Impairment (Notes)

9 Months Ended

Sep. 30, 2018

15.

The Company assesses goodwill for impairment on an annual basis at a minimum (December 1st of each year) or when events or circumstances indicate that the carrying value may not be recoverable. Goodwill is assessed for impairment at the reporting unit level. Tredegar’s reporting units with goodwill are the Personal Care and Surface Protection operating divisions of PE Films and the AACOA and Futura operating divisions of Aluminum Extrusions. The Company estimates the fair value of its reporting units using discounted cash flow analysis and comparative enterprise value-to-EBITDA multiples.

The operations of PE Films have been adversely impacted by a customer transition to alternative suppliers and materials, resulting in the expected loss of business of approximately $70 million annually when the transitions are implemented, which may occur by the end of 2019. Based on an evaluation of projections under various business planning scenarios, the Company concluded that the value of the Personal Care component of PE Films was less than the carrying value of underlying working capital and long-lived net assets. Accordingly, a goodwill impairment charge of $46.8 million ($38.2 million after taxes) was recognized in PE Films in the third quarter of 2018. This impairment charge represents the entire amount of goodwill associated with the Personal Care component. The goodwill of Surface Protection, AACOA and Futura will be tested for impairment at the annual testing date unless there is an indicator of impairment identified at an earlier date.