What changed in this filing

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Item 9A. Controls and Procedures

2022-03-11 compared with 2021-03-16 · 655 added, 722 removed, 963 unchanged (59% of the section changed)

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For further information, see the November 2018 Form 8-K and Item 4.

“Controls and Procedures” of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018 (the “2018 Third Quarter 10-Q”).

“Controls and Procedures” of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018.

“Risk Factors” of this Form 10-K for risks and uncertainties associated with management’s report on internal control over financial reporting as of and for the year ended December 31, 2021.

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this Form 10-K, pursuant to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation, with the participation of its management, including its Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), of the effectiveness of disclosure controls and procedures (as defined under Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2020.

In connection with the preparation of this Form 10-K, pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company carried out an evaluation with the participation of its management, including its Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined under Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2021.

Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, because of the material weaknesses in internal control over financial reporting discussed below, the Company’s disclosure controls and procedures were not effective as of December 31, 2021, to ensure:

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The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

The Company’s internal control over financial reporting is a process designed by or under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer, and overseen by the Board of Directors, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of published financial statements for external purposes in accordance with GAAP and includes policies and procedures that:

The Company’s internal control over financial reporting is a process designed by or under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer, and overseen by the Board of Directors, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes policies and procedures that:

• Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets;

• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that the Company’s receipts and expenditures are being made only in accordance with the authorization of its management and directors;

• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of the Company’s consolidated financial statements would be prevented or detected.

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Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting using the criteria in Internal Control - Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “2013 COSO Framework”).

As a result of this evaluation, management concluded that the

Company’s internal control over financial reporting was not effective as of December 31, 2020, because of the material weaknesses in internal control over financial reporting discussed below.

As a result of this evaluation, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2021, because of the material weaknesses in internal control over financial reporting discussed below.

• Control Environment:

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• Risk Assessment:

The Company did not have an effective risk assessment process that defined clear financial reporting objectives and evaluated risks, including fraud risks, and risks resulting from changes in the external environment and business operations, at a sufficient level of detail to identify all relevant risks of material misstatement across the entity.

The Company did not have an effective risk assessment process to identify and evaluate at a sufficient level of detail all relevant risks of material misstatement, including fraud risks.

• Information and Communication:

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As a consequence of the material weaknesses described above, internal control deficiencies related to the design and operation of process-level controls and general information technology controls were determined to be pervasive throughout the Company’s financial reporting processes.

While these material weaknesses did not result in material misstatements of the Company’s financial statements as of and for the year ended December 31, 2020, these material weaknesses create a reasonable possibility that a material misstatement of account balances or disclosures in annual or interim consolidated financial statements may not be prevented or detected in a timely manner.

While these material weaknesses did not result in material misstatements of the Company’s consolidated financial statements as of and for the year ended December 31, 2021, these material weaknesses create a reasonable possibility that a material misstatement of account balances or disclosures in annual or interim consolidated financial statements may not be prevented or detected in a timely manner.

Accordingly, the Company concluded that the deficiencies represent material weaknesses in its internal control over financial reporting and its internal control over financial reporting was not effective as of December 31, 2021.

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KPMG LLP’s report appears on page 40 of this Form 10-K.

Remediation Plan

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

Remediation of the identified material weaknesses and strengthening the Company’s internal control environment has 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 material weaknesses cannot be considered completely 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.

To remediate the material weaknesses described above, the Company is pursuing the six remediation steps identified in the 2018 Third Quarter 10-Q.

To date, the Company has accomplished the following as part of those remediation steps:

Identified material processes and significant locations for the purpose of identifying risks of material misstatement to the Company’s financial statements,

Conducted interviews with relevant parties to ensure our understanding of the activities involved in the recording of transactions within material processes,

Substantially completed a comprehensive review and update, as necessary, of the documentation of relevant processes with respect to the Company’s internal control over financial reporting,

Documented significant elements of a comprehensive risk assessment and internal control gap analysis and commenced the validation thereof with key stakeholders,

Commenced the design of certain new or redesigned internal controls, and

Commenced the design and implementation of internal controls for certain processes within its Aluminum Extrusions business, PE Films business, its Flexible Packaging business, and its corporate functions.

The Company continues to work with its outside consultant, an internationally recognized accounting firm, to assist in completing the remediation plan.

The Company believes that its remediation plan will be sufficient to remediate the identified

material weaknesses and strengthen its internal control over financial reporting.

Remediation Plan and Efforts to Address the Previously Identified Material Weaknesses

To remediate the material weaknesses described above, the Company, with the oversight of the Audit Committee of the Board of Directors (the “Audit Committee”), has been pursuing the six remediation steps as originally identified in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

The Company’s remediation plan was designed with the assistance of management’s outside consultant, an internationally recognized accounting firm.

The Company continues to work with its outside consultant to assist in completing the remediation plan and believes that its remediation plan will be sufficient to remediate the identified material weaknesses and strengthen its internal control over financial reporting.

As the Company continues to evaluate, and works to improve, its internal control over financial reporting, management may determine that additional measures to address control deficiencies or modifications to the remediation plan are necessary.

The Company cannot assure you, however, when it will remediate such weaknesses, nor can it be certain whether additional actions will be required or the costs of any such actions.

Through the fourth quarter of 2021, the Company has completed certain steps in its remediation plan, including:

• for certain processes, developed new and revised existing process narratives and identified risks of material misstatement inherent to those processes;

• developed new controls and revised the design of existing controls for a significant number of relevant key controls to mitigate the aforementioned risks, inclusive of general information technology controls and entity-level controls;

• conducted initial organization-wide training sessions with all control owners;

• increased resources in the Company’s internal audit function and created and staffed a controls compliance group charged with monitoring and facilitating compliance with the Company’s responsibilities under the Sarbanes Oxley Act of 2002 (“SOX”);

• implemented a software solution to assist in monitoring and documenting compliance with SOX.

The following remaining activities are scheduled for completion in the first half of 2022 in anticipation of conducting management’s testing that will begin in the first half of 2022 in support of issuing management’s assessment of internal control over financial reporting as of December 31, 2022:

• completion of the identification of risks arising from inappropriate segregation of duties and fraud risks;

• completion of risk assessment and control design for the remaining populations of processes and controls;

• implementation of controls across all financial reporting processes and information technology environments;

• ongoing training with control owners, as necessary;

• ongoing migration of certain components of a legacy information technology system onto a common information technology environment, including risk assessment, control design and implementation of new and revised controls.

The Company continues to monitor the impact of employee turnover, the COVID-19 pandemic and other external factors on its remediation plan and its assessment of internal control over financial reporting.

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 Company cannot assure you when it will remediate the identified material weaknesses, nor can it be certain whether additional actions will be required.

Moreover, the Company cannot assure you that additional material weaknesses will not arise in the future.

Changes in Internal Control Over Financial Reporting

The Company is in the process of implementing certain changes in its internal controls to remediate the material weaknesses described above.

The implementation of the material aspects of this plan began in the second quarter of 2019.

During the quarter ended December 31, 2020, the Company, with the assistance of its outside consultant, continued the design and implementation of internal controls for certain processes within its Aluminum business, PE Films business, Flexible Packaging business and its corporate function.

Except as noted above with respect to the implementation of the remediation plan, there has been no change in the Company’s internal control over financial reporting during the quarter ended December 31, 2020, that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

The Company is in the process of making certain changes in its internal controls to remediate the material weaknesses as described above.

The execution of the material aspects of this plan began in the second quarter of 2019.

Except as noted above with respect to the completion of certain steps in the remediation plan, there has been no change in the Company’s internal control over financial reporting during the quarter ended December 31, 2021, that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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Steitz was elected President and Chief Executive Officer effective March 19, 2019.

He previously served as President and Chief Executive Officer of Addivant Corporation, a leading global supplier of antioxidants, intermediates, inhibitors, modifiers, UV stabilizers and other additives to the plastic and rubber industries, from March 2015 until January 2019, as President and Chief Operating Officer of PQ Corporation, a leading worldwide producer of specialty inorganic performance chemicals and catalysts, from October 2013 until March 2015, as President and Chief Executive Officer of Avantor Performance Materials, a global supplier of ultra-high-purity life sciences materials with strict regulatory and performance specifications, from September 2012 until September 2013, as President and Chief Operating Officer of Albemarle Corporation from March 2012 until August 2012, and as Chief Operating Officer and Executive Vice President of Albemarle from April 2007 until March 2012.

He previously served as President and Chief Executive Officer of Addivant Corporation, a leading global supplier of antioxidants, intermediates, inhibitors, modifiers, UV stabilizers and other additives to the plastic and rubber industries, from March 2015 until January 2019, as President and Chief Operating Officer of PQ Corporation, a leading worldwide producer of specialty inorganic performance chemicals and catalysts, from October 2013 until March 2015, as President and Chief Executive Officer of Avantor Performance Materials, a global supplier of ultra-high-purity life sciences materials with strict regulatory and performance specifications, from September 2012 until September 2013, as President and Chief Operating Officer of Albemarle Corporation, a global specialty chemicals company, from March 2012 until August 2012, and as Chief Operating Officer and Executive Vice President of Albemarle from April 2007 until March 2012.

Andrew Edwards.

Edwards was named Executive Vice President and Chief Financial Officer effective August 6, 2020.

Edwards had been Vice President and Chief Financial Officer since July 20, 2015.

Edwards served as Vice President and Chief Financial Officer from July 20, 2015 until August 2020.

He previously served as the Chief Financial Officer of United Sporting Companies, Inc., a wholesale distributor of outdoor sporting goods, from February 2013 until July 2015 and as Vice President, Controller and Chief Accounting Officer of Owens & Minor, Inc., a distributor of acute medical products, from April 2010 to February 2013 and as Acting Chief Financial Officer of Owens & Minor, Inc.

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PRINCIPAL ACCOUNTING FEES AND SERVICES

Our independent registered public accounting firm is KPMG LLP , Richmond, Virginia , Audit Firm ID:

The following is incorporated herein by reference:

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Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Tredegar Corporation and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income (loss), cash flows, and shareholders’ equity for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements).

We have audited the accompanying consolidated balance sheets of Tredegar Corporation and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S.

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 11, 2022 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases .

Basis for Opinion

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The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of investment in kaleo, Inc.

As discussed in Notes 1 and 4 to the consolidated financial statements, the Company accounts for its ownership interest in kaleo, Inc.

(“kaléo”) under the fair value option of accounting.

The Company estimates the fair value of its investment in kaléo by computing the weighted average estimated enterprise value utilizing both the discounted cash flow method (the “DCF method”) and the application of a market multiple to earnings before interest, taxes, depreciation and amortization (the “EBITDA multiple method”), and applying certain other adjustments.

The Company applied an 80% weighting to the DCF method and a 20% weighting to the EBITDA multiple method.

As of December 31, 2020, the estimated fair value of the Company’s ownership interest in kaléo was $34.6M.

We identified the assessment of the fair value of the Company’s ownership interest in kaléo as a critical audit matter.

Subjective auditor judgment was required to evaluate certain assumptions used in the DCF method.

Specifically, the weighted average cost of capital (“WACC”), which was used as the basis for the discount rate, is sensitive to variation such that minor changes to this assumption could have a significant impact on the estimated fair value of the Company’s ownership interest in kaléo.

The following are the primary procedures we performed to address the critical audit matter.

We involved valuation professionals with specialized skills and knowledge who assisted in:

— evaluating the Company’s discount rate by comparing it to a discount rate that was independently developed using publicly available third-party market data for comparable entities

— developing an estimate of fair value using kaléo’s forecasted cash flows and the independently developed discount rate, and comparing the results of our estimate of fair value to the Company’s fair value estimate.

Fair value of investments measured at net asset value

As discussed in Note 8 to the consolidated financial statements, the fair value of pension plan assets at December 31, 2021 was $244.6 million.

Of this amount, $49.0 million represents the fair value of private equity, hedge funds and certain international equity securities measured at net asset value (NAV).

We identified the assessment of the fair value of investments measured at NAV as a critical audit matter.

Subjective auditor judgment was required in the application and performance of procedures to assess the fair value of the investments measured at NAV because the determination involved the use of unobservable inputs.

Additionally, specialized skills and

knowledge were required to assess the fair value of the investments measured at NAV and to assess the sufficiency of audit evidence obtained.

The following are the primary procedures we performed to address this critical audit matter.

For a selection of the investments measured at NAV, we compared:

• the Company’s previous estimates of fair value to the NAVs subsequently audited by third parties

• the rates of return to relevant, publicly available market indices

• the estimated fair values to external confirmations received directly from the third-party investment managers.

We involved valuation professionals with specialized skills and knowledge, who assisted in our risk assessment and the design of procedures performed for the investments measured at NAV.

With respect to the selection of investments tested, the valuation professionals assisted in assessing the sufficiency of audit evidence obtained by assessing the results of the procedures performed.

We have served as the Company’s auditor since 2018.

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In our opinion, because of the effect of the material weaknesses, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income (loss), cash flows, and shareholders’ equity for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements), and our report dated March 16, 2021 expressed an unqualified opinion on those consolidated financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income (loss), shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements), and our report dated March 11, 2022 expressed an unqualified opinion on those consolidated financial statements.

A material weakness is 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 company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Material weaknesses related to an ineffective control environment resulting from an insufficient number of trained resources, ineffective risk assessment, ineffective information and communication, and ineffective monitoring activities resulting in ineffective control activities related to the design and operation of process-level controls and general information technology controls across all financial reporting processes have been identified and included in management’s assessment.

The material weaknesses related to an ineffective control environment resulting from an insufficient number of trained resources, ineffective risk assessment, ineffective information and communication, and ineffective monitoring activities resulting in ineffective control activities related to the design and operation of process-level controls and general information technology controls across all financial reporting processes have been identified and included in management’s assessment.

The material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2021 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.

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Cash and cash equivalents $ 30,521 $ 11,846

Accounts and other receivables, net of allowance for doubtful accounts and sales returns of $ 2,797 in 2020 and $ 1,904 in 2019

86,327 89,117

Accounts and other receivables, net 103,312 86,327

Income taxes recoverable 2,558 2,807

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Pension and other postretirement benefit obligations, net 78,265 110,585

Deferred income tax liabilities — 11,019

Other non-current liabilities 6,218 5,529

Non-current liabilities of discontinued operations — 351

Total liabilities 338,862 405,815

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Other comprehensive income (loss):

Unrealized foreign currency translation adjustment (net of tax benefit of $ 897 in 2020, net of tax benefit of $ 623 in 2019 and net of tax of $ 281 in 2018)

Unrealized foreign currency translation adjustment (net of tax benefit of $ 365 in 2021, net of tax benefit of $ 897 in 2020 and net of tax benefit of $ 623 in 2019)

( 1,643 ) ( 8,781 ) ( 3,723 )

Reclassification of foreign currency translation loss realized on the sale of Personal Care Films — 25,295 —

Derivative financial instruments adjustment (net of tax of $ 790 in 2020, net of tax of $ 71 in 2019 and net of tax benefit of $ 503 in 2018)

Derivative financial instruments adjustment (net of tax benefit of $ 351 in 2021, net of tax of $ 790 in 2020 and net of tax of $ 71 in 2019)

( 1,363 ) 3,571 294

Pension & other postretirement benefit adjustments:

Net gains (losses) and prior service costs (net of tax benefit of $ 4,228 in 2020, net of tax benefit of $ 6,417 in 2019 and net of tax benefit of $ 319 in 2018)

Net gains (losses) and prior service costs (net of tax of $ 5,212 in 2021, net of tax benefit of $ 4,228 in 2020 and net of tax benefit of $ 6,417 in 2019)

18,720 ( 12,197 ) ( 22,508 )

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Accrued pension and postretirement benefits 14,160 14,720 9,642

(Gain) loss on investment in kaléo accounted for under the fair value method 60,900 ( 10,900 ) ( 30,600 )

Stock-based compensation expense 5,167 5,402 7,293

(Gain) loss on investment in kaléo ( 12,462 ) 60,900 ( 10,900 )

Loss on sale of divested businesses — 52,326 —

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Capital expenditures ( 27,361 ) ( 23,355 ) ( 50,864 )

Return of escrowed funds relating to acquisition earn-out — — 4,250

Proceeds from the sale of kaléo 47,062 — —

Net proceeds on sale of divested businesses — 56,236 —

Net proceeds from the sale of investment property — — 1,384

Proceeds from the sale of assets and other 4,749 — 10,936

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Debt financing costs ( 693 ) ( 1,817 )

Repurchase of employee common stock for tax withholdings ( 850 ) ( 854 ) ( 328 )

Proceeds from exercise of stock options and other — 184 1,332

Net cash provided by (used in) financing activities:

Other 325 ( 850 ) ( 670 )

Net cash used in financing activities:

( 76,842 ) ( 125,592 ) ( 77,312 )

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Balance at January 1, 2019 33,176,024 $ 38,892 $ 497,511 $ ( 1,559 ) $ ( 96,940 ) $ ( 1,601 ) $ ( 81,446 ) $ 354,857

Net income — — 24,842 — — — — 24,842

Net income (loss) — — 48,259 — — — — 48,259

Foreign currency translation adjustment — — — — ( 3,723 ) — — ( 3,723 )

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Balance at December 31, 2019 33,365,039 45,514 530,478 ( 1,592 ) ( 100,663 ) ( 1,307 ) ( 95,681 ) 376,749

Net income — — 48,259 — — — — 48,259

Net income (loss) — — ( 75,444 ) — — — — ( 75,444 )

Foreign currency translation adjustment — — — — ( 8,781 ) — — ( 8,781 )

Foreign currency translation loss realized on the sale of Personal Care Films — — — — 25,295 — — 25,295

Derivative financial instruments adjustment — — — — — 3,571 — 3,571

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Repurchase of employee common stock for tax withholdings ( 39,217 ) ( 850 ) — — — — — ( 850 )

Issued upon exercise of stock options 9,500 184 — — — — — 184

Tredegar common stock purchased by trust for savings restoration plan — — 495 ( 495 ) — — — —

Balance at December 31, 2020 33,457,176 50,066 239,480 ( 2,087 ) ( 84,149 ) 2,264 ( 96,519 ) 109,055

Net loss — — ( 75,444 ) — — — — ( 75,444 )

Net income (loss) — — 57,826 — — — — 57,826

Foreign currency translation adjustment — — — — ( 1,643 ) — — ( 1,643 )

Foreign currency translation loss realized on the sale of Personal Care Films 25,295 25,295

Derivative financial instruments adjustment — — — — — ( 1,363 ) — ( 1,363 )

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Stock-based compensation expense 229,014 4,783 — — — — — 4,783

Issued upon exercise of stock options 67,705 915 — — — — — 915

Repurchase of employee common stock for tax withholdings ( 17,266 ) ( 590 ) — — — — — ( 590 )

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custom aluminum extrusions for the North American building & construction, automotive and specialty end-use markets;

surface protection films for high-technology applications in the global electronics industry;

polyethylene overwrap films used in bathroom tissue and paper towels;

surface protection films for high-technology applications in the global electronics industry and polyethylene overwrap films used in bathroom tissue and paper towels;

and polyester-based films for use in packaging applications that have specialized properties primarily for the Latin American and the United States (“U.S.”) flexible packaging markets.

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Commencing in the third quarter of 2020, all historical results for Personal Care Films have been presented as discontinued operations.

In December 2020, the Company entered into a definitive agreement to sell Bright View Technologies (“Bright View”), with the transaction completed on December 31, 2020.

The sale does not represent a strategic shift nor does it have a major effect on the Company’s historical and ongoing operations, thus all financial information for Bright View has been presented as continuing operations.

Bright View historically has been reported in the PE Films segment.

In December 2020, the Company entered into a definitive agreement to sell Bright View Technologies (“Bright View”).

The sale did not represent a strategic shift nor did it have a major effect on the Company’s historical and ongoing operations, thus all financial information for Bright View has been presented as continuing operations in the PE Films segment.

For more information on these transactions, see Note 15 in the Notes to Financial Statements

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The Company may fund or receive cash from the Aluminum Extrusions segment based on Aluminum Extrusion’s cash flows from operations during the intervening period from Aluminum Extrusion’s fiscal year end to the Company’s calendar year end.

As a result, the Company’s cash and cash equivalents declined by $ 3.8 million as of December 31, 2020 since the Company made payments to the Aluminum Extrusions segment to fund its working capital during the intervening period.

There was no intercompany funding with Aluminum Extrusions between December 27, 2021 and December 31, 2021.

As of December 31, 2020, the Company’s cash and cash equivalents declined by $ 3.8 million since the Company made payments to the Aluminum Extrusions segment to fund its working capital during the intervening period.

Use of Estimates.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and disclosure of contingent assets and liabilities (if any).

On an ongoing basis, the Company evaluates its estimates, including those related to provisions for transaction and credit losses, income taxes, pension, and the valuation of goodwill and intangible assets, among others.

Tredegar bases its estimates on historical experience and various other assumptions which the Company believes to be reasonable under the circumstances.

Actual results could differ from those estimates.

Risk and Uncertainties.

While it is not possible to estimate the impact that the coronavirus pandemic (“COVID-19”) may have on the Company’s business, estimates related to the accounting for impairment of long-lived assets and goodwill, an investment accounted for under the fair value method, pension benefits and income taxes could be materially adversely affected in future periods.

While it is not possible to estimate the impact that the coronavirus pandemic (“COVID-19”) may have on the Company’s business, estimates related to the accounting for impairment of long-lived assets and goodwill, pension benefits and income taxes could be materially adversely affected in future periods.

Due to the uncertainty with respect to the magnitude of the impact and duration of COVID-19, future developments associated with COVID-19 may adversely affect the Company's financial condition, results of operations and cash flows.

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Dollar is the functional currency.

Transaction and remeasurement gains or losses included in income were gains of $ 0.6 million, losses of $ 0.6 million and gains of $ 0.1 million in 2020, 2019 and 2018, respectively.

Transaction and remeasurement gains or losses included in income were losses of $ 0.5 million, gains of $ 0.6 million and losses of $ 0.6 million in 2021, 2020 and 2019, respectively.

These amounts do not include the effects between reporting periods that exchange rate changes have on income of the locations outside the U.S.

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Cash and cash equivalents consist of cash on hand in excess of daily operating requirements and highly liquid investments with original maturities of three months or less.

At December 31, 2020 and 2019, Tredegar had cash

and cash equivalents of $ 11.8 million and $ 31.4 million, respectively, including funds held in locations outside the U.S.

At December 31, 2021 and 2020, Tredegar had cash and cash equivalents of $ 30.5 million and $ 11.8 million, respectively, including funds held in locations outside the U.S.

of $ 16.4 million and $ 9.4 million, respectively.

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The primary objectives of the policy are safety of principal and liquidity.

Accounts and Other Receivables.

Accounts receivable are stated at the amount invoiced to customers less allowances for doubtful accounts and sales returns.

Accounts and Other Receivables, net.

Accounts receivable are stated at the amount invoiced to customers less allowances for doubtful accounts.

Accounts receivable are non-interest bearing and arise from the sale of product to customers under typical industry trade terms.

Notes receivable are not significant.

Notes receivable are immaterial.

Past due amounts are determined based on established terms and charged-off when deemed uncollectible.

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Depreciation is computed primarily by the straight-line method based on the estimated useful lives of the assets that generally range from 5 to 40 years for buildings and land improvements and 2 to 20 years for machinery and equipment.

Investments in Private Entities with Less Than or Equal to 50% Voting Ownership Interest.

The Company accounts for its investments in private entities where its voting ownership is less than or equal to 50 % based on the facts and circumstances surrounding the investment.

For those investments measured at fair value, GAAP requires disclosure of the level within the fair value hierarchy in which fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3).

For more information on investments, see Note 4.

Goodwill and Identifiable Intangibles.

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The Step 0 assessment requires the evaluation of certain qualitative factors, including macroeconomic conditions, industry and market considerations, cost factors and overall financial performance, as well as company and reporting unit factors.

If the Company's Step 0 analysis indicates that it is more likely than not that the fair value of a reporting unit is less than the carrying amount, then the Company would perform a quantitative impairment test that estimates the fair value of its reporting units using discounted cash flow analyses and comparative enterprise value-to-EBITDA (earnings before interest, taxes, depreciation and amortization) multiples.

During the first three months of 2020, the Company performed goodwill impairment tests and recognized a goodwill impairment charge of $ 13.7 million ($ 10.5 million after taxes), which represented the entire amount of goodwill associated with Aluminum Extrusions’ AACOA reporting unit.

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Both of these reporting units have separately identifiable operating net assets (operating assets including goodwill and identifiable intangible assets net of operating liabilities).

The Company estimates the fair value of its reporting units using discounted cash flow analyses and comparative enterprise value-to-EBITDA (earnings before interest, taxes, depreciation and amortization) multiples.

As of December 1, 2020, the Company applied the Step 0 goodwill assessment to Surface Protection and Futura, which both had fair values significantly in excess of their carrying amounts when last tested using the quantitative impairment test.

In addition, the Company applied the Step 0 goodwill assessment to Surface Protection and Futura;

both had fair values significantly in excess of their carrying amounts when last tested using the quantitative impairment test.

The Company's Step 0 analyses in 2021 of these reporting units concluded that it is not more likely than not that the fair values of each reporting unit was less than its carrying amount.

Therefore, the quantitative goodwill impairment tests for these reporting units were not necessary in 2021.

The Surface Protection and Futura reporting units had goodwill in the amounts of $ 57.3 million and $ 10.4 million, respectively, at December 31, 2020.

Indefinite-lived identifiable intangible assets are assessed for impairment when events or circumstances indicate that the carrying value may not be recoverable.

The Company estimates the fair value of its trade names using a relief-from-royalty method that relies upon a corresponding discounted cash flow analysis.

Additional disclosure of Tredegar’s goodwill and identifiable intangible assets and the impairments recorded in 2018 are included in Note 8.

Protection and Futura reporting units had goodwill in the amounts of $ 57.3 million and $ 13.3 million, respectively, at December 31, 2021.

For more information on goodwill and identifiable intangibles, see Note 5.

Impairment of Long-Lived Assets.

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Measurement of the impairment loss is the amount by which the carrying amount exceeds the estimated fair value of the asset group.

As of December 31, 2021 and 2020, no events were identified that indicated long-lived assets may be impaired.

Assets that are held for sale are reported at the lower of their carrying amount or estimated fair value less cost to sell, with an impairment loss recognized for any write-down required.

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Tredegar’s policy is to fund its pension plans at amounts not less than the minimum requirements of the Employee Retirement Income Security Act (“ERISA”) of 1974 and to fund postretirement benefits other than pensions when claims are incurred.

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 contributed $ 50 million to the pension plan (the “Special Contribution”).

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

As of December 31, 2021, no adjustment to the consolidated financial statements has been recognized as a result of this announcement and Special Contribution made in 2022.

As the settlement process occurs, the Company expects to recognize a non-cash reclassification adjustment to net income or loss of other comprehensive net actuarial losses associated with the pension plan currently reflected directly in shareholders’ equity.

Other comprehensive net actuarial losses associated with the pension plan were approximately $109 million on a pretax basis as of December 31, 2021.

Additional disclosure regarding Tredegar’s pension costs and postretirement benefit costs other than pensions is included in Note 8.

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Certain allowances are fixed and determinable at the time of sale and are recorded at the time of sale as a reduction to revenues.

Other allowances can vary depending on future outcomes such as customer sales volume and represent variable consideration.

Other allowances can vary depending on future outcomes such as sales returns and customer sales volume, thus represents variable consideration.

Amounts billed to customers related to freight are classified as sales revenue and the cost of freight is classified as a separate line in the accompanying consolidated statements of income.

1 unchanged sentence

See Note 13 for disaggregation of revenue by segment and type.

See Note 6 for a table showing accounts and other receivables, net of allowance for bad debts and sales returns.

See Note 2 for a table showing accounts and other receivables, net of allowance for bad debts.

Revenue expected to be recognized in any future period related to remaining performance obligations, excluding i) revenue pertaining to contracts that have an original expected duration of one year or less, ii) contracts where revenue is recognized as invoiced and iii) variable consideration related to unsatisfied performance obligations, is not expected to materially impact the Company’s financial results.

2 unchanged sentences

R&D costs include a reasonable allocation of indirect costs.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued a revised standard on lease accounting, ASU 2016-2, Leases (Topic 842) .

The Company adopted the standard effective January 1, 2019.

At inception, the Company determines if an arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease.

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Incremental shares attributable to stock options and restricted stock are computed using the average market price during the related period.

For the year ended December 31, 2021, average out-of-the-money options to purchase shares that were excluded from the calculation of incremental shares attributable to stock options and restricted stock were 1,582,222 .

The Company had a net loss from continuing operations for the year ended December 31, 2020, so there is no dilutive impact for such shares.

If the Company had reported net income from continuing operations for the year ended December 31, 2020, average out-of-the-money options to purchase shares that were excluded from the calculation of incremental shares attributable to stock options and restricted stock were 1,212,375 .

For the years ended December 31, 2019 and 2018, average out-of-the-money options to purchase shares that were excluded from the calculation of incremental shares attributable to stock options and restricted stock were 209,592 and 726,475 , respectively.

For the year ended December 31, 2019, average out-of-the-money options

to purchase shares that were excluded from the calculation of incremental shares attributable to stock options and restricted stock were 209,592 .

Stock-Based Employee Compensation Plans.

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Gains and losses reported in other comprehensive income (loss) are reclassified to earnings in the periods in which earnings are affected by the variability of cash flows of the hedged transaction.

Such gains and losses are reported on the same line as the underlying hedged item, and the cash flows related to financial instruments are classified in the consolidated statements of cash flows in a manner consistent with those of the transactions being hedged.

Any hedge ineffectiveness (which represents the amount by which the changes in the fair value of the derivative exceed the variability in the cash flows of the forecasted transaction) is recorded in current period earnings.

The amount of gains and losses recognized for hedge ineffectiveness were not material in 2020, 2019 and 2018.

Such gains and losses are reported in the same line as the underlying hedged item, and the cash flows related to financial instruments are classified in the consolidated statements of cash flows in a manner consistent with those of the transactions being hedged.

The Company’s policy requires that it formally document all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions.

The Company also formally assesses (both at the hedge’s inception and on an ongoing basis) whether the derivatives that are used in hedging transactions have been highly effective in offsetting changes in the fair value or cash flows of hedged items and whether those derivatives may be expected to remain highly effective in future periods.

The Company also uses regression analysis, unless the hedge qualifies for other methods of assessing effectiveness, to formally assess (both at the hedge’s inception and on an ongoing basis) whether the derivatives that are used in hedging transactions have been highly effective in offsetting changes in the fair value or cash flows of hedged items and whether those derivatives may be expected to remain highly effective in future periods.

When it is determined that a derivative is not (or has ceased to be) highly effective as a hedge, the Company discontinues hedge accounting prospectively.

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Other comprehensive income (loss) includes changes in foreign currency translation adjustments, unrealized gains and losses on derivative financial instruments, prior service costs and net gains or losses from pension and other postretirement benefit plans arising during the period and amortization of these prior service costs and net gain or loss adjustments, all recorded net of deferred income taxes.

The following table summarizes the after-tax changes in accumulated other comprehensive income (loss) for the year ended December 31, 2020:

(In thousands) Foreign currency translation adjustment Gain (loss) on derivative financial instruments Pension and other post-retirement benefit adjustments Total

Beginning balance, January 1, 2020 $ ( 100,663 ) $ ( 1,307 ) $ ( 95,681 ) $ ( 197,651 )

Other comprehensive income (loss) before reclassifications ( 8,781 ) ( 3,285 ) ( 12,197 ) ( 24,263 )

Amounts reclassified from accumulated other comprehensive income (loss) 25,295 6,856 11,359 43,510

Net other comprehensive income (loss) - current period 16,514 3,571 ( 838 ) 19,247

Ending balance, December 31, 2020 $ ( 84,149 ) $ 2,264 $ ( 96,519 ) $ ( 178,404 )

The following table summarizes the after-tax changes in accumulated other comprehensive income (loss) for the year ended December 31, 2019:

(In thousands) Foreign currency translation adjustment Gain (loss) on derivative financial instruments Pension and other post-retirement benefit adjustments Total

Beginning balance, January 1, 2019 $ ( 96,940 ) $ ( 1,601 ) $ ( 81,446 ) $ ( 179,987 )

Other comprehensive income (loss) before reclassifications ( 3,723 ) ( 2,686 ) ( 22,508 ) ( 28,917 )

Amounts reclassified from accumulated other comprehensive income (loss) — 2,980 8,273 11,253

Net other comprehensive income (loss) - current period ( 3,723 ) 294 ( 14,235 ) ( 17,664 )

Ending balance, December 31, 2019 $ ( 100,663 ) $ ( 1,307 ) $ ( 95,681 ) $ ( 197,651 )

Reclassifications of balances out of accumulated other comprehensive income (loss) into net income during 2020 are summarized as follows:

(In thousands) Amount reclassified from other comprehensive income (loss) Location of gain (loss) reclassified from accumulated other comprehensive income (loss) to net income (loss)

Gain (loss) on derivative financial instruments:

Aluminum future contracts, before taxes $ ( 2,717 ) Cost of goods sold

Foreign currency forward contracts, before taxes ( 6,069 ) Selling, general and administrative

Foreign currency forward contracts, before taxes 62 Cost of goods sold

Total, before taxes ( 8,724 )

Income tax expense (benefit) ( 1,868 ) Income tax expense (benefit)

Total, net of tax $ ( 6,856 )

Amortization of pension and other post-retirement benefits:

Actuarial gain (loss) and prior service costs, before taxes $ ( 15,296 ) (a)

Income tax expense (benefit) ( 3,937 ) Income tax expense (benefit)

Total, net of tax $ ( 11,359 )

Reclassification adjustment of foreign currency translation loss included in income:

Realized loss on foreign currency translation adjustments related to the sale of Personal Care Films $ ( 25,295 ) Income (loss) from discontinued operations, net of tax

(a) This component of accumulated other comprehensive income is included in the computation of net periodic pension cost (see Note 13 for additional detail).

Reclassifications of balances out of accumulated other comprehensive income (loss) into net income during 2019 are summarized as follows:

(In thousands) Amount reclassified from other comprehensive income (loss) Location of gain (loss) reclassified from accumulated other comprehensive income (loss) to net income

Gain (loss) on derivative financial instruments:

Aluminum future contracts, before taxes $ ( 2,736 ) Cost of goods sold

Foreign currency forward contracts, before taxes ( 904 ) Selling, general and administrative

Foreign currency forward contracts, before taxes 62 Cost of goods sold

Total, before taxes ( 3,578 )

Income tax expense (benefit) ( 598 ) Income tax expense (benefit)

Total, net of tax $ ( 2,980 )

Amortization of pension and other post-retirement benefits:

Actuarial gain (loss) and prior service costs, before taxes $ ( 10,632 ) (a)

Income tax expense (benefit) ( 2,359 ) Income tax expense (benefit)

Total, net of tax $ ( 8,273 )

(a) This component of accumulated other comprehensive income is included in the computation of net periodic pension cost (see Note 13 for additional detail).

Reclassifications of balances out of accumulated other comprehensive income (loss) into net income during 2018 are summarized as follows:

(In thousands) Amount reclassified from other comprehensive income (loss) Location of gain (loss) reclassified from accumulated other comprehensive income (loss) to net income

Gain (loss) on derivative financial instruments:

Aluminum future contracts, before taxes $ 1,069 Cost of goods sold

Foreign currency forward contracts, before taxes ( 1,796 ) Selling, general and administrative

Foreign currency forward contracts, before taxes 62 Cost of goods sold

Total, before taxes ( 665 )

Income tax expense (benefit) 253 Income tax expense (benefit)

Total, net of tax $ ( 918 )

Amortization of pension and other post-retirement benefits:

Actuarial gain (loss) and prior service costs, before taxes $ ( 13,650 ) (a)

Income tax expense (benefit) ( 3,028 ) Income tax expense (benefit)

Total, net of tax $ ( 10,622 )

(a) This component of accumulated other comprehensive income is included in the computation of net periodic pension cost (see Note 13 for additional detail).

The changes in accumulated other comprehensive income (loss) by component are summarized as follows:

Foreign Currency Translation Gain (Loss) on Derivative Financial Instruments Pension & Other Postretirement Benefit Adjust Total Accumulated Other Comprehensive Income (Loss)

Balance at January 1, 2019 $ ( 96,940 ) $ ( 1,601 ) $ ( 81,446 ) $ ( 179,987 )

Other comprehensive income (loss) ( 4,346 ) ( 3,214 ) ( 28,925 ) ( 36,485 )

Income tax (expense) benefit 623 528 6,417 7,568

Other comprehensive income (loss), net of tax ( 3,723 ) ( 2,686 ) ( 22,508 ) ( 28,917 )

Reclassification adjustment to net income (loss) — 3,578 10,632 14,210

Income tax (expense) benefit — ( 598 ) ( 2,359 ) ( 2,957 )

Reclassification adjustment to net income (loss), net of tax — 2,980 8,273 11,253

Other comprehensive income (loss), net of tax ( 3,723 ) 294 ( 14,235 ) ( 17,664 )

Balance at December 31, 2019 ( 100,663 ) ( 1,307 ) ( 95,681 ) ( 197,651 )

Other comprehensive income (loss) ( 9,678 ) ( 4,362 ) ( 16,425 ) ( 30,465 )

Income tax (expense) benefit 897 1,077 4,228 6,202

Other comprehensive income (loss), net of tax ( 8,781 ) ( 3,285 ) ( 12,197 ) ( 24,263 )

Reclassification adjustment to net income (loss) 25,295 8,724 15,296 49,315

Income tax (expense) benefit — ( 1,868 ) ( 3,937 ) ( 5,805 )

Reclassification adjustment to net income (loss), net of tax 25,295 6,856 11,359 43,510

Other comprehensive income (loss), net of tax 16,514 3,571 ( 838 ) 19,247

Balance at December 31, 2020 ( 84,149 ) 2,264 ( 96,519 ) ( 178,404 )

Other comprehensive income (loss) ( 2,008 ) 3,800 23,932 25,724

Income tax (expense) benefit 365 ( 842 ) ( 5,212 ) ( 5,689 )

Other comprehensive income (loss), net of tax ( 1,643 ) 2,958 18,720 20,035

Reclassification adjustment to net income (loss) — ( 5,513 ) 16,862 11,349

Income tax (expense) benefit — 1,192 ( 3,676 ) ( 2,484 )

Reclassification adjustment to net income (loss), net of tax — ( 4,321 ) 13,186 8,865

Other comprehensive income (loss), net of tax ( 1,643 ) ( 1,363 ) 31,906 28,900

Balance at December 31, 2021 $ ( 85,792 ) $ 901 $ ( 64,613 ) $ ( 149,504 )

The amounts reclassified out of accumulated other comprehensive income (loss) related to pension and other postretirement benefits is included in the computation of net periodic pension costs, see Note 8 for additional details.

Accounting Standards Adopted .

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326).” The pronouncement replaces the incurred loss methodology to record credit losses with a methodology that reflects the expected credit losses for financial assets not accounted for at fair value with gains and losses recognized through net income.

In the first quarter of 2020, the Company adopted ASU 2016-13 which resulted in an adjustment of less than $0.2 million and, therefore, did not have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement:

Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which changes the disclosure requirements for fair value measurements by removing, adding and modifying certain disclosures.

ASU 2018-13 is effective for annual periods beginning after December 15, 2019, with early adoption permitted.

This ASU became effective on January 1, 2020 and the requirements of this ASU did not have a material impact on the Company's fair value disclosures.

Accounting Standards Not Yet Adopted .

In December 2019, the FASB issued ASU 2019-12, which simplifies the accounting for income taxes.

The new guidance simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, hybrid taxes and the recognition of deferred tax liabilities for outside basis differences.

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, which simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, hybrid taxes and the recognition of deferred tax liabilities for outside basis differences.

It also clarifies and simplifies other aspects of the accounting for income taxes.

The amendments are effective for fiscal years beginning after December 15, 2020 and interim periods therein, with early adoption permitted.

The Company is currently evaluating the impact of this new guidance.

2 DIVESTITURES AND ASSETS HELD FOR SALE

Personal Care Films

On August 24, 2020, the Company entered into a definitive agreement to sell Personal Care Films for an aggregate purchase price of approximately $ 60.5 million, subject to customary adjustments.

Upon completion of the sale on October 30, 2020, the Company recognized a pre-tax loss of $ 50.0 million ($ 46.7 million after-tax) for the year ended December 31, 2020, which includes the realization of other comprehensive losses on foreign currency translation adjustments of $25.3 million previously reflected in shareholder’s equity.

In addition, the Company agreed to provide certain transition services related to finance, human resources and information technology which are expected to end in the first half of 2021.

Personal Care Films was previously reported in the PE Films segment.

The following table summarizes the financial results of discontinued operations reflected in the Consolidated Statements of Income for the year ended December 31, 2020, 2019 and 2018:

Years Ended December 31

(In thousands) 2020 2019 2018

Revenues and other items:

Sales $ 110,246 $ 146,034 $ 213,637

Other income (expense), net ( 333 ) 6,424 4

109,913 152,458 213,641

Costs and expenses:

Cost of goods sold 92,079 126,371 170,091

Freight 5,229 7,083 8,857

Selling, general and administrative 16,824 17,754 17,354

Research and development 8,863 11,743 12,035

Asset impairments and costs associated with exit and disposal activities, net of adjustments 1,529 3,341 2,515

Goodwill impairment — — 46,792

Loss on sale of business 50,027 — —

Total 174,551 166,292 257,644

Income (loss) from discontinued operations before income taxes ( 64,638 ) ( 13,834 ) ( 44,003 )

Income tax expense (benefit) ( 6,027 ) ( 3,632 ) ( 7,281 )

Income (loss) from discontinued operations, net of tax $ ( 58,611 ) $ ( 10,202 ) $ ( 36,722 )

The assets and liabilities of the discontinued operations reflected in the Consolidated Balance Sheets as of December 31, 2020 and 2019, respectively were as follows:

(In thousands) 2020 2019

Accounts and other receivables, net $ — $ 18,441

Income tax recoverable — 1,439

Inventories — 17,175

Prepaid expenses and other (b) 1,339 363

Total current assets 1,339 37,418

Property, plant and equipment, net — 69,334

Right-of-use leased assets — 728

Deferred income taxes — 694

Other assets 151 105

Total non-current assets 151 70,861

Total assets of discontinued operations $ 1,490 $ 108,279

Accounts payable $ — $ 16,361

Accrued expenses (b) 7,521 6,344

Lease liability, short-term — 575

Total current liabilities 7,521 23,280

Lease liability, long-term — 351

Total non-current liabilities — 351

Total liabilities of discontinued operations (a) $ 7,521 $ 23,631

(a) Pension and other postretirement benefit liabilities related to Personal Care Films have been retained by the Company.

(b) The consolidated balance sheet of discontinued operations as of December 31, 2020 includes $ 0.4 million of other receivables related to the settlement of customary post-closing adjustments, deferred assets of $ 0.9 million and deferred obligations of $ 5.3 million related to transition services, accrued severance of $ 2.1 million, and other miscellaneous accrued expenses of $ 0.2 million.

The following table provides significant operating and investing cash flow information for discontinued operations:

Year Ended December 31,

(In thousands) 2020 2019 2018

Operating activities:

Depreciation and amortization $ 5,511 $ 9,962 $ 9,312

Gain from the sale of the Shanghai manufacturing facility assets

— ( 6,316 ) —

Loss on sale of Personal Care Films 50,027 — —

Total 55,538 3,646 9,312

Investing activities:

Net proceeds on sale of Personal Care Films $ 55,115 $ — $ —

Proceeds from the sale of the Shanghai manufacturing facility assets

Capital expenditures ( 1,912 ) ( 15,353 ) ( 19,475 )

Total $ 53,203 $ ( 4,417 ) $ ( 19,475 )

In December 2020, the Company entered into a definitive agreement and completed the sale of Bright View for an aggregate purchase price of $ 1.5 million, subject to customary adjustments, which resulted in the recognition of a pre-tax loss of $ 2.3 million ($ 1.8 million after-tax) included in “Other income (expense), net” in the consolidated statements of income for the year ended December 31, 2020.

In addition, the Company agreed to provide certain transition services related to information technology.

The sale does not represent a strategic shift nor does it have a major effect on the Company’s

historical and ongoing operations, thus all financial information for Bright View has been presented as continuing operations.

Bright View historically has been reported in the PE Films segment.

Assets Held For Sale

In July 2019, the Company committed to a plan to close its manufacturing facility in Lake Zurich, Illinois, which historically was reported by the Company within the personal care component of its PE Films segment.

In March 2020, this facility was shut down and the production of elastic materials it previously produced was transferred to Terre Haute, Indiana.

In the third quarter of 2020, the held for sale criteria was met since the Company expected the sale of the facility to be completed within one year.

As of December 31, 2020, the disposal group carrying value of $ 4.6 million consists of land, building, and building improvements and is reported in "Prepaid expenses and other" in the Consolidated Balance Sheet.

These assets were not included as part of the sale of Personal Care Films.

3 OTHER INCOME (EXPENSE), NET

Other income (expense), net consists of the following:

(In thousands) 2020 2019 2018

(Loss) gain on investment in kaléo accounted for under fair value method $ ( 60,900 ) $ 28,482 $ 30,600

Loss on sale of Bright View Technologies ( 2,299 ) — —

Corporate costs associated with the divestiture of Personal Care Films ( 851 ) — —

COVID-19-related expenses (a) ( 2,231 ) — —

Other ( 1,013 ) ( 111 ) ( 145 )

Total $ ( 67,294 ) $ 28,371 $ 30,455

(a) Costs associated with operating under COVID-19 conditions include employee overtime expenses associated with absenteeism, personal protective equipment supplies and facility maintenance.

The gain on investment in kaléo accounted for under the fair value method of $ 28.5 million includes a cash dividend of $ 17.6 million received in 2019 from kaléo.

See Note 4 for more details on the investment in kaléo.

4 INVESTMENTS

In August 2007 and December 2008, the Company made an aggregate investment of $ 7.5 million in kaleo, Inc.

(“kaléo”), a privately held specialty pharmaceutical company dedicated to building innovative solutions for serious and life-threatening medical conditions.

Tredegar owns Series A-3 Preferred Stock and Series B Preferred Stock in kaléo that, taken together, represents on a fully-diluted basis an approximate 20 % interest in kaléo.

Tredegar accounts for its investment in kaléo under the fair value option.

At the time of the initial investment, the Company elected the fair value option of accounting since its investment objectives were similar to those of venture capitalists, which typically do not have controlling financial interests.

kaléo’s stock is not publicly traded.

The estimated fair value of the Company’s investment was $ 34.6 million as of December 31, 2020 and $ 95.5 million as of December 31, 2019.

The Company recognized a pre-tax loss on its investment in kaléo of $ 60.9 million ($ 47.6 million after taxes) in 2020, which was primarily due to:

(i) current projections that assume ongoing pricing pressures, (ii) 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, and (iii) a higher private company liquidity discount.

The net appreciation on its investment of $ 28.5 million ($ 23.4 million after taxes) in 2019 included a pre-tax cash dividend of $ 17.6 million received on April 30, 2019.

Future dividends are subject to the discretion of kaléo’s board of directors.

Amounts recognized associated with the Company’s investment in kaléo are included in “Other income (expense), net” in the consolidated statements of income and separately stated in the EBITDA from ongoing operations table in Note 5.

The Company estimates the fair value of its investment in kaléo by:

(i) computing the weighted average estimated enterprise value (“EV”) utilizing both the discounted cash flow method (the “DCF Method”) and the application of a market multiple to earnings before interest, taxes, depreciation and amortization (the “EBITDA Multiple Method”), (ii) applying adjustments for any surplus or deficient working capital and estimates of contingent liabilities, (iii) adding cash and cash equivalents, (iv) subtracting interest-bearing debt, (v) subtracting a private company liquidity discount estimated at 20 % at December 31, 2020 (versus 10 % at December 31, 2019) of the net result of (i) through (iv), and (vi) applying liquidation preferences and fully diluted ownership percentages to the estimated equity value computed in (i) through (v).

The Company’s estimate of kaléo’s EV as of December 31, 2020 was determined by weighting the EBITDA Multiple Method by 20% and the DCF Method by 80% compared to an 80% and 20% weighting of the EBITDA Multiple Method and DCF Method, respectively, used in the Company's estimate of kaléo’s EV as of December 31, 2019.

A heavier weighting towards the DCF Method as of December 31, 2020 was used since kaléo’s projections better reflect ongoing pricing pressures and expected changes in market access.

The DCF Method projections rely on numerous assumptions and Level 3 inputs.

addition, there are various regulatory and legal enforcement efforts, including an ongoing Department of Justice investigation related to kaléo’s discontinued Evzio business, which could have a material adverse effect on kaléo’s business that require assessment in any valuation method applied.

The ultimate value of the Company’s ownership interest in kaléo will be determined and realized only if and when a liquidity event occurs, and the ultimate value could be materially different from the $ 34.6 million estimated fair value reflected in the Company’s financial statements at December 31, 2020.

5 BUSINESS SEGMENTS

The Company's business segments are Aluminum Extrusions, PE Films and Flexible Packaging Films.

Aluminum Extrusions, also referred to as Bonnell Aluminum, produces high-quality, soft-alloy and medium-strength custom fabricated and finished aluminum extrusions for the building and construction, automotive and transportation, consumer durables, machinery and equipment, electrical and renewable energy, and distribution markets.

PE Films is composed of surface protection films, polyethylene overwrap films and films for other markets.

Flexible Packaging Films is comprised of the Company’s polyester films business, Terphane Holdings LLC (“Terphane”).

The Company’s reportable segments are based on its method of internal reporting, which is generally segregated by differences in products.

Accounting standards for presentation of segments require an approach based on the way the Company organizes the segments for making operating decisions and how the chief operating decision maker (“CODM”) assesses performance.

Earnings before interest, taxes, depreciation and amortization from ongoing operations (“EBITDA from ongoing operations”) is the measure of profit and loss used by the CODM (Tredegar’s President and Chief Executive Officer) for purposes of assessing financial performance.

In the fourth quarter of 2019, the Company concluded that “EBITDA from ongoing operations,” instead of “operating profit from ongoing operations,” is the most relevant metric for measuring segment financial performance.

This change resulted in a revision of the Company’s segment disclosures for all periods to report EBITDA from ongoing operations as the measure of segment financial performance.

The Company uses sales less freight (“net sales”) as its measure of revenues from external customers at the segment level.

This measure is separately included in the financial information regularly provided to the CODM.

Information by business segment and geographic area for the last three years is provided in the segment tables below.

There were no accounting transactions between segments and no allocations to segments.

(In thousands) 2020 2019 2018

Aluminum Extrusions $ 455,711 $ 529,602 $ 573,126

PE Films 139,288 133,807 127,708

Flexible Packaging Films 134,605 133,935 123,830

Total net sales 729,604 797,344 824,664

Add back freight 25,686 28,980 27,170

Sales as shown in consolidated statements of income $ 755,290 $ 826,324 $ 851,834

Refer to Notes to Financial Tables that follow these tables.

EBITDA from Ongoing Operations

(In thousands) 2020 2019 2018

Aluminum Extrusions:

Ongoing operations:

EBITDA $ 55,137 $ 65,683 $ 65,479

Depreciation & amortization (d) ( 17,403 ) ( 16,719 ) ( 16,866 )

EBIT 37,734 48,964 48,613

Plant shutdowns, asset impairments, restructurings and other (a) ( 3,506 ) ( 561 ) ( 505 )

Goodwill impairment charge ( 13,696 ) — —

Trade name accelerated amortization (d) — ( 10,040 ) —

Ongoing operations:

EBITDA 45,107 41,133 32,404

Depreciation & amortization ( 6,762 ) ( 5,860 ) ( 6,201 )

EBIT 38,345 35,273 26,203

Plant shutdowns, asset impairments, restructurings and other (a) ( 1,974 ) ( 733 ) ( 186 )

Flexible Packaging Films:

Ongoing operations:

EBITDA 30,645 14,737 11,154

Depreciation & amortization ( 1,761 ) ( 1,517 ) ( 1,262 )

EBIT 28,884 13,220 9,892

Plant shutdowns, asset impairments, restructurings and other (a) ( 18 ) — ( 45 )

Total 85,769 86,123 83,972

Interest income 44 66 146

Interest expense 2,587 4,051 5,702

Gain (loss) on investment in kaléo accounted for under the fair value method (a) ( 60,900 ) 28,482 30,600

Loss on sale of Bright View (f) ( 2,299 ) — —

Loss on sale of investment property (a) — — ( 38 )

Unrealized loss on investment property (a) — — ( 186 )

Stock option-based compensation expense 2,161 4,132 1,156

Corporate expenses, net (a) 42,912 34,482 27,265

Income (loss) from continuing operations before income taxes ( 25,046 ) 72,006 80,371

Income tax expense (benefit) (a) ( 8,213 ) 13,545 18,807

Income (loss) from continuing operations ( 16,833 ) 58,461 61,564

Income (loss) from discontinued operations, net of tax (a) ( 58,611 ) ( 10,202 ) ( 36,722 )

Net income (loss) $ ( 75,444 ) $ 48,259 $ 24,842

Refer to Notes to Financial Tables that follow these tables.

Identifiable Assets

(In thousands) 2020 2019

Aluminum Extrusions $ 244,560 $ 265,027

PE Films 119,013 124,269

Flexible Packaging Films 66,453 74,016

Subtotal 430,026 463,312

General corporate 71,508 109,655

Cash and cash equivalents (b) 11,846 31,422

Discontinued operations 1,490 108,279

Total $ 514,870 $ 712,668

Depreciation and Amortization Capital Expenditures

(In thousands) 2020 2019 2018 2020 2019 2018

Aluminum Extrusions $ 17,403 $ 26,759 $ 16,866 $ 10,260 $ 17,855 $ 12,966

PE Films 6,762 5,860 6,201 6,024 8,567 2,523

Flexible Packaging Films 1,761 1,517 1,262 4,959 8,866 5,423

Subtotal 25,926 34,136 24,329 21,243 35,288 20,912

General corporate (e) 520 186 163 200 223 427

Discontinued operations 5,511 9,962 9,312 1,912 15,353 19,475

Total $ 31,957 $ 44,284 $ 33,804 $ 23,355 $ 50,864 $ 40,814

Net Sales by Geographic Area (c)

(In thousands) 2020 2019 2018

United States $ 530,243 $ 593,599 $ 636,968

Exports from the United States to:

Asia 80,217 82,342 74,499

Canada 18,024 15,022 16,467

Europe 5,440 5,752 3,909

Latin America 2,169 4,135 991

Operations outside the United States:

Brazil 93,511 96,274 85,868

China — 220 5,962

Total $ 729,604 $ 797,344 $ 824,664

Identifiable Assets

by Geographic Area (c) Property, Plant & Equipment,

Net by Geographic Area (c)

(In thousands) 2020 2019 2020 2019

United States $ 363,106 $ 403,366 $ 132,268 $ 140,609

Operations outside the United States:

Brazil 49,157 41,890 15,588 15,348

China 17,763 18,056 16,245 16,210

General corporate 71,508 109,655 2,444 1,389

Cash and cash equivalents (b) 11,846 31,422 n/a n/a

Discontinued operations 1,490 108,279 — 69,334

Total $ 514,870 $ 712,668 $ 166,545 $ 242,890

Refer to Notes to Financial Tables that follow these tables.

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 $ 35.1 million in 2020, $ 32.1 million in 2019 and $ 28.9 million in 2018.

Net Sales by Product Group

(In thousands) 2020 2019 2018

Aluminum Extrusions:

Nonresidential building & construction $ 253,126 $ 272,729 $ 289,572

Consumer durables 44,167 57,607 66,416

Automotive 35,895 46,461 48,037

Machinery & equipment 30,649 38,657 41,899

Distribution 28,339 34,753 40,924

Residential building & construction 40,049 43,554 43,943

Electrical 23,486 35,841 42,335

Subtotal 455,711 529,602 573,126

Surface protection films 109,097 103,893 98,126

Packaging 22,700 22,542 22,310

LED-based products 7,491 7,372 7,272

Subtotal 139,288 133,807 127,708

Flexible Packaging Films 134,605 133,935 123,830

Total $ 729,604 $ 797,344 $ 824,664

(a) See Notes 1, 2, 3, 4 and 17 for more information on losses associated with plant shutdowns, asset impairments and restructurings, unusual items, gains or losses from sale of assets, gains or losses on an investment accounted for under the fair value method and other items.

(b) Cash and cash equivalents includes funds held in locations outside the U.S.

of $ 9.4 million and $ 8.9 million at December 31, 2020 and 2019, respectively.

Export sales relate almost entirely to PE Films.

Operations in China relate to PE Films.

Operations in Brazil relate to Flexible Packaging Films.

(d) Depreciation and amortization for Aluminum Extrusions in 2019 excludes $ 10.0 million for accelerated amortization of trade names as a result of a rebranding initiative (see Note 8 for more information)

(e) Corporate depreciation and amortization are included in Corporate expenses, net, on the EBITDA from ongoing operations table above.

(f) In December 2020, the Company entered into a definitive agreement and completed the sale of Bright View.

See Note 2 for more details.

In the first quarter of 2021, the Company adopted ASU 2019-12, which did not have a material impact on the Company’s consolidated financial statements.

Accounting Standards Not Yet Adopted .

In March 2020, the FASB issued ASU 2020-04, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by the discontinuation of the London Interbank Offered Rate or by another reference rate expected to be discontinued because of reference rate reform.

The guidance was effective beginning March 12, 2020 and can be applied prospectively through December 31, 2022.

In January 2021, the FASB issued ASU 2021-01, which clarified the scope and application of the original guidance.

The Company is currently evaluating the potential impact of adopting this guidance, but does not expect it to have a material impact on the consolidated financial statements.

ACCOUNTS AND OTHER RECEIVABLES

4 unchanged sentences

Total accounts and other receivables 105,048 89,124

Allowance for bad debts and sales returns ( 2,797 ) ( 1,904 )

Allowance for bad debts (a)

( 1,736 ) ( 2,797 )

Total accounts and other receivables, net $ 103,312 $ 86,327

A reconciliation of the beginning and ending balances of the allowance for doubtful accounts and sales returns for the three years ended December 31, 2020 is as follows:

(a) As of December 31, 2021, the Company recorded a reclassification of $ 0.8 million from accounts receivable, net to accrued expenses to account for the Company’s estimated obligation to customers for product returns that may result in either a customer credit or refund.

Prior to December 31, 2021, the Company presented estimated sales returns as a reduction to accounts receivable.

A reconciliation of the beginning and ending balances of the allowance for doubtful accounts for the three years ended December 31, 2021 is as follows:

(In thousands) 2021 2020 2019

4 unchanged sentences

Foreign exchange and other ( 515 ) ( 209 ) ( 71 )

Reclassification to accrued expenses for estimated sales returns ( 775 ) — —

Balance, end of year $ 1,736 $ 2,797 $ 1,904

7 INVENTORIES

Inventories consist of the following:

6 unchanged sentences

Inventories stated on the LIFO basis amounted to $ 18.8 million at December 31, 2021 and $ 14.4 million at December 31, 2020, which were below replacement costs by $ 27.5 million at December 31, 2021 and $ 12.1 million at December 31, 2020.

Inventories stated on the weighted average cost basis was $ 33.6 million and $ 32.9 million at December 31, 2020 and 2019, respectively, while inventories stated on the first in, first out method amounted to $ 18.4 million and $ 18.7 million at December 31, 2020 and 2019, respective ly.

Inventories stated on the weighted average cost basis were $ 30.9 million and $ 33.6 million at December 31, 2021 and 2020, respectively, while inventories stated on the first in, first out method amounted to $ 38.9 million and $ 18.4 million at December 31, 2021 and 2020, respective ly.

Tredegar has various operating lease agreements with remaining terms up to 9 years, including leases of real estate, office equipment and vehicles.

As of December 31, 2021 and 2020, the Company had no finance lease agreements.

Some leases include options to purchase the leased asset, terminate the agreement or extend the term of the agreement for one or more years.

These options are included in the lease term when it is reasonably certain that the option will be exercised.

The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s operating leases as of December 31, 2021:

(In thousands)

Future Lease Payments

Thereafter 5,326

Total undiscounted operating lease payments 17,311

Imputed interest 2,322

Present value of operating lease liabilities $ 14,989

The following table summarizes lease costs, related cash flow and other information for the years ended December 31, 2021 and 2020.

These costs are primarily related to long-term operating leases, but also include amounts for variable leases and short-term leases.

(In thousands) 2021 2020

Operating lease expense $ 2,752 $ 3,260

Right-of-use assets recognized as non-cash additions from the execution of new operating leases

Other Information:

Weighted-average remaining lease term for operating leases 7 years 8 years

Weighted-average discount rate for operating leases 4.22 % 4.21 %

GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS

11 unchanged sentences

Total carrying value of goodwill and identifiable intangible assets $ 84,760 $ 86,528

In the third quarter of 2019, the Company implemented a rebranding initiative at Bonnell Aluminum whereby the use of the AACOA and Futura trade names was discontinued as of December 31, 2019.

The associated trade names assets, with a remaining net book value of $10.2 million, were amortized over the last four months of 2019.

A reconciliation of goodwill at December 31, 2021 and 2020 is as follows:

(In thousands) Aluminum Extrusions 1

(In thousands) Aluminum Extrusions (a)

Net carrying value of goodwill at December 31, 2019

$ 24,066 $ 57,338 $ 81,404

Goodwill impairment charge ( 13,696 ) — ( 13,696 )

Net carrying value of goodwill at December 31, 2020

Goodwill impairment charge ( 13,696 ) — ( 13,696 )

10,370 57,338 67,708

Out-of-period adjustment 2,900 — 2,900

Net carrying value of goodwill at December 31, 2021

The goodwill of Aluminum Extrusions and PE Films is carried by the Futura and Surface Protection reporting units, respectively.

$ 13,270 $ 57,338 $ 70,608

(a) The goodwill of Aluminum Extrusions and PE Films is carried by the Futura and Surface Protection reporting units, respectively.

During the fourth quarter of 2021, the Company recorded an out-of-period adjustment in connection with the original valuation of intangible assets and goodwill related to the acquisition of Futura in February 2017.

This adjustment resulted in a reclassification of $ 2.9 million from acquired customer relationship intangible assets to goodwill and a $ 0.9 million decrease to accumulated amortization and amortization expense as of and for the period ended December 31, 2021.

A reconciliation of identifiable intangibles at December 31, 2021 and 2020 is as follows:

2 unchanged sentences

Net carrying value at December 31, 2019

$ 19,644 $ 55 $ — $ 19,699

Amortization expense ( 2,480 ) ( 20 ) — ( 2,500 )

Net carrying value at December 31, 2020

Amortization expense ( 2,480 ) ( 20 ) — ( 2,500 )

17,164 35 — 17,199

Amortization expense (a)

( 2,239 ) ( 20 ) — ( 2,259 )

Out-of-period Adjustment (b)

( 1,953 ) — — (1,953)

Net carrying value at December 31, 2021

$ 12,972 $ 15 $ — $ 12,987

Net carrying value at December 31, 2019

$ — $ 610 $ — $ 610

Amortization expense — ( 120 ) — ( 120 )

Bright View disposal — ( 490 ) — ( 490 )

Net carrying value at December 31, 2020

Amortization expense — — — —

Bright View disposal — ( 490 ) — ( 490 )

Net carrying value at December 31, 2021

$ — $ — $ — $ —

Flexible Packaging Films:

Net carrying value at December 31, 2019

$ 554 $ 230 $ 1,543 $ 2,327

Amortization expense ( 84 ) ( 53 ) ( 260 ) ( 397 )

Increase (decrease) due to foreign currency translation ( 83 ) ( 18 ) ( 208 ) ( 309 )

Impairment loss — — — —

Net carrying value at December 31, 2020

387 159 1,075 1,621

Amortization expense ( 82 ) ( 53 ) ( 257 ) ( 392 )

1 unchanged sentence

Net carrying value at December 31, 2021

$ 287 $ 103 $ 775 $ 1,165

Total net carrying value of identifiable intangibles at December 31, 2021

$ 13,259 $ 118 $ 775 $ 14,152

(a) Excludes a reduction of $ 0.9 million to amortization expense related to the out-of-period adjustment.

(b) Represents a $ 2.9 million gross reclassification from customer relationship intangible assets to goodwill offset by a $ 0.9 million decrease to accumulated amortization as a result of the out-of-period adjustment.

Amortization expense over the next five years is expected to be as follows:

(In thousands)

9 FINANCIAL INSTRUMENTS

Tredegar uses derivative financial instruments for the purpose of hedging margin exposure from fixed-price forward sales contracts in Aluminum Extrusions and exposure from currency volatility that exist as part of ongoing business operations (primarily in Flexible Packaging Films).

These derivative financial instruments are designated as and qualify as cash flow hedges and are recognized in the consolidated balance sheet at fair value.

The fair value of derivative instruments recorded on the consolidated balance sheets are based upon Level 2 inputs.

If individual derivative instruments with the same counterparty can be settled on a net basis, the Company records the corresponding derivative fair values as a net asset or net liability.

In the normal course of business, Aluminum Extrusions enters into fixed-price forward sales contracts with certain customers for the future sale of fixed quantities of aluminum extrusions at scheduled intervals.

In order to hedge margin exposure created from the fixing of future sales prices relative to volatile raw material (aluminum) costs, Aluminum Extrusions enters into a combination of forward purchase commitments and futures contracts to acquire or hedge aluminum, based on the scheduled purchases for the firm sales commitments.

The fixed-price firm sales commitments and related hedging instruments generally have durations of not more than 12 months, and the notional amount of aluminum futures contracts that hedged future

purchases of aluminum to meet fixed-price forward sales contract obligations was $ 12.1 million ( 13.0 million pounds of aluminum) at December 31, 2020 and $ 20.2 million ( 19.6 million pounds of aluminum) at December 31, 2019.

The table below summarizes the location and gross amounts of aluminum derivative contract fair values (Level 2) in the consolidated balance sheets as of December 31, 2020 and 2019:

December 31, 2020 December 31, 2019

(In thousands) Balance Sheet

Value Balance Sheet

Derivatives Designated as Hedging Instruments

Asset derivatives:

Aluminum futures contracts Prepaid expenses & other $ 1,560 Accrued expenses $ 6

Liability derivatives:

Aluminum futures contracts Accrued expenses ( 22 ) Accrued expenses ( 1,259 )

Net asset (liability) $ 1,538 $ ( 1,253 )

In the event that a counterparty to an aluminum fixed-price forward sales contract chooses not to take delivery of its aluminum extrusions, the customer is contractually obligated to compensate Aluminum Extrusions for any losses on the related aluminum futures and/or forward contracts through the date of cancellation.

Th e table below summarizes the location and gross amounts of foreign currency forward contract fair values (Level 2) in the consolidated balance sheets as of December 31, 2020 and 2019:

December 31, 2020 December 31, 2019

(In thousands) Balance Sheet

Value Balance Sheet

Derivatives Designated as Hedging Instruments

Asset derivatives:

Foreign currency forward contracts Prepaid expenses and other $ 853 Prepaid expenses and other $ 83

Liability derivatives:

Foreign currency forward contracts Accrued expenses ( 466 ) Accrued expenses ( 935 )

Net asset (liability) $ 387 $ ( 852 )

The Company's earnings are exposed to foreign currency exchange risk primarily through the translation of the financial statements of subsidiaries that have a functional currency other than the U.S.

The Company estimates that the net mismatch translation exposure for the Flexible Packaging Film's business unit in Brazil (“Terphane Ltda.”) of its sales and raw materials quoted or priced in U.S.

Dollars and its variable conversion, fixed conversion and sales, general and administrative costs (before depreciation and amortization) quoted or priced in Brazilian Real is annual net costs of R$ 119 million Brazilian Real ("R$").

Terphane Ltda.

has the following outstanding foreign exchange average forward rate contracts to purchase Brazilian Real and sell U.S.

USD Notional Amount (000s) Average Forward Rate Contracted on USD/BRL R$ Equivalent Amount (000s) Applicable Month Estimated % of Terphane Ltda.

R$ Operating Cost Exposure Hedged

$ 1,270 5.4638 R$ 6,939 Jan-21 70 %

$ 1,290 5.4674 R$ 7,053 Feb-21 71 %

$ 1,270 5.4693 R$ 6,946 Mar-21 70 %

$ 1,320 5.4765 R$ 7,229 Apr-21 73 %

$ 1,285 5.4778 R$ 7,039 May-21 71 %

$ 1,395 5.4882 R$ 7,656 Jun-21 77 %

$ 1,450 5.4945 R$ 7,967 Jul-21 80 %

$ 1,430 5.4993 R$ 7,864 Aug-21 79 %

$ 1,520 5.5105 R$ 8,376 Sep-21 84 %

$ 1,400 5.5100 R$ 7,714 Oct-21 78 %

$ 1,495 5.5224 R$ 8,256 Nov-21 83 %

$ 1,170 5.5060 R$ 6,442 Dec-21 65 %

$ 16,295 5.4913 R$ 89,481 75 %

These foreign currency exchange contracts have been designated and qualify as cash flow hedges of Terphane Ltda.’s forecasted sales to customers quoted or priced in U.S.

Dollars over that period.

By changing the currency risk associated with these U.S.

Dollar sales, the derivatives have the effect of offsetting operating costs quoted or priced in Brazilian Real and decreasing the net exposure to Brazilian Real in the consolidated statements of income.

The pre-tax net fair value of the open forward contracts was a negative $ 0.9 million as of December 31, 2020.

These derivative contracts involve elements of market risk that are not reflected on the consolidated balance sheet, including the risk of dealing with counterparties and their ability to meet the terms of the contracts.

The counterparties to any forward purchase commitments are major aluminum brokers and suppliers, and the counterparties to any aluminum futures contracts are major financial institutions.

Fixed-price forward sales contracts are only made available to the best and most credit-worthy customers.

The counterparties to the Company’s foreign currency cash flow hedge contracts are major financial institutions.

The pretax effect on net income (loss) from continuing operations and other comprehensive income (loss) of derivative instruments classified as cash flow hedges and described in the previous paragraphs for years ended December 31, 2020, 2019, and 2018 is summarized in the tables below:

(In thousands) Cash Flow Derivative Hedges

Aluminum Futures Contracts

Years Ended December 31, 2020 2019 2018

Amount of pre-tax gain (loss) recognized in other comprehensive income $ 74 $ ( 2,359 ) $ ( 1,123 )

Location of gain (loss) reclassified from accumulated other comprehensive income into net income (effective portion) Cost of

goods sold Cost of

Amount of pre-tax gain (loss) reclassified from accumulated other comprehensive income to net income (effective portion) $ ( 2,717 ) $ ( 2,736 ) $ 1,069

(In thousands) Cash Flow Derivative Hedges

Foreign Currency Forward Contracts

Years Ended December 31, 2020 2019 2018

Amount of pre-tax gain (loss) recognized in other comprehensive income $ — $ ( 4,437 ) $ — $ ( 856 ) $ — $ ( 2,105 )

Location of gain (loss) reclassified from accumulated other comprehensive income into net income (effective portion) Cost of

goods sold Selling, general & admin Cost of

goods sold Selling, general & admin

Amount of pre-tax gain (loss) reclassified from accumulated other comprehensive income to net income (effective portion) $ 62 $ ( 6,069 ) $ 62 $ ( 904 ) $ 62 $ ( 1,796 )

As of December 31, 2020, the Company expects $ 1.2 million of unrealized after-tax losses on derivative instruments reported in accumulated other comprehensive income (loss) to be reclassified to earnings within the next 12 months.

For the years ended December 31, 2020, 2019 and 2018, net gains or losses realized, from previously unrealized net gains or losses on hedges that had been discontinued, were not material.

ACCRUED EXPENSES

1 unchanged sentence

(In thousands) 2021 2020

Payrolls, related taxes and medical and other benefits $ 9,571 $ 6,227

Incentive compensation $ 7,016 $ 8,138

Payrolls, related taxes and medical and other benefits 6,903 9,571

Vacation 3,452 7,283

Workers’ compensation and disabilities 2,422 2,986

Environmental liabilities (current) 2,066 2,122

Accrued severance 1,894 1,180

Accrued freight 2,337 1,397

Accrued utilities 1,938 1,460

Customer rebates 1,857 1,398

Accrued freight 1,397 1,389

Environmental liabilities (current) 1,634 2,066

Derivative contract liability 1,254 487

Accrued severance 445 1,894

Other 3,846 4,061

Total $ 33,104 $ 40,741

In the fourth quarter of 2021, the Company changed its vacation policy such that effective January 1, 2022 substantially all U.S.

employees earn their vacation for the current year on a monthly basis throughout the year and forfeit any unused vacation at the end of the year, with the exception of a partial rollover allowance subject to a cap or where forfeiture is prohibited by applicable state or local law or a collective bargaining agreement.

Under the previous policy, vacation was granted at the beginning of the year in advance of work being performed for the subsequent year.

As a result of this policy change, the Company recorded in the fourth quarter of 2021 a reduction of $ 3.9 million to accrued expenses and a decrease to selling, general, and administrative expense ($ 1.3 million) and cost of goods sold ($ 2.6 million) within the consolidated statements of income.

DEBT AND CREDIT AGREEMENTS

On December 1, 2020, Tredegar entered into an amendment (“Amendment No.

1”) to its five-year secured revolving credit agreement (the “Credit Agreement”), which matures in June 2024.

The material changes from Amendment No.

1 are as follows:

• Aggregate borrowings available under the facility were reduced from $ 500 million to $ 375 million.

• The definition of Credit EBITDA was amended to permit certain adjustments for prepayment of pension obligations on a pro forma basis.

• Amendments were made to certain of the negative covenants, including, among other amendments, the following:

(i) the restricted payments covenant was amended to permit a one-time special dividend payment of up to $ 200 million and allow for an aggregate amount of dividend payments up to $ 75 million subsequent to Amendment No.

1 through the maturity date of the Credit Agreement;

(ii) the asset disposition covenant was amended to reduce the general basket to 20 % of consolidated total assets over the life of the facility and was reset as of December 1, 2020;

and (iii) the indebtedness covenant was amended to reduce several baskets to $ 25 million each.

Tredegar has a five-year secured revolving credit agreement (the “Credit Agreement”) providing for aggregate borrowings in an amount of $375 million, which matures in June 2024.

Borrowings under the Credit Agreement bear an interest rate of LIBOR plus a credit spread and commitment fees charged on the unused amount under the Credit Agreement at various indebtedness-to-Credit EBITDA levels as follows:

19 unchanged sentences

Renegotiation of the covenant through an amendment to the Credit Agreement may effectively cure the noncompliance, but may have an effect on its financial condition or liquidity depending upon how the covenant is renegotiated.

12 STOCK OPTION AND STOCK AWARD PLANS

As of December 31, 2020, the Company had one stock-based compensation plan that permits the grants of stock options, stock appreciation rights (“SARs”), stock, restricted stock, and stock unit awards.

Stock options may be granted to purchase a specified number of shares of common stock at a price no lower than the fair market value on the date of grant and for a term not to exceed 10 years.

Stock options granted by the Company in 2020, 2019, and 2018 vest after 2 years and have a 7-year life or vest after 3 years and have a 5-year life.

Stock options exercisable totaled 1,287,792 and 360,218 shares at December 31, 2020 and 2019, respectively.

Stock options available for grant totaled 484,835 shares at December 31, 2020.

On December 1, 2020, Tredegar’s Board of Directors declared a special cash dividend of $ 200 million, or $ 5.97 per share, on the Company’s common stock (the “Special Dividend”).

The Special Dividend was payable on December 18, 2020 and had an ex-dividend date of December 21, 2020.

All stock option awards that were outstanding at the time of the Special Dividend were modified pursuant to the nondiscretionary anti-dilution provisions in the related stock-based compensation plan.

SARs that were outstanding at the time of the Special Dividend were also modified pursuant to the nondiscretionary anti-dilution provisions in the related SARs grant agreements.

The modifications included increasing the number of outstanding stock options and SARs as well as reducing the exercise prices of all outstanding stock options and SARS.

The modification did not result in additional stock-based compensation expense.

No other terms or conditions of outstanding awards were modified.

A summary of stock options outstanding at December 31, 2020, 2019 and 2018, and changes during those years, is presented below:

Option Exercise Price/Share

Options Range Weighted

Outstanding at December 31, 2017 608,520 $ 15.65 to $ 24.84 $ 19.75

Granted 451,083 19.35 to 19.35 19.35

Forfeited and expired ( 96,089 ) 15.65 to 24.84 19.58

Exercised ( 73,398 ) 15.65 to 22.49 18.15

Outstanding at December 31, 2018 890,116 15.65 to 24.84 19.69

Granted 758,287 18.48 to 18.48 18.48

Forfeited and expired ( 10,000 ) 19.40 to 19.40 19.40

Exercised ( 9,500 ) 19.40 to 19.40 19.40

Outstanding at December 31, 2019 1,628,903 15.65 to 24.84 19.13

638,074 10.75 to 14.62 11.90

Modification for special cash dividend 1

701,535 10.75 to 14.62 11.90

Forfeited and expired 1

( 141,074 ) 10.75 to 24.84 11.87

Exercised — — to — —

Outstanding at December 31, 2020 1

2,827,438 $ 10.75 to $ 22.49 $ 13.55

The option exercise price per share reflects the reduction to the exercise prices of outstanding stock options impacted by the modification due to the anti-dilution provisions in the stock-based compensation plan.

The assumptions used in the Black-Scholes options-pricing model for valuing Tredegar stock options originally granted in 2020, 2019 and 2018, and the related estimated fair values at the date of grant, were as follows:

2020 2019 2018

Dividend yield 2.5 % 2.4 % 2.3 %

Weighted average volatility percentage 43.8 % 38.3 % 38.3 %

Weighted average risk-free interest rate 0.8 % 2.4 % 2.8 %

Holding period (years) 5 5 5

Weighted average exercise price at date of grant (also weighted average market price at date of grant) 1

$ 14.41 $ 18.48 $ 19.35

Estimated weighted average fair value of options per share at date of grant

$ 4.44 $ 5.43 $ 5.87

Total estimated fair value of stock options granted (in thousands) $ 2,833 $ 4,117 $ 2,648

In December 2020, the weighted average exercise price for outstanding stock option awards granted in 2020, 2019 and 2018 were modified to $ 10.75 , $ 13.78 and $ 14.43 , respectively.

As the anti-dilution provisions in the stock-based compensation plan were structured to equitably adjust the award’s fair value before and after the modification, there is no resulting incremental fair value.

The dividend yield is the actual dividend yield on Tredegar’s common stock at the date of grant, which the Company believes is a reasonable estimate of the expected yield during the holding period.

The expected volatility is based on the historical volatility of Tredegar’s common stock using a sequential period of historical data equal to the expected holding period of the option.

The Company has no reason to believe that future volatility for this period is likely to differ from the past.

The assumed risk-free interest rate is based on observed interest rates for U.S.

Treasury debt securities appropriate for the expected holding period.

The following table summarizes additional information about stock options outstanding and exercisable at December 31, 2020:

Options Outstanding at December 31, 2020 Options Exercisable at December 31, 2020

Weighted Average Aggregate Intrinsic Value Aggregate Intrinsic Value

Exercise Prices Shares Remaining Contractual Life Exercise

Price Shares Weighted Average Exercise Price

$ — to $ 13.99 1,598,700 5.4 years $ 12.11 $ 7,338,799 425,219 $ 12.50 $ 1,785,553

13.99 to 18.65 1,059,138 4.4 years 14.64 2,209,408 692,973 14.66 1,447,785

18.65 to 23.32 169,600 2.1 years 20.27 — 169,600 20.27 —

Total 2,827,438 4.9 years $ 13.55 $ 9,548,207 1,287,792 $ 14.68 $ 3,233,338

Restricted stock grants ordinarily vest three years from the date of grant based upon continued employment.

The fair value of restricted stock awards is estimated as of the grant date using the closing stock price on that date.

Stock unit awards vest upon the achievement of certain performance targets.

The following table summarizes additional information about unvested restricted stock outstanding at December 31, 2020, 2019 and 2018:

Unvested Restricted Stock Maximum Unvested Restricted Stock Units Issuable Upon Satisfaction of Certain Performance Criteria

of Shares Weighted Avg.

Grant Date Fair Value/Share Grant Date

(In thousands) Number

of Shares Weighted Avg.

Grant Date Fair Value/Share Grant Date

(In thousands)

Outstanding at January 1, 2018 206,676 $ 16.15 $ 3,337 172,133 $ 15.78 $ 2,716

Granted 119,915 17.39 2,085 61,227 17.35 1,062

Vested ( 64,702 ) 18.31 ( 1,185 ) — — —

Forfeited ( 17,153 ) 15.84 ( 272 ) ( 48,651 ) 13.23 ( 644 )

Outstanding at December 31, 2018 244,736 16.20 3,965 184,709 16.97 3,134

Granted 185,422 18.46 3,423 57,442 18.34 1,053

Vested ( 117,834 ) 14.76 ( 1,739 ) ( 69,926 ) 10.96 ( 766 )

Forfeited ( 26,389 ) 16.11 ( 425 ) ( 24,562 ) 11.51 ( 283 )

Outstanding at December 31, 2019 285,935 18.27 5,224 147,663 21.25 3,138

Granted 155,138 14.55 2,257 34,275 15.25 523

Vested ( 148,709 ) 17.39 ( 2,586 ) ( 37,370 ) 17.38 ( 649 )

Forfeited ( 57,385 ) 17.00 ( 976 ) ( 32,066 ) 17.36 ( 557 )

Outstanding at December 31, 2020 234,979 $ 16.68 $ 3,919 112,502 $ 21.82 $ 2,455

The total intrinsic value of stock options exercised was $ 0.1 million and $ 0.4 million in 2019 and 2018, respectively.

There were no stock options exercised in 2020.

The grant-date fair value of stock option-based awards vested was $ 3.0 million, $ 0.5 million, and $ 0.1 million in 2020, 2019, and 2018, respectively.

As of December 31, 2020, there was unrecognized compensation cost for continuing operations of $ 2.0 million related to stock option-based awards and $ 1.7 million related to non-vested restricted stock and other stock-based awards.

This cost is expected to be recognized over the remaining weighted average period of 1.2 years for stock option-based awards and 1.4 years for non-vested restricted stock and other stock-based awards.

Commencing in 2019, stock option award grants include a retirement provision that allow for the immediate vesting of options held by a participant that ceases to provide service, including service as a member of the board of directors, with the Company, subsequent to reaching the age of 65.

As a result of this provision, the Company recognized accelerated stock compensation expense for continuing operations of $ 0.1 million and $ 1.3 million in 2020 and 2019, respectively.

SARs granted in 2020 have the same terms and vesting requirements as the 2020 stock option grants except SARs may be settled in cash upon exercise and therefore are classified as liabilities and included in accrued expenses in the consolidated balance sheet.

The fair value of these liability awards is remeasured at each reporting period until the date of settlement.

Increases and decreases in stock-based compensation expense is recognized over the vesting period, or immediately, for vested awards.

The following table summarizes SARs activity in 2020 as no SARs were granted prior to January 1, 2020 since 1992:

Exercise Price/Share

SARs Range Weighted

Outstanding at January 1, 2020 — $ — to $ — $ —

387,252 10.75 to 19.64 11.60

Modification for special cash dividend 71,402 10.75 to 19.64 11.60

Forfeited and expired ( 82,214 ) 10.75 to 19.64 11.39

Exercised — — to — —

Outstanding at December 31, 2020 376,440 $ 10.75 to $ 19.64 $ 11.64

The SARs exercise price per share reflects the reduction to the exercise prices of outstanding SARs as a results of the modification to the awards pursuant to the nondiscretionary anti-dilution provisions in the related SAR s grant agreements.

The grant-date fair value of SARs awards vested in 2020 was $ 0.6 million.

As of December 31, 2020, the SARs unrecognized compensation cost for continuing operations was $ 1.5 million.

This cost is expected to be recognized over the remaining weighted average vesting period of 1.1 years.

RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS

3 unchanged sentences

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.

Tredegar also has a non-qualified supplemental pension plan covering certain employees.

Effective December 31, 2005, further participation in this plan was terminated and benefit accruals for existing participants were frozen.

The plan was designed to restore all or a part of the pension benefits that would have been payable to designated participants from the principal pension plans if it were not for limitations imposed by income tax regulations.

The projected benefit obligation relating to this unfunded plan was $ 2.1 million and $ 2.2 million at December 31, 2021 and December 31, 2020, respectively.

Pension expense recognized for this plan was $ 0.1 million in 2021, 2020, and 2019.

This information has been included in the pension benefit tables below.

In addition to providing pension benefits, the Company provides postretirement life insurance and health care benefits for certain groups of employees.

2 unchanged sentences

Consequently, Tredegar is not eligible for any federal subsidies.

Pension and other postretirement benefit liabilities related to Personal Care Films have been retained by the Company.

Pension expense recognized for participation by these former employees in the Company’s plans is not material for the years ended December 31, 2021, 2020, and 2019.

The following tables reconcile the changes in benefit obligations and plan assets in 2021 and 2020, and reconcile the funded status to prepaid or accrued cost at December 31, 2021 and 2020:

54 unchanged sentences

2027—2031 89,722 2,081

The average remaining duration of benefit payments for the pension plan is about 11.1 years.

The pre-tax a mounts recorded in 2021, 2020 and 2019 in accumulated other comprehensive income consist of:

18 unchanged sentences

Total 100.0 % 100.0 % 100.0 %

Tredegar’s targeted allocation percentage for pension plan assets and the expected long-term rate of return on assets used to determine its benefit obligation at December 31, 2020, are as follows:

Target % Composition of Plan Assets 1

Expected Long-term Return %

Pension plans:

Fixed income securities 12.0 % 1.3 %

Large/mid-capitalization equity securities 27.0 6.3

Small-capitalization equity securities 8.0 6.8

International and emerging market equity securities 20.0 5.6

Total equity securities 55.0 6.1

Private equity and hedge funds 33.0 4.4

Total 100.0 % 5.0 %

Target percentages for the composition of plan assets represents a neutral position within the approved range of allocations for such assets.

Expected long-term returns are estimated by asset class and generally are based on inflation-adjusted historical returns, volatilities, risk premiums and managed asset premiums.

The portfolio of fixed income securities is structured with maturities that generally match estimated benefit payments over the next 1 - 2 years.

The other assets category is primarily comprised of cash and contracts with insurance companies.

The Company’s primary investment objective is to maximize total return with a strong emphasis on the preservation of capital, and it believes that over the long-term a diversified portfolio of fixed income securities, equity securities, hedge funds and private equity funds has a better risk-return profile than fixed income securities alone.

The average remaining duration of benefit payments for the pension plans is about 11.5 years.

The Company expects its required contributions to be approximately $ 11.7 million in 2021.

Prior to commencing plans to terminate and settle the frozen defined benefit pension plan, the Company’s primary investment objective was to maximize total return with a strong emphasis on the preservation of capital, which it expected to achieve through a diversified portfolio with both a higher risk profile and anticipated long-term returns via fixed income securities, equity securities, hedge funds and private equity funds.

Concurrent with the Company’s decision to commence the termination and settlement of the plan, the Company began transitioning to a liability-driven investment strategy aimed at reducing funded status volatility.

The new strategy contemplates an increase of the fixed income securities allocation from 25.3% as of December 31, 2021 to an ultimate target of 100% and decreases to the asset allocations currently invested in equity securities, commodity funds, private equity and hedge funds, from 71.9% to zero over the next 18 months.

The expected long-term rate of return developed through consultation with the Company’s investment advisors as of December 31, 2021 contemplates the impact of this strategy which included consideration of several factors, including prevailing and planned strategic asset allocations, current and expected future market conditions, inflation-adjusted historical returns, volatilities, risk premiums and managed asset premiums.

Estimates of the fair value of assets held by the Company’s pension plan are provided by unaffiliated third parties.

Investments in private equity and hedge funds and certain fixed income securities by the Company’s pension plan are measured at net asset value, which is a practical expedient for measuring fair value.

Investments in private equity, hedge funds and certain international equity securities are measured at net asset value, which is a practical expedient for measuring fair value.

These assets are therefore excluded from the fair value hierarchy for each of the years presented.

11 unchanged sentences

Contracts with insurance companies 9,438 — — 9,438

Other assets 5,629 5,629 — —

Other assets (a)

6,868 6,868 — —

Total plan assets at fair value $ 195,595 $ 133,618 $ 52,539 $ 9,438

8 unchanged sentences

Contracts with insurance companies 9,118 — — 9,118

Other assets 4,509 4,509 — —

Other assets (a)

5,629 5,629 — —

Total plan assets at fair value $ 181,048 $ 160,612 $ 11,318 $ 9,118

1 unchanged sentence

Total plan assets, December 31, 2020 $ 233,075

Includes private equity, hedge funds and certain international equity securities measured at net asset value.

Tredegar also has a non-qualified supplemental pension plan covering certain employees.

Effective December 31, 2005, further participation in this plan was terminated and benefit accruals for existing participants were frozen.

The projected benefit obligation relating to this unfunded plan was $ 2.2 million at December 31, 2020 and December 31, 2019.

Pension expense recognized for this plan was $ 0.1 million in 2020, 2019, and 2018.

This information has been included in the preceding pension benefit tables.

Pension and other postretirement benefit liabilities related to Personal Care Films have been retained by the Company.

Pension expense recognized for participation by these former employees in the Company’s plans is not material for the years ended December 31, 2020, 2019, and 2018.

14 SAVINGS PLAN

Tredegar has a savings plan that allows eligible employees to voluntarily contribute a percentage of their compensation, up to Internal Revenue Service (“IRS”) limitations.

The provisions of the savings plan provided the following benefits for salaried and certain hourly employees:

• The Company makes matching contributions to the savings plan of $ 1 for every $ 1 an employee contributes per pay period up to a maximum of 5 % of eligible compensation.

• The savings plan includes immediate vesting of matching contributions and automatic enrollment at 3 % of eligible compensation unless the employee opts out or elects a different percentage.

The Company also has a non-qualified plan that restores matching benefits for employees suspended from the savings plan due to certain limitations imposed by income tax regulations (“restoration plan”).

Charges recognized for these plans were $ 4.0 million in 2020, $ 3.9 million in 2019 and $ 3.7 million in 2018.

The Company’s liability under the restoration plan was

$ 1.0 million at December 31, 2020 (consisting of 61,394 phantom shares of common stock) and $ 1.4 million at December 31, 2019 (consisting of 62,475 phantom shares of common stock) and valued at the closing market price on those dates.

The Tredegar Corporation Benefits Plan Trust (the “Trust”) purchased 7,200 shares of the Company’s common stock in 1998 for $ 0.2 million and 46,671 shares of its common stock in 1997 for $ 1.0 million, as a partial hedge against the phantom shares held in the restoration plan.

There have been no shares purchased since 1998 except for re-invested dividends.

The cost of the shares held by the Trust is shown as a reduction to shareholders’ equity in the consolidated balance sheets.

Tredegar has various lease agreements with terms up to 10 years, including leases of real estate, office equipment and vehicles.

Some leases include options to purchase the leased asset, terminate the agreement or extend the term of the agreement for one or more years.

These options are included in the lease term when it is reasonably certain that the option will be exercised.

The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s operating leases as of December 31, 2020:

(In thousands)

Future Lease Payments

Thereafter 7,404

Total undiscounted operating lease payments 20,165

Imputed interest 3,134

Present value of operating lease liabilities $ 17,031

As of January 1, 2019, an initial right-of-use asset of $ 20 million was recognized as a non-cash asset addition and an initial lease liability of $ 22 million was recognized as a non-cash liability addition with the adoption of the new lease accounting standard.

The following table summarizes lease costs, related cash flow and other information for the years ended December 31, 2020 and 2019.

These costs are primarily related to long-term operating leases, but also include amounts for variable leases and short-term leases.

(a) Represents investments in certain commodity funds measured using quoted market prices.

OTHER INCOME (EXPENSE), NET

Other income (expense), net consists of the following:

(In thousands) 2021 2020 2019

Operating lease expense $ 3,260 $ 3,087

Right-of-use assets recognized as non-cash additions from the execution of new operating leases

Gain (loss) on investment in kaléo (a)

$ 12,780 $ ( 60,900 ) $ 28,482

Other Information:

Weighted-average remaining lease term for operating leases 8 years 9 years

Weighted-average discount rate for operating leases 4.21 % 4.24 %

16 INCOME TAXES

One-time tax credit in Brazil for unemployment/social security insurance non-income taxes resulting from a favorable decision by Brazil’s Supreme Court regarding the calculation of such tax 8,486 — —

Transition service fees, net of corporate costs associated with the divested Personal Care business 297 ( 851 ) —

COVID-19-related expenses (b)

( 624 ) ( 2,231 ) —

Loss on sale of Bright View Technologies — ( 2,299 ) —

Write-down of investment in Harbinger Capital Partners Special Situations Fund (c)

Gain associated with the sale of Lake Zurich manufacturing facility assets 378 — —

Other ( 424 ) ( 1,013 ) ( 111 )

Total $ 20,376 $ ( 67,294 ) $ 28,371

(a) The gain in 2021 includes a $ 0.3 million dividend received from kaléo in the first quarter of 2021.

The gain in 2019 includes a $17.6 million dividend received from kaléo.

(b) Costs associated with operating under COVID-19 conditions include employee overtime expenses associated with absenteeism, personal protective equipment supplies and facility maintenance.

(c) Represents the unrealized loss on the Company’s investment in Harbinger Capital Partners Special Situations Funds L.P.

that had a fair value of $ 0.2 million, $ 0.7 million and $ 1.1 million as of December 31, 2021, 2020 and 2019, respectively, reported in “Other assets” in the consolidated balance sheet.

In May 2021, the Brazil Supreme Court ruled in a leading case related to the amount of Brazilian value-added tax to exclude from the calculation of unemployment/social security insurance non-income taxes (“PIS/COFINS”).

As a result, in the second quarter of 2021, the Company recorded a pre-tax gain of $ 8.5 million for certain excess PIS/COFINS paid from 2003 to 2021, that included applicable interest, which the Company applied to required Brazilian federal tax payments during 2021.

The pre-tax gain was recorded in “Other income (expense), net” in the consolidated statements of income.

These derivative financial instruments are designated as and qualify as cash flow hedges and are recognized in the consolidated balance sheet at fair value.

The fair value of derivative instruments recorded on the consolidated balance sheets are based upon Level 2 inputs.

If individual derivative instruments with the same counterparty can be settled on a net basis, the Company records the corresponding derivative fair values as a net asset or net liability.

The fixed-price firm sales commitments and related hedging instruments generally have durations of not more than 12 months, and the notional amount of aluminum futures contracts that hedged future purchases of aluminum to meet fixed-price forward sales contract obligations was $ 22.1 million ( 14.9 million pounds of aluminum) at December 31, 2021 and $ 12.1 million ( 13.0 million pounds of aluminum) at December 31, 2020.

The table below summarizes the location and gross amounts of aluminum derivative contract fair values (Level 2) in the consolidated balance sheets as of December 31, 2021 and 2020:

December 31, 2021 December 31, 2020

(In thousands) Balance Sheet

Value Balance Sheet

Derivatives Designated as Hedging Instruments

Asset derivatives:

Aluminum futures contracts Prepaid expenses & other $ 2,085 Prepaid expenses & other $ 1,560

Liability derivatives:

Aluminum futures contracts Accrued expenses ( 119 ) Accrued expenses ( 22 )

Net asset (liability) $ 1,966 $ 1,538

The Company's earnings are exposed to foreign currency exchange risk primarily through the translation of the financial statements of subsidiaries that have a functional currency other than the U.S.

Terphane Ltda.

has the following outstanding foreign exchange average forward rate contracts to purchase Brazilian Real and sell U.S.

USD Notional Amount (000s) Average Forward Rate Contracted on USD/BRL R$ Equivalent Amount (000s) Applicable Month Estimated % of Terphane Ltda.

R$ Operating Cost Exposure Hedged

$ 1,677 5.3360 R$ 8,948 Jan-22 72 %

$ 1,751 5.3631 R$ 9,391 Feb-22 75 %

$ 1,662 5.3905 R$ 8,959 Mar-22 72 %

$ 1,615 5.4247 R$ 8,761 Apr-22 70 %

$ 1,647 5.4545 R$ 8,984 May-22 72 %

$ 1,596 5.4890 R$ 8,760 Jun-22 70 %

$ 1,719 5.5200 R$ 9,489 Jul-22 76 %

$ 1,708 5.5560 R$ 9,490 Aug-22 76 %

$ 1,780 5.5915 R$ 9,953 Sep-22 80 %

$ 1,793 5.6264 R$ 10,088 Oct-22 81 %

$ 1,784 5.6597 R$ 10,097 Nov-22 81 %

$ 1,659 5.6962 R$ 9,450 Dec-22 76 %

$ 20,391 5.5108 R$ 112,370 75 %

These foreign currency exchange contracts have been designated and qualify as cash flow hedges of Terphane Ltda.’s forecasted sales to customers quoted or priced in U.S.

Dollars over that period.

By changing the currency risk associated with these U.S.

The table below summarizes the location and gross amounts of foreign currency forward contract fair values (Level 2) in the consolidated balance sheets as of December 31, 2021 and 2020:

December 31, 2021 December 31, 2020

(In thousands) Balance Sheet

Value Balance Sheet

Derivatives Designated as Hedging Instruments

Asset derivatives:

Foreign currency forward contracts Prepaid expenses and other $ — Prepaid expenses and other $ 853

Liability derivatives:

Foreign currency forward contracts Accrued expenses ( 1,255 ) Accrued expenses ( 466 )

Net asset (liability) $ ( 1,255 ) $ 387

The counterparties to any forward purchase commitments are major aluminum brokers and suppliers, and the counterparties to any aluminum futures contracts are major financial institutions.

Fixed-price forward sales contracts are only made available to the best and most credit-worthy customers.

The counterparties to the Company’s foreign currency cash flow hedge contracts are major financial institutions.

The pretax effect on net income (loss) from continuing operations and other comprehensive income (loss) of derivative instruments classified as cash flow hedges and described in the previous paragraphs for years ended December 31, 2021, 2020, and 2019 is summarized in the tables below:

(In thousands) Cash Flow Derivative Hedges

Aluminum Futures Contracts

Years Ended December 31, 2021 2020 2019

Amount of pre-tax gain (loss) recognized in other comprehensive income $ 6,215 $ 74 $ ( 2,359 )

Location of gain (loss) reclassified from accumulated other comprehensive income into net income (effective portion) Cost of

goods sold Cost of

Amount of pre-tax gain (loss) reclassified from accumulated other comprehensive income to net income (effective portion) $ 5,787 $ ( 2,717 ) $ ( 2,736 )

(In thousands) Cash Flow Derivative Hedges

Foreign Currency Forward Contracts

Years Ended December 31, 2021 2020 2019

Amount of pre-tax gain (loss) recognized in other comprehensive income $ — $ ( 2,415 ) $ — $ ( 4,437 ) $ — $ ( 856 )

Location of gain (loss) reclassified from accumulated other comprehensive income into net income (effective portion) Cost of

goods sold Selling, general & admin Cost of

goods sold Selling, general & admin

Amount of pre-tax gain (loss) reclassified from accumulated other comprehensive income to net income (effective portion) $ 63 $ ( 337 ) $ 62 $ ( 6,069 ) $ 62 $ ( 904 )

As of December 31, 2021, the Company expects $ 0.7 million of unrealized after-tax net gains on aluminum and foreign currency derivative contracts reported in accumulated other comprehensive income (loss) to be reclassified to earnings within the next 12 months.

For the years ended December 31, 2021, 2020 and 2019, net gains or losses realized, from previously unrealized net gains or losses on hedges that had been discontinued, were not material.

STOCK OPTION AND STOCK AWARD PLANS

As of December 31, 2021, the Company had one stock-based compensation plan that permits the grants of stock options, stock appreciation rights (“SARs”), stock, restricted stock, and stock unit awards.

Awards available for grant totaled 910,420 shares at December 31, 2021.

Stock options may be granted to purchase a specified number of shares of common stock at a price no lower than the fair market value on the date of grant and for a term not to exceed 10 years.

Stock options granted by the Company in 2021, 2020 and 2019 vest after 2 years and have a 7-year life or vest after 3 years and have a 5-year life.

Stock options exercisable totaled 1,762,190 and 1,287,792 shares at December 31, 2021 and 2020, respectively.

On December 1, 2020, Tredegar’s Board of Directors declared a special cash dividend of $ 200 million, or $ 5.97 per share, on the Company’s common stock (the “Special Dividend”).

The Special Dividend was payable on December 18, 2020 and had

an ex-dividend date of December 21, 2020.

All stock option awards that were outstanding at the time of the Special Dividend were modified pursuant to the nondiscretionary anti-dilution provisions in the related stock-based compensation plan.

SARs that were outstanding at the time of the Special Dividend were also modified pursuant to the nondiscretionary anti-dilution provisions in the related SARs grant agreements.

The modifications included increasing the number of outstanding stock options and SARs as well as reducing the exercise prices of all outstanding stock options and SARS.

The modification did not result in additional stock-based compensation expense.

No other terms or conditions of outstanding awards were modified.

A summary of stock options outstanding at December 31, 2021, 2020 and 2019, and changes during those years, is presented below:

Option Exercise Price/Share

Options Range Weighted

Outstanding at January 1, 2019 890,116 $ 15.65 to $ 24.84 $ 19.69

Granted 758,287 18.48 to 18.48 18.48

Forfeited and expired ( 10,000 ) 19.40 to 19.40 19.40

Exercised ( 9,500 ) 19.40 to 19.40 19.40

Outstanding at December 31, 2019 1,628,903 15.65 to 24.84 19.13

Granted 638,074 10.75 to 14.62 11.90

Modification for special cash dividend (a)

701,535 10.75 to 14.62 11.90

Forfeited and expired (a)

( 141,074 ) 10.75 to 24.84 11.87

Outstanding at December 31, 2020 (a)

2,827,438 10.75 to 22.49 13.55

Granted 388,822 16.37 to 16.37 16.37

Forfeited and expired ( 22,611 ) 14.47 to 19.64 18.14

Exercised ( 67,705 ) 10.75 to 17.29 13.51

Outstanding at December 31, 2021 3,125,944 $ 10.75 to $ 22.49 $ 13.82

(a) The option exercise price per share reflects the reduction to the exercise prices of outstanding stock options impacted by the modification due to the anti-dilution provisions in the stock-based compensation plan.

The assumptions used in the Black-Scholes options-pricing model for valuing Tredegar stock options originally granted in 2021, 2020 and 2019, and the related estimated fair values at the date of grant, were as follows:

2021 2020 2019

Dividend yield 2.6 % 2.5 % 2.4 %

Weighted average volatility percentage 48.3 % 43.8 % 38.3 %

Weighted average risk-free interest rate 0.9 % 0.8 % 2.4 %

Holding period (years) 5 5 5

Weighted average exercise price at date of grant (also weighted average market price at date of grant) (a)

$ 16.37 $ 14.41 $ 18.48

Estimated weighted average fair value of options per share at date of grant

$ 5.57 $ 4.44 $ 5.43

Total estimated fair value of stock options granted (in thousands) $ 2,165 $ 2,833 $ 4,117

(a) In December 2020, the weighted average exercise price for outstanding stock option awards granted in 2020 and 2019 were modified to $ 10.75 and $ 13.78 , respectively.

The dividend yield is the actual dividend yield on Tredegar’s common stock at the date of grant, which the Company believes is a reasonable estimate of the expected yield during the holding period.

The expected volatility is based on the historical volatility of Tredegar’s common stock using a sequential period of historical data equal to the expected holding period of the option.

The Company has no reason to believe that future volatility for this period is likely to differ from the past.

The assumed risk-free interest rate is based on observed interest rates for U.S.

Treasury debt securities appropriate for the expected holding period.

The following table summarizes additional information about stock options outstanding and exercisable at December 31, 2021:

Options Outstanding at December 31, 2021 Options Exercisable at December 31, 2021

Weighted Average Aggregate Intrinsic Value Aggregate Intrinsic Value

Exercise Prices Shares Remaining Contractual Life Exercise

Price Shares Weighted Average Exercise Price

$ 10.75 to $ 16.37 2,953,052 4.4 years $ 13.48 $ 792,082 1,589,298 $ 13.78 $ 41,076

17.29 to 25.94 172,892 1.6 years 19.71 — 172,892 19.71 —

Total 3,125,944 4.2 years $ 13.82 $ 792,082 1,762,190 $ 14.36 $ 41,076

The total intrinsic value of stock options exercised is $ 0.2 million in 2021 and $ 0.1 million in 2019.

There were no stock options exercised in 2020.

The grant-date fair value of stock option-based awards vested was $ 3.5 million, $ 3.0 million, and $ 0.5 million in 2021, 2020, and 2019, respectively.

As of December 31, 2021, the unrecognized compensation cost for continuing operations related to stock option-based awards was $ 1.7 million.

This cost is expected to be recognized over the remaining weighted average period of 0.6 years.

As a result of this provision, the Company recognized accelerated stock compensation expense for continuing operations of $ 0.1 million and $ 1.3 million in 2020 and 2019, respectively.

There was no accelerated stock compensation expense in 2021.

Restricted stock grants ordinarily vest three years from the date of grant based upon continued employment.

The fair value of restricted stock awards is estimated as of the grant date using the closing stock price on that date.

Stock unit awards vest upon the achievement of certain performance targets.

The following table summarizes additional information about unvested restricted stock outstanding at December 31, 2021, 2020 and 2019:

Unvested Restricted Stock Maximum Unvested Restricted Stock Units Issuable Upon Satisfaction of Certain Performance Criteria

of Shares Weighted Avg.

Grant Date Fair Value/Share Grant Date

(In thousands) Number

of Shares Weighted Avg.

Grant Date Fair Value/Share Grant Date

(In thousands)

Outstanding at January 1, 2019 244,736 $ 16.20 $ 3,965 184,709 $ 16.97 $ 3,134

Granted 185,422 18.46 3,423 57,442 18.34 1,053

Vested ( 117,834 ) 14.76 ( 1,739 ) ( 69,926 ) 10.96 ( 766 )

Forfeited ( 26,389 ) 16.11 ( 425 ) ( 24,562 ) 11.51 ( 283 )

Outstanding at December 31, 2019 285,935 18.27 5,224 147,663 21.25 3,138

Granted 155,138 14.55 2,257 34,275 15.25 523

Vested ( 148,709 ) 17.39 ( 2,586 ) ( 37,370 ) 17.38 ( 649 )

Forfeited ( 57,385 ) 17.00 ( 976 ) ( 32,066 ) 17.36 ( 557 )

Outstanding at December 31, 2020 234,979 16.68 3,919 112,502 21.82 2,455

Granted 200,073 15.63 3,127 14,669 15.24 224

Vested ( 87,636 ) 15.78 ( 1,383 ) ( 73,930 ) 17.17 ( 1,269 )

Forfeited ( 11,616 ) 16.38 ( 190 ) ( 2,523 ) 17.63 ( 44 )

Outstanding at December 31, 2021 335,800 $ 16.30 $ 5,473 50,718 $ 17.63 $ 1,366

As of December 31, 2021, the unrecognized compensation cost for continuing operations related to non-vested restricted stock awards was $ 2.6 million.

This cost is expected to be recognized over the remaining weighted average period of 1.5 years.

SARs granted by the Company in 2021 and 2020 vest after 2 years and have a 7-year life.

No SARs were granted prior to January 1, 2020 since 1992.

SARs may be settled in cash upon exercise and therefore are classified as liabilities and included in accrued expenses in the consolidated balance sheet.

The fair value of these liability awards is remeasured at each reporting period until the date of settlement.

Increases and decreases in stock-based compensation expense is recognized over the vesting period, or immediately, for vested awards.

A summary of SARs outstanding at December 31, 2021 and 2020, and changes during those years, is presented below:

Exercise Price/Share

SARs Range Weighted

Outstanding at January 1, 2020 — $ — to $ — $ —

387,252 10.75 to 19.64 11.60

Modification for special cash dividend 71,402 10.75 to 19.64 11.60

Forfeited and expired ( 82,214 ) 10.75 to 19.64 11.39

Outstanding at December 31, 2020 376,440 10.75 to 19.64 11.64

Granted 164,464 16.37 to 16.37 16.37

Forfeited and expired ( 10,043 ) 10.75 to 16.37 13.01

Exercised ( 9,260 ) 10.75 to 15.25 13.87

Outstanding at December 31, 2021 521,601 $ 10.75 to $ 16.37 $ 13.55

(a) The SARs exercise price per share reflects the reduction to the exercise prices of outstanding SARs as a results of the modification to the awards pursuant to the nondiscretionary anti-dilution provisions in the related SAR s grant agreements.

The grant-date fair value of SARs awards vested was $ 0.1 million and $ 0.6 million in 2021 and 2020, respectively.

As of December 31, 2021, the unrecognized compensation cost for continuing operations was $ 0.4 million.

This cost is expected to be recognized over the remaining weighted average period of 0.6 years.

Income (loss) from continuing operations before income taxes and income tax expense (benefit) for continuing operations are as follows:

19 unchanged sentences

(In thousands, except percentages) Amount % Amount % Amount %

Income tax expense (benefit) at federal statutory rate $ 14,116 21.0 $ ( 5,260 ) 21.0 $ 15,121 21.0

Foreign rate differences 8,269 12.3 4,554 ( 18.2 ) 2,247 2.9

tax on foreign branch income 1,409 ( 5.6 ) 16,029 22.3 2,229 2.8

Non-deductible expenses 219 ( 0.9 ) 285 0.4 99 0.1

Valuation allowance for capital loss carryforwards 52 ( 0.2 ) 60 0.1 553 0.7

Unremitted earnings from foreign operations 13 ( 0.1 ) 60 0.1 126 0.2

Tax on Prodepe tax incentive 2,858 4.3 ( 801 ) 3.2 ( 714 ) ( 1.0 )

Foreign currency translation variation on intercompany loans 1,374 2.0 — — — —

Non-deductible other 1,053 1.6 208 ( 0.8 ) 637 0.9

State taxes, net of federal income tax benefit 933 1.4 ( 373 ) 1.5 1,050 1.5

Tax contingency accruals and tax settlements 202 0.3 ( 58 ) 0.2 ( 2,543 ) ( 3.5 )

Foreign derived intangible income deduction — — — — ( 319 ) ( 0.4 )

Valuation allowance due to foreign losses and impairments — — — — ( 14,350 ) ( 19.9 )

Stock-based compensation ( 24 ) 0.1 292 0.4 177 0.2

Dividend received deduction net of foreign withholding tax ( 109 ) ( 0.2 ) ( 52 ) 0.2 ( 1,016 ) ( 1.4 )

Tax contingency accruals and tax settlements ( 58 ) 0.2 ( 2,543 ) ( 3.5 ) 673 0.8

State taxes, net of federal income tax benefit ( 373 ) 1.5 1,050 1.5 1,203 1.5

Research and development tax credit ( 633 ) 2.5 ( 523 ) ( 0.7 ) ( 130 ) ( 0.2 )

Changes in estimates related to prior year tax provision ( 383 ) ( 0.6 ) ( 2,472 ) 9.9 ( 135 ) ( 0.2 )

Research and development tax credit ( 928 ) ( 1.4 ) ( 633 ) 2.5 ( 523 ) ( 0.7 )

Valuation allowance for capital loss carryforwards ( 5,415 ) ( 8.1 ) 52 ( 0.2 ) 60 0.1

tax on foreign branch income ( 5,667 ) ( 8.4 ) 1,409 ( 5.6 ) 16,029 22.3

Brazilian tax incentive ( 7,019 ) ( 10.4 ) ( 4,787 ) 19.1 ( 1,999 ) ( 2.8 )

Income tax expense (benefit) at federal statutory rate ( 5,260 ) 21.0 15,121 21.0 16,878 21.0

Income tax expense (benefit) at effective income tax rate $ 9,284 13.8 $ ( 8,213 ) 32.8 $ 13,545 18.8

Income taxes in 2021 are primarily due to the strong earnings of Terphane Ltda, which are included in Tredegar’s U.S.

consolidated tax return and, the tax impact of the local statutory tax rates of Tredegar’s foreign subsidiaries being higher than the current U.S.

tax rate of 21%, the benefit of tax incentives in Brazil and the release of the valuation allowance for capital loss carryforwards.

Income taxes in 2020 were primarily impacted by the tax impact of Terphane Ltda.

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realizing this net deferred tax asset.

Income taxes in 2018 were primarily impacted the additional tax impact of Terphane Ltda.

being included in Tredegar’s U.S.

consolidated tax return as a foreign branch as well as the tax impact of the local statutory tax rates of Tredegar’s foreign subsidiaries being higher than the current U.S.

tax rate of 21 %.

These increases to income tax expense were offset by recording a tax benefit on a portion of foreign losses and impairments, by the tax benefit of the foreign derived intangible income deduction under the TCJA, and by the benefit of tax incentives in Brazil.

Tredegar accrues U.S.

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Because of the accumulation of significant losses related to foreign currency translations at Terphane Ltda., there were no deferred income tax liabilities associated with the U.S.

federal income taxes and foreign withholding taxes on Terphane Ltda.’s undistributed earnings as of and December 31, 2020 and 2019.

federal income taxes and foreign withholding taxes on Terphane Ltda.’s undistributed earnings as of December 31, 2021 and 2020.

The Brazilian federal statutory income tax rate is a composite of 34.0 % ( 25.0 % of income tax and 9.0 % of social contribution on income).

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The benefit from the tax incentives was $ 7.0 million, $ 4.8 million and $ 2.0 million in 2021, 2020 and 2019, respectively.

Deferred income tax liabilities and deferred income tax assets for continuing operations at December 31, 2020 and 2019, are as follows:

Deferred income tax liabilities and deferred income tax assets at December 31, 2021 and 2020, are as follows:

(In thousands) 2021 2020

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Excess of carrying value over tax basis of investment in kaléo — 4,905

Derivative financial instruments 659 —

Right-of-use leased assets 2,767 2,979

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federal, state and foreign NOL and credit carryforwards 33,922 18,305

Timing adjustment for unrecognized tax benefits on uncertain tax positions, including portion relating to interest and penalties 134 187

Allowance for doubtful accounts 141 383

Other 146 275

Lease liabilities 2,977 3,144

Derivative financial instruments — 345

Tax basis remaining for installment sale - kaléo 1,092 —

Foreign currency translation gain adjustment 1,970 1,423

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The Company has estimated gross federal, state and foreign tax credits and net operating loss carryforwards of $ 33.9 million and $ 18.3 million at December 31, 2021 and 2020, respectively.

federal foreign tax credits will expire by 2027 and the U.S.

federal foreign tax credits will expire between 2027-2031 and the U.S.

federal research and development tax credits will expire by 2041.

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The valuation allowance for excess capital losses from investments and other related items was $ 0.7 million, $ 7.1 million and $ 1.3 million at December 31, 2021, 2020 and 2019, respectively.

The 2020 balance increased primarily due to capital loss carryforwards created by the sale of Personal Care Films.

The 2018 balance decreased primarily due to the expiration of a portion of prior year capital loss carryforwards.

The 2021 balance decreased primarily due to utilization of capital losses as a result of the sale of the Company’s investment in kaléo.

The amount of the deferred income tax asset considered realizable, however, could be adjusted in the near term if estimates of the fair value of certain investments during the carryforward period change.

Tredegar continues to evaluate opportunities to utilize capital loss carryforwards prior to their expiration at various dates in the future.

As circumstances and events warrant, allowances will be reversed when it is more likely than not that future taxable income will exceed deductible amounts, thereby resulting in the realization of deferred income tax assets.

A valuation allowance of $ 4.9 million was recorded in 2020 related to various deferred state tax assets.

The valuation allowance for asset impairments in foreign jurisdictions where the Company believes it is more likely than not that the deferred income tax asset will not be realized was zero at December 31, 2020 and 2019, and $ 15.8 million at December 31, 2018.

Valuation allowances of $ 2.5 million, $ 4.9 million and $ 0 million at December 31, 2021, 2020 and 2019, respectively, were recorded against certain deferred state tax assets.

In 2019, the Company reversed a $ 12.4 million valuation allowance on the net deferred tax assets of its Brazilian subsidiary Terphane Ltda due to favorable earnings trends.

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The Company anticipates that it is reasonably possible that Federal and state income tax audits or statutes may settle or close within the next 12 months, which could result in the recognition of up to approximately $ 0.5 million of the balance of unrecognized tax positions, including any payments that may be made.

BUSINESS SEGMENTS

The Company's business segments are Aluminum Extrusions, PE Films and Flexible Packaging Films.

PE Films is composed of surface protection films, polyethylene overwrap films and films for other markets.

Flexible Packaging Films is comprised of the Company’s polyester films business, Terphane Holdings LLC (“Terphane”).

The Company’s reportable segments are based on its method of internal reporting, which is generally segregated by differences in products.

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.

Information by business segment and geographic area for the last three years is provided in the segment tables below.

There were no accounting transactions between segments and no allocations to segments.

(In thousands) 2021 2020 2019

Aluminum Extrusions $ 539,325 $ 455,711 $ 529,602

PE Films 118,920 139,288 133,807

Flexible Packaging Films 139,978 134,605 133,935

Total net sales 798,223 729,604 797,344

Add back freight 28,232 25,686 28,980

Sales as shown in consolidated statements of income $ 826,455 $ 755,290 $ 826,324

Refer to Notes to Financial Tables that follow these tables.

EBITDA from Ongoing Operations

(In thousands) 2021 2020 2019

Aluminum Extrusions:

Ongoing operations:

EBITDA $ 55,948 $ 55,137 $ 65,683

Depreciation & amortization (d) ( 16,272 ) ( 17,403 ) ( 16,719 )

EBIT 39,676 37,734 48,964

Plant shutdowns, asset impairments, restructurings and other (a) 3,237 ( 3,506 ) ( 561 )

Goodwill impairment charge — ( 13,696 ) —

Trade name accelerated amortization (d) — — ( 10,040 )

Ongoing operations:

EBITDA 27,694 45,107 41,133

Depreciation & amortization ( 6,263 ) ( 6,762 ) ( 5,860 )

EBIT 21,431 38,345 35,273

Plant shutdowns, asset impairments, restructurings and other (a) ( 371 ) ( 1,974 ) ( 733 )

Flexible Packaging Films:

Ongoing operations:

EBITDA 31,684 30,645 14,737

Depreciation & amortization ( 1,988 ) ( 1,761 ) ( 1,517 )

EBIT 29,696 28,884 13,220

Plant shutdowns, asset impairments, restructurings and other (a) 8,439 ( 18 ) —

Total 102,108 85,769 86,123

Interest income 73 44 66

Interest expense 3,386 2,587 4,051

Gain (loss) on investment in kaléo (a) 12,780 ( 60,900 ) 28,482

Loss on sale of Bright View (f) — ( 2,299 ) —

Stock option-based compensation expense 2,495 2,161 4,132

Corporate expenses, net (a) 41,859 42,912 34,482

Income (loss) from continuing operations before income taxes 67,221 ( 25,046 ) 72,006

Income tax expense (benefit) (a) 9,284 ( 8,213 ) 13,545

Income (loss) from continuing operations 57,937 ( 16,833 ) 58,461

Income (loss) from discontinued operations, net of tax (a) ( 111 ) ( 58,611 ) ( 10,202 )

Net income (loss) $ 57,826 $ ( 75,444 ) $ 48,259

Refer to Notes to Financial Tables that follow these tables.

Identifiable Assets

(In thousands) 2021 2020

Aluminum Extrusions $ 280,521 $ 244,560

PE Films 113,613 119,013

Flexible Packaging Films 75,269 66,453

Subtotal 469,403 430,026

General corporate 23,482 71,508

Cash and cash equivalents (b) 30,521 11,846

Discontinued operations 178 1,490

Total $ 523,584 $ 514,870

Depreciation and Amortization Capital Expenditures

(In thousands) 2021 2020 2019 2021 2020 2019

Aluminum Extrusions $ 15,326 $ 17,403 $ 26,759 $ 18,914 $ 10,260 $ 17,855

PE Films 6,263 6,762 5,860 2,997 6,024 8,567

Flexible Packaging Films 1,988 1,761 1,517 5,603 4,959 8,866

Subtotal 23,577 25,926 34,136 27,514 21,243 35,288

General corporate (e) 207 520 186 ( 153 ) 200 223

Discontinued operations — 5,511 9,962 — 1,912 15,353

Total $ 23,784 $ 31,957 $ 44,284 $ 27,361 $ 23,355 $ 50,864

Net Sales by Geographic Area (c)

(In thousands) 2021 2020 2019

United States $ 614,987 $ 530,243 $ 593,599

Exports from the United States to:

Asia 59,242 80,217 82,342

Canada 17,776 18,024 15,022

Europe 4,489 5,440 5,752

Latin America 4,937 2,169 4,135

Operations outside the United States:

Brazil 96,792 93,511 96,274

China — — 220

Total $ 798,223 $ 729,604 $ 797,344

Identifiable Assets

by Geographic Area (c) Property, Plant & Equipment,

Net by Geographic Area (c)

(In thousands) 2021 2020 2021 2020

United States $ 398,749 $ 363,106 $ 135,310 $ 132,268

Operations outside the United States:

Brazil 54,299 49,157 18,615 15,588

China 16,355 17,763 14,889 16,245

General corporate 23,482 71,508 1,567 2,444

Cash and cash equivalents (b) 30,521 11,846 n/a n/a

Discontinued operations 178 1,490 — —

Total $ 523,584 $ 514,870 $ 170,381 $ 166,545

Refer to Notes to Financial Tables that follow these tables.

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 $ 32.7 million in 2021, $ 35.1 million in 2020 and $ 32.1 million in 2019.

Net Sales by Product Group

(In thousands) 2021 2020 2019

Aluminum Extrusions:

Nonresidential building & construction $ 269,252 $ 253,126 $ 272,729

Consumer durables 53,578 44,167 57,607

Automotive 43,256 35,895 46,461

Machinery & equipment 42,721 30,649 38,657

Distribution 45,639 28,339 34,753

Residential building & construction 52,236 40,049 43,554

Electrical 32,643 23,486 35,841

Subtotal 539,325 455,711 529,602

Surface protection films 88,436 109,097 103,893

Packaging 30,484 22,700 22,542

LED-based products — 7,491 7,372

Subtotal 118,920 139,288 133,807

Flexible Packaging Films 139,978 134,605 133,935

Total $ 798,223 $ 729,604 $ 797,344

(a) See Notes 1, 9, 15, 16 and 17 for more information on losses associated with plant shutdowns, asset impairments and restructurings, unusual items, gains or losses from sale of assets, gains or losses on an investment accounted for under the fair value method and other items.

(b) Cash and cash equivalents includes funds held in locations outside the U.S.

of $ 16.4 million and $ 9.4 million at December 31, 2021 and 2020, respectively.

Export sales relate almost entirely to PE Films.

Operations in China relate to PE Films.

Operations in Brazil relate to Flexible Packaging Films.

(e) Corporate depreciation and amortization are included in Corporate expenses, net, on the EBITDA from ongoing operations table above.

(f) In December 2020, the Company completed the sale of Bright View.

See Note 15 for more details.

Tredegar has a savings plan that allows eligible employees to voluntarily contribute a percentage of their compensation, up to Internal Revenue Service (“IRS”) limitations.

The provisions of the savings plan provided the following benefits for salaried and certain hourly employees:

• The Company makes matching contributions to the savings plan of $ 1 for every $ 1 an employee contributes per pay period up to a maximum of 5 % of eligible compensation.

• The savings plan includes immediate vesting of matching contributions and automatic enrollment at 3 % of eligible compensation unless the employee opts out or elects a different percentage.

Charges recognized for these plans were $ 3.3 million in 2021, $ 4.0 million in 2020 and $ 3.9 million in 2019.

The Company’s liability under the restoration plan was $ 0.7 million at December 31, 2021 (consisting of 56,570 phantom shares of common stock) and $ 1.0 million at December 31, 2020 (consisting of 61,394 phantom shares of common stock) and valued at the closing market price on those dates.

The Tredegar Corporation Benefits Plan Trust (the “Trust”) purchased 7,200 shares of the Company’s common stock in 1998 for $ 0.2 million and 46,671 shares of its common stock in 1997 for $ 1.0 million, which were intended as a hedge against the phantom shares held in the restoration plan.

There have been no shares purchased since 1998 except for re-invested dividends.

The cost of the shares held by the Trust is shown as a reduction to shareholders’ equity in the consolidated balance sheets.

DIVESTITURES AND ASSETS HELD FOR SALE

Personal Care Films

In 2020, the Company completed the sale of Personal Care Films for an aggregate purchase price of $ 60.5 million, subject to customary adjustments.

The Company agreed to provide certain transition services related to finance, human resources and information technology (“IT”) that ended during the second quarter of 2021, resulting in final cash proceeds of $ 64.1 million.

Personal Care Films was previously reported in the PE Films segment.

The following table summarizes the financial results of discontinued operations reflected in the Consolidated Statements of Income for the year ended December 31, 2021, 2020 and 2019:

Years Ended December 31

(In thousands) 2021 2020 2019

Revenues and other items:

Sales $ — $ 110,246 $ 146,034

Other income (expense), net — ( 333 ) 6,424

— 109,913 152,458

Costs and expenses:

Cost of goods sold — 92,079 126,371

Freight — 5,229 7,083

Selling, general and administrative 739 16,824 17,754

Research and development — 8,863 11,743

Asset impairments and costs associated with exit and disposal activities, net of adjustments — 1,529 3,341

Adjustment to the fair value estimates used in the disposal of Personal Care Films (a)

( 1,118 ) — —

Loss on sale of business — 50,027 —

Total ( 379 ) 174,551 166,292

Income (loss) from discontinued operations before income taxes 379 ( 64,638 ) ( 13,834 )

Income tax expense (benefit) 490 ( 6,027 ) ( 3,632 )

Income (loss) from discontinued operations, net of tax $ ( 111 ) $ ( 58,611 ) $ ( 10,202 )

(a) Represents a net increase to the estimated fair value of Personal Care Films primarily due to lower costs associated with IT transition-related services to provide the seller developed assets, which did not exist at the time of the sale, to support the seller’s IT infrastructure.

The assets and liabilities of the discontinued operations reflected in the Consolidated Balance Sheets as of December 31, 2021 and 2020, respectively were as follows:

(In thousands) 2021 2020

Prepaid expenses and other (a)

$ 178 $ 1,339

Other assets — 151

Total assets of discontinued operations $ 178 $ 1,490

Accrued expenses (a)

$ 193 $ 7,521

(a) The consolidated balance sheet of discontinued operations as of December 31, 2021 includes $ 0.2 million of other receivables related to the settlement of customary post-closing adjustments and other miscellaneous accrued expenses of $ 0.2 million.

The consolidated balance sheet of discontinued operations as of December 31, 2020 includes $ 0.4 million of other receivables related to the settlement of customary post-closing adjustments, deferred assets of $ 0.9 million and deferred obligations of $ 5.3 million related to transition services, accrued severance of $ 2.1 million, and other miscellaneous accrued expenses of $ 0.2 million.

The following table provides significant operating and investing cash flow information for discontinued operations:

Year Ended December 31,

(In thousands) 2021 2020 2019

Operating activities:

Depreciation and amortization $ — $ 5,511 $ 9,962

Gain from the sale of the Shanghai manufacturing facility assets

— — ( 6,316 )

Loss on sale of Personal Care Films — 50,027 —

Other ( 1,118 ) — —

Total ( 1,118 ) 55,538 3,646

Investing activities:

Net proceeds on sale of Personal Care Films $ — $ 55,115 $ —

Proceeds from the sale of the Shanghai manufacturing facility assets

Capital expenditures — ( 1,912 ) ( 15,353 )

Total $ — $ 53,203 $ ( 4,417 )

In December 2020, the Company entered into a definitive agreement and completed the sale of Bright View, which resulted in the recognition of a pre-tax loss of $ 2.3 million ($ 1.8 million after-tax) included in “Other income (expense), net” in the consolidated statements of income for the year ended December 31, 2020.

Assets Held For Sale

In July 2019, the Company committed to a plan to close its manufacturing facility in Lake Zurich, Illinois, which historically was reported within the personal care component of its PE Films segment.

As of December 31, 2020, the disposal group carrying value of $ 4.6 million was reported in "Prepaid expenses and other" in the consolidated balance sheet as the held for sale criteria was met.

During the third quarter of 2021, the Company completed the sale of the remaining assets in Lake Zurich, Illinois resulting in total cash proceeds of $ 4.7 million.

In August 2007 and December 2008, the Company made an aggregate investment of $ 7.5 million in kaleo, Inc.

(“kaléo”), a privately held specialty pharmaceutical company dedicated to building innovative solutions for serious and life-threatening medical conditions.

Tredegar historically accounted for its investment in kaléo under the fair value option.

kaléo’s stock is not publicly traded.

On December 27, 2021, the Company completed the sale of its investment interests in kaléo (Series A-3 Preferred Stock, Series B Preferred Stock and common stock) that, taken together, represented on a fully-diluted basis an approximate 18% interest in kaléo.

Tredegar received closing cash proceeds of $ 47.1 million.

A pre-tax gain of $12.8 million on the Company’s investment in kaléo was recognized in the full year ended December 31, 2021 compared to a pre-tax loss of $60.9 million and pre-tax gain of $28.5 million in the full years ended December 31, 2020 and 2019, respectively, which are reported in “Other income (expense), net” in the consolidated statements of income.

The gain in 2021 includes a $ 0.3 million dividend received from kaléo in the first quarter of 2021 and the gain in 2019 includes a $ 17.6 million dividend received from kaléo.

ASSET IMPAIRMENTS AND COSTS ASSOCIATED WITH EXIT AND DISPOSAL ACTIVITIES

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Tredegar is involved in various stages of investigation and remediation relating to environmental matters at certain current and former plant locations.

Where the Company has determined the nature and scope of any required environmental remediation activity, estimates of cleanup costs have been obtained and accrued.

Where the Company has determined the nature and scope of any required environmental

remediation activity, estimates of cleanup costs have been obtained and accrued.

As efforts continue to maintain compliance with applicable environmental laws and regulations, additional contingencies may be identified.

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EXHIBIT INDEX

2.1 Stock Purchase Agreement, dated as of February 1, 2017, by and among Futura Industries Corporation, Futura Corporation, Susan D.

Johnson, The Susan D.

Johnson Trust, Ken Wells, The William L.

Bonnell Company, Inc., and, in his capacity as Sellers’ Representative, Brent F.

Lloyd (filed as Exhibit 2.1 to Tredegar’s Current Report on Form 8-K (File No.

1-10258), filed on February 2, 2017, and incorporated herein by reference)

2.2 Amended and Restated Purchase and Sale Agreement, dated as of October 30, 2020, by and among Fitesa Nao Tecidos S.A., Fitesa US LLC, Miramar Participações Ltda, Tredegar Corporation, Tredegar Far East Corporation, Tredegar Film Products (Latin America), Inc., Tredegar Investments, LLC and Fitesa S.A.

(filed as Exhibit 2.1 to Tredegar’s Current Report on Form 8-K (File No.

1-10258), filed on November 3, 2020, and incorporated herein by reference).

3.1 Amended and Restated Articles of Incorporation of Tredegar (filed as Exhibit 3.1 to Tredegar’s Annual Report on Form 10-K (File No.

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and Wells Fargo Bank, National Association, as co-documentation agents, and the other lenders party thereto (filed as Exhibit 4.1 to Tredegar’s Current Report on Form 8-K (File No.

1-10258), f iled on December 3, 2020, and incorporated herein by reference)

1-10258), filed on December 3, 2020, and incorporated herein by reference)

10.1.4 Amendment No.

2 to the Amended and Restated Credit Agreement, dated as of November 22, 2021, among Tredegar Corporation, as borrower, the lenders named therein, JPMorgan Chase Bank, N.A., as administrative agent, Truist Bank, Citizens Bank, N.A.

and PNC Bank, National Association, as co-syndication agents, and U.S.

Bank National Association, Bank of America, N.A.

and Wells Fargo Bank, National Association, as co-documentation agents, and the other lenders party thereto

10.2 Reorganization and Distribution Agreement, dated as of June 1, 1989, between Tredegar and Ethyl Corporation (filed as Exhibit 10.1 to Tredegar’s Annual Report on Form 10-K (File No.

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1-10258) for the quarterly period ended March 31, 2020, and incorporated herein by reference)

*10.15 Tredegar 2018 Equity Incentive Plan (filed as Annex A to Tredegar’s Definitive Proxy Statement on Schedule 14A (File No.

*10.15 Tredegar 2018 Equity Incentive Plan , as amended and restated (filed as Annex A to Tredegar’s Definitive Proxy Statement on Schedule 14A (File No.

1-10258) filed on March 2 5 , 20 21 , and incorporated herein by reference)

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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 9A. Controls and Procedures