Segment Reporting

9 Months Ended

Sep. 30, 2020

The Company’s business segments are Aluminum Extrusions, PE Films, and Flexible Packaging Films. Information by business segment is reported below. There are no accounting transactions between segments and no allocations to segments. All historical results for the Personal Care business have been presented as discontinued operations. The surface protection component of the PE Films segment now includes Pottsville Packaging.

The Company’s reportable segments are based on its method of internal reporting, which is generally segregated by differences in products. Accounting standards for presentation of segments require an approach based on the way the Company organizes the segments for making operating decisions and how the chief operating decision maker (“CODM”) assesses performance. EBITDA from ongoing operations is the key profitability measure used by the CODM (Tredegar’s President and Chief Executive Officer) for purposes of assessing financial performance. The Company uses sales less freight (“net sales”) from continuing operations as its measure of revenues from external customers at the segment level. This measure is separately included in the financial information regularly provided to the CODM.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2020		2019		2020		2019
Net Sales
Aluminum Extrusions	$	115,621	$	129,505	$	339,566	$	405,310
PE Films	26,440		34,487		103,444		99,313
Flexible Packaging Films	35,856		34,888		100,534		101,950
Total net sales	177,917		198,880		543,544		606,573
Add back freight	6,453		7,088		19,222		21,438
Sales as shown in the Consolidated Statements of Income	$	184,370	$	205,968	$	562,766	$	628,011
EBITDA from Ongoing Operations
Aluminum Extrusions:
Ongoing operations:
EBITDA	$	16,540	$	16,464	$	41,496	$	51,231
Depreciation & amortization	(4,251)		(4,317)		(12,632)		(12,481)
EBIT	12,289		12,147		28,864		38,750
Plant shutdowns, asset impairments, restructurings and other	(720)		(610)		(2,637)		(667)
Goodwill impairment	—		—		(13,696)		—
Trade name accelerated amortization	—		(2,510)		—		(2,510)
PE Films:
Ongoing operations:
EBITDA	6,041		10,257		33,928		30,452
Depreciation & amortization	(1,785)		(1,458)		(4,868)		(4,380)
EBIT	4,256		8,799		29,060		26,072
Plant shutdowns, asset impairments, restructurings and other	(56)		(60)		(225)		(555)

Flexible Packaging Films:
Ongoing operations:
EBITDA	9,546		4,394		22,594		10,477
Depreciation & amortization	(443)		(394)		(1,306)		(1,101)
EBIT	9,103		4,000		21,288		9,376
Plant shutdowns, asset impairments, restructurings and other	(3)		—		(14)		—

Total	24,869		21,766		62,640		70,466
Interest income	11		11		43		25
Interest expense	494		859		1,598		3,354

Gain (loss) on investment in kaléo accounted for under fair value method	(36,200)		4,300		(61,000)		28,482


Stock option-based compensation costs	518		791		1,786		2,060
Corporate expenses, net	10,586		9,198		29,915		25,538
Income (loss) from continuing operations before income taxes	(22,918)		15,229		(31,616)		68,021
Income tax expense (benefit)	(5,942)		177		(8,308)		10,550
Income (loss) from continuing operations	(16,976)		15,052		(23,308)		57,471
Income (loss) from discontinued operations, net of tax	(48,237)		2,081		(53,031)		(6,076)
Net income (loss)	$	(65,213)	$	17,133	$	(76,339)	$	51,395

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


(In thousands)	September 30, 2020		December 31, 2019
Aluminum Extrusions	$	238,683	$	265,027
PE Films	169,195		122,136
Flexible Packaging Films	61,903		74,016
Subtotal	469,781		461,179
General corporate	16,882		111,788
Cash and cash equivalents	35,022		31,422
Assets of discontinued operations	45,955		108,279
Total	$	567,640	$	712,668

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


Net Sales by Geographic Area (a)
	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2020		2019		2020		2019
United States	$	129,654	$	145,629	$	395,207	$	455,509
Exports from the United States to:
Asia	14,255		23,163		59,816		61,037
Latin America	465		880		1,953		1,359
Canada	7,200		2,120		13,359		10,352
Europe	1,468		1,494		4,272		4,227
Operations outside the United States:
Brazil	24,875		25,594		68,937		73,864



China	—		—		—		225

Total	$	177,917	$	198,880	$	543,544	$	606,573

(a) Export sales relate primarily to PE Films. Operations in China relate to PE Films. Operations in Brazil are primarily related to Flexible Packaging Films.

The Company’s facilities in Pottsville, PA (“PV”) and Guangzhou, China (“GZ”) have a tolling arrangement whereby certain surface protection films are manufactured in GZ for a fee with raw materials supplied from PV that are then shipped by GZ directly to customers principally in the Asian market, but paid by customers directly to PV. Amounts associated with this intercompany tolling arrangement are reported in the table above as export sales from the U.S. to Asia, and include net sales of $32.1 million in 2019, $5.9 million and $8.6 million in the third quarters of 2020 and 2019, respectively, and $25.1 million and $21.3 million in the first nine months of 2020 and 2019, respectively.


Net Sales by Product Group
	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2020		2019		2020		2019
Aluminum Extrusions:
Nonresidential building & construction	$	62,611	$	64,340	$	190,476	$	202,998
Consumer durables	11,160		12,939		31,491		44,865
Automotive	10,332		11,091		25,375		36,214
Residential building & construction	10,149		11,110		29,016		33,060
Electrical	5,992		10,468		18,006		31,910
Machinery & equipment	7,581		10,191		23,147		29,585
Distribution	7,796		9,366		22,055		26,678

Subtotal	115,621		129,505		339,566		405,310
PE Films:
Surface protection films	19,868		27,053		79,919		76,194
Packaging	5,042		5,607		17,262		17,305
LED lighting products & other films	1,530		1,827		6,263		5,814
Subtotal	26,440		34,487		103,444		99,313



Flexible Packaging Films	35,856		34,888		100,534		101,950
Total	$	177,917	$	198,880	$	543,544	$	606,573