Extrusions	268,994		147,639		302,153		281,372
Subtotal	717,663		583,033		596,004		572,056
General corporate	62,435		38,618		117,071		100,920
Cash and cash equivalents	31,850		29,511		36,302		34,397
Total	$	811,948	$	651,162	$	749,377	$	707,373

The following tables disaggregate the Company’s revenue by geographic area and product group for the three months ended March 31, 2019 and 2018:



Net Sales by Geographic Area (a)
	Three Months Ended March 31,
(In thousands)	2019		2018
United States	$	172,254	$	159,562
Exports from the United States to:
Asia	13,493		23,592
Canada	3,605		13,298
Europe	1,360		1,822
Latin America	2,867		3,052
Operations outside the United States:
Brazil	28,138		23,151
The Netherlands	9,587		11,928
Hungary	6,834		8,818
China	230		2,274
India	1,077		2,424
Total	$	239,445	$	249,921



Net Sales by Product Group
	Three Months Ended March 31,
(In thousands)	2019	2018
PE Films:
Personal care materials	44,855	61,644
Surface protection films	19,888	29,815
LED lighting products & other films	2,036	1,790
Subtotal	66,779	93,249
Flexible Packaging Films	33,619	28,437
Aluminum Extrusions:
Nonresidential building & construction	69,638	65,280
Consumer durables	15,545	15,189
Distribution	8,573	10,971
Automotive	12,627	9,673
Residential building & construction	11,672	9,601
Machinery & equipment	9,923	9,094
Electrical	11,069	8,427
Subtotal	139,047	128,235
Total	239,445	249,921

See the previous page for a reconciliation of net sales to sales (as shown in the Consolidated Statements of Income).

(a)

Export sales relate primarily to PE Films. Operations outside the U.S. in The Netherlands, Hungary, China and India also relate to PE Films. Operations in Brazil are primarily related to Flexible Packaging Films, but also include PE Films operations. Sales from locations in The Netherlands and Hungary are primarily to customers located in Europe. Sales from locations in China (Guangzhou and Shanghai) are primarily to customers located in China, but also include other customers in Asia.

~~11.~~12

Tredegar recorded tax expense of $9.7 million on pretax net income of $65.8 million in the first nine months of 2017. Therefore, the effective tax rate in the first nine months of 2017 was 14.7%, compared to 7.6% in the first nine months of 2016. The significant differences between the U.S. federal statutory rate and the effective income tax rate for the nine months ended September 30, 2017 and 2016 are as follows:INCOME TAXES

Percent of Income
Before Income Taxes
Nine Months Ended September 30, 2017 2016
Income tax expense at federal statutory rate 35.0
35.0
Foreign rate differences 1.5
1.1
State taxes, net of federal income tax benefit 1.3
0.7
Changes in estimates related to prior year tax provision 0.5
(1.6 )
Non-deductible expenses 0.5
1.6
Valuation allowance for foreign operating loss carry-forwards 0.4
0.3
Unremitted earnings from foreign operations 0.2
(1.1 )
Valuation allowance for capital loss carry-forwards —
(0.4 )
Income tax contingency accruals and tax settlements (0.4 ) 1.3
Remitted earnings from foreign operations (0.6 ) (23.8 )
Research and development tax credit (0.7 ) (1.8 )
Domestic production activities deduction (0.9 ) (3.8 )
Foreign investment write-up (3.5 ) 0.1
Settlement of Terphane acquisition escrow (6.4 ) —
Worthless stock deduction (12.2 ) —
Effective income tax rate 14.7
7.6

~~During~~Tredegar recorded tax expense of $4.0 million on pretax net income of $23.8 million in the ~~second quarter~~first three months of ~~2017,~~2019. Therefore, the ~~Company initiated~~effective tax rate in the first three months of 2019 was 16.9%, compared to 22.5% in the first three months of 2018. The quarterly effective tax rate is an estimate based on a ~~plan to liquidate for tax purposes one of its domestic subsidiaries, which will allow it to claim an income tax benefit on the write-off~~proration of the ~~stock basis of one~~components of the Company’s estimated annual effective tax rate. The significant differences between the U.S. ~~subsidiaries (“worthless stock deduction”) on its 2017~~ federal statutory rate and the effective income tax ~~return. The Company recorded an income tax benefit during~~rate for the ~~second quarter of 2017 of $8.1 million related to the worthless stock deduction, net of valuation allowances~~three months ended March 31, 2019 and ~~accrual for uncertain tax positions.~~2018 are as follows:



(In thousands, except percentages)	2019					2018
Three Months Ended March 31,	Amount			%		Amount			%
Income tax expense at federal statutory rate	$	5,000		21.0		$	4,925		21.0
U.S. Tax on Foreign Branch Income	465			2.0		357			1.5
Foreign rate differences	329			1.4		221			0.9
State taxes, net of federal income tax benefit	180			0.8		321			1.4
Non-deductible expenses	73			0.3		84			0.4
Global Intangible Low Tax Income (GILTI)	—			—		32			0.1
Research and development tax credit	(86		)	(0.4	)	(100		)	(0.4	)
Stock-based compensation	(133		)	(0.6	)	173			0.7
Foreign Derived Intangible Income (FDII)	(194		)	(0.8	)	(153		)	(0.7	)
Valuation allowance due to foreign losses and impairments	(253		)	(1.1	)	(362		)	(1.5	)
Foreign tax incentives	(436		)	(1.8	)	(211		)	(0.9	)
Tax impact of dividend received	(919		)	(3.9	)	—			—
Effective income tax rate	$	4,026		16.9		$	5,287		22.5

Tredegar accrues U.S. federal income taxes on unremitted earnings of all foreign ~~subsidiaries. Prior~~subsidiaries where required. However, due to changes in the ~~second quarter~~taxation of ~~2016, deferred~~dividends under the U.S. Tax Cuts and Jobs Act of 2017, Tredegar will only record U.S. federal income taxes ~~had not been recorded for the undistributed~~on unremitted earnings ~~for Terphane Ltda. because the Company had intended~~of its foreign subsidiaries where Tredegar cannot take steps to ~~permanently reinvest these earnings. Due to concerns about the political and economic conditions in Brazil, Terphane Ltda. began making cash~~eliminate any potential tax on future distributions to the Company in 2016. During the second quarter of 2016, Terphane Ltda. paid a dividend of $10.7 million to the Company. During the second quarter of 2017, the Company recognized a net tax benefit of $0.4 million associated with additional U.S. tax related to this repatriation of cash from ~~Brazil offset by the reversal of related tax contingencies. Because of the accumulation of significant losses related to~~its foreign currency translations at Terphane Ltda., there were no deferred tax liabilities associated with the U.S. federal income taxes and foreign withholding taxes on Terphane Ltda.’s undistributed earnings as of September 30, 2017 and December 31, 2016.subsidiaries.

The Brazilian federal statutory income tax rate is a composite of 34.0% (25.0% of income tax and 9.0% of social contribution on income). Terphane Ltda.’s manufacturing facility in Brazil is the beneficiary of certain income tax incentives that allow for a reduction in the statutory Brazilian federal income tax rate to 15.25% levied on the operating profit on certain of its products. The incentives have been granted for a 10-year period, ~~which has a~~from the commencement date of January 1, 2015. NoThe benefit ~~was recognized~~ from ~~these~~the tax incentives was $0.4 million and $0.2 million in the first ~~nine~~three months of ~~2017 or 2016.~~

Income taxes in 2017 included a partial reversal of a valuation allowance of less than $0.1 million related to the expected limitations on the utilization of assumed capital losses on certain investments that were recognized in prior years. Income taxes in 2016 included the partial reversal of a valuation allowance of $0.1 million related to the expected limitations on the utilization of assumed capital losses on certain investments. The Company had a valuation allowance for excess capital losses from investments2019 and other related items of $11.2 million at September 30, 2017. Tredegar continues to evaluate opportunities to utilize these loss carryforwards prior to their expiration at various dates in the future. As events and circumstances warrant, allowances will be reversed when it is more likely than not that future taxable income will exceed deductible amounts, thereby resulting in the realization of deferred tax assets.

2018, respectively.

Tredegar and its subsidiaries file income tax returns in the U.S., various states, and jurisdictions outside the U.S. With exceptions for some U.S. states and non-U.S. jurisdictions, Tredegar and its subsidiaries are no longer subject to U.S. federal, state or non-U.S. income tax examinations by tax authorities for years before 2014.

The Company includes tax-related interest and penalties in income tax expense. As of March 31, 2019, $0.2 million of interest and penalties are accrued as a tax liability. During the first quarter of 2019, no additional interest or penalties were recorded.

~~12.~~13

In 2011, Tredegar was notified by U.S. Customs and Border Protection (“U.S. Customs”) that certain film products exported by Terphane Ltda. to the U.S. since November 6, 2008 could be subject to duties associated with an antidumping duty order on imported PET films from Brazil. The Company contested the applicability of these antidumping duties to the films exported by Terphane Ltda., and it filed a request with the U.S. Department of Commerce (“Commerce”) for clarification about whether the film products at issue are within the scope of the antidumping duty order. On January 8, 2013, Commerce issued a scope ruling confirming that the films are not subject to the order, provided that Terphane Ltda. can establish to the satisfaction of U.S. Customs that the performance enhancing layer on those films is greater than 0.00001 inches thick. The films at issue are manufactured to specifications that exceed that threshold. On February 6, 2013, certain U.S. producers of PET film filed a summons with the U.S. Court of International Trade to appeal the scope ruling from Commerce. In December 2014, the U.S. International Trade Commission voted to revoke the anti-dumping duty order on imported PET films from Brazil. The revocation, as a result of the vote by the U.S. International Trade Commission, was effective as of November 2013. On February 20, 2015, certain U.S. producers of PET films filed a summons with the U.S. Court of International Trade to appeal the determination by the U.S. International Trade Commission. The Court granted a motion by the plaintiffs to stay the appeal of the revocation decision pending the resolution of the scope appeal. On June 8, 2017, the U.S. Court of International Trade remanded the scope determination to Commerce for re-consideration of certain scope issues. On October 20, 2017, Commerce filed its Remand Redetermination Results with the U.S. Court of International Trade, and again found that Terphane Ltda.’s films are outside of the scope of the antidumping duty order. Commerce’s decision will now be reviewed by the U.S. Court of International Trade.NEW ACCOUNTING PRONOUNCEMENTS

New accounting pronouncements adopted in 2019:

~~13.~~

~~In May 2014,~~

ASU 2016-02, LEASES (TOPIC 842)

In February 2016, the Financial Accounting Standards Board (“FASB”) and International Accounting Standards Board (“IASB”) issued their converged standard on revenue recognition. The revised revenue standard contains principles that an entity will apply to direct the measurement of revenue and timing of when it is recognized. The core principle of the guidance is that the recognition of revenue should depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods and services. To achieve that core principle, an entity will utilize a principle-based five-step approach model. The converged standard also includes more robust disclosure requirements which will require entities to provide sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In March 2016, amended guidance was issued regarding clarifying the implementation guidance on principal versus agent considerations and in April 2016, clarifying guidance was issued relating to identifying performance obligations and licensing implementation. The effective date of this revised standard is for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is permitted as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that annual reporting period. The converged standard can be adopted either retrospectively or through the use of a practical expedient. The Company has made substantial progress towards assessing the impact of this standard. The Company has a team in place to analyze the impact of the standard, and the related guidance issued, across all revenue streams to evaluate the impact of the new standard on revenue contracts. This includes reviewing current accounting policies and practices to identify potential differences that would result from applying the requirements under the new standard. In 2016, the Company made progress on contract reviews, which were completed and validated in the first half of 2017. The Company has also started evaluating the new disclosure requirements and expects to complete its evaluations of the impacts of the accounting and disclosure requirements on its business processes, controls and systems by the end of 2017. The Company is still evaluating the method of adoption of the standard, which will occur in the first quarter of 2018.

In July 2015, the FASB issued new guidance for the measurement of inventories. Inventories within the scope of the revised guidance should be measured at the lower of cost or net realizable value. The previous guidance dictated that inventory should be measured at the lower of cost or market, with market being either replacement cost, net realizable value or net realizable value less an approximation of normal profit margin. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventories measured using LIFO or the retail inventory method. The amendments should be applied prospectively, with early adoption permitted. The Company adopted the new guidance prospectively in the first quarter of 2017, and the adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

In January 2016, the FASB issued amended guidance associated with accounting for equity investments measured at fair value. The amended guidance requires all equity investments to be measured at fair value with changes in the fair

value recognized through net income (other than those accounted for under equity method of accounting or those that result in consolidation of the investee). The amended guidance also requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition, the amendments in this update eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities and the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet for public business entities. The amended guidance is effective for fiscal years beginning after December 31, 2017, including the interim periods within those fiscal years. The amendments should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values (including disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption of the update. Early adoption is permitted under limited, specific circumstances. The guidance is not expected to have a material impact on the Company’s consolidated financial statements.

~~In February 2016, the FASB~~ issued a revised standard on lease accounting. Lessees will need to recognize virtually all of their leases with a term longer than 12 months on the balance sheet, by recording a right-of-use (“ROU”) asset and lease liability. The revised standard requires additional analysis of the components of a transaction to determine if a ~~right-to-use~~right-of-use asset is embedded in the transaction that needs to be treated as a lease. Substantial additional disclosures are also required by the revised standard. The revised standard is effective for the Company for fiscal years beginning after December 31, 2018, including the interim periods within those fiscal years. ~~The revised standard should be applied on a~~A modified retrospective transition approach which requires a cumulative-effect adjustment to the opening balance of retained earnings on the effective date is required for leases existing at, or entered into after, the effective date, with ~~early adoption permitted.~~certain practical expedients available. The Company ~~is still assessing~~elected to use certain transition practical expedients that allow it to elect to not reassess: i) whether expired or existing contracts contain leases under the ~~impact~~new definition of ~~this revised standard on the Company’s consolidated financial statements.~~

~~In March 2016, the FASB issued amended guidance to simplify several aspects of the accounting~~a lease; ii) lease classification for ~~share-based payment transactions, including the income tax consequences, classification of awards as either equity~~expired or ~~liabilities,~~existing leases; and ~~classification on the statements of cash flows.~~iii) whether previously capitalized initial direct costs would qualify for capitalization under Topic 842. The Company adopted the new guidance in the first quarter of ~~2017. Under~~2019, electing the new guidance, excess tax benefits related to equity compensation were recognized in "Income taxes" in the consolidated statements of income rather than in "Common stock" in the consolidated balance sheets and were applied on a prospective basis. If these amounts had been included in the consolidated statements of income in previous years, net income would have been reduced by $0.5 million in the first nine months of 2016 (none in the third quarter of 2016) and $1.1 million for the full year 2016. Changes to the statements of cash flows related to the classification of excess tax benefits and employee taxes paid for share-based payment arrangements were implemented on amodified retrospective basis. In addition, the updated guidance allows the Company to make an accounting policy election related to how forfeitures will impact the recognition of stock compensation cost. Previously, entities were required to estimate forfeitures at the grant date, accounting for estimated forfeitures over the requisite service period. Under the updated guidance, the Company can choose, and the Company has elected, to account for forfeitures as they occur.transition approach. The ~~Company adopted the updated guidance in the first quarter of 2017, and the~~ adoption ~~of this guidance~~ did not have a material ~~impact~~effect on the Company’s consolidated financial statements.

~~In October 2016, the FASB issued guidance that requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs.~~ The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, and should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings at the beginning period of adoption. Early adoption is permitted in the first interim period of an annual reporting period for which financial statements have not been issued. The Company is currently evaluating themost significant impact of ~~adopting this guidance on the Company’s consolidated financial statements.~~

In January 2017, the FASB issued guidance to assist with evaluating when a set of transferred assets and activities (collectively, the "set") is a business and provides a screen to determine when such a set is not a business. Under the new ~~guidance, when substantially all~~standard was the recognition of ~~the fair value~~new ROU assets of gross assets acquired (or disposed of) is concentrated in a single identifiable asset, or group of similar assets, the assets acquired would not represent a business. Also, to be considered a business, an acquisition would have to include an inputapproximately $21 million and a substantive process that together significantly contribute to the ability to produce outputs. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, and should be applied on a prospective basis to any transactions occurring within the period of adoption. Early adoption is permitted for interim or annual periods in which the financial statements have not been issued. The Company has not elected early adoption of this guidance and will apply the new guidance beginning in the first quarter of 2018.

~~In January 2017, the FASB issued amended guidance that eliminates the requirement to determine the fair value of individual assets and~~lease liabilities of a reporting unit to measure goodwill impairment. Under the amendments in the new guidance, goodwill impairment testing will be performed by comparing the fair value of the reporting unit with its carrying amountapproximately $22 million for real estate, office equipment and recognizing an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The new standard is effective for annual and interim goodwill impairment tests in fiscal years beginning after December 15, 2019, and should be applied on a prospective basis. Early adoption is permitted for annual or interim goodwill impairment testing performed after January 1, 2017. The Company is currently evaluating the impact of adopting this guidance on the Company’s consolidated financial statements.vehicle operating leases.

In March 2017, the FASB issued final guidance on the presentation of net periodic pension and postretirement benefit cost (net benefit cost). Currently, net benefit cost is reported as an employee cost within operating income. This new guidance requires the bifurcation of net periodic pension and postretirement benefit costs. Service cost will be part of operating income (and is the only piece eligible to be capitalized). All other components will be shown outside of operations. The new standard is effective for annual and interim periods in fiscal years beginning after December 15, 2017, and should be applied on a retrospective basis, except for the amendments related to capitalization of benefit cost, which should be applied on a prospective basis. Early adoption is permitted only in the first quarter of the reporting year. The Company is currently evaluating the impact of adopting this guidance on the Company’s consolidated financial statements.ASU 2017-12, DERIVATIVES AND HEDGING (TOPIC 815)

In August 2017, the FASB issued amended guidance on the accounting for hedging activities. The amended guidance makes more hedging strategies qualify for hedge accounting. After initial qualification, the amended guidance permits a qualitative effectiveness assessment for certain hedges instead of a quantitative test, if the company can reasonably support an expectation of effectiveness throughout the term of the hedge. The amended guidance is effective for annual and interim periods beginning after January 1, 2019, but may be adopted immediately. The ~~adoption should be on a cumulative effect basis~~Company adopted the amended guidance in the first quarter of 2019 and ~~applied prospectively. The Company is currently evaluating the~~there was no impact ~~of adopting this guidance~~from adoption on the Company’s consolidated financial statements.

ASU 2018-2, REPORTING COMPREHENSIVE INCOME (TOPIC 220)

In February 2018, the FASB issued ASU 2018-2 to provide entities an option to reclassify certain “stranded tax effects” resulting from the recent U.S. tax reform from accumulated other comprehensive income (AOCI) to retained earnings. This new standard takes effect for all entities in fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company has elected to not reclassify the income tax effects resulting from tax reform from AOCI to retained earnings.


14	LEASES

Tredegar has various lease agreements with terms up to 12 years, including leases of real estate, office equipment and vehicles. Some leases include options to purchase, terminate or extend for one or more years. These options are included in the lease term when it is reasonably certain that the option will be exercised.

At inception, the Company determines if an arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. The Company has elected to not record short-term leases with an original lease term of one year or less in the consolidated balance sheet. To the extent such leases contain renewal options that the Company intends to exercise, the related ROU asset and lease liability are included in the consolidated balance sheet. Some of the Company’s lease arrangements contain lease components (e.g. minimum rent payments) and non-lease components (e.g. maintenance, labor charges, etc.). The Company generally accounts for the lease and non-lease components as a single lease component.

Certain of the Company’s lease agreements include rental payments that are adjusted periodically for an index or rate. The leases are initially measured using the projected payments adjusted for the index or rate in effect at the commencement date. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Operating Leases

Operating leases are included in “Right-of-use lease assets”, “Lease liabilities - short-term” and “Lease liabilities - long-term” on the consolidated balance sheets. These assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term using the Company’s secured incremental borrowing rates, adjusted for term and geographic location using country-based swap rates. From reviewing the lease contracts in the implementation effort, the Company found no instance where it could readily determine the rate implicit in the lease.

Lease expense for operating leases is recognized on a straight-line basis over the lease term. Variable lease expense is recognized in the period in which the obligation for those payments is incurred. Depending upon the specific use of the ROU asset, lease expense is included in the “Cost of goods sold”, “Freight”, “Selling, general and administrative”, and “Research and development” line items on the consolidated statements of income. Lease income is not material to the results of operations for the quarter ended March 31, 2019.

The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s operating leases as of March 31, 2019.



(In thousands)		As of March 31, 2019
Maturity of Lease Liabilities	Future Lease Payments
2019 (remaining)		2,555
2020		3,379
2021		3,353
2022		2,451
2023		2,344
Thereafter		12,132
Total undiscounted operating lease payments		26,214
Less: Imputed interest		4,615
Present value of operating lease liabilities		21,599

Balance Sheet Classification
Lease liabilities, short-term		2,526
Lease liabilities, long-term		19,073
Total operating lease liabilities		21,599

Other Information:
Weighted-average remaining lease term for operating leases		9 Years
Weighted-average discount rate for operating leases		4.35	%

Rental expense was $5.2 million in 2018. Rental commitments under all noncancellable leases as of December 31, 2018, were as follows:



(In thousands)
2019	$	4,445
2020	4,007
2021	3,591
2022	2,391
2023	1,245
Remainder	2,630
Total minimum lease payments	$	18,309

Cash Flows

An initial right-of-use asset of $21 million was recognized as a non-cash asset addition and an initial lease liability of $22 million was recognized as a non-cash liability addition with the adoption of the new lease accounting standard.

Operating Lease Costs

Operating lease costs were $1.4 million during the first quarter of 2019. These costs are primarily related to long-term operating leases, but also include amounts for variable leases and short-term leases.


Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-looking and Cautionary Statements

Some of the information contained in this Quarterly Report on Form 10-Q (“Form 10-Q”) may constitute “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. When using the words “believe,” “estimate,” “anticipate,” “expect,” “project,” “plan,” “likely,” “may” and similar expressions, Tredegar does so to identify forward-looking statements. Such statements are based on then current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. It is possible that actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these forward-looking statements. Factors that could cause actual results to differ from expectations include, without limitation, the following:

loss or gain of sales to significant customers on which our business is highly dependent;

ability to achieve sales to new customers to replace lost business;

ability to develop, efficiently manufacture and deliver new products at competitive prices;

failure of our customers to achieve success or maintain market share;

failure to protect our intellectual property rights;

risks of doing business in countries outside the U.S. that affect our substantial international operations;

political, economic, and regulatory factors concerning our products;

uncertain economic conditions in countries in which we do business;

competition from other manufacturers, including manufacturers in lower-cost countries and manufacturers benefiting from government subsidies;

impact of fluctuations in foreign exchange rates;

a change in the amount of our underfunded defined benefit (pension) plan liability;

an increase in the operating costs incurred by our operating companies, including, for example, the cost of raw materials and energy;

inability to successfully identify, complete or integrate strategic acquisitions; failure to realize the expected benefits of such acquisitions; and assumption of unanticipated risks in such acquisitions;

disruption to our manufacturing facilities;

~~occurrence or threat of extraordinary events, including natural disasters and terrorist attacks;~~

an information technology system failure or breach;

volatility and uncertainty of the valuation of our ~~cost-basis~~ investment in kaléo;

~~possibility~~the impact of the imposition of tariffs and sanctions on imported aluminum ~~billet~~ingot used in our aluminum extrusions;

the impact of new tariffs or duties imposed as a result of rising trade tensions between the U.S. and other countries;

failure to establish and maintain effective internal control over financial reporting;

the termination of anti-dumping duties on products imported to Brazil that compete with products produced by Flexible Packaging;

and the other factors discussed in the reports Tredegar files with or furnishes to the Securities and Exchange Commission ~~(“the SEC”~~(the “SEC”) from time to time, including the risks and important factors set forth in additional detail in ~~“Risk Factors” Part II, Item 5 of the Form 10-Q and in~~ Part I, Item 1A of Tredegar’s ~~2016~~2018 Annual Report on Form 10-K (the ~~“2016~~“2018 Form 10-K”) ~~filed with the SEC.~~and Part II, Item 5 of this Form 10-Q. Readers are urged to review and consider carefully the disclosures Tredegar makes in its filings with the SEC, including the ~~2016~~2018 Form 10-K.

Tredegar does not undertake, and expressly disclaims any duty, to update any forward-looking statement to reflect any change in management’s expectations or any change in conditions, assumptions or circumstances on which such statements are based, except as required by applicable law.

References herein to “Tredegar,” “the Company,” “we,” “us” and “our” are to Tredegar Corporation and its subsidiaries, collectively, unless the context otherwise indicates or requires.

Executive Summary

Tredegar is a manufacturer of polyethylene plastic films through its PE Films segment, polyester films through its Flexible Packaging Films segment and aluminum extrusions through its Aluminum Extrusions segment. PE Films is ~~comprised~~composed of personal care materials, surface protection films, polyethylene overwrap films and films for other markets. Flexible Packaging Films produces polyester-based films for use in packaging applications that have specialized properties, such as heat resistance, strength, barrier protection and the ability to accept high-quality print graphics. Aluminum Extrusions produces high-quality, soft-alloy and medium-strength aluminum extrusions primarily for building and construction, automotive, consumer durables, machinery and equipment, electrical and distribution markets.

~~Third-quarter 2017~~First quarter 2019 net income was ~~$8.3~~$19.8 million ($~~0.25~~0.60 per share) compared with net income of ~~$12.0~~$18.2 million ($~~0.37 per share) in the third quarter of 2016. Net income was $56.2 million ($1.70~~0.55 per share) in the first ~~nine months~~quarter of ~~2017 compared with $22.7~~2018. Net income for the first quarter of 2019 had an after-tax gain on the Company’s investment in Kaleo, Inc. (“kaléo”) of $14.3 million ($~~0.69~~0.43 per share), which is accounted for under the fair value method, that includes an after-tax dividend of $14.7 million ($0.44 per share) ~~in the first nine months of 2016. Losses~~from kaléo (see Note 7 for more details). Other losses related to plant shutdowns, asset impairments, restructurings and other items are described in Note 3. 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 of each segment for purposes of assessing performance. See the table in Note 1011 for a presentation of Tredegar’s net sales and operating profit by segment for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~2016.~~

On February 15, 2017, Bonnell Aluminum acquired Futura Industries Corporation (“Futura”) on a net debt-free basis for approximately $92 million. The amount actually funded in cash at the transaction date was approximately $87.0 million, which was net of preliminary closing adjustments for working capital and seller transaction-related obligations assumed and subsequently paid by Bonnell Aluminum. In addition, the Company expects to be refunded $5 million in the first half of 2018 since Futura is not expected to meet certain performance requirements for the 2017 fiscal year. The acquisition, which was funded using Tredegar’s secured revolving credit agreement, is being treated as an asset purchase for U.S. federal income tax purposes. See Note 2 for more details on the acquisition of Futura.2018.

PE Films

A summary of operating results from ongoing operations for PE Films is provided below:


	Three Months Ended				Favorable/ (Unfavorable) % Change		Nine Months Ended						Favorable/ (Unfavorable) % Change		Three Months Ended								Favorable/ (Unfavorable) % Change
(In Thousands, Except Percentages)	September 30,						September 30,
(In Thousands, Except Percentages)	2017		2016					2017		2016
(In thousands, Except Percentages)														March 31,								Favorable/ (Unfavorable) % Change
(In thousands, Except Percentages)														2019				2018
Sales volume (lbs)	34,701		33,754		2.8	%		103,923			106,214			(2.2	)%	25,846				34,823
Net sales	$	89,723	$	82,179	9.2	%		$	265,773		$	251,473		5.7	%	$	66,779			$	93,249			(28.4	)%
Operating profit from ongoing operations	$	11,251	$	9,011	24.9	%	$	30,965		$	23,564		31.4	%	$	2,951			$	14,034			(79.0	)%

~~Third-Quarter 2017~~

First Quarter 2019 Results vs. ~~Third-Quarter 2016~~First Quarter 2018 Results

Net sales (sales less freight) in the ~~third~~first quarter of ~~2017 increased~~2019 decreased by ~~$7.5~~$26.5 million versus ~~2016 primarily due to:~~

~~An increase in surface protection films revenue ($1.9 million)~~2018 primarily due to ~~continued strong demand~~lower volume in Personal Care and Surface Protection. The volume decline in Personal Care was primarily related to lower sales of topsheet materials used in feminine hygiene products, including a large portion associated with the previously disclosed customer product transition discussed below. Volume for elastics products in Personal Care increased slightly year-over-year.

Net sales in Surface Protection declined in the ~~LCD market; and~~

~~Higher~~first quarter of 2019 versus particularly strong sales in the first quarter of 2018, which was a continuation of a very strong market in the second half of 2017. The Company believes that lower sales volume and ~~favorable~~an unfavorable sales mix ~~for elastics~~resulted from a customer’s inventory build in the first half of 2018 and a slowdown in the mobile phone market in the current quarter. The Company estimates that the previously disclosed customer product transition to alternative processes or materials, ~~acquisition distribution layers materials and overwrap products~~which is discussed further in ~~personal care materials ($5.7 million).~~ the subsection below, had little impact on sales as lower volume was offset by volume-based higher selling prices.

Operating profit from ongoing operations in the ~~third~~first quarter of ~~2017 increased~~2019 decreased by ~~$2.2~~$11.1 million versus the ~~third~~first quarter of ~~2016~~2018 primarily due to:

~~Higher~~Lower contribution to profits from ~~surface protection films~~Personal Care primarily due to lower volume and unfavorable product mix ($5.9 million), unfavorable pricing ($0.9 million) and unfavorable production cost variances ($1.4 million), partially offset by the net favorable impact of the timing of resin cost passthroughs ($2.0 million), ~~primarily due to higher volume~~lower selling, general and ~~production efficiencies;~~administrative costs ($1.1 million) and favorable foreign exchange impact ($0.2 million); and

~~Higher~~Lower contribution to profits from ~~personal care materials,~~Surface Protection, primarily due to lower volume, which was partially offset by volume-based higher ~~volume~~selling prices (net unfavorable impact of $4.5 million), and ~~favorable~~unfavorable mix ($~~1.8 million);~~

~~Higher selling and general expenses ($1.8~~1.2 million), higher research and development costs ($0.3 million) and obsolete inventory expense ($0.2 million).

In June 2018, the Company announced plans to close its facility in Shanghai, China, which primarily produced topsheet films used as components for personal care products. Production ceased at this plant during the fourth quarter of 2018. Net annual cash savings from consolidating operations is projected at $1.7 million, with realized cost savings in the first quarter of 2019 of $0.4 million (reflected in the analysis above). Additional information on costs associated with ~~hiring~~exit and ~~employee incentive~~disposal activities (currently estimated at $5.0 million) and other details are available in Note 3 in the Notes to Financial Statements.

Customer Product Transitions in Personal Care and Surface Protection

During October 2018, the Personal Care component of PE Films completed negotiations with its customer regarding a previously disclosed significant product transition. The total annual sales that will be adversely impacted by this product transition is approximately $70 million. During 2019, the Company expects sales for the product of $30 to $35 million with the potential for no sales thereafter. Any actions that the Company takes to reduce fixed costs to partially mitigate the decline in variable contribution that will accompany the decline in sales will depend on the level of success that Personal Care has with replacing the lost business with new products and ~~higher fixed plant costs related to higher~~business.

The Personal Care component of PE Films had operating profit from ongoing operations plus depreciation and ~~other costs ($0.6 million); and~~

~~Realized cost savings~~amortization of $0.8 million ~~associated with the previously announced project to consolidate domestic manufacturing facilities in PE Films (“North American facility consolidation”).~~

~~The North American facility consolidation was completed~~ in the ~~third~~first quarter of ~~2017. Total pretax cash expenditures for this multi-year project were $15.5 million, which includes $11.2 million of capital expenditures.~~

The personal care business is currently evaluating the financial impact of the supply-chain effects of the major storms experienced in Texas and Florida during the third quarter of 2017. Shortages of raw materials and higher distribution costs due to damage to resin supplier infrastructure could have a negative effect on operating profit of up to $12019 versus $3.1 million in the fourth ~~quarter.~~quarter of 2018. As a result of the decline in sales from the significant product transition discussed above, the Company expects operating profit from ongoing operations plus depreciation and amortization for this component of approximately negative $0.5 million during the first half of 2019. Personal Care projects its operating profit from ongoing operations plus depreciation and amortization to be positive in the second half of 2019 assuming productivity improvement and sales growth targets are achieved.

The ~~surface protection operating segment~~Surface Protection component of ~~the~~ PE Films ~~reporting segment~~ supports manufacturers of optical and other specialty substrates used in flat panel display products. These films are primarily used by customers to protect components of displays in the manufacturing and transportation process and then discarded.

AsThe Company previously ~~discussed,~~reported the ~~Company believes that over the next few years, there is an increased~~ risk that a portion of its film products used in surface protection applications ~~will~~could be made obsolete by possible future customer product transitions to less costly alternative processes or materials. These transitions principally relate to one customer. The Company previously believed the transitions could possibly be fully implemented by the fourth quarter of 2019; however, the transitions by the customer continue to encounter delays. If fully implemented, the Company estimates ~~on a preliminary basis~~ that the ~~annual~~annualized adverse impact on ~~ongoing~~future operating profit from this customer ~~shifts to alternative processes or materials in surface protection is in~~shift would be approximately $11 million. To offset the range of up to $5 to $10 million. Given the technological and commercial complexity involved in bringing these alternative processes or materials to market, the Company is very uncertain as to the timing and ultimate amount of the possible transitions. In response,potential adverse impact, the Company is aggressively pursuing and making progress on new surface protection products, applications, markets and customers.

The Company continues to anticipate a significant product transition after 2018 in the personal care operating segment of the PE Films reporting segment. The Company currently estimates that this will adversely impact the annual sales of the

business unit by $70 million sometime between 2019 and 2021. The Company has been increasing its R&D spending (an increase of $7 million annually versus 2014), expects to invest capital, and is accelerating sales and marketing efforts to capture growth and diversify its customer base and product offerings in personal care products. The overall timing and net change in personal care’s revenues and profits and capital expenditures needed to support growth during this transition period are uncertain at this time.

~~Year-To-Date 2017 Results vs. Year-To-Date 2016 Results~~

~~Net sales (sales less freight) in the first nine months of 2017 increased by $14.3 million versus 2016 primarily due to:~~

~~Higher sales from surface protection films ($9.0 million), primarily due to higher volume and a favorable sales mix;~~

Favorable sales mix for acquisition distribution layer materials, elastics materials and overwrap products, and higher volume for acquisition distribution layer materials in personal care materials ($9.4 million), partially offset by volume reductions from the winding down of known lost business in personal care that was substantially completed by the end of 2016 ($5.4 million); and

~~Higher volume and improved pricing related to other PE Films products ($1.3 million).~~

~~Operating profit from ongoing operations in the first nine months of 2017 increased by $7.4 million versus the third quarter of 2016 primarily due to:~~

~~Higher contribution to profits from surface protection films ($8.0 million), primarily due to higher volume, a favorable sales mix, and production efficiencies;~~

Higher contribution to profits from personal care materials, primarily due to improved volume and inflation-driven price increases ($4.2 million), partially offset by known lost business ($2.2 million);

~~Lower contribution to profits from overwrap products ($0.7 million); and~~

Higher net general, selling and plant expenses ($3.6 million), primarily associated with strategic hires and an increase in employee incentive costs, partially offset by realized cost savings of $1.9 million associated with the North American facility consolidation.

Capital Expenditures, Depreciation & Amortization

Capital expenditures in PE Films were ~~$12.9~~$6.7 million in the first ~~nine~~three months of ~~2017~~2019 compared to ~~$20.0~~$1.9 million in the first ~~nine~~three months of ~~2016. PE Films currently estimates that total~~2018. The Company’s latest estimate for 2019 includes projected capital expenditures of $33 million including: $12 million of a total $25 million needed to complete the North American capacity expansion for elastics products in ~~2017 will be $18~~Personal Care ($5 million ~~including approximately~~spent in the first quarter of 2019); $4 million for a new scale-up line in Surface Protection to improve development and speed to market for new products; $5 million for other development projects; and $10 million for ~~routine~~ capital expenditures required to support continuity of current operations. ~~Capital spending for strategic projects in 2017 includes capacity expansion for elastics and acquisition distribution layer materials, in addition to other growth and strategic projects.~~

Depreciation expense was ~~$10.7~~$3.6 million in the first ~~nine~~three months of ~~2017~~2019 and ~~$10.0~~$3.8 million in the first ~~nine~~three months of ~~2016.~~2018. Depreciation expense is projected to be ~~$14~~$15 million in ~~2017.~~2019.

Flexible Packaging Films

A summary of operating results from ongoing operations for Flexible Packaging Films, which is also referred to as Terphane, is provided below:


	Three Months Ended					Favorable/ (Unfavorable) % Change		Nine Months Ended						Favorable/ (Unfavorable) % Change		Three Months Ended								Favorable/ (Unfavorable) % Change
(In Thousands, Except Percentages)	September 30,							September 30,
(In Thousands, Except Percentages)	2017			2016					2017		2016
(In thousands, Except Percentages)															March 31,								Favorable/ (Unfavorable) % Change
(In thousands, Except Percentages)															2019				2018
Sales volume (lbs)	21,640			23,204		(6.7	)%		65,668			66,222			(0.8	)%	25,462				23,318
Net sales	$	26,628		$	27,303	(2.5	)%		$	79,925		$	80,888		(1.2	)%	$	33,619			$	28,437			18.2	%
Operating profit (loss) from ongoing operations	$	(1,074	)	$	93	NA		$	(3,392	)	$	1,184		NA		$	2,859			$	1,715			66.7	%

~~Third-Quarter 2017~~

First Quarter 2019 Results vs. ~~Third-Quarter 2016~~First Quarter 2018 Results

~~Sales volume decreased by 6.7%~~Net sales increased in the ~~third~~first quarter of ~~2017~~2019 compared with the ~~third~~first quarter of ~~2016~~2018 due to ~~lower~~higher shipments resulting from improved demand and increased selling prices associated with the pass-through of higher resin costs. The higher sales volume was associated with increased production ~~volume. Lower~~capacity for Terphane’s Brazilian operations resulting from the re-start of a previously idled production line in July and August 2017 versus the same period in 2016 was due primarily to numerous intermittent power outages at Terphane’s Cabo, Brazil plant. Net sales in the third quarter of 2017 decreased 2.5% versus the third quarter of 2016 due to the low production, partially offset by a favorable sales mix.June 2018.

Terphane’s operating results from ongoing operations in the ~~third~~first quarter of ~~2017 declined~~2019 increased by ~~$1.2~~$1.1 million versus the ~~third~~first quarter of ~~2016~~2018 primarily due to:

The benefit from higher volume ($1.6 million) was fully offset by higher production, operating and selling, general and administrative costs;

~~Inefficiencies from lower-than-planned production, as noted above, in the third quarter~~Favorable foreign currency translation of ~~2017, partially~~Real-denominated operating costs ($1.1 million), which was offset by a ~~favorable sales mix (net unfavorable impact of $0.7 million);~~$0.1 million loss on foreign currency forward contracts that partially hedged Real-denominated operating costs; and

~~Foreign~~Benefit from net foreign currency transaction gain of $0.1 million (minimal gains in 2019 versus losses of ~~$0.3~~$0.1 million in ~~the third quarter of 2017 versus $0.1 million of gains in the third quarter of 2016, associated with U.S. Dollar denominated export sales in Brazil.~~2018).

~~The~~Terphane’s quarterly financial results have been volatile, and the Company expects ~~Terphane’s future operating results to continue to be volatile~~continued uncertainty and volatility until industry capacity utilization and the competitive dynamics in Latin America improve. Additional capacity from a competitor in Latin America came on-line late in the third quarter of 2017. A non-cash impairment charge associated with Terphane’s trade name intangibles not subject to amortization (balance of $6.5 million at September 30, 2017) and depreciable and amortizable assets could be triggered depending on ~~the market's response to this increased capacity~~.

~~Year-To-Date 2017 Results vs. Year-To-Date 2016 Results~~

Sales volume declined by 0.8% in the first nine months of 2017 compared with the first nine months of 2016 partially due to lower volume in its markets outside of Brazil in the second quarter of 2017 and lower production resulting from power outages at Terphane’s Cabo, Brazil plant in the third quarter of 2017. Net sales in the first nine months of 2017 decreased 1.2% versus the first nine months of 2016 largely due to production issues in the third quarter, partially offset by a favorable sales mix.

Terphane had an operating loss from ongoing operations in the first nine months of 2017 of $3.4 million versus an operating profit from ongoing operations in the first nine months of 2016 of $1.2 million. The resulting unfavorable change of $4.6 million for the period was primarily due to:

~~Inefficiencies from lower-than-planned production in the first and third quarters of 2017, partially offset by a favorable sales mix (net unfavorable impact of $1.0 million);~~

Foreign currency transaction losses of $0.4 million in the first nine months of 2017 versus $3.2 million of losses in the first nine months of 2016, associated with U.S. Dollar denominated export sales in Brazil;

Higher raw material costs of $2.1 million in the first nine months of 2017 that could not be passed through to customers due to competitive pressures versus a benefit of $1.2 million in the first nine months of 2016 from lower raw material costs; and

Higher costs and expenses of $3.1 million primarily related to the adverse impact of high inflation in Brazil and the appreciation by approximately 12% of the average exchange rate for the Brazilian Real relative to the U.S. Dollar.

Capital Expenditures, Depreciation & Amortization

Capital expenditures in Terphane were ~~$2.3~~$1.7 million in the first ~~nine~~three months of ~~2017~~2019 compared to ~~$2.0~~$0.6 million in the first ~~nine~~three months of ~~2016. Terphane currently estimates that total capital~~2018. Capital expenditures are projected to be $12 million in ~~2017 will be $4~~2019, including $7 million ~~all~~ for ~~routine~~new capacity for value-added products and productivity projects and $5 million for capital expenditures required to support continuity of current operations. Depreciation expense was ~~$5.5~~$0.2 million in the first ~~nine~~three months of ~~2017~~2019 and ~~$4.9~~$0.3 million in the first ~~nine~~three months of ~~2016.~~2018. Depreciation expense is projected to be $7$1.0 million in ~~2017.~~2019. Amortization expense was ~~$2.2~~$0.1 million in the first ~~nine~~three months of ~~2017~~2019 and ~~$2.1~~$0.1 million in the first ~~nine~~three months of ~~2016,~~2018, and is projected to be $3$0.5 million in ~~2017.~~2019.

Aluminum Extrusions

A summary of operating results from ongoing operations for Aluminum Extrusions is provided below:

Three Months Ended Favorable/
(Unfavorable)
% Change Nine Months Ended Favorable/
(Unfavorable)
% Change
(In Thousands, Except Percentages) September 30, September 30,
2017 2016 2017 2016
Sales volume (lbs) * 45,241
43,549
3.9 % 132,598
129,872
2.1 %
Net sales $ 122,149
$ 91,067
34.1 % $ 344,956
$ 269,987
27.8 %
Operating profit from ongoing operations $ 12,601
$ 9,427
33.7 % $ 34,201
$ 27,786
23.1 %
* Excludes sales volume associated with Futura, acquired on February 15, 2017.



	Three Months Ended				Favorable/ (Unfavorable) % Change
(In thousands, Except Percentages)	March 31,
(In thousands, Except Percentages)	2019		2018
Sales volume (lbs)	53,616		51,503		4.1	%
Net sales	$	139,047	$	128,235	8.4	%
Operating profit from ongoing operations	$	12,085	$	10,199	18.5	%

~~Third-Quarter 2017~~First Quarter 2019 Results vs. ~~Third-Quarter 2016~~First Quarter 2018 Results

Net sales in the ~~third~~first quarter of ~~2017~~2019 increased versus ~~2016~~2018 primarily ~~due to the addition of Futura. Futura contributed net sales of $20.3 million in the third quarter of 2017. Excluding the impact of Futura, net sales improved~~ due to higher sales volume and an increase in average selling prices ~~primarily due~~ to cover higher operating costs, partially offset by the pass-through ~~to customers~~ of ~~higher market-driven raw material~~lower metal costs.

~~Volume on an organic basis (which excludes the impact of the Futura acquisition)~~Sales volume in the ~~third~~first quarter of ~~2017~~2019 increased by ~~3.9%~~4.1% versus ~~2016~~2018 mainly due to higher volume in ~~the~~ building & construction and ~~specialty~~automotive markets. ~~Higher average net selling prices, primarily attributed to an increase in aluminum market prices, had a favorable impact on net sales of $7.8 million.~~

Operating profit from ongoing operations in the third quarter of 2017 increased by $3.2 million in comparison to the third quarter of 2016. Excluding the favorable profit impact of Futura ($2.4 million), operating profit from ongoing operations increased $0.8 million. Higher volume and inflation-related sales prices ($2.2 million) were partially offset by increased operating costs, including utilities and employee-related expenses and higher depreciation ($0.7 million). In addition, the startup of the new extrusion line at the Niles, Michigan plant, resulted in disruptions to normal plant production and had an estimated adverse impact on profits of $0.7 million.

~~Year-To-Date 2017 Results vs. Year-To-Date 2016 Results~~

Net sales in the first nine months of 2017 increased $75.0 million versus 2016 primarily due to the addition of Futura. Futura has contributed net sales of $49.8 million since its acquisition in the first quarter of 2017. Excluding the impact of Futura, net sales were higher primarily as a result of an increase in average selling prices due to the pass-through to customers of higher market-driven raw material costs and higher volume. Higher average net selling prices, primarily attributed to an increase in aluminum market prices, had a favorable impact on net sales of $20.5 million.

Volume on an organic basis in the first nine months of 2017 increased by 2.1% versus 2016. Higher volume in the specialty and automotive markets was partially offset by a decrease in the building & construction market. The Company believes that lower year-to-date sales volume in the building & construction market has resulted primarily from downtime in the first quarter associated with upgrades made to a paint line that serves this market and the timing of customer orders. Overall booking and backlog trends continue to increase compared with the prior year.

Operating profit from ongoing operations in the first ~~nine months~~quarter of ~~2017~~2019 increased by ~~$6.4~~$1.9 million ~~versus~~in comparison to the first ~~nine months~~quarter of ~~2016. Excluding the favorable profit impact of Futura ($6.2 million), operating profit from ongoing operations increased $0.2 million, primarily~~2018, due to ~~higher~~the following:

Higher sales volume and ~~higher inflation-related sales prices,~~pricing partially offset by higher ~~depreciation~~freight and ~~disruptions~~die costs ($8.5 million net impact); and

Higher expenses for labor primarily related to ~~normal plant production~~headcount for manufacturing operations associated with ~~the startup of the new extrusion line~~anticipated demand ($3.8 million), higher supplies and maintenance costs ($2.2 million) and higher selling, general and administrative expenses ($0.6 million).

The operating profit at the facility in Niles, Michigan ~~plant.~~

~~Cast House Explosion~~

~~On June 29, 2016, the Bonnell Aluminum plant in Newnan, Georgia suffered an explosion in the casting department, causing significant damage~~was approximately $1 million below expectations and continues to the cast house and related equipment. The Company completed the process of replacing the damaged casting equipment, and the cast house resumed production in the third quarter of 2017. Bonnell Aluminum has various forms of insurance to cover losses associated with this type of event.

During the first nine months of 2017, Bonnell incurred $5.6 million of additional operational expenses as a result of the explosion, and $5.5 million of this amount has been fully offset by anticipated insurance recoveries. Additionally, $0.6 million of additional operational expenses incurred in 2016 that were previously considered not reasonably assured of being covered by insurance recoveries are now expected to be recovered and are included as an offset to expenses in “Plant shutdowns, asset impairments, restructurings and other” in the Net Sales and Operating Profit by Segment and in “Cost of goods sold” in the Consolidated Statements of Income. In the fourth quarter of 2017, all remaining insurance claims associated with this matter are expected to be settled, which will likely trigger a gain associated with the involuntary conversion of the old cast house. suffer from inefficiencies.

Capital Expenditures, Depreciation & Amortization

Capital expenditures in Aluminum Extrusions were ~~$21.9 million in the~~ ~~first nine months~~ ~~of 2017 (including $1.3 million associated with Futura since it was acquired), compared to $8.5~~$4.4 million in the first ~~nine~~three months of ~~2016. Net capital~~2019 compared to $2.5 million in the first three months of 2018. Capital expenditures are projected to ~~total $23~~be $18 million in ~~2017 (net of $5~~2019, including approximately $8 million ~~of expected insurance recoveries), including $9 million used to complete the extrusions capacity expansion project~~for infrastructure upgrades at the ~~Niles, Michigan plant, expenditures to repair the damage caused by the cast house explosion net of related insurance recoveries (facility upgrades of~~Carthage, Tennessee facility and other productivity improvements, and approximately $2$10 million ~~will not be covered by insurance reimbursements), $5 million for routine items~~ required to support ~~legacy operations, and $2 million to support the operations~~continuity of ~~Futura.~~current operations. Depreciation expense was ~~$8.7~~$3.3 million in the first ~~nine~~three months of ~~2017, which included $2.1 million from the addition of Futura,~~2019 compared to ~~$6.1~~$3.3 million in the first ~~nine~~three months of ~~2016,~~2018, and is projected to be ~~approximately $12~~$13 million in ~~2017.~~2019. Amortization expense was ~~$2.2 million in the first nine months of 2017, which included $1.5 million from the addition of Futura, and~~ $0.8 million in the first ~~nine~~three months of ~~2016,~~2019 and $0.9 million in the first three months of 2018, and is projected to be ~~approximately~~ $3 million in ~~2017.~~2019.

Corporate Expenses, Interest and Taxes

Pension expense was ~~$7.6~~$2.4 million in the first ~~nine~~three months of ~~2017, a favorable change of $0.4~~2019, versus $2.6 million ~~from~~ in the first ~~nine~~three months of ~~2016. Most of the~~2018. The impact on earnings from pension expense is reflected in “Corporate expenses, net” in the net sales and operating profit by segment table in Note ~~10.~~11. Pension expense is projected to be approximately ~~$10.1~~$9.7 million in ~~2017.~~2019. Corporate expenses, net, ~~decreased~~increased in the first ~~nine~~three months of ~~2017~~2019 versus ~~2016~~2018 primarily due to higher stock-based employee benefit costs, consulting fees related to new lease accounting and software implementation and identification and remediation of previously disclosed material weaknesses in the Company’s internal control over financial reporting.

Interest expense was $1.2 million in the first three months of 2019 in comparison to $1.6 million in the first three months of 2018, primarily due to lower ~~pension expense and stock-based employee benefit costs, partially offset by higher incentive accruals.~~

~~Interest expense was $4.6 million in the first nine months of 2017 in comparison to $2.9 million in the first nine months of 2016, primarily due to higher~~ average debt levels from the acquisition of Futura. Interest expense in 2016 included the write off of $0.2 million in unamortized loan fees from the credit facility that was refinanced in the first quarter of 2016.levels.

The effective tax rate used to compute income taxes in the first ~~nine~~three months of ~~2017~~2019 was ~~14.7%~~16.9% compared to ~~7.6%~~22.5% in the first ~~nine~~three months of ~~2016.~~2018. The ~~significant~~ differences between the U.S. federal statutory rate and the effective tax rate for the first ~~nine~~three months is shown in the table provided in Note ~~11.~~12.

Net capitalization and other credit measures are provided in Liquidity and Capital Resources.

Critical Accounting Policies

In the ordinary course of business, the Company makes 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 in the United States (“GAAP”). The Company believes the estimates, assumptions and judgments described in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” of the ~~2016~~2018 Form 10-K have the greatest potential impact on our financial statements, so Tredegar considers these to be its critical accounting policies. These policies include accounting for impairment of long-lived assets and goodwill, investment accounted for under the fair value method, pension benefits and income taxes. 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. Actual results could differ significantly from those estimates under different assumptions and conditions. The Company believes the consistent application of these policies enables it to provide readers of the financial statements with useful and reliable information about our operating results and financial condition. Since December 31, ~~2016,~~2018, there have been no changes in these policies that have had a material impact on results of operations or financial position. For more information on new accounting pronouncements, see Note 13.

Results of Operations

~~Third~~First Quarter of ~~2017~~2019 Compared with the ~~Third~~First Quarter of ~~2016~~2018

Overall, sales in the ~~third~~first quarter of ~~2017 increased~~2019 decreased by ~~19.0%~~4.0% compared with the ~~third~~first quarter of ~~2016.~~2018. Net sales ~~increased 9.2%~~decreased 28.4% in PE ~~Films~~Films. Personal Care was down primarily due to sales of topsheet materials, including a ~~market-driven increase~~large portion associated with a previously disclosed customer transition. Sales were down in ~~surface protection films~~Surface Protection, which the Company believes was due to a slowdown in the mobile phone market and comparison to particularly strong sales ~~and higher elastic, acquisition distribution layer, and overwrap product sales.~~in the prior year. Net sales in Flexible Packaging Films ~~decreased 2.5%~~increased 18.2% due to ~~lower~~higher demand and additional production from the restart of a previously idled manufacturing ~~disruptions and lower export sales volume.~~line in the second quarter of 2018. Net sales increased ~~34.1%~~8.4% in Aluminum Extrusions primarily due to ~~the acquisition of Futura,~~ higher sales ~~volumes~~volume and an increase in average selling prices ~~as a result of the pass-through~~ to ~~customers of~~cover higher ~~market-driven raw material costs. For more information on net sales and volume, see the~~ ~~Executive Summary~~.

Consolidated gross profit (sales minus cost of goods sold and freight) as a percentage of sales was 17.0% in the third quarter of 2017 compared to 16.3% in the third quarter of 2016. The gross profit margin in PE Films increased due to higher volume in surface protection films and personal care films. The gross profit margin in Flexible Packaging Films decreased significantly due to higher costs in 2017 compared to 2016, primarily due to production disruptions at its plant in Cabo, Brazil and the adverse impact of high inflation in Brazil and the appreciation of the Brazilian Real relative to the U.S. Dollar. The gross profit margin in Aluminum Extrusions increased primarily as a result of the operating ~~performance by Futura, higher volume and higher average selling prices as a result of the pass-through to customers of higher market-driven raw material costs.~~

As a percentage of sales, selling, general and administrative (“SG&A”) and R&D expenses were 10.4% in the third quarter of 2017, compared with 10.5% in the third quarter of last year total SG&A expenses increased as a result of the Futura acquisition and related acquisition and integration costs and other business development costs.

Plant shutdowns, asset impairments, restructurings and other items in the third quarter of 2017 and 2016 are shown in the segment operating profit table in Note 10 and are described in detail in Note 3. A discussion of unrealized gains and losses on investments can also be found in Note 7.

Interest expense increased from $0.9 million in the third quarter of 2016 to $1.8 million in the third quarter of 2017. In February 2017, the Company borrowed $87 million under its Credit Agreement (as defined in Liquidity and Capital Resources) to fund the acquisition of Futura.

~~Average debt outstanding and interest rates were as follows:~~

Three Months Ended September 30,
(In Millions) 2017 2016
Floating-rate debt with interest charged on a rollover basis at one-month LIBOR plus a credit spread:
Average outstanding debt balance $ 189.7
$ 99.2
Average interest rate 3.2 % 2.3 %
Fixed-rate and other debt:
Average outstanding debt balance $ —
$ —
Average interest rate n/a
n/a
Total debt:
Average outstanding debt balance $ 189.7
$ 99.2
Average interest rate 3.2 % 2.3 %

~~First Nine Months of 2017 Compared with the First Nine Months of 2016~~

Overall, sales in the first nine months of 2017 increased by 14.7% compared with the first nine months of 2016. Net sales increased 5.7% in PE Films primarily due to a market driven increase in surface protection films sales and higher personal care films sales, partially offset by known lost business and product transitions. Net sales in Flexible Packaging Films decreased 1.2% largely due to production issues in the third quarter, partially offset by a favorable sales mix. Net sales increased 27.8% in Aluminum Extrusions primarily due to the acquisition of Futura and an increase in average selling prices as a result of the pass-through to customers of higher market-driven raw material costs. For more information on net sales and volume, see the Executive Summary.

Consolidated gross profit (sales minus cost of goods sold and freight) as a percentage of sales was ~~16.1%~~15.6% in the first ~~nine months~~quarter of ~~2017~~2019 compared to ~~16.5%~~18.1% in the first ~~nine months~~quarter of ~~2016.~~2018. The gross profit margin in PE Films ~~increased~~decreased primarily due to ~~higher~~lower volume ~~favorable sales mix~~in personal care films and ~~production efficiencies in~~ surface protection films, unfavorable production cost variances, and ~~inflation-driven price increases, partially offset by lower volume as a result of lost business and product transitions and volume reductions for other personal care products.~~higher operating costs. The gross profit margin in Flexible Packaging Films ~~decreased significantly~~increased slightly due to higher costs in 2017 compared to 2016, primarily due to higher material costs that could not be passed through to customers due to competitive pressures, the adverse impact of high inflation in Brazil and the appreciation of the Brazilian Real relative to the U.S. Dollar, partially offset by foreign currency losses in the prior year associated with U.S. Dollar denominated export sales in Brazil.volume. The gross profit margin in Aluminum Extrusions increased primarily as a result of higher ~~margins achieved by Futura, partially offset by higher depreciation~~volume and ~~inefficiencies related to the startup of a new line at Niles, Michigan.~~selling prices.

As a percentage of sales, selling, general and administrative (“SG&A&A”) and R&D expenses were ~~10.8%~~10.7% in the first ~~nine months~~quarter of ~~2017,~~2019, compared with ~~11.5%~~10.1% in the first ~~nine months~~quarter of last ~~year, a reduction from the prior~~ year. SG&A ~~expense decreases~~expenses were up slightly year-over-year, with the higher SG&A percentage in ~~2017 included~~2019 being attributable to lower ~~pension expense and stock-based employee benefit and other costs, partially offset by Futura acquisition and integration costs and business development costs.~~net sales in 2019 versus 2018.

Plant shutdowns, asset impairments, restructurings and other items in the ~~nine months~~first quarter of ~~2017~~2019 and ~~2016~~2018 are shown in the segment operating profit table in Note 1011 and are described in detail in Note 3. A discussion of ~~unrealized~~ gains and losses on investments can also be found in Note 7.

Interest expense ~~increased from $2.9~~was $1.2 million in the first nine months of 2016 to $4.6 million in the first nine months of 2017. In February 2017, the Company borrowed $87 million under its Credit Agreement to fund the acquisition of Futura. Interest expense in 2016 included the write off of $0.2 million in unamortized loan fees from the credit facility that was refinanced in the first quarter of ~~2016.~~

2019 compared to $1.6 million in the first quarter of 2018. Average debt outstanding and interest rates were as follows:


	Nine Months Ended September 30,						Three Months Ended March 31,
(In Millions)	2017			2016			2019			2018
Floating-rate debt with interest charged on a rollover basis at one-month LIBOR plus a credit spread:
Average outstanding debt balance	$	177.6		$	104.8		$	108.7		$	155.1
Average interest rate	2.9		%	2.3		%	4.1		%	3.4		%
Fixed-rate and other debt:
Average outstanding debt balance	$	—		$	—		$	—		$	—
Average interest rate	n/a			n/a			n/a			n/a
Total debt:
Average outstanding debt balance	$	177.6		$	104.8		$	108.7		$	155.1
Average interest rate	2.9		%	2.3		%	4.1		%	3.4		%

Liquidity and Capital Resources

Tredegar’s management continues to focus on improving working capital ~~management, and measures~~management. Measures such as days sales outstanding (“DSO”), days inventory outstanding (“DIO”) and days payables outstanding (“DPO”) are used to evaluate changes in working capital. Changes in operating assets and liabilities from December 31, ~~2016~~2018 to ~~September 30, 2017~~March 31, 2019 are summarized as follows:

Accounts and other receivables ~~increased $29.6~~decreased $1.8 million ~~(30.4%~~(1.4%).

Accounts ~~receivable~~and other receivables in PE Films ~~increased~~decreased by ~~$6.0~~$4.3 million primarily due to ~~higher volume~~lower net sales for ~~surface protection films and personal care films,~~certain Personal Care products, a focus on collection efforts and the timing of cash receipts. DSO (represents trailing 12 months net sales divided by a rolling 12-month average of accounts and other receivables balances) was approximately ~~48.6~~44.2 days for the 12 months ended ~~September 30, 2017~~March 31, 2019 and ~~45.7~~43.2 days for the 12 months ended December 31, ~~2016.~~2018.

Accounts ~~receivable~~and other receivables in Flexible Packaging Films ~~were relatively flat.~~decreased by $0.2 million primarily due to the timing of cash receipts. DSO was approximately ~~53.5~~40.5 days for the 12 months ended ~~September 30, 2017~~March 31, 2019 and ~~51.8~~43.7 days for the 12 months ended December 31, ~~2016.~~2018.

Accounts and other receivables in Aluminum Extrusions increased by ~~$24.2~~$2.8 million primarily due to the ~~addition~~timing of ~~balances from the acquisition of Futura, including the recording of a contingent receivable of $5 million related to~~

~~an earnout provision in the Purchase Agreement (see Note 2 for more details) and higher net sales.~~cash receipts. DSO was approximately ~~43.2~~46.1 days for the 12 months ended ~~September 30, 2017~~March 31, 2019 and ~~43.3~~44.6 days for the 12 months ended December 31, ~~2016.~~2018.

Inventories increased ~~$16.4~~$6.6 million ~~(24.8%~~(7.0%).

Inventories in PE Films increased by ~~approximately $3.5~~$0.3 million primarily due to ~~increased production to accommodate higher demand~~lower sales and the timing of raw material purchases. DIO (represents trailing 12 months costs of goods sold calculated on a first-in, first-out basis divided by

a rolling 12-month average of inventory balances calculated on the first-in, first-out basis) was approximately ~~54.2~~55.0 days for the 12 months ended ~~September 30, 2017~~March 31, 2019 and ~~52.2~~54.9 days for the 12 months ended December 31, ~~2016.~~2018.

Inventories in Flexible Packaging Films ~~decreased~~increased by approximately $0.2 million primarily due to ~~the timing of raw material purchases.~~a higher production level leading to more finished goods on hand. DIO was approximately ~~70.9~~85.3 days for the 12 months ended ~~September 30, 2017~~March 31, 2019 and ~~77.0~~77.9 days for the 12 months ended December 31, ~~2016.~~2018.

Inventories in Aluminum Extrusions increased by ~~$13.0~~$6.0 million due to ~~the addition of balances from the acquisition of Futura, the restart of the Newnan, Georgia cast house~~shipments lower than planned and the timing of purchases. DIO was approximately ~~31.1~~34.8 days for the 12 months ended ~~September 30, 2017~~March 31, 2019 and ~~26.5~~33.5 days for the 12 months ended December 31, ~~2016.~~2018.

Net property, plant and equipment increased ~~$49.4~~$4.0 million ~~(18.9%~~(1.7%) primarily due to ~~property and equipment added from the acquisition of Futura of $32.7 million,~~ capital expenditures of ~~$37.2~~$12.9 million, ~~and a change in the value of the U.S. dollar relative to foreign currencies ($6.4 million increase) and partially offset by~~which exceeded depreciation expenses of ~~$25.1~~$7.2 million.

~~Goodwill and other~~Other identifiable intangibles, ~~increased~~net decreased by ~~$36.9~~$0.9 million ~~(24.4%~~(2.5%) primarily due to ~~balances added from the acquisition of Futura of $41.1 million, partially offset by~~ amortization expense of ~~$4.6~~$0.9 million. ~~Identifiable intangible assets and goodwill associated with the Futura acquisition were $30.7 million and $10.4 million, respectively.~~

Accounts payable ~~increased $14.3~~decreased $1.6 million ~~(17.6%~~(1.4%).

Accounts payable in PE Films increased ~~$3.2~~$0.6 million due to lower production, longer supplier terms and the normal volatility associated with the timing of payments. DPO (represents trailing 12 months costs of goods sold calculated on a first-in, first-out basis divided by a rolling 12-month average of accounts payable balances) was approximately ~~38.7~~43.7 days for the 12 months ended ~~September 30, 2017~~March 31, 2019 and ~~38.5~~43.7 days for the 12 months ended December 31, ~~2016.~~2018.

Accounts payable in Flexible Packaging Films decreased ~~$1.2~~$2.5 million due to lower inventory levels and resin prices and the normal volatility associated with the timing of payments. DPO was approximately ~~42.2~~54.2 days for the 12 months ended ~~September 30, 2017~~March 31, 2019 and ~~39.5~~51.9 days for the 12 months ended December 31, ~~2016.~~2018.

Accounts payable in Aluminum Extrusions increased by ~~$12.5~~$0.9 million primarily due to ~~the addition of balances from the acquisition of Futura,~~higher volume, negotiation of ~~favorable~~longer payment terms and the normal volatility associated with the timing of payments. DPO was approximately ~~48.2~~50.3 days for the 12 months ended ~~September 30, 2017~~March 31, 2019 and ~~45.4~~49.7 days for the 12 months ended December 31, ~~2016.~~2018.

Accrued expenses ~~increased~~decreased by $~~3.1~~1.6 million (~~8.1%~~3.9%) from December 31, ~~2016~~2018 due to ~~normal fluctuations in~~ the ~~accounts.~~reversal of accruals of employee related benefits and severance accruals related to the Shanghai transition.

Cash provided by operating activities was ~~$53.5~~$11.1 million in the first ~~nine~~three months of ~~2017~~2019 compared with ~~$34.5~~$15.0 million in the first ~~nine~~three months of ~~2016.~~2018. The ~~change~~decrease is primarily ~~related~~due to ~~normal volatility of working capital components.~~lower operating profit before depreciation and amortization from ongoing operations ($8.5 million).

Cash used in investing activities was ~~$124.2~~$12.9 million in the first ~~nine~~three months of ~~2017~~2019 compared with ~~$29.5~~$0.8 million in the first ~~nine~~three months of ~~2016.~~2018. Cash used in investing activities primarily represents capital expenditures, which were $12.9 million and $5.1 million in the first three months of 2019 and 2018, respectively. Additionally, in the first quarter of 2018, the Company received $5 million from escrowed funds related to an earnout from the acquisition of Futura, of which $4.3 million was classified in ~~2017~~cash flows for $87.1 million (which includes the net settlement of post-closing adjustments of $0.1 million) and capital expenditures, which were $37.2 million and $30.9 million in the first nine months of 2017 and 2016, respectively.investing activities.

Cash provided by financing activities was ~~$71.8~~$4.0 million in the first ~~nine~~three months of ~~2017 and was~~2019 primarily related to net borrowings ~~under~~from the Credit Agreement ~~to fund the acquisition~~ of ~~Futura for $87.1~~$8.5 million, ~~(including $5.0 million paid into the Earnout Escrow and the net settlement of post-closing adjustments of $0.1 million; see Note 2 for more details) and~~partially offset by the payment of regular quarterly dividends of ~~$10.9~~$3.7 million ~~(33~~(11 cents per share). Cash used in financing activities was ~~$23.6~~$14.9 million in the first ~~nine~~three months of ~~2016~~2018 and was primarily related to net repayments of $11.0 million under the Credit Agreement and the payment of regular quarterly dividends of ~~$10.8~~$3.6 million ~~(33~~(11 cents per share) ~~and net repayments of debt and refinancing costs of $14.8 million.~~.

Further information on cash flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 is provided in the consolidated statements of cash flows.

On March 1, 2016, the Company executed its ~~new~~ five-year, $400 million secured revolving credit agreement that expires on March 1, 2021 (“Credit Agreement”)~~, replacing the previous $350 million unsecured revolving credit agreement.~~. Net capitalization and indebtedness as defined under the Credit Agreement as of ~~September 30, 2017~~March 31, 2019 were as follows:


Net Capitalization and Indebtedness as of September 30, 2017
(In Thousands)
Net Capitalization and Indebtedness as of March 31, 2019			Net Capitalization and Indebtedness as of March 31, 2019
(In thousands)			(In thousands)
Net capitalization:
Cash and cash equivalents	$	31,850	$	36,302
Debt:
Credit Agreement	177,000		110,000
Debt, net of cash and cash equivalents	145,150		73,698
Shareholders’ equity	373,914		372,621
Net capitalization	$	519,064	$	446,319
Indebtedness as defined in Credit Agreement:
Total debt	$	177,000	$	110,000
Face value of letters of credit	2,685		2,686
Other	422
Indebtedness	$	180,107	$	112,686

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



Pricing Under The Credit Agreement (Basis Points)
Indebtedness-to-Adjusted EBITDA Ratio	Credit Spread Over LIBOR	Commitment Fee
> 3.5x but <= 4.0x	250	45
> 3.0x but <= 3.5x	225	40
> 2.0x but <= 3.0x	200	35
> 1.0x but <= 2.0x	175	30
<= 1.0x	150	25

At ~~September 30, 2017,~~March 31, 2019, the interest rate on debt under the Credit Agreement existing at that date was priced at one-month LIBOR plus the applicable credit spread of 175 basis points. Under the Credit Agreement, borrowings are permitted up to $400 million, and approximately ~~$214~~$259 million was available to borrow at ~~September 30, 2017~~March 31, 2019 based upon the most restrictive ~~covenants.~~covenants within the Credit Agreement.

The computations of adjusted EBITDA, adjusted EBIT, the leverage ratio and interest coverage ratio as defined in the Credit Agreement are presented below. Adjusted EBITDA and adjusted EBIT as defined in the Credit Agreement are not intended to represent net income (loss) or cash flow from operations as defined by GAAP and should not be considered as an alternative to either ~~net~~Net income (loss) or to cash flow.


Computations of Adjusted EBITDA, Adjusted EBIT, Leverage Ratio and Interest Coverage Ratio as Defined in the Credit Agreement Along with Related Most Restrictive Covenants as of and for the Twelve Months Ended September 30, 2017 (In Thousands)
Computations of adjusted EBITDA and adjusted EBIT as defined in the Credit Agreement for the twelve months ended September 30, 2017:
Computations of Adjusted EBITDA, Adjusted EBIT, Leverage Ratio and Interest Coverage Ratio as Defined in the Credit Agreement Along with Related Most Restrictive Covenants as of and for the Twelve Months Ended March 31, 2019 (In Thousands)				Computations of Adjusted EBITDA, Adjusted EBIT, Leverage Ratio and Interest Coverage Ratio as Defined in the Credit Agreement Along with Related Most Restrictive Covenants as of and for the Twelve Months Ended March 31, 2019 (In Thousands)
Computations of adjusted EBITDA and adjusted EBIT as defined in the Credit Agreement for the twelve months ended March 31, 2019:				Computations of adjusted EBITDA and adjusted EBIT as defined in the Credit Agreement for the twelve months ended March 31, 2019:
Net income (loss)	$	57,908		$	26,464
Plus:
After-tax losses related to discontinued operations	—			—
Total income tax expense for continuing operations	11,020			10,265
Interest expense	5,467			5,290
Depreciation and amortization expense for continuing operations	38,126
All non-cash losses and expenses, plus cash losses and expenses not to exceed $10,000, for continuing operations that are classified as unusual, extraordinary or which are related to plant shutdowns, asset impairments and/or restructurings (cash-related of $9,694)	12,625
Depreciation and amortization expense for continuing operations*				33,344
All non-cash losses and expenses, plus cash losses and expenses not to exceed $10,000, for continuing operations that are classified as unusual, extraordinary or which are related to plant shutdowns, asset impairments and/or restructurings (cash-related of $8,289)				56,104
Charges related to stock option grants and awards accounted for under the fair value-based method	185			1,550
Losses related to the application of the equity method of accounting	—			—
Losses related to adjustments in the estimated fair value of assets accounted for under the fair value method of accounting	—			—
Minus:
After-tax income related to discontinued operations	—			—
Total income tax benefits for continuing operations	—			—
Interest income	(274		)	(372		)
All non-cash gains and income, plus cash gains and income in excess of $10,000, for continuing operations that are classified as unusual, extraordinary or which are related to plant shutdowns, asset impairments and/or restructurings	(2,826		)	(250		)
Income related to changes in estimates for stock option grants and awards accounted for under the fair value-based method	—			—
Income related to the application of the equity method of accounting	—			—
Income related to adjustments in the estimated fair value of assets accounted for under the fair value method of accounting	(26,600		)	(39,482		)
Plus cash dividends declared on investments accounted for under the equity method of accounting	—			—
Plus or minus, as applicable, pro forma EBITDA adjustments associated with acquisitions and asset dispositions	3,436			—
Adjusted EBITDA as defined in the Credit Agreement	99,067			92,913
Less: Depreciation and amortization expense for continuing operations (including pro forma for acquisitions and asset dispositions)	(40,183		)	(33,344		)
Adjusted EBIT as defined in the Credit Agreement	$	58,884		$	59,569
Computations of leverage and interest coverage ratios as defined in the Credit Agreement at September 30, 2017:
Computations of leverage and interest coverage ratios as defined in the Credit Agreement at March 31, 2019:				Computations of leverage and interest coverage ratios as defined in the Credit Agreement at March 31, 2019:
Leverage ratio (indebtedness-to-adjusted EBITDA)	1.82x			1.21x
Interest coverage ratio (adjusted EBIT-to-interest expense)	10.77x			11.26x
Most restrictive covenants as defined in the Credit Agreement:
Maximum permitted aggregate amount of dividends that can be paid by Tredegar during the term of the Credit Agreement ($100,000 plus 50% of net income generated for each quarter beginning January 1, 2016)	$	140,323		$	179,737
Maximum leverage ratio permitted	4.00			4.00
Minimum interest coverage ratio permitted	2.50			2.50
* Excludes the amortization of right-to-use assets required under the new accounting guidance for leases.

As of ~~September 30, 2017,~~March 31, 2019, Tredegar was in compliance with all financial covenants in the Credit Agreement. Noncompliance with any one or more of the debt covenants may have a material adverse effect on the Company’s financial condition or liquidity in the event such noncompliance cannot be cured or should the Company be unable to obtain a waiver from the lenders as we would not be permitted to borrow under the credit facility and any amounts outstanding would become due and payable. Renegotiation of the covenant(s) through an amendment to the Credit Agreement could effectively cure the noncompliance, but could have an effect on financial condition or liquidity depending upon how the covenant is renegotiated.

At ~~September 30, 2017,~~March 31, 2019, the Company had cash and cash equivalents of ~~$31.9~~$36.3 million, including funds held in locations outside the U.S. of ~~$24.2~~$26.7 million. ~~Tredegar accrues U.S. federal income taxes on unremitted earnings of all foreign subsidiaries.~~ The Company believes that existing borrowing availability, current cash balances and cash flow from operations will be sufficient to satisfy its working capital, capital expenditure and dividend requirements for the next 12 months.


Item 3.	Quantitative and Qualitative Disclosures About Market Risk.

Tredegar has exposure to the volatility of interest rates, polyethylene and polypropylene resin prices, ~~Terephtalic~~Terephthalic Acid (“PTA”) and Monoethylene Glycol (“MEG”) prices, aluminum ingot and scrap prices, energy prices, foreign currencies and emerging markets. See Liquidity and Capital Resources regarding ~~Credit Agreement and~~ interest rate ~~exposures.~~exposures related to borrowings under the Credit Agreement.

Changes in polyethylene resin prices, and the timing of those changes, could have a significant impact on profit margins in PE Films. Changes in polyester resin, PTA and MEG prices, and the timing of those changes, could have a significant impact on profit margins in Flexible Packaging Films. Profit margins in Aluminum Extrusions are sensitive to fluctuations in aluminum ingot and scrap prices as well as natural gas prices (natural gas is the principal energy source used to operate its casting furnaces). There is no assurance of the Company’s ability to pass through higher raw material and energy costs to its customers. For more information on significantly higher raw material costs in Aluminum Extrusions, see Aluminum Extrusions in Executive Summary.

The volatility of average quarterly prices of ~~low density~~low-density polyethylene resin in the U.S. (a primary raw material for PE Films) is shown in the chart below.

Source: Quarterly averages computed by Tredegar using monthly data provided by IHS, Inc. In January 2015, IHS reflected a 21 cents per pound non-market adjustment based on their estimate of the growth of discounts in prior periods. The 4th quarter 2014 average rate of $1.09 per pound is shown on a pro forma basis as if the non-market adjustment was made in the fourth quarter of 2014.

Polyethylene resin prices in Europe, Asia and South America have exhibited similar long-term trends. The price of resin is driven by several factors, including supply and demand and the price of oil, ethylene and natural gas. To address fluctuating resin prices, PE Films has index-based pass-through raw material cost agreements for the majority of its business. However, under certain agreements, changes in resin prices are not passed through for an average period of 90 days (see Executive Summary ~~and Note 10~~for more information). Pricing on the remainder of the business is based upon raw material costs and supply/demand dynamics within the markets that the Company competes.

Polyester resins, MEG and PTA used in flexible packaging films produced in Brazil are primarily purchased domestically, with other sources available mostly from Asia and the U.S. Given the nature of these products as commodities, pricing is derived from Asian pricing indexes. The volatility of the average quarterly prices for polyester fibers in Asia, which is representative of polyester resin (a primary raw material for Flexible Packaging Films) pricing trends, is shown in the chart below:

Source: Quarterly averages computed by Tredegar using monthly data from CMAI Global Index data.

The volatility of average quarterly prices of PTA and MEG in Asia (raw materials used in the production of polyester resins produced by Flexible Packaging Films) is shown in the chart below:

Source: Quarterly averages computed by Tredegar using monthly data from CMAI Global Index data.

In the normal course of business, Aluminum Extrusions enters 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 its exposure to aluminum price volatility (see the chart below) under these fixed-price arrangements, which generally have a duration of not more than 12 months, the Company enters into a combination of forward purchase commitments and futures contracts to acquire or hedge aluminum, based on the scheduled deliveries. See Note 8 for additional information.

The volatility of quarterly average aluminum prices is shown in the chart below.

Source: Quarterly averages computed using daily Midwest average prices provided by Platts.

From time-to-time, Aluminum Extrusions ~~hedges~~has hedged a portion of its exposure to natural gas price volatility by entering into fixed-price forward purchase contracts with the Company’s natural gas suppliers. The Company estimates that, in an unhedged situation, every $1 per mmBtu per month change in the market price of natural gas has a ~~$79,000~~$0.1 million impact on the continuing monthly operating profit in Aluminum Extrusions. The Company has an energy surcharge for its aluminum extrusions business in the U.S. to be applied when the NYMEX natural gas price is in excess of $8.85 per mmBtu.

The volatility of quarterly average natural gas prices is shown in the chart below.

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

The Company sells to customers in foreign markets through its foreign operations and through exports from U.S. plants. The percentage of sales for manufacturing operations related to foreign markets for the first ~~nine~~three months of ~~2017~~2019 and ~~2016~~2018 are as follows:

																	Percentage of Net Sales from Ongoing Operations Related to Foreign Markets*
	Nine Months Ended September 30,								Three Months Ended March 31,
	2017				2016				2019				2018
	Exports From U.S.		Foreign Operations		Exports From U.S.		Foreign Operations		Exports From U.S.		Foreign Operations		Exports From U.S.		Foreign Operations
Canada	5	%	—	%	6	%	—	%	2	%	—	%	5	%	—	%
Europe	1		9		1		10		1		7		1		8
Latin America	2		9		—		11		1		12		1		9
Asia	9		2		9		3		6		1		9		2
Total	17	%	20	%	16	%	24	%	10	%	20	%	16	%	19	%
* The percentages for foreign markets are relative to Tredegar’s total net sales from ongoing operations	* The percentages for foreign markets are relative to Tredegar’s total net sales from ongoing operations								* The percentages for foreign markets are relative to Tredegar’s total net sales from ongoing operations

Tredegar attempts to match the pricing and cost of its products in the same currency and generally ~~view~~views the volatility of foreign currencies and emerging markets, and the corresponding impact on earnings and cash flow, as part of the overall risk of operating in a global environment (for additional information, see trends for the Euro, Brazilian Real and Chinese Yuan in the charts on the following page). Exports from the U.S. are generally denominated in U.S. Dollars. The Company’s foreign currency exposure on income from continuing foreign operations relates to the Euro, the Chinese Yuan, the Hungarian Forint, the Brazilian Real and the Indian Rupee.

PE Films is generally able to match the currency of its sales and costs for its product lines. For flexible packaging films produced in Brazil, selling prices and key raw material costs are principally determined in U.S. Dollars and are impacted by local economic conditions. Competition in Brazil, Terphane’s primary market, has been exacerbated by global overcapacity in the polyester industry generally, and by particularly acute overcapacity in Latin America. ~~Additional PET capacity from a competitor in Latin America came on line in September 2017.~~ These factors have resulted in significant competitive pricing pressures and U.S. Dollar equivalent margin compression. Moreover, variable conversion, fixed conversion and sales, general and administrative costs for operations in Brazil ~~are expected to be~~have been adversely impacted by inflation in Brazil that is higher than in the U.S. Flexible Packaging Films is exposed to additional foreign exchange translation risk (its functional currency is the Brazilian Real) because almost 90% of Flexible Packaging ~~Films’ Brazilian~~Films business unit in Brazil, Terphane Ltda.'s (“Terphane Ltda.”) sales are quoted or priced in U.S. Dollars while a large majority of its Brazilian costs are quoted or priced in Brazilian Real. This mismatch, together with a variety of economic variables impacting currency exchange rates, causes volatility that could negatively or positively impact operating profit for Flexible Packaging Films.

The Company's earnings are exposed to foreign currency exchange risk primarily through the translation of the financial statements of subsidiaries that have a functional currency other than the U.S. Dollar. The Company estimates that the net mismatch translation exposure between ~~Terphane’s~~Terphane Ltda.’s U.S. Dollar quoted or priced sales and underlying Brazilian Real quoted or priced operating costs (excluding depreciation and amortization) is annual net costs of R$~~95 million (approximately $30 million annually in equivalent U.S. Dollars or $2.5 million per month). On September 29, 2017, the Flexible Packaging Films business unit in Brazil (“~~125 million. Terphane Ltda.~~”) entered into 15 monthly~~ has outstanding foreign exchange average forward rate contracts to purchase Brazilian Real ~~(“R$”)~~ and sell U.S. Dollars ~~covering the period from October 2017 through December 2018. These agreements~~to hedge ~~half of the Company’s exposure at monthly average forward rates ranging~~its exposure. See Note 8 for more information on an approximately linear increasing basis from R$3.164 for each U.S. Dollar in October 2017 to R$3.3148 in December 2018. For example, if in December 2018 the actual average rate was R$3.000 for each U.S. Dollar, then Terphane Ltda. would have a settlement gain on its forward contract of R$393,500, which would help offset the estimated translation loss on the net mismatch exposure of R$787,000 for December 2018. The opposite would occur if the actual average rate were greater than the forward rate. These foreign currency exchangeoutstanding hedging contracts ~~have been designated~~ and qualify as cash flow hedges of Terphane Ltda.'s forecasted sales to customers quoted or priced in U.S. Dollars over that period. By changing the currency risk associated with these U.S. Dollar sales, the derivatives have the effect of offsetting operating costs quoted or priced in Brazilian Real and decreasing the net exposure to Brazilian Real in the consolidated statements of income. The aggregate notional amount of open foreign exchange contracts at September 30, 2017 was $18.75 million (R$60.7 million). The forward rates contracted and the related market rates as of September 30, 2017 were the same, and accordingly the fair value of all 15 open forward contracts were zero at that date.this hedging program.

Tredegar estimates that the change in the value of foreign currencies relative to the U.S. Dollar on PE Films had a favorable impact on operating profit from ongoing operations in PE Films of ~~$0.7 million in the third quarter of 2017~~

~~compared with the third quarter of 2016 and $0.3~~$0.2 million in the first ~~nine months~~quarter of ~~2017~~2019 compared towith the first ~~nine months~~quarter of ~~2016.~~2018.

Trends for the Euro exchange rates relative to the U.S. Dollar are shown in the chart below.

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

Trends for the Brazilian Real and Chinese Yuan exchange rates relative to the U.S. Dollar are shown in the chart below.

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


Item 4.	Controls and Procedures.

~~Pursuant~~

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this Form 10-Q, pursuant to Rule 13a-15(b) under the ~~Securities~~ Exchange Act, ~~of 1934, as amended, we~~the Company carried out an evaluation, with the participation of ~~our~~its management, including ~~our principal~~its Chief Executive Officer (principal executive ~~officer~~officer) and ~~principal~~Chief Financial Officer (principal financial ~~officer,~~officer), of the effectiveness of ~~our~~ disclosure controls and procedures (as defined under Rule 13a-15(e) and 15d-15(e) under the ~~Securities~~ Exchange ~~Act of 1934)~~Act) as of March 31, 2019.

Based on this evaluation, the ~~end~~Company’s Chief Executive Officer and Chief Financial Officer concluded that, because of the ~~period covered by this report. Based upon that evaluation, the principal executive officer and principal~~material weaknesses in internal control over financial ~~officer concluded that~~reporting discussed below, the Company’s disclosure controls and procedures ~~are~~were not effective as of March 31, 2019, to ~~ensure~~ensure: (i) that information required to be disclosed by usthe Company in the reports that ~~we file~~it files or ~~submit~~submits under the ~~Securities~~ Exchange Act, ~~of 1934,~~ is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and (ii) that such information is accumulated and communicated to ~~our~~ management, including the ~~principal executive officer~~Chief Executive Officer and ~~principal financial officer,~~Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

~~There~~Management’s Report on Internal Control Over Financial Reporting as of December 31, 2018

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is a process designed by or under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer, and overseen by the Board of Directors, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of published financial statements for external purposes in accordance with GAAP 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 the Company’s assets;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that the Company’s receipts and expenditures are being made only in accordance with the authorization of its management and directors; and

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 consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of the Company’s consolidated financial statements would be prevented or detected. 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.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting using the criteria in Internal Control - Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “2013 COSO Framework”). As a result of this evaluation, management concluded, as disclosed in the 2018 Form 10-K that the Company’s internal control over financial reporting was not effective as of December 31, 2018, because of the material weaknesses in internal control over financial reporting discussed below.

Control Environment: The Company did not have a sufficient number of trained resources with assigned responsibility and accountability for the design, operation and documentation of internal control over financial reporting in accordance with the 2013 COSO Framework.

Risk Assessment: The Company did not have an effective risk assessment process that defined clear financial reporting objectives and evaluated risks, including fraud risks, and risks resulting from changes in the external environment and business operations, at a sufficient level of detail to identify all relevant risks of material misstatement across the entity.

Information and Communication: The Company did not have an effective information and communication process that identified and assessed the source of and controls necessary to ensure the reliability of information used in financial reporting and that communicates relevant information about roles and responsibilities for internal control over financial reporting.

Monitoring Activities: The Company did not have effective monitoring activities to assess the operation of internal control over financial reporting, including the continued appropriateness of control design and level of documentation maintained to support control effectiveness.

Control Activities: As a consequence of the material weaknesses described above, internal control deficiencies related to the design and operation of process-level controls and general information technology controls were determined to be pervasive throughout the Company’s financial reporting processes.

While these material weaknesses did not result in material misstatements of the Company’s financial statements as of and for the year ended December 31, 2018, these material weaknesses create a reasonable possibility that a material misstatement of account balances or disclosures in annual or interim consolidated financial statements may not be prevented or detected in a timely manner. Accordingly, the Company concluded that the deficiencies represent material weaknesses in its internal control over financial reporting and its internal control over financial reporting was not effective as of December 31, 2018.

The Company’s independent registered public accounting firm, KPMG LLP, which audited the 2018 consolidated financial statements included in the 2018 Form 10-K, expressed an adverse opinion on the operating effectiveness of the Company's internal control over financial reporting.

Remediation Plan

The Company’s remediation efforts are ongoing and it will continue its initiatives to implement and document policies and procedures, and strengthen the Company’s internal control environment. Remediation of the identified material weaknesses and strengthening the Company’s internal control environment will require a substantial effort throughout 2019, and those efforts will extend into 2020. The material weaknesses cannot be considered completely remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

To remediate the material weaknesses described above, the Company plans to pursue the following remediation steps:


1.	Perform a comprehensive financial risk assessment and internal control gap analysis to ensure that all relevant risks of material misstatement to the Company’s financial statements are identified and that the Company’s internal controls are sufficient to address those risks.

Review and update, as necessary, documentation of relevant processes, policies and procedures, and design of relevant controls, with respect to the Company’s internal control over financial reporting. The Company intends to implement any necessary changes as a result of deficiencies identified in its relevant processes, policies and procedures as promptly as practical and to satisfy documentation requirements under Section 404 of the Sarbanes-Oxley Act.

Seek to ensure that the Company’s internal control over financial reporting is properly designed, implemented, operating effectively, and appropriately documented by (i) enhancing the design of existing control activities and/or implementing additional control activities, as needed, (ii) monitoring the operating effectiveness of those controls, and (iii) ensuring that sufficient documentation exists to evidence the design, implementation, and operation of those controls.


4.	Evaluate and enhance the Company’s monitoring activities to ensure the components of internal control under the 2013 COSO Framework are present, functioning, and able to be appropriately evidenced.


5.	Design, execute and monitor a plan, with appropriate executive sponsorship, and with the assistance of outside consultants, to enhance the Company’s internal control over financial reporting and accomplish the goals of the remediation plan as set forth above.


6.	Continue to seek, train and retain individuals that have the appropriate skills and experience related to designing, operating and documenting internal controls.

The Company has hired an internationally recognized accounting firm as its outside consultant, to assist in achieving the objectives described above. The Company and its outside consultant have prepared and delivered to the Audit Committee of the Board a detailed implementation schedule for the remediation plan. The Company believes that its remediation plan will be sufficient to remediate the identified material weaknesses and strengthen its internal control over financial reporting. As the Company continues to evaluate, and works to improve, its internal control over financial reporting, management may determine that additional measures to address control deficiencies or modifications to the remediation plan are necessary. The Company cannot assure you, however, when it will remediate such weaknesses, nor can it be certain whether additional actions will be

required or the costs of any such actions. Moreover, the Company cannot assure you that additional material weaknesses will not arise in the future.

Changes in Internal Control Over Financial Reporting

The Company is in the process of implementing certain changes in its internal controls to remediate the material weaknesses described above. The implementation of the material aspects of this plan began in the second quarter of 2019. As a result, there has been no change in the Company’s internal control over financial reporting during the quarter ended ~~September 30, 2017,~~March 31, 2019, that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

PART II - OTHER INFORMATION


Item 5.	Risk Factors.

As disclosed in “Item 1A. Risk Factors” in ~~our 2016~~the 2018 Form 10-K, there are a number of risks and uncertainties that can have a material effect on the operating results of our businesses and our financial condition. There are no additional material updates or changes to our ~~other~~ risk factors since the filing of ~~our 2016~~the 2018 Form ~~10-K, except for the following:~~

The imposition of tariffs or duties on imported aluminum products could significantly increase the price of Aluminum Extrusions’ main raw material, which could adversely impact demand for its products. On April 27, 2017, President Trump directed the U.S. Department of Commerce to begin an investigation under Section 232 of the Trade Expansion Act regarding the effects on U.S. economic and national security of aluminum imports into the U.S. It is unknown at this time ifthe President will take any action as a result of the Section 232 investigation, and, if action is taken, what the impact of that action would be on Bonnell. However, the President could impose tariffs on aluminum imports to the U.S. Bonnell Aluminum and other major U.S. aluminum industries are net importers of aluminum raw materials. If high tariffs are imposed on imported aluminum billet purchased by Bonnell, then the aggregate cost of aluminum extrusions produced by Bonnell could rise significantly. Bonnell would expect to be able to pass through the higher aluminum costs to its customers. However, a higher cost for aluminum extrusions could result in product substitutions in place of aluminum extrusions, which could materially and negatively affect Bonnell and other U.S. aluminum extrusion businesses and their results of operations.

~~PE Films is highly dependent on sales associated with its top five customers, the largest of which is P&G.~~ PE Films’ top five customers comprised approximately 29%, 32% and 38% of Tredegar’s consolidated net sales from continuing operations, in 2016, 2015 and 2014, respectively, with net sales to P&G alone comprising approximately 16%, 19% and 24% in 2016, 2015 and 2014, respectively. The loss or significant reduction of sales associated with one or more of these customers could have a material adverse effect on the Company’s business. Other factors that could adversely affect the business include, by way of example, (i) failure by a key customer to achieve success or maintain share in markets in which they sell products containing PE Films’ materials, (ii) key customers rolling out products utilizing technologies developed by others that replace PE Films’ business with such customer, (iii) delays in a key customer rolling out products utilizing new technologies developed by PE Films and (iv) operational decisions by a key customer that result in component substitution, inventory reductions and similar changes. While PE Films is undertaking efforts to expand its 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 these large customers.

~~In recent years, PE Films lost substantial sales volume due to product transitions and suffered other sales losses associated with various customers (see further discussion in the 2016 Form 10-K,~~ ~~Executive Summary~~, PE Films section). PE Films anticipates further exposure to product transitions and lost business in the case of certain personal care materials that the Company estimates could negatively impact PE Films by $70 million in annual revenue between 2019 and 2021.

PE Films is also facing the risk that, over the next few years, a portion of its film used in surface protection applications will be made obsolete by possible future customer product transitions to less costly alternative processes or materials. If these product transitions were to occur, they could negatively affect future surface protection materials annual operating profit from ongoing operations by an amount estimated to be in the range of up to $5 to $10 million, although the timing and ultimate amount of the possible transitions for surface protection materials are uncertain.

While it continues to identify new business opportunities with its existing customers, PE Films is also working to expand its customer base in order to create long-term growth and profitability by actively competing for new business with new and existing customers across its full product portfolio and introducing new products and/or improvements to existing applications. There is no assurance that these efforts to expand the revenue base and mitigate this or any future loss of sales and profits from significant customers will be successful.

~~PE Films and its customers operate in highly competitive markets~~. PE Films competes on product innovation, quality, price and service, and its businesses and their customers operate in highly competitive markets. Global market conditions continue to exacerbate the Company’s exposure to margin compression due to competitive forces, especially as certain products move into the later stages of their product life cycles. In addition, the changing dynamics of consumer products retailing, including the impact of on-line retailers such as Amazon, is creating price and margin pressure on the customers of PE Films’ personal care business. While PE Films continually works to identify new business opportunities with new and existing customers, primarily through the development of new products with improved performance and/or cost characteristics, there can be no assurances that such efforts will be successful, or that they will offset business lost from competitive dynamics or customer product transitions.10-K.


Item 6.	Exhibits.



Exhibit Nos.

10.1		~~31.1~~Form of Notice of Nonstatutory Stock Option Grant and Nonstatutory Stock Option Terms and Conditions (filed as Exhibit 10.3 to Tredegar Corporation’s Registration Statement on Form S-8 (Registration No. 333-230386) and incorporated herein by reference).

31.1		Certification of John ~~D. Gottwald,~~M. Steitz, President and Chief Executive Officer of Tredegar Corporation, pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of D. Andrew Edwards, Vice President and Chief Financial Officer of Tredegar Corporation, pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of John ~~D. Gottwald,~~M. Steitz, President and Chief Executive Officer of Tredegar Corporation, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of D. Andrew Edwards, Vice President and Chief Financial Officer of Tredegar Corporation, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		XBRL Instance Document and Related Items.

SIGNATURES

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



		Tredegar Corporation
		(Registrant)

Date:	~~November 1, 2017~~May 9, 2019	/s/ John ~~D. Gottwald~~M. Steitz
		John ~~D. Gottwald~~M. Steitz
		President and Chief Executive Officer
		(Principal Executive Officer)

Date:	~~November 1, 2017~~May 9, 2019	/s/ D. Andrew Edwards
		D. Andrew Edwards
		Vice President and Chief Financial Officer
		(Principal Financial Officer)

Date:	~~November 1, 2017~~May 9, 2019	/s/ Frasier W. Brickhouse, II
		Frasier W. Brickhouse, II
		Corporate Treasurer and Controller
		(Principal Accounting Officer)



(in Thousands)
Accounts receivable	$	6,680
Inventories	10,342
Prepaid expenses and other current assets	240
Property, plant & equipment	32,662
Identifiable intangible assets:
Customer relationships	24,000
Trade names	6,700
Trade payables & accrued expenses	(8,135		)
Total identifiable net assets	72,489
Adjusted Net Purchase Price	82,860
Goodwill	$	10,371



(In Thousands)	Severance (a)			Asset Impairments			Other (b)			Total
Balance at January 1, 2017	$	1,854		$	—		$	554		$	2,408
Changes in 2017:
Charges	300			50			303			653
Cash spent	(1,068		)	—			(307		)	(1,375		)
Charges against assets	—			(50		)	—			(50		)
Balance at September 30, 2017	$	1,086		$	—		$	550		$	1,636
(a) Severance primarily includes severance payments associated with the consolidation of North American PE Films manufacturing facilities. (b) Other primarily includes other shutdown-related costs associated with the shutdown and sale of the Company’s aluminum extrusions manufacturing facility in Kentland, Indiana.



Unaudited (In Thousands)	September 30, 2017		December 31, 2016			September 30, 2017			December 31, 2016
Assets:					Liabilities & Equity:
Cash & short-term investments	$	104,753	$	102,329
Restricted cash	31		31		Current liabilities	$	85,086		$	50,134
Other current assets	39,059		15,391		Long term debt, net	138,305			143,380
Property & equipment	10,399		13,011		Other noncurrent liabilities	807			822
Other long-term assets	494		472		Equity	(69,462		)	(63,102		)
Total assets	$	154,736	$	131,234	Total liabilities & equity	$	154,736		$	131,234



	Percent of Income Before Income Taxes
Nine Months Ended September 30,	2017		2016
Income tax expense at federal statutory rate	35.0		35.0
Foreign rate differences	1.5		1.1
State taxes, net of federal income tax benefit	1.3		0.7
Changes in estimates related to prior year tax provision	0.5		(1.6	)
Non-deductible expenses	0.5		1.6
Valuation allowance for foreign operating loss carry-forwards	0.4		0.3
Unremitted earnings from foreign operations	0.2		(1.1	)
Valuation allowance for capital loss carry-forwards	—		(0.4	)
Income tax contingency accruals and tax settlements	(0.4	)	1.3
Remitted earnings from foreign operations	(0.6	)	(23.8	)
Research and development tax credit	(0.7	)	(1.8	)
Domestic production activities deduction	(0.9	)	(3.8	)
Foreign investment write-up	(3.5	)	0.1
Settlement of Terphane acquisition escrow	(6.4	)	—
Worthless stock deduction	(12.2	)	—
Effective income tax rate	14.7		7.6