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Item 1.	BUSINESS

•	Apertured film and laminate materials for use as topsheet in feminine hygiene products, baby diapers and adult incontinence products (including materials sold under the ComfortAire™, ComfortFeel™ and FreshFeel™ brand names);

•	Breathable, embossed and elastic materials for use as components for baby diapers, adult incontinence products and feminine hygiene products (including elastic components sold under the ExtraFlex™, FabriFlex™, FlexAire™ and FlexFeel™ brand names);

•	Absorbent transfer layers for baby diapers and adult incontinence products sold under the AquiDry® and AquiDry Plus™ brand names;

•	Thin-gauge films that are readily printable and convertible on conventional processing equipment for overwrap for bathroom tissue and paper towels; and

•	Polypropylene films for various industrial applications, including tape and automotive protection.

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Item 1A.	RISK FACTORS

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PE Films is highly dependent on sales associated with its top five customers, the largest of which is P&G. PE Films’ top five customers comprised approximately 29%, 32% and 38% of Tredegar’s consolidated net sales from continuing operations, in 2016, 2015 and 2014, respectively, with net sales to P&G alone comprising approximately 16%, 19% and 24% in 2016, 2015 and 2014, respectively. The loss or significant reduction of sales associated with one or more of these customers could have a material adverse effect on the Company’s business. Other factors that could adversely affect the business include, by way of example, (i) failure by a key customer to achieve success or maintain share in markets in which they sell products containing PE Films’ materials, (ii) key customers rolling out products utilizing technologies developed by others that replace PE Films’ business with such customer, (iii) delays in a key customer rolling out products utilizing new technologies developed by PE Films and (iv) operational decisions by a key customer that result in component substitution, inventory reductions and similar changes. While PE Films has undertaken efforts to expand its customer base, there can be no assurance that such efforts will be successful, or that they will offset any delay or loss of sales and profits associated with these large customers.

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PE Films depends on its ability to develop and deliver new products at competitive prices. Personal Care, Surface Protection and Bright View applications are now being made with a variety of new innovative materials and the overall cycle for bringing new films products to market has accelerated. While PE Films has substantial technological resources, there can be no assurance that its new products can be brought to market successfully, or if brought to market successfully, at the same level of profitability and market share of replaced films. The competitive dynamics in the personal care business require continuous development of new materials for customers.  The product development process for personal care materials, which spans from idea inception to product commercialization, is typically 24 to 48 months. A shift in customer preferences away from PE Films’ technologies, its inability to develop and deliver new profitable products, or delayed acceptance of its new products in domestic or foreign markets, could have a material adverse effect on its consolidated financial condition, results of operations and cash flows. In the long term, growth will depend on PE Films’ ability to provide innovative products at a price that meets the customers’ needs.

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PE Films and its customers operate in highly competitive markets. PE Films competes on product innovation, quality, price and service, and its businesses and their customers operate in highly competitive markets. Global market conditions continue to exacerbate the Company’s exposure to margin compression due to competitive forces, especially as certain products move into the later stages of their product life cycles. While PE Films continually works to identify new business opportunities with existing and new customers, primarily through the development of new products with improved performance and/or cost characteristics, there can be no assurances that such efforts will be successful, or that they will offset business lost from competitive dynamics or customer product transitions.

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Failure of PE Films’ customers, who are subject to cyclical downturns, to achieve success or maintain market share could adversely impact PE Films’ sales and operating margins. PE Films’ plastic films serve as components for various consumer products sold worldwide. A customer’s ability to successfully develop, manufacture and market those products is integral to PE Films’ success. In addition, many customers are in industries that are cyclical in nature and sensitive to changes in general economic conditions. During weak economic cycles, consumers of premium products made with or using PE Films’ components may shift to less premium, less expensive products, reducing the demand for PE Films’ plastic films. Cyclical downturns may negatively affect businesses that use PE Films’ plastic film products, which could adversely affect sales and operating margins.

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The Company’s inability to protect its intellectual property rights or its infringement of the intellectual property rights of others could have a material adverse impact on PE Films. PE Films operates in an industry where its significant customers and competitors have substantial intellectual property portfolios. The continued success of PE Films’ business depends on its ability not only to protect its own technologies and trade secrets, but also to develop and sell new products that do not infringe upon existing patents or threaten existing customer relationships. Intellectual property litigation is very costly and could result in substantial expense and diversions of Company resources, both of which could adversely affect its consolidated financial condition, results of operations and cash flows. In addition, there may be no effective legal recourse against infringement of the Company’s intellectual property by third parties, whether due to limitations on enforcement of rights in foreign jurisdictions or as a result of other factors. An unfavorable outcome in any intellectual property litigation or similar proceeding could have a material adverse effect on the consolidated financial condition, results of operations and cash flows of PE Films.

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An unstable economic environment could have a disruptive impact on PE Films’ supply chain. Certain raw materials used in manufacturing PE Films’ products are sourced from single suppliers, and PE Films may not be able to quickly or inexpensively re-source from other suppliers.  The risk of damage or disruption to its supply chain may increase if and when different suppliers consolidate their product portfolios or experience financial distress. Failure to take adequate steps to effectively manage such events, which are intensified when a product is procured from a single supplier or location, could adversely affect PE Films’ consolidated financial condition, results of operations and cash flows, as well as require additional resources to restore its supply chain.

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Our restructuring activities and cost saving initiatives may not achieve the results we anticipate. PE Films has undertaken and will continue to undertake restructuring activities and cost reduction initiatives to consolidate certain domestic production, improve operating efficiencies and generate cost savings. PE Films cannot be certain that it will be able to complete these initiatives as planned or that the estimated operating efficiencies or cost savings from such activities will be fully realized or maintained over time. In addition, PE Films may not be successful in moving production to other facilities or timely qualifying new production equipment. Failure to complete these initiatives could adversely affect PE Films’ financial condition, results of operations and cash flows.

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Uncertain economic conditions in Brazil and overcapacity in Latin American polyester film production could adversely impact the financial condition, results of operations and cash flows of Flexible Packaging Films. Flexible Packaging Films and its customers operate in a highly competitive global market for polyester films. Competition in Brazil, Terphane’s primary market, has been exacerbated by global overcapacity in the polyester industry, in general, and by particularly acute overcapacity in Latin America. Additional PET capacity from a competitor in Latin America is expected to come on line in the second quarter of 2017. In addition, Flexible Packaging Films operations have been adversely impacted by ongoing unfavorable economic and political conditions in Brazil, which accounted for approximately 52% of its overall sales in 2016.  These combined factors have resulted in significant competitive pricing pressures and U.S. Dollar equivalent margin compression. Moreover, variable conversion, fixed conversion and general, sales and administrative (“GS&A”) costs for operations in Brazil (“Operating Costs”) are expected to be adversely impacted by inflation that is higher than in the U.S.  The possible offsetting impact on U.S. Dollar equivalent Operating Costs from higher Brazilian Real inflation of depreciation in the value of the Real relative to the U.S. Dollar (i.e., purchasing power parity) may not occur.  There are many economic variables impacting currency exchange rates, and the Real could appreciate in value relative to the U.S. Dollar despite higher inflation resulting in U.S. Dollar equivalent Operating Costs being adversely affected by both higher Real inflation and Real appreciation.  Accordingly, the U.S. Dollar equivalent pricing/product margins related to the underlying Operating Costs may not move in the same direction with the combined result being a whipsaw of the U.S. Dollar equivalent operating profit for Flexible Packaging Films.

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Governmental failure to extend anti-dumping duties in Brazil on imported products or prevent competitors from circumventing such duties could adversely impact Flexible Packaging Films. In recent years, excess global capacity in the industry has led to increased competitive pressures from imports into Brazil. The Company believes that these conditions have shifted the competitive environment from a regional to a global landscape and have driven price convergence and lower product margins for Flexible Packaging Films. Recent favorable anti-dumping rulings have been issued against China, Egypt and India. Competitors not currently subject to anti-dumping duties may choose to utilize their excess capacity by selling product in Brazil, which may result in pricing pressures that Flexible Packaging Films may not be able to offset with cost savings measures and/or manufacturing efficiency initiatives. There can be no assurance that efforts to impose anti-dumping constraints on these competitors will be successful.

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Sales volume and profitability of Aluminum Extrusions is seasonal and cyclical and highly dependent on economic conditions of end-use markets in the U.S., particularly in the construction sector. Aluminum Extrusions’ end-use markets can be subject to seasonality as well as large cyclical swings in volume. Because of the capital intensive nature and level of fixed costs inherent in the aluminum extrusions business, the percentage drop in operating profits in a cyclical downturn will likely exceed the percentage drop in volume. In addition, during an economic slowdown, excess industry capacity often drives increased pricing pressure in many end-use markets as competitors protect their position with key customers. Any benefits associated with cost reductions and productivity improvements may not be sufficient to offset the adverse effects on profitability from pricing and margin pressure and higher bad debts (including a greater chance of loss associated with customers defaulting on fixed-price forward sales contracts) that usually accompany a downturn. In addition, higher energy costs can further reduce profits unless offset by price increases or cost reductions and productivity improvements.

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Failure to extend anti-dumping and countervailing duties on imported products or prevent competitors from circumventing such duties, or a reduction in such duties, could adversely impact Aluminum Extrusions. In years prior to 2011, imports into the U.S., primarily from China, represented an increasing portion of the U.S. aluminum extrusion market. However, due to an affirmative determination by the U.S. International Trade Commission in April 2011 that asserted that dumped and subsidized imports of aluminum extrusion from China unfairly and negatively impacted the domestic industry, the U.S. Department of Commerce has applied anti-dumping and countervailing duties to these imported products. As a result, aluminum extrusion imports from China have decreased significantly. While the risk to the domestic industry had been abated for a period of time, these protective duties were scheduled to expire in November 2016 but have been extended until a hearing can be held and a subsequent decision can be made on further extending the duties. A final decision on extending these duties is expected in March 2017. There are ongoing efforts within the U.S. aluminum extrusions industry supporting the extension of these protective duties. Chinese and other overseas manufacturers continue to try to circumvent anti-dumping duties, by both legal and illegal means. An unfavorable outcome on the continuation of U.S. anti-dumping duties, or a failure by U.S. trade officials to curtail efforts to circumvent those duties, could have a material adverse effect on the financial condition, results of operations and cash flows of Aluminum Extrusions.

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Competition from China could increase significantly if China is granted market economy status by the World Trade Organization. As of December 11, 2016 China’s automatic status as a non-market economy under World Trade Organization rules ended. As a result, China believes with respect to all Chinese-made products that it should receive market economy status and the rights attendant to that status under World Trade Organization rules.  The United States and the European Union have each rejected that interpretation with respect to at least certain products, and are expected to do so with respect to aluminum extrusions.  If China is granted market economy status by the United States government with respect to aluminum extrusions, that would likely create substantial pricing pressure on Aluminum Extrusions products and could have a material adverse effect on the financial condition, results of operations and cash flows of Aluminum Extrusions.

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The markets for Aluminum Extrusions’ products are highly competitive with product quality, service, delivery performance and price being the principal competitive factors. Aluminum Extrusions has approximately 1,500 customers that are in a variety of end-use markets within the broad categories of building and construction, distribution, automotive and other transportation, machinery and equipment, electrical and consumer durables. No single customer exceeds 4% of Aluminum Extrusions’ net sales. Future success and prospects depend on its ability to provide superior service, high quality products, timely delivery and competitive pricing to retain existing customers and participate in overall industry cross-cycle growth. Failure in any of these areas could lead to a loss of customers, which could have an adverse material effect on the financial condition, results of operations and cash flows of Aluminum Extrusions.

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Aluminum Extrusions may not have sufficient capacity to meet its growth targets and service all of its customers. In recent years, increased demand, primarily from the nonresidential building and construction sector, has pushed Aluminum Extrusions’ average capacity utilization in excess of 90%. Aluminum Extrusions’ ability to grow and service existing customers is closely tied to having sufficient capacity.

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Aluminum Extrusions’ efforts to expand the Company’s presence in the automotive market may not be successful. Aluminum Extrusions has made significant capital investments in recent years to increase sales to automotive and light truck tier suppliers. Efforts to expand product offerings and broaden the customer base are tied to successfully substituting the Company’s aluminum extrusions for current market alternatives. New Corporate Average Fuel Economy (“CAFE”) standards requiring material improvements in the automotive and light truck MPG (miles per gallon) by 2025, are expected to increase demand for lighter materials used in the vehicle’s body, some of which can be supplied by Aluminum Extrusions. If the demand does not increase and/or the alternative products offered by Aluminum Extrusions are not accepted by its customers or if CAFE standards are reduced or delayed, Aluminum Extrusions may not generate expected returns on its capital investments, which could have a material adverse effect on its consolidated financial condition, results of operations and cash flows.

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Tredegar has an underfunded defined benefit (pension) plan. Tredegar sponsors a pension plan that covers certain hourly and salaried employees in the U.S. The plan was substantially frozen to new participants in 2007, and frozen to benefit accruals for active participants in 2014. As of December 31, 2016, the plan was underfunded under U.S. generally accepted accounting principles (“GAAP”) measures by $88.6 million. Tredegar expects that it will be required to make a cash contribution of approximately $5.5 million to its underfunded pension plan in 2017, and may be required to make higher cash contributions in future periods depending on the level of interest rates and investment returns on plan assets.

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An impairment of our long-lived intangible assets, including goodwill, could have a material non-cash adverse impact on our results of operations. As of December 31, 2016, reporting units in PE Films and Aluminum Extrusions carried goodwill balances of $104.1 million and $13.7 million, respectively. PE Films’ goodwill balance was carried by its operating units, Personal Care Films and Surface Protection Films, at $46.8 million and $57.3 million, respectively. The Company assesses goodwill for impairment when events or circumstances indicate that the carrying value may not be recoverable, or, at a minimum, on an annual basis. The valuation of goodwill depends on a variety of factors, including the success in achieving the Company’s business goals, global market and economic conditions, earnings growth and expected cash flows, and goodwill impairment valuations can be sensitive to assumptions associated with such factors. Failure to successfully achieve projections could result in future impairments. Impairments to goodwill and other intangible assets may also be caused by factors outside the Company’s control, such as increasing competitive pricing pressures, changes in foreign exchange rates, lower than expected sales and profit growth rates, and various other factors. Significant and unanticipated changes could require a non-cash charge for impairment in a future period, which may significantly affect the Company’s results of operations in the period of such charge.

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Noncompliance with any of the covenants in the Company’s $400 million secured revolving credit facility, which matures in March of 2021, could result in all debt under the agreement outstanding at such time becoming due and limiting its borrowing capacity, which could have a material adverse effect on consolidated financial condition and liquidity. The credit agreement governing Tredegar’s secured revolving credit facility contains restrictions and financial covenants that, if violated, could restrict the Company’s operational and financial flexibility. Failure to comply with these covenants could result in an event of default, which if not cured or waived, would result in all outstanding debt under the credit facility at such time becoming due, which could have a material adverse effect on the Company’s consolidated financial condition and liquidity.

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Tredegar’s performance is influenced by costs incurred by its operating companies, including, for example, the cost of raw materials and energy. These costs include, without limitation, the cost of resin (the raw material on which PE Films primarily depends), PTA and MEG (the raw materials on which Flexible Packaging Films primarily depends), aluminum (the raw material on which Aluminum Extrusions primarily depends), natural gas (the principal fuel necessary for Aluminum Extrusions’ plants to operate), electricity and diesel fuel. Resin, aluminum and natural gas prices are extremely volatile as shown in the charts in the Quantitative and Qualitative Disclosures section. The Company attempts to mitigate the effects of increased costs through price increases and contractual pass-through provisions, but there are no assurances that higher prices can effectively be passed through to customers or that Tredegar will be able to offset fully or on a timely basis the effects of higher raw material and energy costs through price increases or pass-through arrangements. Further, the Company’s cost control efforts may not be sufficient to offset any increases in raw material, energy or other costs.

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Tredegar is subject to credit risk that is inherent with efforts to increase market share as the Company attempts to broaden its customer base. In the event of the deterioration of operating cash flows or diminished borrowing capacity of Tredegar’s customers, the collection of trade receivable balances may be delayed or deemed unlikely. The Company’s credit risk exposure could increase as business is expanded, including on export sales which generally have longer payment terms than domestic sales. In addition, the operations of the customers for Aluminum Extrusions generally follow the cycles within the economy, resulting in increased credit risk from diminished operating cash flows and greater risk of bankruptcy when the economy is deteriorating or in recession. In addition, difficult economic conditions in Brazil have resulted in increased credit risk to Flexible Packaging from customers whose businesses are detrimentally affected by those conditions.

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Tredegar may not be able to successfully identify, complete or integrate strategic acquisitions. From time to time, the Company evaluates acquisition candidates that fit its business objectives. Acquisitions, including our recent acquisition of Futura, involve special risks, including, without limitation, meeting revenue, margin, working capital and capital expenditure expectations that substantially drive valuation, diversion of management’s time and attention from existing businesses, the potential assumption of unanticipated liabilities and contingencies and potential difficulties in integrating acquired businesses and achieving anticipated operational improvements.  Acquired businesses may not achieve expected results.

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Tredegar is subject to various environmental laws and regulations and could become exposed to material liabilities and costs associated with such laws. The Company is subject to various environmental obligations and could become subject to additional obligations in the future. Changes in environmental laws and regulations, or their application, including, but not limited to, those relating to global climate change, could subject Tredegar to significant additional capital expenditures and operating expenses. Moreover, future developments in federal, state, local and international environmental laws and regulations are difficult to predict. Environmental laws have become and are expected to continue to become increasingly strict. As a result, Tredegar expects to be subject to new environmental laws and regulations. However, any such changes are uncertain and, therefore, it is not possible for the Company to predict with certainty the amount of additional capital expenditures or operating expenses that could be necessary for compliance with respect to any such changes. See Government Regulation in “Item 1. Business” for a further discussion of this risk factor.

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Material disruptions at one of the Company’s major manufacturing facilities could negatively impact financial results. Tredegar believes its facilities are operated in compliance with applicable local laws and regulations and that the Company has implemented measures to minimize the risks of disruption at its facilities. Such a disruption could be a result of any number of events, including but not limited to: an equipment failure with repairs requiring long lead times, labor stoppages or shortages, utility disruptions, constraints on the supply or delivery of critical raw materials, and severe weather conditions. A material disruption in one of the Company’s operating locations could negatively impact production and its consolidated financial condition, results of operations and cash flows.

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An information technology system failure may adversely affect the business. Tredegar relies on information technology systems to transact its business. An information technology system failure due to computer viruses, internal or external security breaches, cybersecurity attacks, power interruptions, hardware failures, fire, natural disasters, human error, or other causes could disrupt its operation and prevent it from being able to process transactions with its customers, operate its manufacturing facilities, and properly report transactions in a timely manner. A significant, protracted information technology system failure may adversely affect Tredegar’s results of operations, financial condition, or cash flows.

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An inability to renegotiate the Company’s collective bargaining agreements could adversely impact its consolidated financial condition, results of operations and cash flows. Some of the Company’s employees are represented by labor unions under various collective bargaining agreements with varying durations and expiration dates. Tredegar may not be able to satisfactorily renegotiate collective bargaining agreements when they expire, which could result in strikes or work stoppages or higher labor costs. In addition, existing collective bargaining agreements may not prevent a strike or work stoppage at the Company’s facilities in the future. Any such work stoppages (or potential work stoppages) could negatively impact Tredegar’s ability to manufacture its products and adversely affect its consolidated financial condition, results of operations and cash flows.

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Tredegar’s valuation of its $7.5 million cost-basis investment in kaléo is volatile and uncertain. Tredegar uses the fair value method to account for its ownership interest of approximately 19% in kaleo, Inc. (“kaléo”), a privately held specialty pharmaceutical company. There is no active secondary market for buying or selling stock in kaléo. The Company’s fair value estimates can fluctuate materially between reporting periods, primarily due to variances in performance versus expectations, and kaléo’s ability to meet developmental and commercialization milestones within an anticipated time frame. Commercial sales of kaléo’s first licensed product, an epinephrine auto-injector, commenced in the first quarter of 2013, and commercial sales of its second product, a naloxone auto-injector, commenced in the third quarter of 2014.

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Item 1B.	UNRESOLVED STAFF COMMENTS

Item 2.	PROPERTIES

Item 3.	LEGAL PROCEEDINGS

Item 4.	MINE SAFETY DISCLOSURES

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Item 5.	MARKET FOR TREDEGAR’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

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Item 6.	SELECTED FINANCIAL DATA

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(a)

Plant shutdowns, asset impairments, restructurings and other charges for 2016 include income of $0.4 million related to the explosion that occurred in the second quarter of 2016 at Bonnell’s 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 that are not recoverable from insurance of $0.6 million (included in “Selling, general and administrative”) and excess production costs for which recovery from insurance is not assured of $0.6 million (included in “Cost of goods sold” in the consolidated statements of income); charges of $4.3 million associated with the consolidation of domestic PE Films manufacturing facilities, which includes severance and other employee-related costs of $1.2 million, asset impairments of $0.4 million, accelerated depreciation of $0.6 million (included in “Cost of goods sold” in the consolidated statements of income) and other facility consolidation-related expenses of $2.0 million ($1.6 million is included in “Cost of goods sold” in the consolidated statements of income); charges of $0.4 million associated with a business development project included in “Selling, general and administrative” in the consolidated statements of income); charge 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); charges of $0.6 million associated with the acquisition of Futura Industries Corporation (included in “Selling, general and administrative” in the consolidated statements of income); charges of $0.5 million related to expected future environmental costs at the Company’s aluminum extrusions manufacturing facility in Newnan, Georgia (included in “Cost of goods sold” in the consolidated statements of income); charges of $0.3 million related to the settlement of a tax dispute in the Flexible Packaging Films segment (included in “Cost of goods sold” in the consolidated statements of income); charges of $0.2 million associated with asset impairments in PE Films; gain of $0.1 million from the settlement of a Terphane pre-acquisition contingency (included in “Other income (expense), net” in the consolidated statements of income); charge of $0.1 million from the sale of the aluminum extrusions manufacturing facility in Kentland, Indiana at a pretax gain of $0.2 million, offset by pretax charges of $0.3 million associated with the shutdown of this facility. The unrealized gain on the Company’s investment in kaléo of $1.6 million is included in “Other income (expense), net” in the consolidated statements of income.

(b)	Results for 2015 included a goodwill impairment charge of $44.5 million ($44.5 million after taxes) recognized in Flexible Packaging Films in the third quarter of 2015 upon completion of an impairment analysis performed as of September 30, 2015.

(c)

Plant shutdowns, asset impairments, restructurings and other charges for 2015 include charges of $3.9 million (included in “Selling, general and administrative” in the consolidated statements of income) for severance and other employee-related costs associated with the resignation of the Company’s former chief executive and chief financial officers; charges of $2.2 million associated with the consolidation of domestic PE Films manufacturing facilities, which includes severance and other employee-related costs of $0.8 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 $0.6 million ($0.1 million is included in “Cost of goods sold” in the consolidated statements of income); charge of $2.2 million for severance and other employee-related costs associated with restructurings in PE Films ($2.0 million) ($0.4 million included in “Selling, general and administrative expense” in the consolidated statement of income), Flexible Packaging Films ($0.2 million), Aluminum Extrusions ($35,000) and Corporate ($26,000); charges of $1.0 million associated with a non-recurring business development project (included in “Cost of goods sold” in the consolidated statements of income); charges of $0.4 million associated with the shutdown of the aluminum extrusions manufacturing facility in Kentland, Indiana; and charges of $0.3 million related to expected future environmental costs at the Company’s aluminum extrusions manufacturing facility in Newnan, Georgia (included in “Cost of goods sold” in the consolidated statements of income). The unrealized loss on the Company’s investment in kaléo of $20.5 million is included in “Other income (expense), net” in the consolidated statements of income.

(d)

Plant shutdowns, asset impairments, restructurings and other for 2014 include a charge of $10.0 million (included in “Other income (expense), net” in the consolidated statements of income) associated with the one-time, lump sum license payment to 3M Company (“3M”) after the Company settled all litigation issues associated with a patent infringement complaint; charges of $2.3 million for severance and other employee-related costs in connection with restructurings in PE Films ($1.7 million), Flexible Packaging Films ($0.6 million) and Aluminum Extrusions ($31,000); charges of $0.9 million related to expected future environmental costs at the aluminum extrusions manufacturing facility in Newnan, Georgia (included in “Cost of goods sold” in the consolidated statement of income); charges of $0.7 million associated with the shutdown of the film products manufacturing facility in Red Springs, North Carolina, which includes severance and other employee-related costs of $0.4 million and asset impairment and other shutdown-related charges of $0.3 million; gain of $0.1 million related to the sale of previously shutdown film products manufacturing facility in LaGrange, Georgia (included in “Other income (expense), net” in the consolidated statements of income); and charges of $54,000 associated with the shutdown of the aluminum extrusions manufacturing facility in Kentland, Indiana. The unrealized gain on the Company’s investment in kaléo of $2.0 million; the unrealized loss on the Company’s investment in Harbinger Capital Partners Special Situations Fund L.P. (“Harbinger”) of $0.8 million and the gain on sale on a portion the Company’s investment property in Alleghany and Bath County, Virginia was $1.2 million in 2014 are included in “Other income (expense), net” in the consolidated statements of income. Income taxes from continuing operations in 2014 includes the recognition of a tax benefit for a portion of the Company’s capital loss carryforwards of $4.9 million. These capital loss carryforwards were previously offset by a valuation allowance associated with expected limitations on the utilization of these assumed capital losses. As a result of changes in the underlying basis of certain foreign subsidiaries, income taxes from continuing operations in 2014 also included an adjustment of $2.2 million to reverse previously accrued deferred tax liabilities arising from foreign currency translation adjustments.

(e)

Plant shutdowns, asset impairments, restructurings and other for 2013 include a charge of $1.7 million related to expected future environmental costs at the aluminum extrusions manufacturing facility in Newnan, Georgia (included in “Cost of goods sold” in the consolidated statement of income); charges of $0.6 million associated with the shutdown of the Company’s aluminum extrusions manufacturing facility in Kentland, Indiana; charges of $0.5 million associated with the shutdown of the film products manufacturing facility in Red Springs, North Carolina, which includes severance and other employee-related costs of $0.3 million and asset impairment charges of $0.2 million; charges of $0.4 million for severance and other employee-related costs in connection with restructurings in Aluminum Extrusions ($0.3 million) and PE Films ($0.1 million); charges of $0.2 million for integration-related expenses and other nonrecurring transactions (included in “Selling, general and administrative expenses” in the consolidated statements of income) associated with the acquisition of AACOA, Inc. (“AACOA”) by Aluminum Extrusions; and a loss of $0.1 million related to the sale of previously impaired machinery and equipment at the Company’s film products manufacturing facility in Shanghai, China (included in “Other income (expense), net” in the consolidated statements of income). The unrealized gain on the Company’s investment in kaléo of $3.4 million, the unrealized loss on the Company’s investment in Harbinger of $0.4 million and the unrealized loss on the Company’s investment property in Alleghany and Bath County, Virginia of $1.0 million in 2013 are included in “Other income (expense), net” in the consolidated statements of income. Income taxes for 2013 include the recognition of an additional valuation allowance of $0.4 million related to the expected limitations on the utilization of assumed capital losses on certain investments.

(f)

Plant shutdowns, asset impairments, restructurings and other for 2012 include a net charge of $3.6 million associated with the shutdown of the Company’s aluminum extrusions manufacturing facility in Kentland, Indiana, which included accelerated depreciation for property and equipment of $2.4 million (included in “Cost of goods sold” in the consolidated statement of income), severance and other employee-related costs of $1.2 million and other shutdown-related charges of $2.3 million, partially offset by adjustments to inventories accounted for under the last-in, first-out method of $1.5 million (included in “Cost of goods sold” in the consolidated statements of income) and gains of $0.8 million (included in “Other income (expense), net” in the consolidated statements of income); a gain of $1.3 million in PE Films (included in “Other income (expense), net” in the consolidated statements of income) associated with an insurance recovery on idle equipment that was destroyed in a fire at an outside warehouse; charges of $1.3 million for acquisition-related expenses (included in “Selling, general and administrative expenses in the consolidated statements of income) associated with the acquisition of AACOA by Aluminum Extrusions; charges of $1.1 million for integration-related expenses and other nonrecurring transactions (included in “Selling, general and administrative expenses” in the consolidated statements of income) associated with the acquisition of Terphane by Tredegar; gain of $1.1 million (included in “Other income (expense), net” in the consolidated statements of income) on the sale of assets associated with a previously shutdown film products manufacturing facility in LaGrange, Georgia; losses of $0.8 million for asset impairments associated with a previously shutdown film products manufacturing facility in LaGrange, Georgia; charges of $0.5 million for severance and other employee-related costs in connection with restructurings in PE Films ($0.3 million) and Aluminum Extrusions ($0.2 million); charges of $0.2 million for asset impairments in PE Films; charges of $0.2 million for integration-related expenses and other nonrecurring transactions (included in “Selling, general and administrative expenses” in the consolidated statements of income) associated with the acquisition of AACOA by Aluminum Extrusions; charges of $0.1 million associated with purchase accounting adjustments made to the value of inventory sold by Aluminum Extrusions after its acquisition of AACOA; and a charge of $0.1 million (included in “Costs of goods sold” in the consolidated statements of income) related to expected future environmental costs at the aluminum extrusions manufacturing facility in Newnan, Georgia (included in “Cost of goods sold” in the consolidated statement of income). The unrealized gain on the Company’s investment in kaléo of $16.1 million and the unrealized loss on the Company’s investment in Harbinger of $1.1 million in 2012 are included in “Other income (expense), net” in the consolidated statements of income. Income taxes for 2012 include the recognition of an additional valuation allowance of $1.3 million related to the expected limitations on the utilization of assumed capital losses on certain investments.

(g)

On November 20, 2012, Tredegar sold its membership interests in Falling Springs, LLC. All historical results for this business have been reflected in discontinued operations. In 2012, discontinued operations also includes an after-tax loss of $2.0 million from the sale of Falling Springs in addition to operating results through the closing date. In 2012, net income of $0.5 million has been reclassified to discontinued operations. On February 12, 2008, Tredegar sold its aluminum extrusions business in Canada. All historical results for this business have been reflected as discontinued operations. In 2014, accruals for indemnifications under the purchase agreement were adjusted, resulting in income from discontinued operations of $0.9 million. In 2013 and 2012, discontinued operations include after-tax charges of $14.0 million and $13.4 million, respectively, to accrue for indemnifications under the purchase agreement related to environmental matters.

(h)	Total return to shareholders is defined as the change in stock price during the year plus dividends per share, divided by the stock price at the beginning of the year.

(i)	Equity market capitalization is the closing market price per share for the period multiplied by the shares outstanding at the end of the period.

(j)	Net sales represent gross sales less freight. Net sales is the measure used by the chief operating decision maker of each segment for purposes of assessing performance.

(k)	In addition to quarterly dividends of 4 1/2 cents per share in the first and second quarters and 6 cents per share in the third and fourth quarters of 2012, there was a special one-time dividend of 75 cents per share in December 2012.

(l)	Total assets in 2015 and 2016 are not comparable to prior years due to the adoption of new FASB guidance associated with the classification of deferred income tax assets and liabilities. See Note 17 to the Notes to the Financial Statements for additional details.

(m)	Equity per share is computed by dividing shareholders’ equity at year end by the shares outstanding at end of period.

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Item 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

•	The write-off of all goodwill associated with Flexible Packaging Films ($44.5 million); and

•	An unrealized loss on the Company’s investment in kaléo ($20.5 million), which is accounted for under the fair value method.

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•	The loss of business with PE Films’ largest customer related to various products in personal care materials ($22.0 million) and other personal care materials customers ($7.6 million);

•	Lower volume in personal care materials primarily due to the timing of product transitions and lower customer demand ($10.8 million);

•	A decline in volume in surface protection films ($6.2 million) that the Company believes is primarily the result of lower consumer demand for products with flat panel display screens; and

•	Lower volume of low margin overwrap films ($9.1 million) primarily due to the loss of business with a large customer, partially offset by sales growth for components used in LED lighting products ($1.3 million).

•	Lower contribution to profits from surface protection films ($5.0 million) primarily due to lower volume and productivity issues;

•	Lower contribution to profits in personal care materials primarily due to volume declines resulting from the timing of product transitions and lower customer demand ($3.1 million) and lower productivity ($1.8 million) due in part to operational inefficiencies largely related to elastics production for European customers sourced from the Lake Zurich, Illinois facility;

•	The unfavorable lag in the pass-through of average resin costs of $0.2 million in 2016 versus the favorable lag of $1.3 million in 2015;

•	A charge for inventories accounted for under the LIFO method of $0.9 million in 2016 versus income of $0.4 million in 2015;

•	Higher contribution to profits from other products in PE Films ($0.7 million); and

•	Higher research and development expenses to support new product opportunities ($3.0 million), offset by lower general, sales and administrative expenses ($3.6 million).

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•	Cash outlays associated with previously discussed exit and disposal expenses of approximately $5 million, including additional operating expenses of approximately $1 million associated with customer product qualifications on upgraded and transferred production lines;

•	Capital expenditures associated with equipment upgrades at other PE Films manufacturing facilities in the U.S. of approximately $11 million; and

•	Cash incentives of approximately $1 million in connection with meeting safety and quality standards while production ramps down at the Lake Zurich manufacturing facility.

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•	Foreign currency transaction losses of $3.5 million in 2016 versus foreign currency transaction gains of $3.5 million in 2015, associated with U.S. dollar denominated export sales in Brazil;

•	Higher volume ($3.0 million) and operating efficiencies ($0.7 million);

•	Net refunds of $1.6 million in 2015 received as a result of the reinstatement by the U.S. of the Generalized System of Preferences (GSP) program for allowing duty-free shipments of Terphane products into the U.S. (none in 2016);

•	The favorable settlement of certain loss contingencies of $0.6 million in 2015 (none in 2016);

•	The estimated lag in the pass through of lower raw material costs of $1.2 million in 2016 versus $1.0 million in 2015; and

•	Lower depreciation and amortization costs ($0.2 million) and other costs and expenses ($1.4 million).

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•	Higher volume ($0.9 million) and lower materials, supply and other net costs ($2.6 million, including $0.7 million of construction-related costs incurred in 2015 for the anodizing upgrade project); and

•	Improved management of freight logistics and lower utility costs ($2.2 million) and other efficiencies ($1.8 million).

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•	An increase in volume of over 6% and a favorable mix for surface protection films ($4.2 million);

•	A decrease in volume for polyethylene overwrap films and other personal care materials ($2.4 million);

•	The favorable lag in the pass-through of average resin costs of $1.3 million in 2015 versus a negative $0.1 million in 2014;

•	An increase in foreign currency translation and transaction losses ($3.7 million); and

•	Other factors including higher research and development costs partially offset by lower depreciation.

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•	An improvement of $1.4 million in 2015 versus 2014 due to lower general, sales and administration costs of $1.2 million and operating efficiencies of $0.9 million, partially offset by lower margins of $0.7 million primarily from competitive pricing pressures;

•	Foreign currency transaction gains associated with U.S. dollar denominated export sales in Brazil of $3.5 million in 2015 versus $0.5 million in 2014;

•	The estimated lag in the pass through of lower raw material costs of $1.0 million in 2015 (none in 2014);

•	Net refunds of $1.6 million in 2015 as a result of the reinstatement by the U.S. in the third quarter of 2015 of the Generalized System of Preferences (GSP) program allowing for duty-free shipment of Terphane’s products to the U.S. versus duties paid of $1.1 million in 2014; and

•	The favorable settlement of certain loss contingencies of $0.6 million in 2015 versus $0.3 million in 2014.

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•	Accounts and other receivables increased $3.2 million (3.4%).

•	Accounts and other receivables in PE Films increased by $0.8 million due mainly to the timing of cash receipts and slower collections. DSO (represents trailing 12 months net sales divided by a rolling 12-month average of accounts and other receivables balances) was approximately 45.7 days in 2016 and 42.7 days in 2015.

•	Accounts and other receivables in Flexible Packaging Films increased by $0.2 million primarily due to the impact of the change in the value of the U.S. dollar relative to the Brazilian real. DSO was approximately 51.8 days in 2016 and 68.9 days in 2015.

•	Accounts and other receivables in Aluminum Extrusions increased by $2.0 million primarily due to the timing of cash receipts. DSO was approximately 43.3 days in 2016 and 45.1 days in 2015.

•	Inventories increased $0.7 million (1.1%).

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Inventories in PE Films decreased by $0.3 million primarily due to lower storeroom and shop supply balances and the timing of shipments at the end of the year. 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 52.2 days in 2016 and 48.3 days in 2015.

•	Inventories in Flexible Packaging Films increased by $0.1 million primarily due to the impact of the change in the value of the U.S. dollar relative to the Brazilian real. DIO was approximately 77.0 days in 2016 and 81.6 days in 2015.

•	Inventories in Aluminum Extrusions increased by $1.0 million primarily due to higher sales volume and the timing of shipments at the end of the year. DIO was approximately 26.5 days in 2016 and 29.8 days in 2015.

•	Net property, plant and equipment increased $29.4 million (12.7%) due primarily to capital expenditures of $45.5 million and changes in the value of the U.S. dollar relative to the Brazilian Real of $12.9 million, partially offset by depreciation of $28.5 million.

•	Goodwill and other intangibles decreased by $1.6 million (1.1%) primarily due to amortization expense of $4.0 million, partially offset by changes in the value of the U.S. dollar relative to the Brazilian real of $2.3 million.

•	Accounts payable decreased by $2.8 million (3.3%).

•	Accounts payable in PE Films decreased by $3.4 million primarily due to the timing of payments at the end of the year. 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 38.5 days in 2016 and 39.0 days in 2015.

•	Accounts payable in Flexible Packaging Films increased by $3.7 million, the timing of payments and the impact of the change in the U.S. dollar value of currencies for operations outside the U.S. DPO was approximately 39.5 days in 2016 and 34.2 days in 2015.

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•	Accounts payable in Aluminum Extrusions decreased by $1.9 million, primarily due to the timing of payments. DPO was approximately 45.4 days in 2016 and 48.0 days in 2015.

•	Accrued expenses increased by $5.0 million (14.8%) from December 31, 2015 due to higher employee benefit accruals, higher stock-based benefit obligations and deferred revenue related to the startup of a new production line.

•	Other noncurrent liabilities decreased by $5.8 million (5.2%) from December 31, 2015, primarily due to a reduction in the accrued pension liability.

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Net noncurrent deferred income tax liabilities in excess of noncurrent deferred tax assets increased by $1.9 million primarily due to numerous changes between years in the balance of the components shown in the December 31, 2016 and 2015 schedule of deferred income tax assets and liabilities provided in Note 17 of the Notes to Financial Statements. The Company had a current income tax receivable of $7.5 million at December 31, 2016 compared to $0.4 million at December 31, 2015. The change is primarily due to timing of tax payments and anticipated refunds of credits available for carryback to prior years.