Segment Reporting

6 Months Ended

Jun. 30, 2020

The Company’s business segments are Aluminum Extrusions, PE Films, and Flexible Packaging Films. Information by business segment is reported below. There are no accounting transactions between segments and no allocations to segments.

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 (“EBITDA”) from ongoing operations is the key profitability measure used by the CODM (Tredegar’s President and Chief Executive Officer) for purposes of assessing 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.

The following table presents net sales and EBITDA from ongoing operations by segment for the three and six months ended June 30, 2020 and 2019:


	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2020		2019		2020		2019
Net Sales
Aluminum Extrusions	$	106,058	$	136,757	$	223,945	$	275,804
PE Films	71,012		69,161		142,273		135,941
Flexible Packaging Films	34,104		33,443		64,678		67,062
Total net sales	211,174		239,361		430,896		478,807
Add back freight	7,464		8,887		16,044		17,907
Sales as shown in the Consolidated Statements of Income	$	218,638	$	248,248	$	446,940	$	496,714
EBITDA from Ongoing Operations
Aluminum Extrusions:
Ongoing operations:
EBITDA	$	13,279	$	18,600	$	24,956	$	34,767
Depreciation & amortization	(4,267)		(4,082)		(8,380)		(8,164)
EBIT	9,012		14,518		16,576		26,603
Plant shutdowns, asset impairments, restructurings and other	(1,230)		(17)		(1,918)		(57)
Goodwill impairment	—		—		(13,696)		—
PE Films:
Ongoing operations:
EBITDA	15,319		11,160		29,507		17,703
Depreciation & amortization	(3,753)		(3,394)		(7,477)		(6,986)
EBIT	11,566		7,766		22,030		10,717
Plant shutdowns, asset impairments, restructurings and other	(646)		(1,523)		(1,552)		(2,901)

Flexible Packaging Films:
Ongoing operations:
EBITDA	6,495		2,880		13,048		6,084
Depreciation & amortization	(436)		(363)		(864)		(707)
EBIT	6,059		2,517		12,184		5,377
Plant shutdowns, asset impairments, restructurings and other	(10)		—		(10)		—

Total	24,751		23,261		33,614		39,739
Interest income	24		48		76		107
Interest expense	548		1,263		1,104		2,495

Gain (loss) on investment in kaléo accounted for under fair value method	1,300		7,100		(24,800)		24,182


Stock option-based compensation costs	725		898		1,309		1,313
Corporate expenses, net	10,542		9,331		21,080		17,492
Income (loss) before income taxes	14,260		18,917		(14,603)		42,728
Income tax expense (benefit)	3,064		4,440		(3,477)		8,467


Net income (loss)	$	11,196	$	14,477	$	(11,126)	$	34,261

The following table presents identifiable assets by segment at June 30, 2020 and December 31, 2019:


(In thousands)	June 30, 2020		December 31, 2019
Aluminum Extrusions	$	240,905	$	265,027
PE Films	226,027		230,415
Flexible Packaging Films	66,011		74,016
Subtotal	532,943		569,458
General corporate	85,934		111,788
Cash and cash equivalents	39,930		31,422
Total	$	658,807	$	712,668

The following tables disaggregate the Company’s revenue by geographic area and product group for the three and six months ended June 30, 2020 and 2019:


Net Sales by Geographic Area (a)
	Three Months Ended June 30,							Six Months Ended June 30,
(In thousands)		2020		2019		2020			2019
United States		$	141,559	$	162,788	$	287,742		$	335,042
Exports from the United States to:
Asia		23,643		24,513		45,807			38,006
Latin America		2,078		2,670		5,212			5,537
Canada		1,854		5,872		6,752			9,477
Europe		1,562		1,517		3,063			2,877
Operations outside the United States:
Brazil		25,739		27,582		51,687			55,721
The Netherlands		7,132		8,450		15,017			18,037
Hungary		5,751		5,162		12,355			11,996
India		1,856		807		3,261			1,884
China		—		—		—			230

Total		$	211,174	$	239,361	$	430,896		$	478,807

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

The Company’s facilities in Pottsville, PA (“PV”) and Guangzhou, China (“GZ”) have a tolling arrangement whereby certain surface protection films are manufactured in GZ for a fee with raw materials supplied from PV that are then sold by GZ directly to customers principally in the Asian market, but paid by customers directly to PV. Amounts associated with this intercompany tolling arrangement are reported in the table above as export sales from the U.S. to Asia, and include net sales of $32.1 million in 2019, $10.0 million and $7.5 million in the second quarters of 2020 and 2019, respectively, and $19.3 millionand $12.7 million in the first six months of 2020 and 2019, respectively.


Net Sales by Product Group
	Three Months Ended June 30,							Six Months Ended June 30,
(In thousands)		2020		2019		2020			2019
Aluminum Extrusions:
Nonresidential building & construction		$	64,726	$	69,019	$	127,865		$	138,657
Consumer durables		7,782		16,381		20,331			31,926
Automotive		5,572		12,496		15,043			25,123
Residential building & construction		9,052		10,278		18,867			21,950
Electrical		4,775		10,373		12,014			21,442
Machinery & equipment		7,630		9,471		15,566			19,394
Distribution		6,521		8,739		14,259			17,312

Subtotal		106,058		136,757		223,945			275,804
PE Films:
Personal care materials		36,258		37,956		77,488			82,812
Surface protection films		31,699		29,253		60,052			49,142
LED lighting products & other films		3,055		1,952		4,733			3,987
Subtotal		71,012		69,161		142,273			135,941



Flexible Packaging Films		34,104		33,443		64,678			67,062
		$	211,174	$	239,361	$	430,896		$	478,807