BUSINESS SEGMENTS

The Company's business segments are Aluminum Extrusions, PE Films and Flexible Packaging Films. Aluminum Extrusions, also known as Bonnell Aluminum, 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). PE Films is comprised of the following operating segments: surface protection films, personal care materials, and films for other markets. Flexible Packaging Films is comprised of the Company’s polyester films business, Terphane Holdings LLC (“Terphane”).

The Company’s reportable segments are based on its method of internal reporting, which is generally segregated by differences in products. Accounting standards for presentation of segments require an approach based on the way the Company organizes the segments for making operating decisions and how the chief operating decision maker (“CODM”) assesses performance.

Earnings before interest, taxes, depreciation and amortization from ongoing operations (“EBITDA from ongoing operations”) is the measure of profit and loss used by the CODM (Tredegar’s President and Chief Executive Officer) for purposes of assessing financial performance. In the fourth quarter of 2019, the Company concluded that “EBITDA from ongoing operations,” instead of “operating profit from ongoing operations,” is the most relevant metric for measuring segment financial performance. EBITDA from ongoing operations is the key profitability metric used by Tredegar’s President and Chief Executive Officer, who was elected by the Tredegar Board of Directors in March 2019. This change resulted in a revision of the Company’s segment disclosures for all periods to report EBITDA from ongoing operations as the measure of segment financial performance. The Company uses sales less freight (“net sales”) as its measure of revenues from external customers at the segment level. This measure is separately included in the financial information regularly provided to the CODM.

PE Films’ net sales to The Procter & Gamble Company (“P&G”) totaled $58.8 million in 2019, $106.5 million in 2018 and $122.4 million in 2017. These sales include plastic film sold to others that convert the film into materials used with products manufactured by P&G.

Information by business segment and geographic area for the last three years is provided in the segment tables below. There were no accounting transactions between segments and no allocations to segments.



Net Sales
(In thousands)	2019		2018		2017
Aluminum Extrusions	$	529,602	$	573,126	$	466,833
PE Films	272,758		332,488		352,459
Flexible Packaging Films	133,935		123,830		108,355
Total net sales	936,295		1,029,444		927,647
Add back freight	36,063		36,027		33,683
Sales as shown in consolidated statements of income	$	972,358	$	1,065,471	$	961,330



EBITDA from Ongoing Operations
(In thousands)	2019			2018			2017
Aluminum Extrusions:
Ongoing operations:
EBITDA	$	65,683		$	65,479		$	58,524
Depreciation & amortization (c)	(16,719		)	(16,866		)	(15,070		)
EBIT	48,964			48,613			43,454
Plant shutdowns, asset impairments, restructurings and other (a)	(561		)	(505		)	321
Trade name accelerated amortization	(10,040		)	—			—
PE Films:
Ongoing operations:
EBITDA	37,803			51,058			55,889
Depreciation & amortization (c)	(14,627		)	(14,877		)	(14,343		)
EBIT	23,176			36,181			41,546
Plant shutdowns, asset impairments, restructurings and other (a)	(475		)	(5,905		)	(4,905		)
Goodwill impairment charge	—			(46,792		)	—
Flexible Packaging Films:
Ongoing operations:
EBITDA	14,737			11,154			7,817
Depreciation & amortization	(1,517		)	(1,262		)	(10,443		)
EBIT	13,220			9,892			(2,626		)
Plant shutdowns, asset impairments, restructurings and other (a)	—			(45		)	(89,398		)
Total	74,284			41,439			(11,608		)
Interest income	296			369			209
Interest expense	4,051			5,702			6,170
Gain on investment in kaléo accounted for under the fair value method (a)	28,482			30,600			33,800
Loss on sale of investment property (a)	—			(38		)	—
Unrealized loss on investment property (a)	—			(186		)	—
Stock option-based compensation expense	4,209			1,221			264
Corporate expenses, net (a)(d)	36,630			28,893			30,879
Income (loss) before income taxes	58,172			36,368			(14,912		)
Income tax expense (benefit) (a)	9,913			11,526			(53,163		)
Net income (loss)	$	48,259		$	24,842		$	38,251

See footnotes following the tables.



Identifiable Assets
(In thousands)	2019		2018
Aluminum Extrusions	$	265,027	$	281,372
PE Films	230,415		231,720
Flexible Packaging Films	74,016		58,964
Subtotal	569,458		572,056
General corporate	111,788		100,920
Cash and cash equivalents (b)	31,422		34,397
Total	$	712,668	$	707,373



	Depreciation and Amortization						Capital Expenditures
(In thousands)	2019		2018		2017		2019		2018		2017
Aluminum Extrusions	$	26,759	$	16,866	$	15,070	$	17,855	$	12,966	$	25,653
PE Films	15,822		15,513		14,609		23,920		21,998		15,029
Flexible Packaging Films	1,517		1,262		10,443		8,866		5,423		3,619
Subtotal	44,098		33,641		40,122		50,641		40,387		44,301
General corporate (d)	186		163		155		223		427		61
Total	$	44,284	$	33,804	$	40,277	$	50,864	$	40,814	$	44,362



Net Sales by Geographic Area (b)
(In thousands)	2019		2018		2017
United States	$	638,815	$	691,232	$	584,066
Exports from the United States to:
Asia	82,829		75,904		84,846
Canada	16,846		51,984		46,505
Europe	6,091		6,203		8,505
Latin America	13,735		12,106		15,199
Operations outside the United States:
Brazil	111,246		101,217		87,155
The Netherlands	35,871		45,667		54,380
Hungary	25,530		33,512		24,727
China	225		7,814		12,199
India	5,107		3,805		10,065
Total	$	936,295	$	1,029,444	$	927,647



	Identifiable Assets by Geographic Area (b)				Property, Plant & Equipment, Net by Geographic Area (b)
(In thousands)	2019		2018		2019		2018
United States	$	458,066	$	454,178	$	181,989	$	166,550
Operations outside the United States:
Brazil	54,698		52,796		20,542		16,072
The Netherlands	12,579		15,020		5,729		6,005
Hungary	20,179		23,615		13,715		15,436
China	18,056		21,610		16,210		19,213
India	5,880		4,837		3,316		3,692
General corporate	111,788		100,920		1,389		1,401
Cash and cash equivalents (b)	31,422		34,397		n/a		n/a
Total	$	712,668	$	707,373	$	242,890	$	228,369

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.



Net Sales by Product Group
(In thousands)	2019		2018		2017
Aluminum Extrusions:
Nonresidential building & construction	$	272,729	$	289,572	$	239,713
Consumer durables	57,607		66,416		54,126
Automotive	46,461		48,037		38,261
Machinery & equipment	38,657		41,899		33,450
Distribution	34,753		40,924		30,202
Residential building & construction	43,554		43,943		40,354
Electrical	35,841		42,335		30,727
Subtotal	529,602		573,126		466,833
PE Films:
Personal care materials	161,493		227,090		246,416
Surface protection films	103,893		98,126		99,079
LED-based products	7,372		7,272		6,964
Subtotal	272,758		332,488		352,459
Flexible Packaging Films	133,935		123,830		108,355
Total	$	936,295	$	1,029,444	$	927,647


(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)

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 $23.0 million and $31.1 million at December 31, 2019 and 2018, 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. The facility in Shanghai was shut down in the fourth quarter of 2018.


(c)	Depreciation and amortization for Aluminum Extrusions in 2019 excludes $10.0 million for accelerated amortization of trade names as a result of a rebranding initiative (see Note 8 for more information) and for PE Films in 2019, 2018 and 2017 excludes $1.2 million, $0.6 million and $0.3 million, respectively, for accelerated depreciation associated with restructurings and plant closures.


(d)	Corporate depreciation and amortization is included in Corporate expenses, net, on the EBITDA from ongoing operations table above.