What changed in this filing

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Item 1A. Risk Factors

2022-03-11 compared with 2021-03-16 · 123 added, 118 removed, 57 unchanged (81% of the section changed)

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The following risk factors should be considered, in addition to the other information included in this Form 10-K, when evaluating Tredegar and its businesses.

Risks Related to all Tredegar Businesses

• Our results of operations, financial condition and cash flows could be adversely affected by pandemics, epidemics or other public health emergencies, such as coronavirus (“ COVID-19”) and emerging variants.

Our business, results of operations, financial condition, and cash flows have been, and may continue to be, adversely affected by pandemics, epidemics or other public health emergencies, such as the global outbreak of COVID-19 and emerging variants.

In March 2020, the World Health Organization characterized COVID-19 as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency.

The outbreak resulted in governments around the world implementing increasingly stringent measures to help control the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments, school closures, and other measures.

However, there have been increases in COVID-19 cases in many areas caused by a combination of the potentially more contagious variants of the virus, as well as vaccine hesitancy and low vaccination rates in many areas of the U.S.

The extent to which the COVID-19 pandemic will ultimately impact our business, results of operations, financial condition and cash flows depends on future developments that are highly uncertain, rapidly evolving and difficult to predict at this time, including:

• the duration, spread and intensity of the pandemic;

• the availability, usage and effectiveness of vaccines, low vaccination rates in many areas of the U.S., and employee hesitancy to get vaccinated;

• increasing costs of labor, raw materials, and global transportation and logistics resources;

• a sustained labor shortage due to excessive absenteeism as a result of COVID-19 cases and/or exposures and increased turnover rates within our employee base impacting our ability to meet desired shipping levels;

• the ability of our suppliers, contractors and third-party logistics providers to meet their obligations to us (including supplying us with essential raw materials or shipping finished goods to our customers) on a timely basis and at previously anticipated costs without significant disruption, and our ability to identify alternative sources of materials and services, if necessary;

• our ability to continue to meet our customers’ needs in the event of the suspension or interruption of essential elements of our manufacturing and supply arrangements and activities such as, the continued availability of raw materials, transportation, labor and production capacity at previously anticipated costs;

• the effect of the COVID-19 pandemic on our customers, including their ability to remain in operation and pay for the products purchased from us on a timely basis;

• the impact of the COVID-19 pandemic on the financial and credit markets and economic activity generally, including our ability to maintain compliance with financial covenants, access lending, capital markets, and other sources of liquidity when needed on reasonable terms or at all.

While it is not possible at this time to estimate the impact that any particular epidemic, including COVID-19, could have on the Company’s business, the extent of that impact would likely be affected by factors outside of our control such as the severity, duration and spread of such an epidemic, the measures taken by the governments of countries affected and the ability of our customers and consumers to access government programs providing liquidity and support during the crisis.

The impact of an epidemic on our employees, our customers, our supply chains, demand for our products, our ability to supply customers, our operating costs and our other business activities, could adversely affect our financial condition, results of operations and cash flows.

For more information on the effect of COVID-19 on our business and financial condition, refer to “ The Impact of COVID-19 ” in Item 7.

• 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 the cost of aluminum (the raw material on which Aluminum Extrusions primarily depends), resin (the raw material on which PE Films primarily depends), PTA and MEG (the raw materials on which Flexible Packaging Films primarily depends), natural gas (the principal fuel necessary for Aluminum Extrusions’ plants to operate), electricity, diesel fuel and paint.

Aluminum, resin and natural gas prices are volatile as shown in the charts in Quantitative and Qualitative Disclosures in Item 7.

The Company continues to face inflationary pressures stemming from the COVID-19 operating environment, including notable increases in costs for raw materials, labor and freight.

Additionally, geopolitical tensions, including deteriorating relations between the United States and Russia

resulting from the current situation involving Russia and Ukraine, could result in economic sanctions, tariffs, import-export restrictions and retaliatory actions that all have the potential to adversely impact the cost of raw materials and energy.

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.

• Material disruptions at one of the Company’s major manufacturing facilities could negatively impact financial results.

Tredegar believes it has implemented measures to minimize the risks of disruption at its facilities.

However, a disruption could occur as 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, including potential flooding at the Aluminum Extrusions facility located in Carthage, TN.

A material disruption in one of the Company’s operating locations could negatively impact production and the Company’s consolidated financial condition, results of operations and cash flows.

• 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 closed to new participants in 2007, and substantially frozen to benefit accruals for active participants in 2014.

As of January 31, 2018, the plan no longer accrued benefits associated with crediting employees for service, thereby freezing all future benefits under the plan.

On February 10, 2022, Tredegar announced the initiation of a process to terminate and settle its frozen defined benefit pension plan, which could take up to 24 months to complete.

In connection therewith, on February 9, 2022, the Company borrowed funds under its revolving credit agreement to contribute $50 million to the pension plan (the “Special Contribution”) to reduce its underfunding and as part of a program within the pension plan to hedge or fix the expected future contributions that will be needed by the Company through the settlement process.

As of December 31, 2021 (and before the Special Contribution), the plan was underfunded under U.S.

generally accepted accounting principles (“GAAP”) measures by $69.5 million.

The Company estimates that, with the Special Contribution, there will be no required minimum contributions to the pension plan until final settlement.

The ultimate settlement benefit obligation may differ from the projected benefit obligation (“PBO”) of $314 million as of December 31, 2021, depending on market factors for buyers of pension obligations at the time of settlement.

Additionally, factors that could cause actual future contributions by the Company to settle the pension plan to differ from expectations include, without limitation, the change in the values of pension plan assets and liabilities up through initiating hedging activities to fix underfunding amounts and assumptions thereafter relating to differences between the ultimate settlement benefit obligation and the PBO, census data, administrative costs, the effectiveness of hedging activities and discounts required to liquidate non-public securities held by the plan.

• Noncompliance with any of the covenants in the Company’s $375 million revolving credit facility, as amended on December 1, 2020, which matures in June 2024, could result in all debt under the agreement outstanding at such time becoming due and limiting the Company’s borrowing capacity, which could have a material adverse effect on its 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.

• 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, maintain the financial accuracy of its business records and maintain personally identified information of its employees.

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.

Additionally, increased cybersecurity risk arises due to certain employees working remotely during the COVID-19 pandemic.

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, or personally identified information, as a result of a cybersecurity incident or other cause, could result in substantial costs to the Company, damage to the Company’s reputation, regulatory enforcement actions and lawsuits and could adversely affect the Company’s results of operations, financial condition or cash flows.

• The Company has identified material weaknesses in its internal control over financial reporting.

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, could, in turn, have a negative impact on its financial condition.

Maintaining effective internal control over financial reporting is an integral part of producing reliable financial statements.

As discussed in Item 9A.

“Controls and Procedures” of this Form 10-K (“Item 9A”), the Company’s management concluded that the Company’s internal control over financial reporting was not effective for the periods referred to therein as a result of certain deficiencies that were determined to constitute material weaknesses in the Company’s internal control over financial reporting.

Under standards established by the Public Company Accounting Oversight Board, a material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

Under the criteria set forth in Internal Control - Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission, a material weakness in the design of monitoring controls indicates that the Company has not sufficiently developed and/or documented internal controls by which management can review and oversee the Company’s financial information to detect and correct material errors or that the personnel responsible for performing the review did not have the sufficient skill set or knowledge of the subject matter to perform a proper assessment.

The Company is in the process of making certain changes in its internal control over financial reporting to remediate the material weaknesses as described in Item 9A.

The implementation of the material aspects of this plan began in the second quarter of 2019 with the continuous significant assistance and support of a well-known outside consultant, and, while meaningful progress has been made, completion has been delayed by the COVID-19 pandemic, turnover in positions relevant to internal controls and the need for additional training.

As the Company continues to evaluate and work to improve its internal control over financial reporting and disclosure controls and procedures, management may determine to take additional measures to address control deficiencies or modify the remediation plan.

The Company cannot provide assurance, however, as to when it will remediate all such weaknesses, nor can it be certain of whether additional actions will be required or the costs of any such actions.

Moreover, the Company cannot provide assurance that additional material weaknesses will not arise in the future.

See Item 9A for details regarding the numerous activities in the remediation plan that were completed through the fourth quarter of 2021 and the remaining activities that are scheduled for completion in the first half of 2022, in anticipation of conducting management’s testing beginning in the first half of 2022.

The material weaknesses cannot be considered remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

The material weaknesses discussed in Item 9A did not result in material misstatements of the Company’s financial statements as of and for the years ended December 31, 2021, 2020 and 2019 or in the intervening interim periods during those respective years.

Any failure to remediate the material weaknesses, or the development of new material weaknesses in its internal control over financial reporting, could result in material misstatements in the Company’s consolidated financial statements and cause it to fail to meet its reporting and financial obligations, which in turn could have a negative impact on its financial condition.

• Tredegar is subject to current and future governmental regulation, including environmental laws and regulations, and could become exposed to material liabilities and costs associated with such regulation.

The Company is subject to regulation by local, state, federal and foreign governmental authorities.

New laws and regulations, or changes to existing laws, including those relating to environmental matters (including global climate change and plastic products), and privacy matters, could subject Tredegar to significant additional capital expenditures, operating expenses or other compliance costs.

Moreover, future developments in federal, state, local and international laws and regulations, including environmental laws, are difficult to predict.

Environmental laws and privacy restrictions have become and are expected to continue to become increasingly strict.

As a result, Tredegar expects to be subject to new environmental and privacy 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.

The Company is subject to the U.S.

Foreign Corrupt Practices Act, Brazilian anti-corruption laws and similar anti-bribery laws in other jurisdictions, which generally prohibit companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or retaining business.

Although we have policies and procedures designed to facilitate compliance with these laws and regulations, our employees, contractors and agents may take actions in violation of our policies.

Any such violation, even if prohibited by our policies, could adversely affect our business and/or our reputation.

See Government Regulation in Item 1.

“Business” of this Form 10-K for a further discussion of this risk factor.

• The transition away from the use of the London interbank offered rate ("LIBOR") settings as an interest rate benchmark may negatively impact our debt agreements and financial position, results of operations and liquidity.

On March 5, 2021, the United Kingdom’s Financial Conduct Authority published the dates that the use of LIBOR as an index for commercial loans will be phased out.

Foreign currency indices, including the British pound, the Euro, and Swiss franc, along with the U.S.

dollar 1-week and 2-month settings ceased after December 31, 2021.

Also, after June 30, 2023, the remaining U.S.

dollar settings will cease.

Our most significant exposure to LIBOR relates to our revolving domestically held credit facility, which may be negatively impacted by renegotiated terms and costs of indebtedness associated with the latter of these transition dates.

In addition, the overall financial markets may be disrupted as a result of the replacement of LIBOR, which could have an adverse effect on our cost of capital and our financial position.

We continue to monitor the LIBOR transition and will work to minimize any impact.

Risks Related to Aluminum Extrusions

• 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, and have been adversely impacted during the coronavirus pandemic (“COVID-19”).

Because of the capital intensive nature and level of fixed costs inherent in the aluminum extrusions business, the percentage drop in earnings before interest, taxes, depreciation and amortization (“EBITDA”) from ongiong operations in a cyclical downturn will likely exceed the percentage drop in volume.

Aluminum Extrusions’ end-use markets can be cyclical and subject to seasonal swings in volume and have been adversely impacted during the COVID-19 pandemic.

Because of the capital-intensive nature and level of fixed costs inherent in the aluminum extrusions business, the percentage drop in earnings before interest, taxes, depreciation and amortization (“EBITDA”) from ongoing operations 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 seek to protect their position with key customers.

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In addition, higher energy costs can reduce profits unless offset by price increases or cost reductions and productivity improvements.

• The failure to successfully implement the new enterprise resource planning and manufacturing execution systems could adversely impact the Aluminum Extrusions business and results of operations.

On January 28, 2022, Aluminum Extrusions obtained approval from the Board to engage in the implementation project of a new enterprise resource planning and manufacturing execution systems (“ERP/MES”) across all locations of the Aluminum Extrusions business.

The ERP/MES project is expected to cost $28 million over a two-year time span.

The implementation of these systems is a major undertaking from a financial, management, and personnel perspective.

The implementations may prove to be more difficult, costly, or time consuming than expected, and there can be no assurance that these systems will be beneficial to the extent anticipated.

Any disruptions, delays or deficiencies in the design and implementation of the new systems could adversely affect our financial position, results of operations and cash flows;

additionally, any disruptions, delays or deficiencies could adversely affect our remediation efforts with respect to the effectiveness of our internal controls over financial reporting.

• Failure to prevent competitors from evading anti-dumping and countervailing duties, or a reduction in such duties, could adversely impact Aluminum Extrusions.

Effective April 25, 2017, the anti-dumping duty and countervailing duty orders on aluminum extrusions were extended for a period of five years.

The orders will be reviewed again beginning in

Chinese and other overseas manufacturers continue to try to evade the anti-dumping and countervailing orders to avoid duties.

Effective April 25, 2017, the anti-dumping duty and countervailing duty orders on aluminum extrusions were extended for a period of five years.

The orders will be reviewed again beginning in March 2022.

A failure by, or the inability of, U.S.

trade officials to curtail the evasion of these duties, or the potential reduction of applicable duties pursuant to annual administrative reviews of the orders by the Department of Commerce, could have a material adverse effect on the financial condition, results of operations and cash flows of Aluminum Extrusions.

• The duty-free importation of goods allowed under the United States-Mexico-Canada Agreement (“USMCA”) could result in lower demand for aluminum extrusions made in the U.S., which could materially and negatively affect Bonnell Aluminum’s business and results of operations.

• The duty-free importation of goods allowed under the United States-Mexico-Canada Agreement (“USMCA”), or other free trade agreements or duty-preference regimes, could result in lower demand for aluminum extrusions made in the U.S., which could materially and negatively affect Aluminum Extrusions’ business and results of operations.

In March 2018, the U.S.

imposed tariffs of 10% on aluminum ingot and semi-finished aluminum imported in the U.S.

from certain countries, including countries from which Bonnell Aluminum has historically sourced aluminum products.

imposed tariffs of 10% on aluminum ingot and semi-finished aluminum imported into the U.S.

from certain countries, including countries from which Aluminum Extrusions has historically sourced aluminum products.

In September 2019, the U.S., Canada and Mexico entered into the USMCA.

As a result of the 10% tariffs on aluminum ingot imported to the U.S.

and the duty-free importation of goods allowed under USMCA, aluminum extrusions made in Canada and Mexico are free of the 10% tariff and can now be imported into and sold in the U.S.

and the duty-free importation of goods allowed under USMCA or other trade agreement regimes or duty-preference programs, aluminum extrusions from outside the United States that are able to take advantage of duty-preference programs upon importation into the United States made in Canada and Mexico are free of the 10% tariff and can now be imported into and sold in the U.S.

at very competitive prices.

This could result in lower demand for aluminum extrusions made in the U.S., which could materially and negatively affect Bonnell Aluminum’s business and results of operations.

• Competition from China could increase significantly if China is granted market economy status by the World Trade Organization.

China launched a formal complaint to the World Trade Organization (“WTO”) 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 WTO 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 WTO rules.

and the European Union have each rejected that interpretation.

If China is granted market economy status by the WTO, the extent to which the U.S.

anti-dumping 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 anti-dumping duty investigations involving China, which could ultimately limit the level of anti-dumping 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.

In June 2019, at China’s request, after certain preliminary rulings in the case went against the Chinese position, the WTO indefinitely suspended the proceedings on the Chinese WTO complaint.

This could result in lower demand for aluminum extrusions made in the U.S., which could materially and negatively affect Aluminum Extrusions’ business and results of operations.

• 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 1,450 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.

Aluminum Extrusions has approximately 1,370

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 Aluminum Extrusions’ customer exceeds 4% of consolidated net sales.

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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.

Additionally, PE Films anticipates that a portion of its film products used in surface protection applications could be made obsolete by possible future customer product transitions to less costly alternative processes or materials.

These transitions principally relate to one customer.

The Company believes that previously reported delays in this customer's transitions were recently resolved by the customer and much of the remaining transitions could occur by the end of 2021.

Under this scenario, the Company estimates that the contribution to EBITDA from ongoing operations for PE Films could decline due to the remaining customer product transitions by $18 million in 2021 versus 2020 and $4 million in 2022 versus 2021.

To offset the expected adverse impact, the Company is aggressively pursuing and making progress in generating contribution from sales from new surface protection products, applications and customers and implementing cost savings measures.

Annual contribution to EBITDA from ongoing operations for PE Films on surface protection products unrelated to the customer product transitions has increased since 2018 by approximately $12 million.

The Company previously reported the risk that a portion of its film products used in surface protection applications would be made obsolete by customer product transitions to less costly alternative processes or materials.

The Company estimates that these transitions, which principally relate to one customer, adversely impacted EBITDA from ongoing operations for PE Films by $14.8 million during 2021 versus 2020.

A further decline of $7 million in EBITDA from ongoing operations due to the transitions is expected in 2022 versus 2021, at which time the transitions are expected to be complete.

The Surface Protection business is also experiencing competitive pricing pressures, unrelated to the customer product transitions, that are expected to adversely impact EBITDA from ongoing operations by approximately $6 million in 2022 versus 2021.

To offset the expected adverse impact of the customer transitions and pricing pressures, the Company is aggressively pursuing and making progress in generating contribution from sales of new surface protection products, applications and customers and driving production efficiencies and cost savings.

Annual contribution to EBITDA from ongoing operations for PE Films from sales of products unrelated to previously disclosed customer product transitions increased $7 million for the two-year period ended December 31, 2021, which excludes the impact of resin pass-through lag but includes the adverse impact of customer inventory corrections, customer production slowdowns associated with COVID-19-related factors, and a slowdown in the television market in the fourth quarter of 2021.

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 loss of sales and profits associated with customer transitions and other large customer declines.

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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, and also require additional resources to restore its supply chain.

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, and also require additional resources to restore its supply chain.

• Rising trade tensions could cause an increase in the cost of PE Films’ products or otherwise negatively impact the Company.

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Risks Related to Flexible Packaging Films

• 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.

• A history of uncertain economic conditions in Brazil could adversely impact the financial condition, results of operations and cash flows of Flexible Packaging Films.

For flexible packaging films produced in Brazil, selling prices and key raw material costs are principally determined in U.S.

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While Flexible Packaging Films hedges this exposure on a short-term basis with foreign exchange forward rate contracts, the exposure continues to exist beyond the hedging periods.

• 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.

• Overcapacity in Latin American polyester film production and 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.

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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.

Brazilian authorities initiated an investigation for sunset review on anti-dumping rulings against China, India and Egypt and extended duties that would have expired in 2020 for

There can be no assurance that efforts to extend anti-dumping duties beyond 2021 on products imported from China, India, Egypt and other countries will be successful.

Risks Related to all Tredegar Businesses

• The Company has identified material weaknesses in its internal control over financial reporting.

Maintaining effective internal control over financial reporting is an integral part of producing reliable financial statements.

As discussed in Item 9A.

As discussed in Item 9A to remediate the material weaknesses, the Company, with the assistance of its outside consultant, is in the process of implementing certain changes to its internal controls and reviewing the entire control environment to help ensure that there are no other material weaknesses.

The Company believes that its remediation plan will be sufficient to remediate the identified material weaknesses and strengthen its internal control over financial reporting.

The Company’s remediation efforts are ongoing, and it will continue its initiatives to implement and document policies and procedures.

Remediation of the identified material weaknesses and strengthening the Company’s internal control environment have extended into 2021.

In addition, the Company is monitoring the impact of COVID-19 on its remediation plan.

Depending on the severity and length of the pandemic, the remediation timeline could be negatively impacted because of inefficiencies caused by COVID-related limitations on travel, meetings, on-site work and close collaboration and the related increase in time necessary to complete remediation projects.

The Company cannot provide assurance, however, as to when it will remediate all such weaknesses, nor can it be certain of whether additional actions will be required or the costs of any such actions.

Moreover, the Company cannot provide assurance that additional material weaknesses will not arise in the future.

While the material weaknesses discussed in Item 9A did not result in material misstatements of the Company’s financial statements as of and for the years ended December 31, 2020, 2019, 2018 and 2017 or in the intervening interim periods during those respective years, any failure to remediate the material weaknesses, or the development of new material weaknesses in its internal control over financial reporting, could result in material misstatements in the Company’s consolidated financial statements and cause it to fail to meet its reporting and financial obligations, which in turn could have a negative impact on its financial condition.

• 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 closed to new participants in 2007, and substantially frozen to benefit accruals for active participants in 2014.

As of January 31, 2018, the plan no longer accrued benefits associated with crediting employees for service, thereby freezing all future benefits under the plan.

As of December 31, 2020, the plan was underfunded under U.S.

generally accepted accounting principles (“GAAP”) measures by $103.1 million.

Tredegar expects that it will be required to make a cash contribution of approximately $11.7 million to its underfunded pension plan in 2021, 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.

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

• Tredegar’s performance is influenced by costs incurred by its operating companies, including, for example, the cost of raw materials and energy.

Aluminum, resin and natural gas prices are volatile as shown in the charts in Quantitative and Qualitative Disclosures in Item 7.

Further, the Company’s cost control efforts may not be sufficient to offset any increases in raw material, energy or other costs.

The Company is subject to regulation by local, state, federal and foreign governmental authorities.

Moreover, future developments in federal, state, local and international laws and regulations, including environmental laws, are difficult to predict.

Environmental laws and privacy restrictions have become and are expected to continue to become increasingly strict.

As a result, Tredegar expects to be subject to new environmental and privacy laws and regulations.

See Government Regulation in Item 1.

“Business” of this Form 10-K for a further discussion of this risk factor.

We are subject to the U.S.

Although we have policies and procedures designed to facilitate compliance with these laws and regulations, our employees, contractors and agents may take actions in violation of our policies.

Any such violation, even if prohibited by our policies, could adversely affect our business and/or our reputation.

• Material disruptions at one of the Company’s major manufacturing facilities could negatively impact financial results.

Tredegar believes it has implemented measures to minimize the risks of disruption at its facilities.

However, a disruption could occur as a result of any number of events:

A material disruption in one of the Company’s operating locations could negatively impact production and the Company’s consolidated financial condition, results of operations and cash flows.

• An inability to renegotiate the Company’s collective bargaining agreements could adversely impact its consolidated financial condition, results of operations and cash flows .

Approximately 34% of the Company’s employees are represented by labor unions located in the U.S.

and Brazil 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.

None of Tredegar’s collective bargaining agreements expire before the fourth quarter of 2021.

• Our business and operations, and the operations of our customers, suppliers and others we do business with, may be adversely affected by epidemics such as the recent COVID-19 pandemic, which could adversely affect our financial condition, results of operations and cash flows .

We may face risks related to health epidemics or outbreaks of communicable diseases.

The outbreak of such a communicable disease could result in a widespread health crisis that could adversely affect general commercial activity and the economies and financial markets of many countries.

For example, COVID-19 has spread across the globe to every country in which the Company does business and is impacting worldwide economic activity.

A public health epidemic, including COVID-19, poses the risk that we or our contractors, suppliers, customers and other business partners may be prevented or otherwise adversely affected in the conduct of business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities and by other government mandates or policy changes.

We may also face staffing issues if our employees

become ill from an epidemic, are subject to epidemic-related “stay-at-home” orders, or absenteeism increases because of fear of epidemic-related health risks.

An epidemic may also cause a significant reduction in demand for one or more of our products as a result of a drop in product-specific demand, because of an epidemic’s impact on the world economy generally, or for other reasons.

Bonnell Aluminum is experiencing higher than normal absenteeism and hiring difficulties due to COVID-19 factors.

As a result, it is having difficulty maintaining sufficient labor to meet desired shipping levels.

As a result of an epidemic, we may be unable to meet our supply commitments or otherwise fulfill our customers’ needs due to disruptions in our manufacturing and supply arrangements, including as a result of constrained workforce capacity, interruption of raw material supplies, transportation disruptions or a loss or disruption of other key elements of our manufacturing and distribution capability.

An epidemic may cause the failure of, or default in performance by, third parties we rely on to supply our manufacturing operations, to process, transport or purchase our products, to finance our operations, and to otherwise provide products and services to the Company in support of our business and operations.

For more information on the effect of COVID-19 on our business and financial condition, refer to “ The Impact of COVID-19 ” in Item 7.

• 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 changes in kaléo’s projections, which rely on numerous assumptions, and changes in the valuation of guideline public companies as measured by their enterprise value-to-EBITDA multiples.

The estimated fair value of the Company’s investment in kaléo may significantly decline due to pricing pressures and expected changes in market access as well as continued lower market demand for epinephrine delivery devices resulting from COVID-19-driven delays in in-person back-to-school schedules and social distancing guidelines.

Additionally, 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 be estimated with certainty.

During 2020, kaléo discontinued the marketing of its Evzio product.

• A failure in the Company’s information technology systems as a result of cybersecurity attacks or other causes could negatively affect Tredegar’s business.

To date, interruptions of the Company’s IT systems have been infrequent and have not had a material impact on the Company’s operations.

In May 2021, the Brazilian authorities concluded the sunset review relating to the anti-dumping process for polyester film imported from China, India and Egypt, and decided to extend duties for another five years.

However, due to its doubts that films would continue to be imported from China and Egypt, the government immediately suspended the implementation of the tariffs for those countries.

If in the future there are volumes imported from China or Egypt which are harming the Brazilian market, authorities may promptly reinstate tariffs.

For India, the Brazilian authorities also reviewed measures against countervailing duties and extended those for five years as well.

Considering the expiration date for anti-dumping rulings against Mexico, United Arab Emirates and Turkey in first quarter 2023, Terphane may request a sunset review in the fourth quarter of 2022, if there are indications of continuous dumping practices from those sources into the Brazilian market.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors