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, 2019, the consolidated results of operations for the three and nine months ended September 30, 2019 and 2018, the consolidated cash flows for the nine months ended September 30, 2019 and 2018, and the consolidated changes in shareholders’ equity for the nine months ended September 30, 2019 and 2018, 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 quarter for ~~2017~~2019 and ~~2016~~2018 for this segment references 13-week periods ended September ~~24, 2017~~29, 2019 and September ~~25, 2016,~~23, 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,~~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 13~~presentation.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts shown in the consolidated statements of cash flows:



	September 30,		December 31,
(In thousands)	2019		2018
Cash and cash equivalents	$	36,886	$	34,397
Restricted cash	7,766		—
Total cash, cash equivalents and restricted cash	$	44,652	$	34,397

Restricted cash as of September 30, 2019 consists of funds received in the second and third quarters of 2019 for ~~additional detail).~~the sale of the PE Films idle manufacturing facility in Shanghai, China. The sale of the facility closed in the third quarter of 2019, and a pre-tax gain of $6.3 million was recognized. The Company is in the process of liquidating the legal entity that previously operated the Shanghai facility and received the funds from the sale. Chinese government regulations limit the use of these funds to the purposes of the liquidating entity until the completion of the liquidation process, which the Company expects to be concluded within the next six months.

Trade Name Accelerated Amortization

On October 30, 2019, Bonnell Aluminum announced a rebranding initiative. Bonnell and its subsidiaries, AACOA and Futura, will now all fall under the Bonnell Aluminum brand. The usage of the AACOA and Futura trade names will be discontinued at the end of 2019. In September 2019, management committed to implement the rebranding initiative. Prior to this commitment, the AACOA trade name had an indefinite useful life and a remaining net book value of $4.8 million, and the Futura trade name had an estimated remaining useful life of approximately 10.5 years and a remaining net book value of $5.4 million. As a result of the rebranding initiative, there was a change in estimate in the useful lives for both trade names to 4 months, the point at which the rebranding initiative is estimated to be substantially complete. The non-cash amounts amortized and to be amortized in the third and fourth quarters of 2019, respectively, related to these trade names are as follows:



(in millions)	Three Months Ended
	September 30, 2019		December 31, 2019
AACOA - accelerated	$	1.2	$	3.6
Futura - accelerated	1.3		3.9
Futura - ongoing¹	0.1		0.1
Total amortization	$	2.6	$	7.6
1. Amortization based on original useful life.

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 September 30, 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 $115.7 million and $124.7 million, respectively, made up of the William L. Bonnell Company, Inc. (which is a wholly-owned subsidiary of Tredegar) and operates as a division of Bonnell Aluminum, and its results of operations are included in Tredegar’s consolidated financial statements from the date of acquisition.

Under the terms of the transaction, $5 million of the Initial Cash Funding was placed 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:following:

(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.



	September 30,			December 31,
(In thousands)	2019			2018
Customer receivables	$	114,112		$	122,182
Other accounts and notes receivable	4,689			5,482
Total accounts and other receivables	118,801			127,664
Less: Allowance for bad debts and sales returns	(3,140		)	(2,937		)
Total accounts and other receivables, net	$	115,661		$	124,727

For the three and nine month periods ended September 30, 2017 (for Futura, the period from the acquisition on February 15, 2017 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, and is not necessarily indicative of 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~~2019, the Company had no material bad-debt expense and ~~2016 are presented below:~~there were no material contract assets, contract liabilities or deferred contract costs recorded on the consolidated balance sheets as of September 30, 2019. Payment terms start from the date of satisfaction of the 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 time.

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~~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 2017three and nine ~~cents per share for the first nine~~ months ended September 30, 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 ~~2017.~~

~~The Company’s pro forma net income was computed for the periods shown as: (i)~~one year or less, ii) contracts where revenue is recognized as invoiced and iii) variable consideration related to unsatisfied performance obligations, is not expected to materially impact 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).

financial results.

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.ASSET IMPAIRMENTS AND COSTS ASSOCIATED WITH EXIT AND DISPOSAL ACTIVITIES

~~Plant shutdowns, asset impairments, restructurings~~The Company plans to close its PE Films manufacturing facility in Lake Zurich, Illinois, which produces elastic materials. Production at the Lake Zurich plant is expected to cease during the fourth quarter of 2019 with product transfers to the new elastic production line at Terre Haute, Indiana (“Lake Zurich plant shutdown”). As a result of the Lake Zurich plant shutdown, the Company expects to recognize pre-tax cash costs of $7.6 million comprised of (i) customer-related costs ($0.7 million), (ii) severance and other ~~items~~employee related costs ($1.8 million), and (iii) asset disposal and other cash costs ($5.1 million). In addition, the Company expects non-cash asset write-offs and accelerated depreciation of $1.6 million. Total expenses associated with the Lake Zurich plant shutdown are $1.9 million since

project inception. Cash expenditures were $0.2 million and $0.2 million in the three and nine months ended September 30, 2019, respectively. Proceeds from the expected sale of Lake Zurich’s real property are estimated at approximately $5 million. The Company anticipates that the Lake Zurich plant shutdown will be completed by the end of 2020.

The Company plans to consolidate the production of certain PE Films personal care products in Europe over the next twelve months (“PC Europe consolidation”). As a result of this consolidation, the Company expects to recognize pre-tax cash costs of $1.7 million, primarily for severance and customer-related costs. Total expenses associated with the PC Europe consolidation are $0.7 million since project inception. Cash expenditures were $0.1 million in the three and nine months ended September 30, 2019.

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 plant shutdown”). Production ceased at this plant during the fourth quarter of 2018. Total expenses associated with the Shanghai transition are $4.0 million since project inception. Cash expenditures were $0.2 million and $0.7 million in the three and nine months ended September 30, 2019, respectively, and $3.2 million since project inception. The plant facilities were sold in the third quarter of ~~2017 include:~~

~~Pretax charges~~2019, resulting in a pre-tax gain of ~~$0.7~~$6.3 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 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 of $0.1 million for severance and other employee-related costs associated with restructurings in PE Films.~~

~~Plant shutdowns, asset impairments, restructurings and other items in the first nine months of 2017 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~~reported in “Other income (expense), net” in the consolidated statements of ~~income). In settling~~income.

Other pre-tax charges include restructuring costs in PE Films for severance in the ~~escrow arrangement,~~amounts of $0.1 million and $0.6 million, in the ~~Company assumed~~three and nine months ended September 30, 2019, respectively, the ~~risk~~write-off 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 estimatesinventory at PE Films’ Personal Care facility in Restag, Hungary in the amount of ~~such future claims at approximately $3.5 million;~~

~~Pretax charges of $3.3~~$0.2 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~~three months ended September 30, 2019, and the write-off of ~~income), ii) acquisition costs of $1.5 million and, iii) integration costs of $0.1 million (included in “Selling, general and administrative expenses”~~a Personal Care production line at the Guangzhou, China facility 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 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~~amount 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 million associated with a business development project (included in “Selling, general and administrative expense” in the consolidated statements of income);~~

Pretax charges of $0.4 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.~~

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. (“kaléo”), which is accounted for under the fair value method (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 toended 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.2019.

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 months ended September 30, ~~2017~~2019 is as ~~follows:~~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 thousands)	Severance			Asset Impairments			Other			Total
Balance at January 1, 2019	$	616		$	—		$	160		$	776
Changes in 2019:
Charges:
Shanghai plant shutdown	101			—			625			726
Lake Zurich plant shutdown	720			206			—			926
PC Europe consolidation	594			96			—			690
Other restructuring charges^(a)	628			573			52			1,253
	2,043			875			677			3,595
Cash payments	(1,212		)	—			(721		)	(1,933		)
Charges against assets	—			(875		)	—			(875		)
Balance at September 30, 2019	$	1,447		$	—		$	116		$	1,563
(a) Asset impairments not related to restructuring or exit and disposal activities are described in a paragraph above.

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.


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

The components of inventories are as follows:


		September 30,		December 31,			September 30,		December 31,
(In Thousands)		2017		2016
(In thousands)						(In thousands)	2019		2018
Finished goods	Finished goods	$	21,442	$	16,215	Finished goods	$	22,638	$	24,938
Work-in-process	Work-in-process	10,695		8,590		Work-in-process	13,565		15,648
Raw materials	Raw materials	32,061		23,733		Raw materials	29,014		33,741
Stores, supplies and other	Stores, supplies and other	18,228		17,531		Stores, supplies and other	20,098		19,483
Total	Total	$	82,426	$	66,069	Total	$	85,315	$	93,810

Lower contribution to profits from ~~overwrap products~~Personal Care of $15.9 million primarily due to lower volume and unfavorable mix ($~~0.7 million); and~~

~~Higher net general, selling and plant expenses ($3.6~~15.3 million), ~~primarily associated with strategic hires~~unfavorable pricing ($3.9 million), unfavorable production efficiencies ($3.4 million), and ~~an increase~~the decline in ~~employee incentive costs,~~the value of currencies for operations outside of the U.S. relative to the U.S. Dollar ($0.3 million), partially offset by ~~realized cost savings~~the timing in the passthrough of ~~$1.9 million associated with the North American facility consolidation.~~changes in resin prices ($1.4 million), lower fixed manufacturing ($3.4 million) and selling, general and administrative costs ($2.5 million).

Capital Expenditures, Depreciation & Amortization

Capital expenditures in PE Films were ~~$12.9~~$19.5 million in the first nine months of ~~2017~~2019 compared to ~~$20.0~~$13.5 million in the first nine months of ~~2016. PE Films currently estimates that total~~2018. The Company’s latest estimate for 2019 includes projected capital expenditures of $27 million including: $12 million of a total $25 million which completed the North American capacity expansion for elastics products in ~~2017 will be $18~~Personal Care; $4 million ~~including approximately~~for a new scale-up line in Surface Protection to improve development and speed to market for new products; $4 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~~$11.4 million in the first nine months of ~~2017~~2019 and ~~$10.0~~$11.7 million in the first nine 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
(In Thousands, Except Percentages) September 30, September 30,
2017 2016 2017 2016
Sales volume (lbs) 21,640
23,204
(6.7 )% 65,668
66,222
(0.8 )%
Net sales $ 26,628
$ 27,303
(2.5 )% $ 79,925
$ 80,888
(1.2 )%
Operating profit (loss) from ongoing operations $ (1,074 ) $ 93
NA
$ (3,392 ) $ 1,184
NA



	Three Months Ended				Favorable/ (Unfavorable) % Change		Nine Months Ended				Favorable/ (Unfavorable) % Change
(In thousands, Except Percentages)	September 30,						September 30,
(In thousands, Except Percentages)	2019		2018				2019		2018
Sales volume (lbs)	27,920		27,258		2.4	%	79,841		74,276		7.5	%
Net sales	$	34,888	$	33,725	3.4	%	$	101,950	$	90,466	12.7	%
Operating profit from ongoing operations	$	4,000	$	3,609	10.8	%	$	9,376	$	6,617	41.7	%

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

~~Sales volume decreased by 6.7%~~Net sales increased in the third quarter of ~~2017~~2019 compared ~~with~~to the third quarter of ~~2016~~2018 due to ~~lower production volume. Lower production in July~~higher sales volume 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.increased selling prices.

Terphane’s operating results from ongoing operations in the third quarter of ~~2017 declined~~2019 increased by ~~$1.2~~$0.4 million versus the third quarter of ~~2016~~2018 primarily due to:

~~Inefficiencies from lower-than-planned production, as noted above, in the third quarter of 2017,~~Higher volume ($0.3 million) and higher selling prices ($1.0 million), partially offset by ~~a favorable sales mix (net~~higher fixed and variable costs ($0.9 million);

Net unfavorable ~~impact~~foreign currency translation of ~~$0.7~~Real-denominated operating costs ($0.4 million); and

Foreign currency transaction ~~losses~~gains of $0.3 million in ~~the third quarter~~2019 versus losses 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 Company expects Terphane’s future operating results to continue to be volatile 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~~First Nine Months 2019 Results vs. ~~Year-To-Date 2016~~First Nine Months 2018 Results

~~Sales volume declined by 0.8%~~Net sales increased in the first nine months of ~~2017~~2019 compared ~~with~~to the first nine months of ~~2016 partially~~2018 due to ~~lower~~higher sales 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.increased selling prices.

~~Terphane had an~~Terphane’s operating ~~loss~~results from ongoing operations in the first nine months of ~~2017 of $3.4~~2019 increased by $2.8 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~~2018 primarily due to:

~~Inefficiencies from lower-than-planned production in the first~~Higher volume ($2.2 million) and ~~third quarters of 2017,~~higher selling prices ($1.8 million), partially offset by higher fixed and variable costs, including costs related to a restarted line ($2.3 million);

Net favorable ~~sales mix (net unfavorable impact~~foreign currency translation of ~~$1.0 million);~~Real-denominated operating costs of $0.3 million; and

Foreign currency transaction gains of $0.3 million in 2019 versus losses of ~~$0.4~~$0.5 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;~~2018.

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 $5.7 million in the first nine months of 2019 compared to $2.3 million in the first nine months of ~~2017 compared~~2018. Capital expenditures are projected to ~~$2.0~~be $10 million in ~~the first nine months of 2016. Terphane currently estimates that total capital expenditures in 2017 will be $4~~2019, including $5 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 million in the first nine months of 2017 and $4.9 million in the first nine months of 2016. Depreciation expense is projected to be $7 million in 2017. Amortization expense was $2.2 million in the first nine months of 2017 and $2.1 million in the first nine months of 2016, and is projected to be $3 million in 2017.

~~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.

~~Third-Quarter 2017 Results vs. Third-Quarter 2016 Results~~

Net sales in the third quarter of 2017 increased versus 2016 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 the pass-through to customers of higher market-driven raw material costs.

Volume on an organic basis (which excludes the impact of the Futura acquisition) in the third quarter of 2017 increased by 3.9% versus 2016 due to higher volume in the building & construction and specialty 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 of 2017 increased by $6.4 million versus the first nine months of 2016. Excluding the favorable profit impact of Futura ($6.2 million), operating profit from ongoing operations increased $0.2 million, primarily due to higher volume and higher inflation-related sales prices, partially offset by higher depreciation and disruptions to normal plant production associated with the startup of the new extrusion line at the 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 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.

~~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 million in the first nine months of 2016. Net capital expenditures are projected to total $23 million in 2017 (net of $5 million of expected insurance recoveries), including $9 million used to complete the extrusions capacity expansion project at the Niles, Michigan plant, expenditures to repair the damage caused by the cast house explosion net of related insurance recoveries (facility upgrades of approximately $2 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 of Futura. Depreciation expense was $8.7 million in the first nine months of 2017, which included $2.1 million from the addition of Futura, compared to $6.1 million in the first nine months of 2016, and is projected to be approximately $12 million in 2017. 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 months of ~~2016,~~2019 and $0.6 million in the first nine months of 2018. Depreciation expense is projected to be $1.0 million in 2019. Amortization expense was $0.3 million in the first nine months of 2019 and $0.3 million in the first nine months of 2018, and is projected to be ~~approximately $3~~$0.5 million in ~~2017.~~2019.

Corporate Expenses, Interest and Taxes

Pension expense was ~~$7.6~~$7.2 million in the first nine months of ~~2017, a favorable change of $0.4~~2019, versus $7.8 million ~~from~~ in the first nine 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 months of ~~2017~~2019 versus ~~2016~~2018 primarily due to ~~lower pension expense and~~higher stock-based employee ~~benefit costs, partially offset by higher incentive accruals.~~compensation ($1.3 million), and consulting fees ($3.5 million) related to the identification and remediation of previously disclosed material weaknesses in the Company’s internal control over financial reporting, business development activities, and implementation of new accounting guidance.

Interest expense was ~~$4.6~~$3.4 million in the first nine months of ~~2017~~2019 in comparison to ~~$2.9~~$4.5 million in the first nine months of ~~2016,~~2018, primarily due to ~~higher~~lower 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 months of ~~2017~~2019 was ~~14.7%~~14.1% compared to ~~7.6%~~172.1% in the first nine months of ~~2016.~~2018. The ~~significant~~tax rate in 2018 was affected by a pretax loss caused by a non-deductible goodwill impairment charge of $46.8 million. The differences between the U.S. federal statutory rate and the effective tax rate for the first nine 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 Quarter of ~~2017~~2019 Compared with the Third Quarter of ~~2016~~2018

Overall, sales in the third quarter of ~~2017 increased~~2019 decreased by ~~19.0%~~9.0% compared with the third quarter of ~~2016.~~2018. Net sales ~~increased 9.2%~~decreased 12.3% in ~~PE Films~~Aluminum Extrusions primarily due to ~~a market-driven~~lower sales volume and the passthrough of lower metal costs, partially offset by an increase in ~~surface protection films~~average selling prices to cover higher operating costs. Net sales decreased 8.7% in PE Films. Personal Care volume declined in most product categories due to competitive pressures, including a large portion associated with a previously disclosed customer transition. In addition, net sales were adversely impacted by unfavorable product mix and ~~higher elastic, acquisition distribution layer, and overwrap product sales.~~the decline in the value of currencies for operations outside of the U.S. relative to the U.S. Dollar. Net sales in Flexible Packaging Films ~~decreased 2.5%~~increased 3.4% due to ~~lower production from manufacturing disruptions and lower export sales volume. Net sales increased 34.1% in Aluminum Extrusions primarily due to the acquisition of Futura,~~ higher sales ~~volumes~~volume and ~~an increase in average~~increased selling ~~prices as a result of the pass-through to customers of higher market-driven raw material costs.~~prices. 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%~~17.5% in the third quarter of ~~2017~~2019 compared to ~~16.3%~~15.1% 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.2018. The gross profit margin in Aluminum Extrusions increased primarily as a result of ~~the operating performance by Futura,~~ higher ~~volume and~~selling prices. The gross profit margin in PE Films increased primarily due to higher ~~average selling prices~~profits in Surface Protection as a result of ~~the pass-through~~higher sales volume and selling prices and quality claims in 2018 that did not recur in 2019. The gross profit margin in Flexible Packaging Films decreased slightly due to ~~customers of~~ higher ~~market-driven raw material costs.~~operating costs, partially offset by higher sales volume and selling prices.

As a percentage of sales, selling, general and administrative (“SG&A”) and research and development (“R&D&D”) expenses were ~~10.4%~~11.5% in the third quarter of ~~2017,~~2019, compared with ~~10.5%~~9.7% in the third quarter of last ~~year total~~year. SG&A expenses ~~increased as a result of the Futura acquisition~~were

up year-over-year, while net sales decreased. Increased spending was due to higher stock-based employee compensation and ~~related acquisition and integration costs~~consulting fees associated with remediation activities and other costs relating to the Company’s material weaknesses in internal control over financial reporting, business development ~~costs.~~activities, and implementation of new accounting guidance.

~~Plant~~Pre-tax losses associated with plant shutdowns, asset impairments, restructurings and other items for continuing operations in the third quarter of ~~2017~~2019 and ~~2016~~2018 detailed below are shown in the ~~segment~~statements of net sales and operating profit by segment table in Note 1011 and are ~~described~~included in ~~detail~~“Asset impairments and costs associated with exit and disposal activities, net of adjustments” in ~~Note 3. A discussion~~the consolidated statements of ~~unrealized gains and losses on investments can also be found in Note 7.~~ income, unless otherwise noted.



($ in millions)			Three Months Ended September 30,
			2019			2018
Aluminum Extrusions:
Losses from sale of assets, investment writedowns and other items:
	Wind damage to roof of Elkhart, Indiana plant²		$	0.3		$	0.1
	Environmental charges at Carthage Tennessee plant¹		0.3			0.2
		Total for Aluminum Extrusions	$	0.6		$	0.3

PE Films:
(Gains)/losses associated with plant shutdowns, asset impairments and restructurings:
	Shanghai plant shutdown:
		Asset-related expenses	$	0.2		$	—
		Employee-related expenses	—			1.1
		Employee related expenses - administrative¹	—			0.2
		Gain from sale of plant³	(6.3		)	—
		Accelerated depreciation¹	—			0.4
	Consolidation of Personal Care manufacturing facilities - U.S. and Europe:⁴
		Severance	0.5			—
	Lake Zurich, Illinois plant shutdown and transfer of production to new elastics lines in Terre Haute, Indiana:⁴
		Severance	0.5			—
		Accelerated depreciation¹	0.5			—
		Product qualifications¹	0.1			—
	Reserve for inventory impairment - Personal Care's Hungary facility		0.2			—
	Other restructuring costs - severance		0.1			0.2
		Total	(4.2		)	1.9

Losses from sale of assets, investment writedowns and other items:
	Estimated excess costs associated with ramp-up of new product offerings and additional expenses related to strategic capacity expansion projects¹		0.3			0.2
	Costs to prepare a market study²		—			0.2
		Total	0.3			0.4

		Total for PE Films	$	(3.9	)	$	2.3

Corporate:
	Professional fees associated with: remediation activities and other costs relating to the Company’s material weaknesses in internal control over financial reporting; business development activities; and implementation of new accounting guidance²		$	1.6		$	0.2
1. Included in “Cost of goods sold” in the consolidated statements of income. 2. Included in “Selling, general and administrative” in the consolidated statements of income. 3. Included in “Other income (expense), net” in the consolidated statements of income. 4. See additional details in Note 3.

Interest expense ~~increased from~~was $0.9 million in the third quarter of ~~2016~~2019 compared to ~~$1.8~~$1.3 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)~~2018, primarily due to ~~fund the acquisition of Futura.~~

lower average debt levels. Average debt outstanding and interest rates were as follows:


	Three Months Ended September 30,						Three Months Ended September 30,
(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	$	189.7		$	99.2		$	71.1		$	101.3
Average interest rate	3.2		%	2.3		%	3.9		%	3.9		%
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~~2019 Results vs. First Nine Months ~~of 2016~~2018 Results

Overall, sales in the first nine months of ~~2017 increased~~2019 decreased by ~~14.7%~~6.3% compared with the first nine months of ~~2016.~~2018. Net sales ~~increased 5.7%~~decreased 3.6% in ~~PE Films~~Aluminum Extrusions primarily due to ~~a market driven increase in surface protection films~~lower sales volume and ~~higher personal care films sales,~~the passthrough of lower metal costs, partially offset by ~~known lost business~~an increase in average selling prices to cover higher operating costs. Net sales decreased 18.4% in PE Films. Personal Care volume declined in most product categories due to competitive pressures, including a large portion associated with a previously disclosed customer transition. In addition, net sales were adversely impacted by mix, the timing in the passthrough of changes in resin prices and ~~product transitions.~~the decline in the value of currencies for operations outside of the U.S. relative to the U.S. Dollar. Net sales in Flexible Packaging Films ~~decreased 1.2% largely~~increased 12.7% due to higher sales volume generated by additional production ~~issues~~from the restart of a previously idled manufacturing line in the ~~third~~second quarter ~~partially offset by a favorable sales mix. Net sales~~of 2018 and 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.~~prices. 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%~~17.3% in the first nine months of ~~2017~~2019 compared to ~~16.5%~~16.7% in the first nine months of 2016. The gross profit margin in PE Films increased due to higher volume, favorable sales mix and production efficiencies in surface protection films 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. The gross profit margin in Flexible Packaging Films decreased significantly 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.2018. The gross profit margin in Aluminum Extrusions increased primarily as a result of higher selling prices. The increase in gross profit margin in PE Films was primarily due to higher sales at improved margins ~~achieved by Futura, partially offset by higher depreciation and inefficiencies related to~~in Surface Protection. The gross profit margin in Flexible Packaging Films was flat with the ~~startup of a new line at Niles, Michigan.~~prior year.

As a percentage of sales, SG&A and R&D expenses were ~~10.8%~~11.3% in the first nine months of ~~2017,~~2019, compared with ~~11.5%~~9.8% in the first nine months of last ~~year, a reduction from the prior~~ year. SG&A ~~expense decreases in 2017 included lower pension expense and~~expenses were up year-over-year, while net sales declined. Increased spending was due to higher stock-based employee ~~benefit~~compensation and consulting fees due to to remediation activities and other costs ~~partially offset by Futura acquisition and integration costs and~~relating to the Company’s material weaknesses in internal control over financial reporting, business development ~~costs.~~activities, and implementation of new accounting guidance.

~~Plant~~

Pre-tax losses associated with plant shutdowns, asset impairments, restructurings and other items for continuing operations in the first nine months of ~~2017~~2019 and ~~2016~~2018 detailed below are shown in the ~~segment~~statements of net sales and operating profit by segment table in Note 1011 and are ~~described~~included in ~~detail~~“Asset impairments and costs associated with exit and disposal activities, net of adjustments” in ~~Note 3. A discussion~~the consolidated statements of ~~unrealized gains and losses on investments can also be found in Note 7.~~income, unless otherwise noted.



($ in millions)			Nine Months Ended September 30,
			2019			2018
Aluminum Extrusions:
Losses associated with plant shutdowns, asset impairments and restructurings:
	Other restructuring costs - severance		$	—		$	0.1

Losses from sale of assets, investment writedowns and other items:
	Wind damage to roof of Elkhart, Indiana plant²		0.3			0.1
	Environmental charges at Carthage Tennessee plant¹		0.3			0.2
		Total	0.6			0.3
		Total for Aluminum Extrusions	$	0.6		$	0.4

PE Films:
(Gains)/losses associated with plant shutdowns, asset impairments and restructurings:
	Shanghai plant shutdown:
		Asset-related expenses	$	0.6		$	0.1
		Employee-related expenses	0.1			1.4
		Employee related expenses - administrative¹	—			0.3
		Gain from sale of plant³	(6.3		)	—
		Accelerated depreciation¹	—			0.5
	Consolidation of Personal Care manufacturing facilities - U.S. and Europe:⁴
		Severance	0.6			—
		Asset impairment	0.1			—
	Lake Zurich, Illinois plant shutdown and transfer of production to new elastics lines in Terre Haute, Indiana:⁴
		Severance	0.7			—
		Asset impairment	0.2			—
		Accelerated depreciation¹	0.8			—
		Product qualifications¹	0.2			—
	Reserve for inventory impairment - Personal Care's Hungary facility		0.2			—
	Other restructuring costs - severance		0.7			0.3
	Write-off Personal Care production line - Guangzhou, China facility		0.4			—
		Total	(1.7		)	2.6

Losses from sale of assets, investment writedowns and other items:
	Estimated excess costs associated with ramp-up of new product offerings and additional expenses related to strategic capacity expansion projects¹		0.8			1.7
	Costs to prepare a market study²		—			0.2
		Total	0.8			1.9

		Total for PE Films	$	(0.9	)	$	4.5

Corporate:
	Professional fees associated with: remediation activities and other costs relating to the Company’s material weaknesses in internal control over financial reporting; business development activities; and implementation of new accounting guidance²		$	4.5		$	0.5
1. Included in “Cost of goods sold” in the consolidated statements of income. 2. Included in “Selling, general and administrative” in the consolidated statements of income. 3. Included in “Other income (expense), net” in the consolidated statements of income. 4. See additional details in Note 3.

Interest expense ~~increased from $2.9~~was $3.4 million in the first nine months of ~~2016~~2019 compared to ~~$4.6~~$4.5 million in the first nine months of ~~2017. In February 2017, the Company borrowed $87 million under its Credit Agreement~~2018, primarily due 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.~~

lower average debt levels. Average debt outstanding and interest rates were as follows:


	Nine Months Ended September 30,						Nine Months Ended September 30,
(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		$	93.1		$	129.6
Average interest rate	2.9		%	2.3		%	4.1		%	3.7		%
Fixed-rate and other debt:
Average outstanding debt balance	$	—		$	—
Average interest rate	n/a			n/a
Total debt:
Average outstanding debt balance	$	177.6		$	104.8
Average interest rate	2.9		%	2.3		%

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~~2019 are summarized as follows:

Accounts and other receivables ~~increased $29.6~~decreased $9.1 million ~~(30.4%~~(7.3%).

Accounts ~~receivable~~and other receivables in ~~PE Films increased~~Aluminum Extrusions decreased by ~~$6.0~~$4.4 million primarily due to ~~higher~~lower sales volume ~~for surface protection films and personal care films,~~ 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~~47.5 days for the 12 months ended September 30, ~~2017~~2019 and ~~45.7~~44.6 days for the 12 months ended December 31, ~~2016.~~2018.

Accounts ~~receivable~~and other receivables in ~~Flexible Packaging~~PE Films ~~were relatively flat.~~decreased by $6.5 million primarily due to lower net sales for Personal Care products, a focus on collection efforts and the timing of cash receipts. DSO was approximately ~~53.5~~43.5 days for the 12 months ended September 30, ~~2017~~2019 and ~~51.8~~43.2 days for the 12 months ended December 31, ~~2016.~~2018.

Accounts and other receivables in ~~Aluminum Extrusions~~Flexible Packaging Films increased by ~~$24.2~~$1.9 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~~37.5 days for the 12 months ended September 30, ~~2017~~2019 and ~~43.3~~43.7 days for the 12 months ended December 31, ~~2016.~~2018.

Inventories ~~increased $16.4~~decreased $8.5 million ~~(24.8%~~(9.1%).

Inventories in ~~PE Films increased~~Aluminum Extrusions decreased by ~~approximately $3.5~~$0.9 million ~~primarily~~ due to ~~increased production to accommodate higher demand 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 37.7 days for the 12 months ended September 30, 2019 and 33.5 days for the 12 months ended December 31, 2018.

Inventories in PE Films decreased by $2.4 million primarily due to lower sales and the timing of raw material purchases. DIO was approximately 54.2 days for the 12 months ended September 30, ~~2017~~2019 and ~~52.2~~54.9 days for the 12 months ended December 31, ~~2016.~~2018.

Inventories in Flexible Packaging Films decreased by approximately ~~$0.2~~$5.2 million primarily due to ~~the timing~~a reduction of finished goods on hand and overall reduction in raw material ~~purchases.~~levels. DIO was approximately ~~70.9~~95.1 days for the 12 months ended September 30, ~~2017~~2019 and ~~77.0~~77.9 days for the 12 months ended December 31, ~~2016.~~

Inventories in Aluminum Extrusions increased by $13.0 million due to the addition of balances from the acquisition of Futura, the restart of the Newnan, Georgia cast house and the timing of purchases. DIO was approximately 31.1 days for the 12 months ended September 30, 2017 and 26.5 days for the 12 months ended December 31, 2016.2018.

Net property, plant and equipment increased ~~$49.4~~$8.0 million ~~(18.9%~~(3.5%) primarily due to ~~property and equipment added from the acquisition of Futura of $32.7 million,~~ capital expenditures of $37.2 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~~$22.6 million, disposals of fixed assets of $4.6 million and the effect of changes in foreign exchange rates of $3.3 million.

~~Goodwill and other~~Other identifiable intangibles, ~~increased~~net decreased by ~~$36.9~~$5.3 million ~~(24.4%~~(14.6%) ~~primarily~~ due to ~~balances added from the acquisition of Futura of $41.1 million, partially offset by~~ amortization expense of ~~$4.6~~$5.2 million, which includes the acceleration of trade name amortization of $2.5 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 $8.8 million ~~(17.6%~~(7.8%).

Accounts payable in ~~PE Films increased $3.2~~Aluminum Extrusions decreased by $4.8 million primarily due to lower volume 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~~48.3 days for the 12 months ended September 30, ~~2017~~2019 and ~~38.5~~49.7 days for the 12 months ended December 31, ~~2016.~~2018.

Accounts payable in ~~Flexible Packaging~~PE Films decreased ~~$1.2~~$0.5 million due to the normal volatility associated with the timing of payments. DPO was approximately ~~42.2~~43.7 days for the 12 months ended September 30, ~~2017~~2019 and ~~39.5~~43.7 days for the 12 months ended December 31, ~~2016.~~2018.

Accounts payable in ~~Aluminum Extrusions increased by $12.5~~Flexible Packaging Films decreased $3.5 million ~~primarily~~ due to ~~the addition of balances from the acquisition of Futura, negotiation of favorable payment terms~~lower inventory levels and the normal volatility associated with the timing of payments. DPO was approximately ~~48.2~~55.5 days for the 12 months ended September 30, ~~2017~~2019 and ~~45.4~~51.9 days for the 12 months ended December 31, ~~2016.~~2018.

Accrued expenses increased by ~~$3.1~~$5.2 million (~~8.1%~~ (12.2%) from December 31, ~~2016~~2018 primarily due to ~~normal fluctuations~~higher stock-based compensation accruals and accruals for severance payments related to restructurings and plant shutdowns in ~~the accounts.~~

Personal Care.

Cash provided by operating activities was ~~$53.5~~$86.3 million in the first nine months of ~~2017~~2019 compared with ~~$34.5~~$93.0 million in the first nine months of ~~2016.~~2018. The ~~change~~decrease is primarily ~~related~~due to ~~normal volatility~~the net of ~~working capital components.~~income tax refunds received in 2018 over income tax payments made in the same period in 2019 ($25.0 million), partially offset by the receipt of a $17.6 million dividend from kaléo in 2019.

Cash used in investing activities was ~~$124.2~~$26.3 million in the first nine months of ~~2017~~2019 compared with ~~$29.5~~$19.7 million in the first nine months of ~~2016.~~2018. Cash used in investing activities primarily represents ~~the acquisition of Futura in 2017 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~~$25.1 million in the first nine months of ~~2017~~2019 and ~~2016,~~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 as cash flows used in investing activities.

Cash ~~provided by~~used in financing activities ~~was $71.8~~of $47.5 million in the first nine months of ~~2017 and~~2019 was primarily related to net ~~borrowings~~repayments of $35.3 million (including debt financing fees of $1.8 million) under the Credit Agreement ~~to fund the acquisition of Futura for $87.1 million (including $5.0 million paid into the Earnout Escrow~~ and the payment of regular quarterly dividends of $11.3 million (34 cents per share). Cash used in financing activities of $70.9 million in the first nine months of 2018 was primarily related to net ~~settlement~~repayments of ~~post-closing adjustments of $0.1 million; see Note 2 for more details)~~$61.0 million under the Credit Agreement (as defined below) and the payment of regular quarterly dividends of $10.9 million (33 cents per share). Cash used in financing activities was $23.6 million in the first nine months of 2016 and was primarily related to the payment of regular quarterly dividends of $10.8 million (33 cents per share) and net repayments of debt and refinancing costs of $14.8 million.

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

On ~~March 1, 2016,~~June 28, 2019, Tredegar entered into a $500 million five-year, secured revolving credit agreement (“Credit Agreement”), with an option to increase that amount by $100 million. The Credit Agreement amends and restates the ~~Company executed its new five-year,~~Company’s previous $400 million five-year, secured revolving credit agreement that ~~expires~~was due to expire on March 1, ~~2021 (“Credit Agreement”), replacing the previous $350 million unsecured revolving credit agreement.~~ 2021.

Net capitalization and indebtedness as defined under the Credit Agreement as of September 30, ~~2017~~2019 were as follows:


Net Capitalization and Indebtedness as of September 30, 2017
(In Thousands)
Net Capitalization and Indebtedness as of September 30, 2019			Net Capitalization and Indebtedness as of September 30, 2019
(In thousands)			(In thousands)
Net capitalization:
Cash and cash equivalents	$	31,850	$	36,886
Debt:
Credit Agreement	177,000		68,000
Debt, net of cash and cash equivalents	145,150		31,114
Shareholders’ equity	373,914		397,835
Net capitalization	$	519,064	$	428,949
Indebtedness as defined in Credit Agreement:
Total debt	$	177,000	$	68,000
Face value of letters of credit	2,685
Other	422		—
Indebtedness	$	180,107	$	68,000

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	Credit Spread Over LIBOR	Commitment Fee
> 3.5x but <= 4.0x	250	45	200.0	40
> 3.0x but <= 3.5x	225	40	187.5	35
> 2.0x but <= 3.0x	200	35	175.0	30
> 1.0x but <= 2.0x	175	30	162.5	25
<= 1.0x	150	25	150.0	20



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)



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



Large accelerated filer	¨	Accelerated filer	x	Smaller reporting company	¨

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


	September 30,			December 31,			September 30,			December 31,
	2017			2016			2019			2018
Assets
Current assets:
Cash and cash equivalents	$	31,850		$	29,511		$	36,886		$	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
Restricted cash							7,766			—
Accounts and other receivables, net of allowance for doubtful accounts and sales returns of $3,140 in 2019 and $2,937 in 2018							115,661			124,727
Income taxes recoverable	8,260			7,518			5,263			6,783
Inventories	82,426			66,069			85,315			93,810
Prepaid expenses and other	8,354			7,738			9,438			9,564
Total current assets	257,854			208,224			260,329			269,281
Property, plant and equipment, at cost	881,139			797,630			796,829			793,072
Less accumulated depreciation	(571,062		)	(536,905		)	(560,493		)	(564,703		)
Net property, plant and equipment	310,077			260,725			236,336			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							19,526			—
Investment in kaléo (cost basis of $7,500)							95,500			84,600
Identifiable intangible assets, net							31,010			36,295
Goodwill							81,404			81,404
Deferred income taxes							1,740			3,412
Other assets							5,089			4,012
Total assets	$	811,948		$	651,162		$	730,934		$	707,373
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	95,684		$	81,342		$	103,926		$	112,758
Accrued expenses	41,776			38,647			47,677			42,495
Lease liability, short-term							2,842			—
Total current liabilities	137,460			119,989			154,445			155,253
Lease liability, long-term							18,197			—
Long-term debt	177,000			95,000			68,000			101,500
Pension and other postretirement benefit obligations, net							80,665			88,124
Deferred income taxes	25,767			21,110			6,816			—
Other noncurrent liabilities	97,807			104,280			4,976			7,639
Total liabilities	438,034			340,379			333,099			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 - 33,350,128 shares at September 30, 2019 and 33,176,024 shares at December 31, 2018)							42,708			38,892
Common stock held in trust for savings restoration plan (74,338 shares at September 30, 2019 and 72,883 shares at December 31, 2018)							(1,583		)	(1,559		)
Accumulated other comprehensive income (loss):
Foreign currency translation adjustment	(84,153		)	(93,970		)	(103,231		)	(96,940		)
Gain on derivative financial instruments	1,151			863
Gain (loss) on derivative financial instruments							(2,457		)	(1,601		)
Pension and other post-retirement benefit adjustments	(84,373		)	(90,127		)	(75,210		)	(81,446		)
Retained earnings	508,782			463,507			537,608			497,511
Total shareholders’ equity	373,914			310,783			397,835			354,857
Total liabilities and shareholders’ equity	$	811,948		$	651,162		$	730,934		$	707,373



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



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



									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



(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.


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


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)


(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			(6,291		)	(3,065		)	—			(9,356		)
Amounts reclassified from accumulated other comprehensive income (loss)	—			(529		)	5,754			5,225			—			2,209			6,236			8,445
Net other comprehensive income (loss) - current period	9,817			288			5,754			15,859			(6,291		)	(856		)	6,236			(911		)
Ending balance, September 30, 2017	$	(84,153	)	$	1,151		$	(84,373	)	$	(167,375	)
Ending balance, September 30, 2019													$	(103,231	)	$	(2,457	)	$	(75,210	)	$	(180,898	)


(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	$	(816	)	Cost of sales
Foreign currency forward contracts, before taxes					(101		)	Selling, general & administrative
Foreign currency forward contracts, before taxes	15			Cost of sales	15			Cost of sales
Total, before taxes	246				(902		)
Income tax expense (benefit)	90			Income taxes	(179		)	Income taxes
Total, net of tax	$	156			$	(723	)
Amortization of pension and other post-retirement benefits:
Actuarial gain (loss) and prior service costs, before taxes	$	(2,911	)	(a)	$	(2,672	)	(a)
Income tax expense (benefit)	(1,057		)	Income taxes	(593		)	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).


Item 1.	Financial Statements.


	Three Months Ended September 30,					Nine Months Ended September 30,				Three Months Ended September 30,						Nine Months Ended September 30,
	2017		2016			2017		2016		2019			2018			2019		2018
Revenues and other items:
Sales	$	247,121	$	207,702		$	715,494	$	623,569	$	243,217		$	267,294		$	739,931	$	789,765
Other income (expense), net	34		388			38,055		1,481		10,634			(2,557		)	34,840		11,532
	247,155		208,090			753,549		625,050		253,851			264,737			774,771		801,297
Costs and expenses:
Cost of goods sold	196,393		166,622			575,614		499,504		191,565			217,378			584,799		631,235
Freight	8,621		7,153			24,840		21,221		8,986			9,438			26,893		26,667
Selling, general and administrative	21,214		17,383			63,438		57,027		23,130			20,676			69,006		63,452
Research and development	4,455		4,519			14,028		14,458		4,942			5,150			14,877		14,107
Amortization of intangibles	1,658		1,019			4,550		2,965
Amortization of identifiable intangibles										3,400			1,022			5,182		3,076
Pension and postretirement benefits										2,415			2,653			7,246		7,809
Interest expense	1,757		886			4,579		2,918		859			1,318			3,354		4,539
Asset impairments and costs associated with exit and disposal activities, net of adjustments	361		1,129			653		2,355		1,464			1,209			3,595		1,799
Goodwill impairment										—			46,792			—		46,792
Total	234,459		198,711			687,702		600,448		236,761			305,636			714,952		799,476
Income before income taxes	12,696		9,379			65,847		24,602
Income taxes (benefit)	4,422		(2,669		)	9,667		1,864
Net income	$	8,274	$	12,048		$	56,180	$	22,738
Income (loss) before income taxes										17,090			(40,899		)	59,819		1,821
Income tax expense (benefit)										(43		)	(6,699		)	8,424		3,135
Net income (loss)										$	17,133		$	(34,200	)	$	51,395	$	(1,314	)

Earnings per share:
Earnings (loss) per share:
Basic	$	0.25	$	0.37		$	1.71	$	0.69	$	0.51		$	(1.03	)	$	1.55	$	(0.04	)
Diluted	$	0.25	$	0.37		$	1.70	$	0.69	$	0.51		$	(1.03	)	$	1.55	$	(0.04	)
Shares used to compute earnings per share:
Shares used to compute earnings (loss) per share:
Basic	32,954		32,818			32,945		32,730		33,271			33,110			33,222		33,056
Diluted	32,954		32,828			32,952		32,733		33,285			33,110			33,230		33,056
Dividends per share	$	0.11	$	0.11		$	0.33	$	0.33	$	0.12		$	0.11		$	0.34	$	0.33


~~(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).~~



($ Millions)			EV-to-Adjusted EBITDA Multiple
			7.0 x		8.0 x		9.0 x		10.0x		11.0x
Weighting to DCF Method	50	%	$	85.2	$	91.4	$	97.6	$	103.8	$	109.9
	40	%	$	82.1	$	89.5	$	96.9	$	104.3	$	111.7
	30	%	$	78.9	$	87.6	$	96.2	$	104.9	$	113.5
	20	%	$	75.8	$	85.6	$	95.5	$	105.4	$	115.3
	10	%	$	72.6	$	83.7	$	94.8	$	106.0	$	117.1
	0	%	$	69.5	$	81.8	$	94.2	$	106.5	$	118.9



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



	September 30, 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	$	—		Prepaid expenses and other	$	37
Liability derivatives: Foreign currency forward contracts	Accrued expenses	(1,857		)	Accrued expenses	(1,090		)
Net asset (liability)		$	(1,857	)		$	(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

$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	3.7966	R$5,315	Jan-20	50%
$1,400	3.8041	R$5,326	Feb-20	51%
$1,400	3.8086	R$5,332	Mar-20	48%
$1,400	3.8163	R$5,343	Apr-20	49%
$1,400	3.8244	R$5,354	May-20	50%
$1,400	3.8323	R$5,365	Jun-20	49%
$1,400	3.8426	R$5,380	Jul-20	47%
$1,400	3.8545	R$5,396	Aug-20	49%
$1,400	3.8656	R$5,412	Sep-20	48%
$1,400	3.8769	R$5,428	Oct-20	49%
$1,400	3.8877	R$5,443	Nov-20	49%
$1,400	3.8997	R$5,460	Dec-20	53%
$22,200	3.8645	R$85,792		53%



(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


	Pension Benefits						Other Post-Retirement Benefits						Pension Benefits						Other Post-Retirement Benefits
	Three Months Ended September 30,						Three Months Ended September 30,						Three Months Ended September 30,						Three Months Ended September 30,
(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		$	—		$	7		$	9		$	7
Interest cost	9,431			9,993			226			236			3,067			2,818			72			65
Expected return on plan assets	(11,216		)	(12,027		)	—			—			(3,404		)	(3,736		)	—			—
Amortization of prior service costs, (gains) losses and net transition asset	9,241			9,903			(207		)	(144		)	2,729			3,565			(58		)	(75		)
Net periodic benefit cost	$	7,601		$	8,047		$	44		$	121		$	2,392		$	2,654		$	23		$	(3	)

													Pension Benefits						Other Post-Retirement Benefits
													Nine Months Ended September 30,						Nine Months Ended September 30,
(In thousands)													2019			2018			2019			2018
Service cost													$	—		$	17		$	25		$	27
Interest cost													9,202			8,582			218			203
Expected return on plan assets													(10,212		)	(11,258		)	—			—
Amortization of prior service costs, (gains) losses and net transition asset													8,188			10,421			(173		)	(183		)
Net periodic benefit cost													$	7,178		$	7,762		$	70		$	47


~~10.~~10	~~The Company’s business segments are PE Films, Flexible Packaging Films and Aluminum Extrusions.~~OTHER INCOME (EXPENSE), NET



Net Sales by Geographic Area (a)
	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2019		2018		2019		2018
United States	$	156,469	$	176,022	$	491,511	$	506,769
Exports from the United States to:
Asia	23,344		14,893		61,350		57,370
Latin America	3,332		3,104		8,869		9,810
Canada	2,429		13,451		11,906		40,988
Europe	1,616		1,608		4,493		5,127
Operations outside the United States:
Brazil	29,481		26,591		85,202		73,402
The Netherlands	9,471		11,428		27,508		34,750
Hungary	6,404		7,987		18,400		25,324
India	1,685		396		3,574		3,216
China	—		2,376		225		6,342
Total	$	234,231	$	257,856	$	713,038	$	763,098



Net Sales by Product Group
	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2019		2018		2019		2018
Aluminum Extrusions:
Nonresidential building & construction	$	64,341	$	75,870	$	202,998	$	213,500
Consumer durables	12,939		14,991		44,865		47,300
Automotive	11,091		13,205		36,214		33,992
Residential building & construction	11,110		11,163		33,060		32,976
Electrical	10,468		12,093		31,910		30,243
Machinery & equipment	10,191		11,191		29,585		30,335
Distribution	9,366		9,148		26,678		32,109
Subtotal	129,506		147,661		405,310		420,455
PE Films:
Personal care materials	40,958		57,356		123,770		174,985
Surface protection films	27,052		17,193		76,194		71,926
LED lighting products & other films	1,827		1,921		5,814		5,266
Subtotal	69,837		76,470		205,778		252,177
Flexible Packaging Films	34,888		33,725		101,950		90,466
Total	$	234,231	$	257,856	$	713,038	$	763,098



	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



(In thousands)		As of September 30, 2019
Maturity of Lease Liabilities	Future Lease Payments
2019 (remaining)		$	923
2020		3,686
2021		3,473
2022		2,547
2023		2,411
Thereafter		12,182
Total undiscounted operating lease payments		25,222
Less: Imputed interest		4,183
Present value of operating lease liabilities		$	21,039

Balance Sheet Classification
Lease liabilities, short-term		$	2,842
Lease liabilities, long-term		18,197
Total operating lease liabilities		$	21,039

Other Information:
Weighted-average remaining lease term for operating leases		9 Years
Weighted-average discount rate for operating leases		4.32		%



(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



Pricing Under Credit Revolving Agreement (Basis Points)
Indebtedness-to-Adjusted EBITDA Ratio	Credit Spread Over LIBOR	Commitment Fee
> 3.5x but <= 4.0x	200.0	40
> 3.0x but <= 3.5x	187.5	35
> 2.0x but <= 3.0x	175.0	30
> 1.0x but <= 2.0x	162.5	25
<= 1.0x	150.0	20


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



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:
Net income (loss)	$	57,908
Plus:
After-tax losses related to discontinued operations	—
Total income tax expense for continuing operations	11,020
Interest expense	5,467
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
Charges related to stock option grants and awards accounted for under the fair value-based method	185
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		)
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		)
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		)
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
Less: Depreciation and amortization expense for continuing operations (including pro forma for acquisitions and asset dispositions)	(40,183		)
Adjusted EBIT as defined in the Credit Agreement	$	58,884
Computations of leverage and interest coverage ratios as defined in the Credit Agreement at September 30, 2017:
Leverage ratio (indebtedness-to-adjusted EBITDA)	1.82x
Interest coverage ratio (adjusted EBIT-to-interest expense)	10.77x
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
Maximum leverage ratio permitted	4.00
Minimum interest coverage ratio permitted	2.50



Computations of Adjusted EBITDA, 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, 2019 (In Thousands)
Computation of adjusted EBITDA as defined in the Credit Agreement for the twelve months ended September 30, 2019:
Net income (loss)	$	77,550
Plus:
After-tax losses related to discontinued operations	—
Total income tax expense for continuing operations	16,815
Interest expense	4,517
Depreciation and amortization expense (excluding amortization of right-of-use lease assets) for continuing operations	36,210
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 $10,000)	11,079
Charges related to stock option grants and awards accounted for under the fair value-based method	2,536
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	(242		)
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	(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	(47,182		)
Plus cash dividends declared on investments in an amount not to exceed $10,000 for such period	10,000
Plus or minus, as applicable, pro forma EBITDA adjustments associated with acquisitions and asset dispositions	—
Adjusted EBITDA as defined in the Credit Agreement	111,033
Computations of leverage and interest coverage ratios as defined in the Credit Agreement at September 30, 2019:
Leverage ratio (indebtedness-to-adjusted EBITDA)	.61x
Interest coverage ratio (adjusted EBITDA-to-interest expense)	24.58x
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 ($130,000 plus 50% of net income generated for each quarter beginning April 1, 2019)	$	145,805
Maximum leverage ratio permitted	4.00
Minimum interest coverage ratio permitted	3.00


Item 3.	Quantitative and Qualitative Disclosures About Market Risk.

																	Percentage of Net Sales from Ongoing Operations Related to Foreign Markets*
	Nine Months Ended September 30,								Nine Months Ended September 30,
	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		6		1		8
Latin America	2		9		—		11		1		12		1		10
Asia	9		2		9		3		9		1		8		1
Total	17	%	20	%	16	%	24	%	13	%	19	%	15	%	19	%
* The percentages for foreign markets are relative to Tredegar’s total net sales from ongoing operations


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.