BUSINESS SEGMENTS

The Company's business segments are PE Films, Flexible Packaging Films and Aluminum Extrusions. PE Films is comprised of the following operating segments: personal care materials, surface protection films, and LED lighting products. Flexible Packaging Films is comprised of the Company’s polyester films business, Terphane Holdings LLC (“Terphane”), which was acquired by Tredegar in October 2011. Aluminum Extrusions, which includes Bonnell Aluminum and its operating divisions, AACOA and Futura, produces high-quality, soft-alloy and medium-strength aluminum extrusions primarily for the following markets: building and construction, automotive, and specialty, which consists of consumer durables, machinery and equipment, electrical and distribution end-use products.

Information by business segment and geographic area for the last three years is provided below. There were no accounting transactions between segments and no allocations to segments. Net sales (sales less freight) and operating profit from ongoing operations are the measures of sales and operating profit used by the chief operating decision maker (Tredegar’s President and Chief Executive Officer) for purposes of assessing performance. PE Films’ net sales to The Procter & Gamble Company (“P&G”) totaled $122.4 million in 2017, $129.1 million in 2016 and $163.9 million in 2015. These amounts include plastic film sold to others that convert the film into materials used with products manufactured by P&G.



Net Sales
(In thousands)	2017		2016		2015
PE Films	$	352,459	$	331,146	$	385,550
Flexible Packaging Films	108,355		108,028		105,332
Aluminum Extrusions	466,833		360,098		375,457
Total net sales	927,647		799,272		866,339
Add back freight	33,683		29,069		29,838
Sales as shown in consolidated statements of income	$	961,330	$	828,341	$	896,177



Operating Profit
(In thousands)	2017			2016			2015
PE Films:
Ongoing operations	$	41,546		$	26,312		$	48,275
Plant shutdowns, asset impairments, restructurings and other (a)	(4,905		)	(4,602		)	(4,180		)
Flexible Packaging Films:
Ongoing operations	(2,626		)	1,774			5,453
Plant shutdowns, asset impairments, restructurings and other (a)	(89,398		)	(214		)	(185		)
Goodwill impairment charge	—			—			(44,465		)
Aluminum Extrusions:
Ongoing operations	43,454			37,794			30,432
Plant shutdowns, asset impairments, restructurings and other (a)	321			(741		)	(708		)
Total	(11,608		)	60,323			34,622
Interest income	209			261			294
Interest expense	6,170			3,806			3,502
Gain (loss) on investment in kaléo accounted for under the fair value method (a)	33,800			1,600			(20,500		)
Unrealized loss on investment property (a)	—			1,032			—
Stock option-based compensation expense	264			56			483
Corporate expenses, net (a)	30,879			29,607			33,638
Income (loss) before income taxes	(14,912		)	27,683			(23,207		)
Income tax expense (benefit) (a)	(53,163		)	3,217			8,928
Net income (loss)	$	38,251		$	24,466		$	(32,135	)



Identifiable Assets
(In thousands)	2017		2016
PE Films	$	289,514	$	278,558
Flexible Packaging Films	49,915		156,836
Aluminum Extrusions	268,127		147,639
Subtotal	607,556		583,033
General corporate (b)	111,696		38,618
Cash and cash equivalents (d)	36,491		29,511
Total	$	755,743	$	651,162



	Depreciation and Amortization						Capital Expenditures
(In thousands)	2017		2016		2015		2017		2016		2015
PE Films	$	14,609	$	13,653	$	15,480	$	15,029	$	25,759	$	21,218
Flexible Packaging Films	10,443		9,505		9,697		3,619		3,391		3,489
Aluminum Extrusions	15,070		9,173		9,698		25,653		15,918		8,124
Subtotal	40,122		32,331		34,875		44,301		45,068		32,831
General corporate	155		141		107		61		389		—
Total	$	40,277	$	32,472	$	34,982	$	44,362	$	45,457	$	32,831

See footnotes following the tables.



Net Sales by Geographic Area (d)
(In thousands)	2017		2016		2015
United States	$	584,066	$	475,734	$	528,881
Exports from the United States to:
Asia	84,846		73,220		75,383
Canada	46,505		45,683		45,290
Europe	8,505		7,348		9,809
Latin America	15,199		5,561		3,464
Operations outside the United States:
Brazil	87,155		90,571		89,829
The Netherlands	54,380		54,352		53,211
Hungary	24,727		24,207		32,612
China	12,199		14,390		18,919
India	10,065		8,206		8,941
Total (c)	$	927,647	$	799,272	$	866,339



	Identifiable Assets by Geographic Area (d)				Property, Plant & Equipment, Net by Geographic Area (d)
(In thousands)	2017		2016		2017		2016
United States (b)	$	475,844	$	367,406	$	156,054	$	118,661
Operations outside the United States:
Brazil	49,536		139,163		13,396		91,553
China	28,833		29,751		23,273		23,759
Hungary	28,573		20,610		18,230		15,117
The Netherlands	17,423		19,484		6,423		5,784
India	7,347		6,619		4,628		4,670
General corporate (b)	111,696		38,618		1,087		1,181
Cash and cash equivalents (d)	36,491		29,511		n/a		n/a
Total	$	755,743	$	651,162	$	223,091	$	260,725



Net Sales by Product Group
(In thousands)	2017		2016		2015
PE Films:
Personal care materials	$	246,416	$	238,213	$	287,768
Surface protection films	99,079		84,013		90,197
LED lighting products & other films	6,964		8,920		7,585
Subtotal	352,459		331,146		385,550
Flexible Packaging Films	108,355		108,028		105,332
Aluminum Extrusions:
Nonresidential building & construction	239,713		212,863		221,363
Consumer durables	54,126		39,293		41,835
Automotive	38,261		34,700		30,250
Machinery & equipment	33,450		20,872		18,102
Distribution	30,202		20,506		18,659
Residential building & construction	40,354		20,252		22,737
Electrical	30,727		11,612		22,511
Subtotal	466,833		360,098		375,457
Total	$	927,647	$	799,272	$	866,339

See footnotes following the tables and a reconciliation of net sales to sales as shown in the Consolidated Statements of Income in the first table of this Note 5.


(a)	See Notes 1, 3, 4 and 17 for more information on losses associated with plant shutdowns, asset impairments and restructurings, unusual items, gains or losses from sale of assets, gains or losses on an investment accounted for under the fair value method and other items.


(b)	The balance sheets include the funded status of each of the Company’s defined benefit pension and other postretirement plans. The funded status of the Company’s defined benefit pension plan was a net liability of $91.8 million and $88.6 million as of December 31, 2017 and 2016, respectively. See Note 13 for more information on the Company’s pension and other postretirement plans.


(c)	The difference between total consolidated sales as reported in the consolidated statements of income and segment, geographic and product group net sales reported in this note is freight of $33.7 million in 2017, $29.1 million in 2016 and $29.8 million in 2015.

(d)

Information on exports and foreign operations are provided on the previous page. Cash and cash equivalents includes funds held in locations outside the U.S. of $32.7 million and $23.8 million at December 31, 2017 and 2016, respectively. Export sales relate almost entirely to PE Films. Operations outside the U.S. in The Netherlands, Hungary, China and India also relate to PE Films. Operations in Brazil are primarily related to Flexible Packaging Films, but also include PE Films operations. Sales from locations in The Netherlands and Hungary are primarily to customers located in Europe. Sales from locations in China (Guangzhou and Shanghai) are primarily to customers located in China, but also include other customers in Asia.