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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 Sure&Soft™, ComfortAire™, ComfortFeel™ and FreshFeel™ brand names);

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

•	Three-dimensional apertured film transfer layers for baby diapers and adult incontinence products sold under the AquiSoft™, 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 21%, 26% and 29% of Tredegar’s consolidated net sales, in 2018, 2017 and 2016, respectively, with net sales to P&G alone comprising approximately 10%, 13% and 16% in 2018, 2017 and 2016, respectively. The loss or significant reduction of sales associated with one or more of these customers without replacement by new business could have a material adverse effect on the Company. 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 using products 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 is undertaking 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 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. In addition, the changing dynamics of consumer products retailing, including the impact of on-line retailers such as Amazon, is creating price and margin pressure on the customers of PE Films’ personal care business. While PE Films continually works to identify new business opportunities with new and existing 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.

•

Our cost saving initiatives may not achieve the results we anticipate. PE Films has undertaken and will continue to undertake cost reduction initiatives to consolidate certain 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

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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, or are used in the production of, various consumer products sold worldwide. A customer’s ability to successfully develop, manufacture and market those products is integral to PE Films’ success. Also, consumers of premium products made with or using PE Films’ components may shift to less premium or 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.

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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, experience financial distress or disruption of manufacturing operations (such as, for example, the impact of hurricanes on petrochemical production). 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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Overcapacity in Latin American polyester film production and a history of uncertain economic conditions in Brazil could adversely impact the financial condition, results of operations and cash flows of Flexible Packaging Films. Competition in Brazil, Terphane’s primary market, has been exacerbated by global overcapacity in the polyester industry generally, and by particularly acute overcapacity in Latin America. Additional PET capacity from a competitor in Latin America came on line in 2017. These factors have resulted in significant competitive pricing pressures and U.S. Dollar equivalent margin compression.

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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. Favorable anti-dumping rulings or countervailing duties are in effect for products imported from China, Egypt, India, Mexico, UAE and Turkey.  In January 2018, the Brazilian government opened new anti-dumping investigations for products imported from Peru and Bahrain. 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 products imported to Brazil from Peru and Bahrain, or to extend duties beyond 2020 on products imported from certain other countries, will be successful.

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•

Sales volume and profitability of Aluminum Extrusions is cyclical and seasonal 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 cyclical and subject to seasonal 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.

•

Failure to prevent competitors from circumventing anti-dumping and countervailing duties, or a reduction in such duties, could adversely impact Aluminum Extrusions. As of April 2017, the antidumping duty and countervailing duty orders on aluminum extrusions from China will remain in place until the next five-year review of the orders. Chinese and other overseas manufacturers continue to try to circumvent the antidumping and countervailing orders to avoid duties. A failure by, or the inability of, U.S. trade officials to curtail efforts to circumvent these duties, or the potential reduction of applicable duties pursuant to annual reviews of the orders, could have a material adverse effect on the financial condition, results of operations and cash flows of Aluminum Extrusions.

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The imposition of tariffs or duties on imported aluminum products could significantly increase the price of Aluminum Extrusions’ main raw material, which could adversely impact demand for its products. In March 2018, the U.S. imposed tariffs of 10% on aluminum ingot and semi-finished aluminum imported into the U.S. from certain countries, including countries from which Bonnell Aluminum has historically sourced aluminum supplies. These tariffs have increased the cost of aluminum ingot used by Bonnell Aluminum to make its products.  For the vast majority of its business, Bonnell Aluminum expects to be able to pass through higher aluminum costs to customers.  However, sustained higher costs for aluminum extrusions could result in reduced demand and product substitutions in place of aluminum extrusions, which could materially and negatively affect Bonnell Aluminum’s business and results of operations.

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Competition from China could increase significantly if China is granted market economy status by the World Trade Organization. China has launched a formal complaint at the World Trade Organization challenging its non-market economy status, claiming that as of December 11, 2016, China’s transition period as a non-market economy under its Accession Protocol to the World Trade Organization ended. 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 U.S. and the European Union have each rejected that interpretation.  If China is granted market economy status, the extent to which the U.S. antidumping laws will be able to limit unfair trade practices from China will likely be limited because the U.S. government will be forced to utilize Chinese prices and costs that do not reflect market principles in antidumping duty investigations involving China, which could ultimately limit the level of antidumping duties applied to unfairly traded Chinese imports. The volume of unfairly traded imports of Chinese aluminum extrusions could increase as a result and this, in turn, 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 1,400 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 Aluminum Extrusions’ 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. Aluminum Extrusions’ ability to grow and service existing customers is closely tied to having sufficient capacity. In recent years, increased demand, primarily from the nonresidential building and construction sector, has substantially increased Aluminum Extrusions’ average capacity utilization.

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The Company has identified material weaknesses in its internal control over financial reporting at December 31, 2017 and 2018. The Company’s failure to establish and maintain effective internal control over financial reporting and to maintain effective disclosure controls and procedures increases the risk of a material misstatement in its consolidated financial statements, and its failure to meet its reporting and financial obligations, which in turn could have a negative impact on its financial condition.

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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, 2018, the plan was underfunded under U.S. generally accepted accounting principles (“GAAP”) measures by $81.9 million. Tredegar expects that it will be required to make a cash contribution of approximately $8.1 million to its underfunded pension plan in 2019, 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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Noncompliance with any of the covenants in the Company’s $400 million 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 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 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 may not be able to successfully integrate strategic acquisitions. Acquisitions 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 those relating to global climate change and plastic products, 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: an equipment failure with repairs requiring long lead times, labor stoppages or shortages, cybersecurity attacks, 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 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 fully-diluted ownership interest of approximately 20% 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 its performance versus expectations and changes in the valuation of guideline public companies as measured by their enterprise value-to-EBITDA (earnings before interest, taxes, depreciation and amortization) multiples. Additionally, the estimated fair value of the Company’s investment in kaléo could decline. Kaléo’s first product, an epinephrine auto-injector, was licensed to Sanofi-Aventis U.S. LLC (“Sanofi”) in 2009. Sanofi commenced commercial sales in the first quarter of 2013. Kaléo subsequently developed and commenced commercial sales of its second product, a naloxone auto-injector (“Evzio”), in the third quarter of 2014. Public pressure to lower the price of pharmaceutical products continues to mount, which could affect the price at which kaléo sells its products. The U.S. Department of Justice began an investigation of kaléo’s Evzio business in 2018, the impact of which on kaléo and on the value of the Company’s interest in kaléo cannot yet be estimated with any certainty. See Note 4 to the Notes to Financial Statements (“Note 4”) for more information.

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Rising trade tensions. A significant portion of the Company’s business involves imports to and from the U.S. and other countries where the Company produces and sells its products. Trade tensions have been rising between the U.S. and other countries, particularly China. An increase in tariffs and other trade barriers between the U.S. and China, or between the U.S. and other countries, could cause an increase in the cost of the Company’s products or otherwise negatively impact the production and sale of the Company’s products in world markets.

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A failure in the Company’s information technology systems as a result of cybersecurity attacks or other causes could negatively affect Tredegar’s business. The Company depends on information technology (“IT”) to record and process customers' orders, manufacture and ship products in a timely manner, secure its production processes and know-how, and maintain the financial accuracy of its business records. An IT system failure due to computer viruses, internal or external security breaches, cybersecurity attacks, or other malicious causes could disrupt our operations and prevent us from being able to process transactions with our customers, operate our manufacturing facilities and properly report transactions in a timely manner. Increased global IT security threats and cyber-crime pose a potential risk to the security and availability of the Company’s IT systems, networks, and services, including those that are managed, hosted, provided, or used by third parties, as well as to the confidentiality, availability, and integrity of the Company’s data. To date, interruptions of the Company’s IT systems have been infrequent and have not had a material impact on the Company’s operations. A significant protracted failure of or security breach of the IT systems, networks, or service providers the Company relies upon, or a loss or disclosure of business or other sensitive information, as a result of a cybersecurity incident or other cause, could result in damage to the Company’s reputation and legal challenges, and adversely affect our results of operations, financial condition or cash flows.

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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 2018 include charges of $3.3 million associated with the shutdown of PE Films’ manufacturing facility in Shanghai, China, which consists of severance and other employee-related costs of $2.2 million ($0.4 million included in “Cost of goods sold” in the consolidated statements of income), 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 $0.5 million ($0.1 million included in “Cost of goods sold” in the consolidated statements of income); charges of $2.0 million for estimated excess costs associated with the ramp-up of new product offerings and additional expenses for strategic capacity expansion projects (included in “Cost of goods sold” in the consolidated statements of income); charges of $0.8 million for professional fees associated with the Terphane Limitada worthless stock deduction, the impairment of assets of Flexible Packaging Films, determining the effect of the new U.S. federal income tax law, and a market study for PE Films (included in “Selling, general and administrative expense” in the consolidated statements of income); charges of $0.8 million for severance and other employee-related costs associated with restructurings in PE Films ($0.7 million) and Aluminum Extrusions ($0.1 million); charges of $0.5 million associated with a business development projects (included in “Selling, general and administrative” in the consolidated statements of income); charges of $0.3 million related to expected environmental costs at certain Aluminum Extrusions manufacturing facilities (included in “Cost of goods sold” in the consolidated statements of income); charges of $0.5 million for professional fees associated with the implementation of new accounting guidance and analysis and revision to the Company’s internal control over financial reporting (included in “Selling, general and administrative” in the consolidated statements of income); income of $0.3 million from the reversal of a PE Films’ contingent liability related to the acquisition of Bright View Technologies (included in “Other income (expense), net” in the consolidated statements of income); charges of $0.1 million related to wind damage that occurred in the third quarter of 2018 at the aluminum extrusions manufacturing facility in Elkhart, Indiana (included in “Selling, general and administrative expense” in the consolidated statements of income); and charges of $0.1 million related to a fire that occurred in the fourth quarter of 2018 at the PE Films facility in Retsag, Hungary (included in “Selling, general and administrative expense” in the consolidated statements of income).

(b)

Plant shutdowns, asset impairments, restructurings and other charges for 2017 include charges of $101.3 million related to the impairment of assets of Flexible Packaging Films; income of $11.9 million related to the settlement of an escrow arrangement established upon the acquisition of Terphane in 2011 (included in “Other income (expense), net” in the consolidated statements of income); charges of $3.3 million related to the acquisition of Futura ($1.7 million included in “Cost of goods sold” and $1.6 million included in “Selling, general and administrative expense” in the consolidated statements of income), offset by pretax income of $0.7 million related to the fair valuation of an earnout provision (included in “Other income (expense), net” in the condensed consolidated statements of income); charges of $4.1 million for estimated excess costs associated with the ramp-up of new product offerings and additional expenses for strategic capacity expansion projects (included in “Cost of goods sold” in the consolidated statements of income); income of $5.6 million related to the explosion that occurred in the second quarter of 2016 at the aluminum extrusions manufacturing facility in Newnan, Georgia, including the recognition of a gain of $5.3 million for a portion of the insurance recoveries received from the insurer for the replacement of capital equipment, plus the recovery of excess production costs incurred in 2016 for which recovery from insurance carriers was not previously considered to be reasonably assured, net of other nonrecoverable costs, of $0.3 million ($0.4 million benefit included in “Cost of goods sold” in the consolidated statements of income and $0.1 million charge included in “Selling, general and administrative expenses” in the consolidated statements of income); charges of $0.8 million associated with the consolidation of domestic PE Films manufacturing facilities, which includes asset impairments of $0.1 million, accelerated depreciation of $0.3 million and other facility consolidation-related expenses of $0.5 million (included in “Cost of goods sold” in the consolidated statements of income) offset by income of $0.1 million related to a reduction of severance and other employee-related accrued costs; charges of $2.4 million associated with business development projects (included in “Selling, general and administrative” in the consolidated statements of income); charges of $1.9 million related to expected future environmental costs at certain Aluminum Extrusions manufacturing facilities (included in “Cost of goods sold” in the consolidated statements of income); charges of $0.8 million at Corporate related to expected future environmental costs at various shutdown facilities (included in “Cost of goods sold” in the consolidated statements of income); charge of $0.7 million for severance and other employee-related costs associated with restructurings in PE Films ($0.2 million), Aluminum Extrusions ($0.1 million) and Corporate ($0.4 million, included in “Corporate expenses, net” in the statements of net sales and operating profit by segment); charges of $0.4 million for professional fees associated with the Terphane Limitada worthless stock deduction and impairment of assets of Flexible Packaging Films; charges of $0.3 million associated with asset impairments in PE Films; and charges of $0.2 million associated with the settlement of customer claims and the shutdown of the aluminum extrusions manufacturing facility in Kentland, Indiana.

(c)

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 the 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); charges 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 (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, which includes a pretax gain of $0.2 million, related to the sale of property, offset by pretax charges of $0.3 million associated with the shutdown of this facility.

(d)

Results for 2018 included a goodwill impairment charge of $46.8 million ($38.2 million after taxes) recognized in PE Films in the third quarter of 2018 upon completion of an impairment analysis performed as of September 30, 2018. 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.

(e)

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 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 aluminum extrusions manufacturing facility in Newnan, Georgia (included in “Cost of goods sold” in the consolidated statements of income).

(f)

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 loss of $0.8 million on the Company’s investment in Harbinger Capital Partners Special Situations Fund L.P. (“Harbinger”) and the gain of $1.2 million on sale on a portion the Company’s investment property in Alleghany and Bath County, Virginia in 2014 are included in “Other income (expense), net” in the consolidated statements of income.

(g)	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.

(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 for purposes of assessing performance.

(k)	The gains and losses on the Company’s investment in kaléo are included in “Other income (expense), net” in the consolidated statements of income.

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

(m)	For the years ended December 31, 2014 to 2017, the pension and postretirement benefit expenses recorded in Cost of goods sold and Selling, general and administrative have been reclassified to a new line item, Pension and postretirement benefits, on the consolidated statements of income, due to the retrospective adoption of ASU 2017-07.

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

•	An after-tax impairment of the total goodwill balance of PE Films’ Personal Care division was recorded in the amount of $38.2 million ($1.15 per share after-tax). See the Customer Product Transitions in Personal Care and Surface Protection section below and Note 8 for more details; and

•	An unrealized after-tax gain on the Company’s investment in kaléo of $23.9 million ($0.72 per share), which is accounted for under the fair value method (see Note 4 for more details);

•	An unrealized after-tax gain on the Company’s investment in kaléo of $24.0 million ($0.73 per share);

•	An after-tax gain of $11.9 million ($0.36 per share) from the settlement of an escrow agreement related to the Terphane acquisition in 2011 (see Note 17 for more details);

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An income tax benefit of $61.4 million ($1.86 per share) associated with the write-off of the stock basis of Terphane Limitada, Terphane’s Brazilian subsidiary, and Terphane’s U.S. subsidiary, Terphane Inc., computed at the 35% U.S. corporate federal income tax rate in effect in 2017 ($56.6 million ($1.72 per share) when reduced for the deductions applicable to the 21% U.S. corporate federal income tax rate effective in 2018 under the Tax Cuts and Jobs Act (the “TCJA”)) (see Note 16 for more details);

•	An income tax benefit from the adjustment of deferred income tax liabilities as a result of the reduction of U.S. federal corporate income tax rates effective in 2018 and other law changes of $4.4 million ($0.13 per share) (see Note 16 for more details); and

•	An after-tax write-down of the assets of Flexible Packaging Films of $87.2 million ($2.65 per share) (see Note 17 for more details).

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The volume decline in Personal Care was primarily related to topsheet business lost from competitive pressures in North America, Europe and Asia, including at the Shanghai, China, facility that was shut down in the fourth quarter of 2018. A small portion of the volume decline was associated with the start of the previously disclosed customer product transition discussed below. Volume for elastics products in Personal Care increased year-over-year.

•	Slightly lower sales in Surface Protection caused by lower volume and the adverse impact of quality claims, partially offset by higher volume-based selling prices.

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Lower contribution to profits from Personal Care, primarily due to lower volume and unfavorable product mix ($9.3 million), partially offset by volume-based higher selling pricing ($2.2 million), lower fixed and selling, general and administrative costs ($1.1 million), the timing of resin cost passthroughs ($0.7 million), productivity improvements ($0.3 million) and net favorable impact from the change in U.S. Dollar value of currencies for operations outside of the U.S. ($0.8 million);

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Lower contribution to profits from Surface Protection, primarily due to lower volumes and unfavorable product mix ($4.1 million), the adverse impact of quality claims ($1.3 million), higher fixed and other manufacturing costs ($1.6 million), higher research and development spending and selling, general and administrative costs ($0.4 million) and higher freight costs ($0.5 million), partially offset by volume-based higher selling prices ($4.4 million); and

•	Realized cost savings associated with the North American consolidation of our PE Films manufacturing facilities completed in 2017 ($2.4 million).

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•	Significantly lower depreciation and amortization of $8.9 million resulting from the $101 million non-cash asset impairment loss recognized in the fourth quarter of 2017;

•	A benefit from higher volume ($5.5 million) and favorable tax incentives ($1.3 million), partially offset by the unfavorable impact of mix and higher resin costs, net of higher selling prices ($2.2 million);

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•	Higher fixed and other manufacturing costs and selling, general and administrative costs, primarily related to higher volume ($2.0 million);

•	Favorable foreign currency translation of Real-denominated operating costs ($3.2 million), which was offset by a $1.7 million loss on foreign currency forward contracts that partially hedged Real-denominated operating costs; and

•	Unfavorable net foreign currency transaction impact ($0.6 million) resulting from foreign currency transaction losses of $0.8 million in 2018 and losses of $0.2 million in 2017.

•	Higher volume ($5.1 million) and favorable mix ($5.8 million), which were offset by higher employee-related costs ($5.2 million), higher supplies and maintenance ($2.3 million), higher freight ($1.7 million), higher utilities, primarily in the first quarter of 2018 at the Newnan, Georgia facility ($0.9 million), and higher depreciation ($0.9 million).

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•	Higher sales from surface protection films ($15.1 million), primarily due to higher volume and a favorable sales mix; and

•	Higher volume for acquisition distribution layer materials and overwrap products, and a favorable sales mix in personal care materials ($12.0 million), partially offset by volume reductions from the winding down of known lost business in personal care that was substantially completed by the end of 2016 ($6.2 million).

•	Higher contribution to profits from surface protection films ($12.3 million), primarily due to higher volume, a favorable sales mix, and production efficiencies;

•	Higher contribution to profits from personal care materials, primarily due to improved volume, production efficiencies and favorable pricing ($7.3 million), partially offset by known lost business ($2.1 million);

•	A benefit for inventories accounted for under the LIFO method of $1.1 million in 2017 versus a charge of $0.9 million in 2016; and

•	Higher net general, selling and plant expenses ($7.3 million), primarily associated with strategic hires and an increase in employee incentive costs, partially offset by realized cost savings of $3.1 million associated with the North American facility consolidation.

•	Lower production, primarily due to numerous intermittent power outages during the third quarter ($0.5 million), and lower average sales price ($1.6 million), partially offset by a favorable sales mix ($1.5 million);

•	Higher raw material costs of $1.8 million in 2017 that could not be passed through to customers due to competitive pressures versus a benefit from lower raw material costs of $1.2 million in 2016;

•	Foreign currency transaction losses primarily associated with U.S. Dollar denominated export sales in Brazil of $0.2 million in 2017 versus foreign currency transaction losses of $3.5 million in 2016;

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•	Higher costs and expenses of $3.2 million primarily related to the adverse impact of high inflation in Brazil and the appreciation by approximately 9% of the average exchange rate for the Brazilian Real relative to the U.S. Dollar; and

•	Higher depreciation and amortization costs ($0.9 million).

•	Higher volume and inflation-related sales prices ($7.3 million benefit);

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•	Increased operating costs, including utilities and employee-related expenses and higher depreciation ($3.9 million);

•	Higher costs associated with the startup of the new press at the Niles, Michigan plant, resulting from disruptions to normal plant production ($4.3 million); and

•	A charge for inventories accounted for under the LIFO method of $1.3 million in 2017 versus a benefit of $0.5 million in 2016.

•	Accounts and other receivables increased $4.6 million (3.8%).

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Accounts and other receivables in PE Films decreased by $5.0 million due mainly to lower net sales for certain Personal Care products, a focus on collection efforts, the use of supply chain financing arrangements and the timing of cash receipts. DSO (computed using trailing 12 months net sales and a rolling 12-month average of accounts and other receivables balances) was approximately 43.2 days in 2018 and 48.4 days in 2017.

•	Accounts and other receivables in Flexible Packaging Films decreased by $2.9 million primarily due to the negotiation of shorter payments terms with certain customers, the use of supply chain financing arrangements and the timing of cash receipts. DSO was approximately 43.7 days in 2018 and 53.2 days in 2017.

•	Accounts and other receivables in Aluminum Extrusions increased by $12.5 million primarily due to higher prices resulting from the pass-through of higher metal costs. DSO was approximately 44.6 days in 2018 and 43.3 days in 2017.

•	Inventories increased $6.9 million (7.9%).

•	Inventories in PE Films decreased by $5.7 million primarily due to lower sales and the timing of raw material purchases. DIO (computed using trailing 12 months costs of goods sold calculated on a first-in, first-out basis and a rolling 12-month average of inventory balances calculated on the first-in, first-out basis) was approximately 54.9 days in 2018 and 55.0 days in 2017.

•	Inventories in Flexible Packaging Films increased by $9.5 million primarily due to a higher production level leading to more finished goods on hand and higher levels of raw materials to support increased production, and the impact of

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•	Inventories in Aluminum Extrusions increased by $3.2 million primarily due to an increase in raw material prices and the timing of purchases. DIO was approximately 33.5 days in 2018 and 32.6 days in 2017.

•	Net property, plant and equipment increased by $5.3 million (2.4%) due primarily to capital expenditures of $40.8 million, offset by depreciation of $29.8 million and a change in the value of the U.S. dollar relative to foreign currencies ($5.2 million decrease).

•	Identifiable intangible assets decreased by $4.3 million (10.5%) primarily due to amortization expense of $4.0 million.

•	Goodwill decreased by $46.8 million (36.5%) due to the write-off of all of the goodwill related to the Personal Care component of PE Films.

•	Accounts payable increased by $4.4 million (4.0%).

•	Accounts payable in PE Films decreased by $5.6 million primarily due to lower planned production and the normal volatility associated with the timing of payments. DPO (computed using trailing 12 months costs of goods sold calculated on a first-in, first-out basis and a rolling 12-month average of accounts payable balances) was approximately 43.7 days in 2018 and 40.6 days in 2017.

•	Accounts payable in Flexible Packaging Films increased by $3.4 million, due to higher production levels and inventory levels to meet market demand and the normal volatility associated with the timing of payments. DPO was approximately 51.9 days in 2018 and 42.8 days in 2017.

•	Accounts payable in Aluminum Extrusions increased by $5.5 million, primarily due to higher volume, an increase in metal prices, negotiation of longer payment terms and the normal volatility associated with the timing of payments. DPO was approximately 49.7 days in 2018 and 48.0 days in 2017.

•	Accrued expenses increased by $0.1 million (0.1%) from December 31, 2017 due to normal fluctuations in the accrual accounts.

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Net noncurrent deferred income tax assets in excess of noncurrent deferred income tax liabilities decreased by $11.1 million primarily due to numerous changes between years in the balance of the components shown in the December 31, 2018 and 2017 schedule of deferred income tax assets and liabilities provided in Note 16. The Company had a current income tax receivable of $6.8 million at December 31, 2018 compared to a current income tax receivable of $32.1 million at December 31, 2017. The change is primarily due to timing of tax payments and refunds from net operating losses and tax credits carried back to prior years.

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