TREDEGAR CORP 10-K

Item 9A. CONTROLS AND PROCEDURES On November 1, 2018, the Company filed a Current Report on Form 8-K (the “November 2018 Form 8-K”) to disclose deficiencies in internal control over financial reporting. 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. See Item 1A. “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 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: (i) that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and (ii) that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management’s Report on Internal Control Over Financial Reporting 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 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; and • 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 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. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. 32 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, 2021, because of the material weaknesses in internal control over financial reporting discussed below. • Control Environment: The Company did not have a sufficient number of trained resources with assigned responsibility and accountability for the design, operation and documentation of internal control over financial reporting in accordance with the 2013 COSO Framework. • Risk Assessment: 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: The Company did not have an effective information and communication process that identified and assessed the source of and controls necessary to ensure the reliability of information used in financial reporting and that communicates relevant information about roles and responsibilities for internal control over financial reporting. • Monitoring Activities: The Company did not have effective monitoring activities to assess the operation of internal control over financial reporting, including the continued appropriateness of control design and level of documentation maintained to support control effectiveness. • Control Activities: 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 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. The Company’s independent registered public accounting firm, KPMG LLP, which audited the 2021 consolidated financial statements included in this Form 10-K, has expressed an adverse opinion on the operating effectiveness of the Company's internal control over financial reporting. KPMG LLP’s report appears on page 40 of this Form 10-K. 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. 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”); and • 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; 33 • 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; and • 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 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). Item 9B. OTHER INFORMATION None. Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS None. 34 PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information concerning directors and persons nominated to become directors of Tredegar to be included in the Proxy Statement under the headings “Proposal 1: Election of Directors” and “Tredegar’s Board of Directors” is incorporated herein by reference. The information concerning corporate governance to be included in the Proxy Statement under the headings “Board Meetings, Meetings of Non-Management Directors and the Board Committees” and “Corporate Governance” is incorporated herein by reference. Set forth below are the names, ages and titles of the Company’s executive officers: Name Age Title John M. Steitz 63 President and Chief Executive Officer D. Andrew Edwards 63 Executive Vice President and Chief Financial Officer Kevin C. Donnelly 47 Vice President, General Counsel and Corporate Secretary John M. Steitz. Mr. 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, 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. D. Andrew Edwards. Mr. Edwards was named Executive Vice President and Chief Financial Officer effective August 6, 2020. Mr. 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. from March 2012 to February 2013. Mr. Edwards also served as Vice President, Finance, of Owens & Minor, Inc. from December 2009 until April 2010. Mr. Edwards previously served as the Company’s Vice President, Chief Financial Officer and Treasurer from August 2003 to December 2009 and as the Company’s Vice President, Finance from November 1998 to August 2003. Mr. Edwards also served as the Company’s Treasurer from May 1997 to December 2009 and as the Company’s Controller from October 1992 until July 2000. Kevin C. Donnelly . Mr. Donnelly was elected Vice President, General Counsel and Corporate Secretary effective January 1, 2021. He joined Tredegar in 2010 and served as its Associate General Counsel from 2013 to 2020. Prior to joining Tredegar, Mr. Donnelly was an associate at Hunton & Williams LLP (now Hunton Andrews Kurth LLP). He received a B.A. degree from the University of Richmond and a J.D. from the University of Virginia. Tredegar has adopted a Code of Conduct that applies to all of its directors, officers and employees (including its chief executive officer, chief financial officer and principal accounting officer) and has posted the Code of Conduct on its website. All amendments to or waivers from any provision of the Company’s Code of Conduct applicable to the chief executive officer, chief financial officer and principal accounting officer will be disclosed on the Company’s website. The Company’s internet address is www.tredegar.com . Item 11. EXECUTIVE COMPENSATION The information to be included in the Proxy Statement under the headings “Compensation of Directors,” “Board Meetings, Meetings of Non-Management Directors and Board Committees - Executive Compensation Committee Interlocks and Insider Participation,” “Compensation Discussion and Analysis,” “Executive Compensation Committee Report” and “Compensation of Executive Officers” is incorporated herein by reference. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information to be included in the Proxy Statement under the heading “Equity Compensation Plan Information” is incorporated herein by reference. 35 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information to be included in the Proxy Statement under the headings “Certain Relationships and Related Transactions,” “Tredegar’s Board of Directors” and “Board Meetings, Meetings of Non-Management Directors and Board Committees” is incorporated herein by reference. Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Our independent registered public accounting firm is KPMG LLP , Richmond, Virginia , Audit Firm ID: 185 . The following is incorporated herein by reference: • Information on accounting fees and services to be included in the Proxy Statement under the heading “Audit and Non-Audit Fees;” and • Information on the Audit Committee’s procedures for pre-approving certain audit and non-audit services to be included in the Proxy Statement under the heading “Board Meetings, Meetings of Non-Management Directors and Board Committees—Audit Committee Matters.” 36 PART IV Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) List of documents filed as a part of the report: (1) Financial statements: Tredegar Corporation Index to Financial Statements and Supplementary Data Page Auditors’ Opinions: Report of Independent Registered Public Accounting Firm 38 Opinion on Internal Control Over Financial Reporting 40 Financial Statements: Consolidated Balance Sheets 42 Consolidated Statements of Income 43 Consolidated Statements of Comprehensive Income (Loss) 44 Consolidated Statements of Cash Flows 45 Consolidated Statements of Shareholders' Equity 46 Notes to Financial Statements 47 (2) Financial statement schedules: None (3) Exhibit Index 88 37 Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Tredegar Corporation: 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, 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. generally accepted accounting principles. 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. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. 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. 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 38 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. /s/ KPMG LLP We have served as the Company’s auditor since 2018. Richmond, Virginia March 11, 2022 39 Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors Tredegar Corporation: Opinion on Internal Control Over Financial Reporting We have audited Tredegar Corporation and subsidiaries' (the Company) 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. 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, 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. 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. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) 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 financial statements. 40 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Richmond, Virginia March 11, 2022 41 CONSOLIDATED BALANCE SHEETS Tredegar Corporation and Subsidiaries December 31 2021 2020 (In thousands, except share data) Assets Current assets: Cash and cash equivalents $ 30,521 $ 11,846 Accounts and other receivables, net 103,312 86,327 Income taxes recoverable 2,558 2,807 Inventories 88,569 66,437 Prepaid expenses and other 11,275 19,679 Current assets of discontinued operations 178 1,339 Total current assets 236,413 188,435 Property, plant and equipment, at cost: Land and land improvements 4,537 4,544 Buildings 69,406 66,406 Machinery and equipment 424,368 404,669 Total property, plant and equipment 498,311 475,619 Less accumulated depreciation ( 327,930 ) ( 309,074 ) Net property, plant and equipment 170,381 166,545 Right-of-use leased assets 13,847 16,037 Investment in kaléo (cost basis of $ 7,500 ) — 34,600 Identifiable intangible assets, net 14,152 18,820 Goodwill 70,608 67,708 Deferred income tax assets 15,723 19,068 Other assets 2,460 3,506 Non-current assets of discontinued operations — 151 Total assets $ 523,584 $ 514,870 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 123,760 $ 89,702 Accrued expenses 33,104 40,741 Lease liability, short-term 2,158 2,082 Income taxes payable 9,333 706 Current liabilities of discontinued operations 193 7,521 Total current liabilities 168,548 140,752 Lease liability, long-term 12,831 14,949 Long-term debt 73,000 134,000 Pension and other postretirement benefit obligations, net 78,265 110,585 Other non-current liabilities 6,218 5,529 Total liabilities 338,862 405,815 Shareholders’ equity: Common stock (no par value): Authorized 150,000,000 shares; Issued and outstanding— 33,736,629 shares in 2021 and 33,457,176 in 2020 (including restricted stock) 55,174 50,066 Common stock held in trust for savings restoration plan ( 108,433 shares in 2021 and 105,067 in 2020) ( 2,135 ) ( 2,087 ) Accumulated other comprehensive income (loss): Foreign currency translation adjustment ( 85,792 ) ( 84,149 ) Gain (loss) on derivative financial instruments 901 2,264 Pension and other postretirement benefit adjustments ( 64,613 ) ( 96,519 ) Retained earnings 281,187 239,480 Total shareholders’ equity 184,722 109,055 Total liabilities and shareholders’ equity $ 523,584 $ 514,870 See accompanying notes to financial statements. 42 CONSOLIDATED STATEMENTS OF INCOME Tredegar Corporation and Subsidiaries Years Ended December 31 2021 2020 2019 (In thousands, except per-share data) Revenues and other: Sales $ 826,455 $ 755,290 $ 826,324 Other income (expense), net 20,376 ( 67,294 ) 28,371 846,831 687,996 854,695 Costs and expenses: Cost of goods sold 649,690 558,967 641,140 Freight 28,232 25,686 28,980 Selling, general and administrative 74,964 84,246 76,598 Research and development 6,347 8,398 7,893 Amortization of identifiable intangibles 1,704 3,017 13,601 Pension and postretirement benefits 14,160 14,720 9,642 Interest expense 3,386 2,587 4,051 Asset impairments and costs associated with exit and disposal activities, net of adjustments 1,127 1,725 784 Goodwill impairment — 13,696 — Total 779,610 713,042 782,689 Income (loss) from continuing operations before income taxes 67,221 ( 25,046 ) 72,006 Income tax expense (benefit) 9,284 ( 8,213 ) 13,545 Net income (loss) from continuing operations 57,937 ( 16,833 ) 58,461 Income (loss) from discontinued operations, net of tax ( 111 ) ( 58,611 ) ( 10,202 ) Net income (loss) $ 57,826 $ ( 75,444 ) $ 48,259 Earnings (loss) per share: Basic: Continuing operations $ 1.72 $ ( 0.51 ) $ 1.76 Discontinued operations — ( 1.75 ) ( 0.31 ) Basic earnings (loss) per share $ 1.72 $ ( 2.26 ) $ 1.45 Diluted: Continuing operations $ 1.72 $ ( 0.51 ) $ 1.76 Discontinued operations — ( 1.75 ) ( 0.31 ) Diluted earnings (loss) per share $ 1.72 $ ( 2.26 ) $ 1.45 Shares used to compute earnings (loss) per share: Basic 33,563 33,402 33,236 Diluted 33,670 33,402 33,258 See accompanying notes to financial statements. 43 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Tredegar Corporation and Subsidiaries Years Ended December 31 2021 2020 2019 (In thousands) Net income (loss) $ 57,826 $ ( 75,444 ) $ 48,259 Other comprehensive income (loss): 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 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 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 ) Amortization of prior service costs and net gains or losses (net of tax of $ 3,676 in 2021, net of tax of $ 3,937 in 2020 and net of tax of $ 2,359 in 2019) 13,186 11,359 8,273 Other comprehensive income (loss) 28,900 19,247 ( 17,664 ) Comprehensive income (loss) $ 86,726 $ ( 56,197 ) $ 30,595 See accompanying notes to financial statements. 44 CONSOLIDATED STATEMENTS OF CASH FLOWS Tredegar Corporation and Subsidiaries Years Ended December 31 2021 2020 2019 (In thousands) Cash flows from operating activities: Net income (loss) $ 57,826 $ ( 75,444 ) $ 48,259 Adjustments for noncash items: Depreciation 22,080 28,940 30,683 Amortization of identifiable intangibles 1,704 3,017 13,601 Goodwill impairment — 13,696 — Reduction of right-of-use lease asset 2,086 2,753 2,588 Deferred income taxes ( 4,944 ) ( 16,892 ) 5,856 Accrued pension and postretirement benefits 14,160 14,720 9,642 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 — Net gain on disposal of assets — — ( 6,334 ) Changes in assets and liabilities: Accounts and other receivables ( 16,993 ) ( 335 ) 16,471 Inventories ( 23,132 ) ( 4,366 ) 11,315 Income taxes recoverable/payable 8,956 1,617 2,644 Prepaid expenses and other 3,612 ( 2,203 ) 795 Accounts payable and accrued expenses 19,835 4,045 ( 2,937 ) Lease liability ( 1,935 ) ( 3,049 ) ( 2,723 ) Pension and postretirement benefit plan contributions ( 5,687 ) ( 12,681 ) ( 8,614 ) Other, net 310 1,927 ( 1,776 ) Net cash provided by operating activities 70,583 74,373 115,863 Cash flows from investing activities: Capital expenditures ( 27,361 ) ( 23,355 ) ( 50,864 ) Proceeds from the sale of kaléo 47,062 — — Net proceeds on sale of divested businesses — 56,236 — Proceeds from the sale of assets and other 4,749 — 10,936 Net cash provided by (used in) investing activities 24,450 32,881 ( 39,928 ) Cash flows from financing activities: Borrowings 75,500 162,250 65,500 Debt principal payments ( 136,500 ) ( 70,250 ) ( 125,000 ) Dividends paid ( 16,167 ) ( 216,049 ) ( 15,325 ) Debt financing costs ( 693 ) ( 1,817 ) Other 325 ( 850 ) ( 670 ) Net cash used in financing activities: ( 76,842 ) ( 125,592 ) ( 77,312 ) Effect of exchange rate changes on cash 484 ( 1,238 ) ( 1,598 ) Increase (decrease) in cash and cash equivalents 18,675 ( 19,576 ) ( 2,975 ) Cash and cash equivalents at beginning of period 11,846 31,422 34,397 Cash and cash equivalents at end of period $ 30,521 $ 11,846 $ 31,422 Supplemental cash flow information: Interest payments $ 2,923 $ 1,679 $ 4,358 Income tax payments (refunds), net $ 4,706 $ 1,670 $ 2,595 See accompanying notes to financial statements. 45 CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY Tredegar Corporation and Subsidiaries Accumulated Other Comprehensive Income (Loss) Common Stock Retained Earnings Trust for Savings Restoration Plan Foreign Currency Translation Gain (Loss) on Derivative Financial Instruments Pension & Other Postretirement Benefit Adjust Total Shareholders’ Equity (In thousands, except share and per-share data) Shares Amount Balance at January 1, 2019 33,176,024 $ 38,892 $ 497,511 $ ( 1,559 ) $ ( 96,940 ) $ ( 1,601 ) $ ( 81,446 ) $ 354,857 Net income (loss) — — 48,259 — — — — 48,259 Foreign currency translation adjustment — — — — ( 3,723 ) — — ( 3,723 ) Derivative financial instruments adjustment — — — — — 294 — 294 Net gains or (losses) and prior service costs — — — — — — ( 22,508 ) ( 22,508 ) Amortization of prior service costs and net gains or losses — — — — — — 8,273 8,273 Cash dividends declared ($ 0.46 per share) — — ( 15,325 ) — — — — ( 15,325 ) Stock-based compensation expense 228,959 7,292 — — — — — 7,292 Repurchase of employee common stock for tax withholdings ( 49,444 ) ( 854 ) — — — — — ( 854 ) Issued upon exercise of stock options 9,500 184 — — — — — 184 Tredegar common stock purchased by trust for savings restoration plan — — 33 ( 33 ) — — — — Balance at December 31, 2019 33,365,039 45,514 530,478 ( 1,592 ) ( 100,663 ) ( 1,307 ) ( 95,681 ) 376,749 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 Net gains or (losses) and prior service costs — — — — — — ( 12,197 ) ( 12,197 ) Amortization of prior service costs and net gains or losses — — — — — — 11,359 11,359 Cash dividends declared ($ 6.45 per share) — — ( 216,049 ) — — — — ( 216,049 ) Stock-based compensation expense 131,354 5,402 — — — — — 5,402 Repurchase of employee common stock for tax withholdings ( 39,217 ) ( 850 ) — — — — — ( 850 ) 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 income (loss) — — 57,826 — — — — 57,826 Foreign currency translation adjustment — — — — ( 1,643 ) — — ( 1,643 ) Derivative financial instruments adjustment — — — — — ( 1,363 ) — ( 1,363 ) Net gains or (losses) and prior service costs — — — — — — 18,720 18,720 Amortization of prior service costs and net gains or losses — — — — — — 13,186 13,186 Cash dividends declared ($ 0.48 per share) — — ( 16,167 ) — — — — ( 16,167 ) 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 ) Tredegar common stock purchased by trust for savings restoration plan — — 48 ( 48 ) — — — — Balance at December 31, 2021 33,736,629 $ 55,174 $ 281,187 $ ( 2,135 ) $ ( 85,792 ) $ 901 $ ( 64,613 ) $ 184,722 See accompanying notes to financial statements. 46 NOTES TO FINANCIAL STATEMENTS Tredegar Corporation and Subsidiaries 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations. Tredegar Corporation and subsidiaries (collectively “Tredegar,” “the Company,” “we,” “us” or “our”) is an industrial manufacturer with three primary businesses: 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 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. The Company’s business segments are Aluminum Extrusions (also referred to as Bonnell Aluminum), PE Films, and Flexible Packaging Films (also referred to as Terphane). More information on the Company’s business segments is provided in Note 13. On October 30, 2020, the Company completed the sale of its personal care films business (“Personal Care Films”), which was part of its PE Films segment. The transaction excluded the packaging film lines and related operations located at the Pottsville, Pennsylvania manufacturing site (“Pottsville Packaging”), which are now being reported within the Surface Protection component of PE Films. 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”). 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 Basis of Presentation and Principles of Consolidation. The consolidated financial statements include the accounts and operations of the Company and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Intercompany balances and transactions have been eliminated in consolidation. Certain amounts for the prior years have been reclassified to conform to current year presentation. Fiscal Year End. The Company operates on a calendar fiscal year except for the Aluminum Extrusions segment, which operates on a 52/53-week fiscal year basis. References to Aluminum Extrusions for 2021, 2020 and 2019 relate to the 52-week fiscal year ended December 26, 2021, the 52-week fiscal year ended December 27, 2020 and the 52-week fiscal year ended December 29, 2019, respectively. The Company does not believe the impact of reporting the results of this segment in this manner is material to the consolidated financial results. 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. 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, 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. The Company continues to monitor the impact of COVID-19 on the business and its effect on the consolidated financial statements. Foreign Currency Translation. The financial statements of subsidiaries located outside the U.S., where the local currency is the functional currency, are translated into U.S. Dollars using exchange rates in effect at the period end for assets and liabilities and average exchange rates during each reporting period for results of operations. Adjustments resulting from the translation of these financial statements are reflected as a separate component of shareholders’ equity. There are no operating subsidiaries located outside the U.S. where the U.S. Dollar is the functional currency. 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. that result from translation into U.S. Dollars. 47 Cash and Cash Equivalents. 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, 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. The Company’s policy permits investment of excess cash in marketable securities that have the highest credit ratings and maturities of less than one year. The primary objectives of the policy are safety of principal and liquidity. 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 immaterial. Past due amounts are determined based on established terms and charged-off when deemed uncollectible. The allowance for doubtful accounts is determined based on an assessment of probable losses taking into account past due amounts, customer credit profile, historical experience and current economic conditions. For receivables that do not have a specific allowance, the loss rate is computed by segment to apply to the remaining receivables balance, using each segment’s historic loss rate. Other receivables include value-added taxes related to certain foreign subsidiaries and other miscellaneous receivables due within one year. For certain customers, the Company has arrangements in place with financial institutions whereby certain customer receivables are sold to the financial institution at a discount and without recourse. Upon sale, the associated receivable is unrecognized and the discount is recognized as a reduction of sales. For more information on accounts receivable and other receivables, net, see Note 2. Inventories. Inventories are stated at the lower of cost or market, with cost determined using the last in, first out (“LIFO”), the weighted average cost or the first in, first out method. Cost elements included in work-in-process and finished goods inventories are raw materials, direct labor and manufacturing overhead. Finished goods, work-in-process, raw materials and supplies, stores and other inventory are reviewed to determine if inventory quantities are in excess of forecasted usage or if they have become obsolete. Property, Plant and Equipment. Accounts include costs of assets constructed or purchased, related delivery and installation costs and interest incurred on significant capital projects during their construction periods. Expenditures for renewals and betterments also are capitalized, but expenditures for repairs and maintenance are expensed as incurred. The cost and accumulated depreciation applicable to assets retired or sold are removed from the respective accounts, and gains or losses thereon are included in income. Capital expenditures for property, plant and equipment include capitalized interest. Capitalized interest included in capital expenditures for property, plant and equipment was $ 0.1 million, $ 0.1 million and $ 0.3 million in 2021, 2020 and 2019, respectively. 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. Goodwill and Identifiable Intangibles. The excess of the purchase price over the fair value of identifiable net assets of acquired companies is allocated to goodwill. The Company assesses goodwill for impairment when events or circumstances indicate that the carrying value may not be recoverable or, at a minimum, on an annual basis (December 1st of each year). When assessing goodwill for impairment, accounting guidance allows the Company to first perform a qualitative assessment about the likelihood of the carrying value of a reporting unit exceeding its fair value, referred to as the "Step 0" assessment. 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. The operations of the AACOA reporting unit, which includes the Niles, Michigan and Elkhart, Indiana facilities, were expected to be severely impacted by COVID-19, with over 80% of the aluminum extrusions manufactured at these facilities sold to customers that make consumer durable products, such as recreational boating and power sports vehicles, and to customers serving the building and construction and automotive markets. As of December 1, 2021, the Company’s reporting units with goodwill were Surface Protection in PE Films and Futura in Aluminum Extrusions. Both of these reporting units have separately identifiable operating net assets (operating assets including goodwill and identifiable intangible assets net of operating liabilities). 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 48 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. The Company reviews long-lived assets for possible impairment when events indicate that an impairment may exist. For assets that are held and used in operations, if events indicate that an asset may be impaired, the Company estimates the future unlevered pre-tax cash flows expected to result from the use of the asset and its eventual disposition. Assets are grouped for this purpose at the lowest level for which there are identifiable and independent cash flows. If the sum of these undiscounted pre-tax cash flows is less than the carrying amount of the asset group, an impairment loss is calculated. 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. Pension Costs and Postretirement Benefit Costs Other than Pensions. Pension costs and postretirement benefit costs other than pensions have been accrued over the period employees provided service to Tredegar. Liabilities and expenses for pension plans and other postretirement benefits are determined using actuarial methodologies and incorporate significant assumptions, including the rate used to discount the future estimated liability, the long-term rate of return on plan assets, and several assumptions relating to the employee workforce. The Company recognizes the funded status of its pension and other postretirement plans in the accompanying consolidated balance sheets. 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. Revenue Recognition. The Company’s revenue is primarily generated from the sale of finished products to customers. Those sales predominantly contain a single performance obligation and revenue is recognized at the point in time when control of the product is transferred to customers, along with the title, risk of loss and rewards of ownership. Depending on the arrangement with the customer, these criteria are met either at the time the product is shipped or when the product is made available or delivered at the destination specified in the agreement with the customer. Sales revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to in exchange for that finished product. The Company offers various discounts, rebates and allowances to customers, (collectively, “allowances”), all of which are considered when determining the transaction price. 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 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. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction between Tredegar and its customers (such as value-added taxes) are accounted for on a net basis and therefore excluded from revenues. See Note 13 for disaggregation of revenue by segment and type. 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. Research & Development (“R&D”) Costs. R&D costs are expensed as incurred and include primarily salaries, wages, employee benefits, equipment depreciation, facility costs and the cost of materials consumed relating to R&D efforts. R&D costs include a reasonable allocation of indirect costs. 49 Leases. 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. The Company has elected to not record short-term leases with an original lease term of one year or less in the consolidated balance sheet. To the extent such leases contain renewal options that the Company intends to exercise, the related Right-of-Use (“ROU”) asset and lease liability are included in the consolidated balance sheet. Some of the Company’s lease arrangements contain lease components (e.g., minimum rent payments) and non-lease components (e.g., maintenance, labor charges, etc.). The Company generally accounts for the lease and non-lease components as a single lease component. Certain of the Company’s lease agreements include rental payments that are adjusted periodically for an index or rate. The leases are initially measured using the projected payments adjusted for the index or rate in effect at the commencement date. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Operating leases are included in “Right-of-use lease assets”, “Lease liabilities - short-term” and “Lease liabilities - long-term” on the consolidated balance sheets. These assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term using the Company’s secured incremental borrowing rates, adjusted for term and geographic location using country-based swap rates. As a result of the Company’s review of new and existing lease contracts, there were no instances where the Company could readily determine a rate implicit in the lease. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Variable lease expense is recognized in the period in which the obligation for those payments is incurred. Depending upon the specific use of the ROU asset, lease expense is included in the “Cost of goods sold”, “Freight”, “Selling, general and administrative”, and “Research and development” line items on the consolidated statements of income. Lease income is not material to the results of operations for the years ended December 31, 2021 and 2020, respectively. Additional disclosure regarding Tredegar’s leases is included in Note 4. Income Taxes. Income taxes are recognized during the period in which transactions enter into the determination of income for financial reporting purposes, with deferred income taxes being provided at enacted statutory tax rates on the differences between the financial reporting and tax bases of assets and liabilities (see Note 12). Tredegar’s policy is to accrue U.S. federal income taxes to the extent required under GAAP on unremitted earnings of all foreign subsidiaries where required. However, due to changes in the taxation of dividends under the Tax Cuts and Jobs Act (the “TCJA”) enacted by the U.S. government in December 2017, Tredegar only records U.S. federal income taxes on unremitted earnings of its foreign subsidiaries where Tredegar cannot take steps to eliminate any potential tax on future distributions from its foreign subsidiaries. Because of the accumulation of significant losses related to foreign currency translations at Terphane Limitada, there were no unrecorded deferred income tax liabilities associated with U.S. federal income taxes and foreign withholding taxes on Terphane Limitada’s undistributed earnings as of December 31, 2021 and December 31, 2020. A valuation allowance is recorded in the period when the Company determines that it is more likely than not that all or a portion of deferred income tax assets may not be realized. The establishment and removal of a valuation allowance requires the Company to consider all positive and negative evidence and make a judgmental decision regarding the amount of valuation allowance required as of a reporting date. The benefit of an uncertain tax position is included in the accompanying financial statements when the Company determines that it is more likely than not that the position will be sustained, based on the technical merits of the position, if the taxing authority examines the position and the dispute is litigated. This determination is made on the basis of all the facts, circumstances and information available as of the reporting date. Earnings Per Share. Basic earnings per share is computed using the weighted average number of shares of common stock outstanding. Diluted earnings per share is computed using the weighted average common and potentially dilutive common equivalent shares outstanding, determined as follows: 2021 2020 2019 Weighted average shares outstanding used to compute basic earnings per share 33,562,684 33,402,147 33,236,115 Incremental shares attributable to stock options and restricted stock 107,566 — 22,022 Shares used to compute diluted earnings per share 33,670,250 33,402,147 33,258,137 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 year ended December 31, 2019, average out-of-the-money options 50 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. The cost of all share-based payments is recognized using the calculated fair value at the grant date, or the date of any later modification, over the requisite service period under the graded-vesting method. See Note 11 for additional information. Financial Instruments. Tredegar uses derivative financial instruments for the purpose of hedging aluminum price volatility and currency exchange rate exposures that exist as part of transactions associated with ongoing business operations. The Company’s derivative financial instruments are designated as and qualify as cash flow hedges and are recognized in the accompanying balance sheet at fair value. A change in the fair value of the derivative that is highly effective and that is designated and qualifies as a cash flow hedge is recorded in other comprehensive income. 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 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 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. As a policy, Tredegar does not engage in speculative or leveraged transactions, nor does it hold or issue financial instruments for trading purposes. Additional disclosure of the utilization of derivative hedging instruments is included in Note 10. Comprehensive Income (Loss). Comprehensive income (loss) is defined as net income or loss as adjusted by other comprehensive income or loss items. 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. 51 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. 52 Accounting Standards Adopted . 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. 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. 2. ACCOUNTS AND OTHER RECEIVABLES As of December 31, 2021 and 2020, accounts receivable and other receivables, net, were $ 103.3 million and $ 86.3 million, respectively, made up of the following: (In thousands) 2021 2020 Customer receivables $ 102,090 $ 85,274 Other accounts and notes receivable 2,958 3,850 Total accounts and other receivables 105,048 89,124 Less: Allowance for bad debts (a) ( 1,736 ) ( 2,797 ) Total accounts and other receivables, net $ 103,312 $ 86,327 (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 Balance, beginning of year $ 2,797 $ 1,904 $ 2,054 Charges to expense 1,440 1,901 715 Recoveries 35 ( 90 ) ( 38 ) Write-offs and settlements ( 1,246 ) ( 709 ) ( 756 ) 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 53 3. INVENTORIES Inventories consist of the following: (In thousands) 2021 2020 Finished goods $ 25,199 $ 15,251 Work-in-process 11,955 9,098 Raw materials 32,958 25,913 Stores, supplies and other 18,457 16,175 Total $ 88,569 $ 66,437 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 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. 4. LEASES 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 2022 $ 2,594 2023 2,478 2024 2,417 2025 2,417 2026 2,079 Thereafter 5,326 Total undiscounted operating lease payments 17,311 Less: 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 $ — $ 529 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 % 54 5. GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS The components of goodwill and identifiable intangibles at December 31, 2021 and 2020, and related amortization periods are as follows: (In thousands) 2021 2020 Amortization Periods Goodwill $ 70,608 $ 67,708 Not amortized Identifiable intangible assets, net: Customer relationships (cost basis of $ 26,526 in 2021 and $ 29,450 in 2020) 13,259 17,551 10-12 years Proprietary technology (cost basis of $ 3,721 in 2021 and $ 3,726 in 2020) 118 194 Not more than 15 years Trade names (cost basis of $ 13,338 in 2021 and $ 13,397 in 2020) 775 1,075 5 - 13 years Total carrying value of identifiable intangibles 14,152 18,820 Total carrying value of goodwill and identifiable intangible assets $ 84,760 $ 86,528 A reconciliation of goodwill at December 31, 2021 and 2020 is as follows: (In thousands) Aluminum Extrusions (a) PE Films (a) Total 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 10,370 57,338 67,708 Out-of-period adjustment 2,900 — 2,900 Net carrying value of goodwill at December 31, 2021 $ 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. 55 A reconciliation of identifiable intangibles at December 31, 2021 and 2020 is as follows: (In thousands) Customer Relationships Proprietary Technology Trade Names Total Aluminum Extrusions: 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 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 PE Films: 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 — — — — 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 ) Net carrying value at December 31, 2020 387 159 1,075 1,621 Amortization expense ( 82 ) ( 53 ) ( 257 ) ( 392 ) Increase (decrease) due to foreign currency translation ( 18 ) ( 3 ) ( 43 ) ( 64 ) 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: Year Amount (In thousands) 2022 $ 2,579 2023 1,953 2024 1,913 2025 1,913 2026 1,913 56 6. ACCRUED EXPENSES Accrued expenses consist of the following: (In thousands) 2021 2020 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 Accrued freight 2,337 1,397 Accrued utilities 1,938 1,460 Customer rebates 1,857 1,398 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. 7. DEBT AND CREDIT AGREEMENTS 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: Pricing Under Credit Agreement (Basis Points) Indebtedness-to-Credit EBITDA Ratio Credit Spread Over LIBOR Commitment Fee > 3.5x but <= 4.0x 200.0 40 > 3.0x but <= 3.5x 187.5 35 > 2.0x but <= 3.0x 175.0 30 > 1.0x but <= 2.0x 162.5 25 <= 1.0x 150.0 20 At December 31, 2021, the interest cost on debt borrowed under the Credit Agreement was priced at one-month LIBOR plus the applicable credit spread of 150.0 basis points. The most restrictive covenants in the Credit Agreement include: • Maximum indebtedness-to-Credit EBITDA (“Leverage Ratio”) of 4.00 x; • Minimum Credit EBITDA-to-interest expense of 3.00 x; and • Maximum aggregate distributions to shareholders over the remaining term of the Credit Agreement of $ 75 million; provided, that if the Leverage Ratio of equal to or greater than 3.00 x, a limitation on such payments for the succeeding quarter at the greater of (i) $ 4.75 million and (ii) 50 % of consolidated net income for the most recent fiscal quarter. The Credit Agreement is secured by substantially all of the Company’s and its domestic subsidiaries’ assets, including equity in certain material first-tier foreign subsidiaries. At December 31, 2021, based upon the most restrictive covenant within the Credit Agreement, available credit under the Credit Agreement was approximately $ 287 million. Total debt outstanding was $ 73 million and $ 134 million as of December 31, 2021 and 2020, respectively. 57 Tredegar was in compliance with all of its debt covenants as of December 31, 2021. Noncompliance with any of the debt covenants may have a material adverse effect on its financial condition or liquidity, in the event such noncompliance cannot be cured or should the Company be unable to obtain a waiver from the lenders. 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. 8. RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS Tredegar sponsors a noncontributory defined benefit (pension) plan covering certain current and former U.S. employees. The plan for salaried and hourly employees currently in effect is based on a formula using the participant’s years of service and compensation or using the participant’s years of service and a dollar amount. The plan is closed to new participants and pay for active plan participants for benefit calculations was frozen as of December 31, 2007. 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. Tredegar and retirees share in the cost of postretirement health care benefits, with employees hired on or before January 1, 1993, receiving a fixed subsidy to cover a portion of their health care premiums. The Company eliminated prescription drug coverage for Medicare-eligible retirees as of January 1, 2006. 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. 58 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: Pension Benefits Other Post- Retirement Benefits (In thousands) 2021 2020 2021 2020 Change in benefit obligation: Benefit obligation, beginning of year $ 336,159 $ 318,763 $ 8,164 $ 7,650 Service cost — — 21 29 Interest cost 8,398 10,156 195 243 Effect of actuarial (gains) losses related to the following: Discount rate change ( 12,512 ) 26,887 ( 272 ) 644 Retirement rate assumptions and mortality table adjustments 1,028 ( 3,446 ) ( 1 ) 13 Other ( 101 ) 69 ( 274 ) 55 Plan participant contributions — — 613 606 Benefits paid ( 16,803 ) ( 16,270 ) ( 1,076 ) ( 1,076 ) Benefit obligation, end of year $ 316,169 $ 336,159 $ 7,370 $ 8,164 Change in plan assets: Plan assets at fair value, beginning of year $ 233,075 $ 218,329 $ — $ — Actual return on plan assets 23,131 18,800 — — Employer contributions 5,209 12,216 463 470 Plan participant contributions — — 613 606 Benefits paid ( 16,803 ) ( 16,270 ) ( 1,076 ) ( 1,076 ) Plan assets at fair value, end of year $ 244,612 $ 233,075 $ — $ — Funded status of the plans $ ( 71,557 ) $ ( 103,084 ) $ ( 7,370 ) $ ( 8,164 ) Amounts recognized in the consolidated balance sheets: Accrued expenses (current) $ 181 $ 181 $ 478 $ 481 Pension and other postretirement benefit obligations, net 71,376 102,903 6,892 7,683 Net amount recognized $ 71,557 $ 103,084 $ 7,370 $ 8,164 The following table sets forth the assumptions used in accounting for the pension and other post-retirement benefits, and the components of net periodic benefit cost: Pension Benefits Other Post- Retirement Benefits (In thousands, except percentages) 2021 2020 2019 2021 2020 2019 Weighted-average assumptions used to determine benefit obligations: Discount rate 2.90 % 2.57 % 3.27 % 2.86 % 2.54 % 3.25 % Expected long-term return on plan assets 3.05 % 5.00 % 5.00 % n/a n/a n/a Weighted-average assumptions used to determine net periodic benefit cost: Discount rate 2.57 % 3.27 % 4.40 % 2.54 % 3.25 % 4.37 % Expected long-term return on plan assets 5.00 % 5.00 % 6.00 % n/a n/a n/a Components of net periodic benefit cost: Service cost $ — $ — $ — $ 21 $ 29 $ 26 Interest cost 8,398 10,156 12,222 195 243 290 Expected return on plan assets ( 11,316 ) ( 11,004 ) ( 13,528 ) — — — Amortization of prior service costs and gains or losses 17,003 15,494 10,891 ( 141 ) ( 198 ) ( 258 ) Net periodic benefit cost $ 14,085 $ 14,646 $ 9,585 $ 75 $ 74 $ 58 59 Net periodic benefit cost is determined using assumptions at the beginning of each year. Funded status is determined using assumptions at the end of each year. The amount of the accumulated benefit obligation is the same as the projected benefit obligation. At December 31, 2021, the effect of a 1 % change in the health care cost trend rate assumptions would not impact the post-retirement obligation. Expected benefit payments over the next five years and in the aggregate for 2027—2031 are as follows: (In thousands) Pension Benefits Other Post- Retirement Benefits 2022 $ 18,256 $ 478 2023 18,380 472 2024 18,591 465 2025 18,615 456 2026 18,574 447 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: Pension Other Post-Retirement (In thousands) 2021 2020 2019 2021 2020 2019 Net actuarial (gain) loss $ 109,893 $ 150,267 $ 150,047 $ ( 320 ) $ 86 $ ( 824 ) Pension expense is expected to be $ 13.9 million in 2022. The amounts in accumulated other comprehensive income, before related deferred income taxes, that are expected to be recognized as components of net periodic cost during 2022 are $ 13.2 million of cost for the pension plan and $ 0.1 million of benefit for other post-retirement plans. The percentage composition of assets held by pension plans at December 31, 2021, 2020 and 2019 are as follows: % Composition of Plan Assets at December 31, 2021 2020 2019 Pension plans: Fixed income securities 25.3 % 7.7 % 8.7 % Large/mid-capitalization equity securities 28.1 27.1 21.3 Small-capitalization equity securities 6.8 8.6 7.8 International and emerging market equity securities 19.9 20.6 19.7 Total equity securities 54.8 56.3 48.8 Private equity and hedge funds 10.4 12.1 35.0 Cash and cash equivalents 2.8 17.5 1.4 Other assets 6.7 6.4 6.1 Total 100.0 % 100.0 % 100.0 % 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. 60 Estimates of the fair value of assets held by the Company’s pension plan are provided by unaffiliated third parties. 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. At December 31, 2021 and 2020, the pension plan assets are categorized by level within the fair value measurement hierarchy as follows: (In thousands) Total Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Balances at December 31, 2021 Cash and cash equivalents $ 6,943 $ 6,943 $ — $ — Large/mid-capitalization equity securities 68,739 68,739 — — Small-capitalization equity securities 16,588 16,588 — — International and emerging market equity securities 25,174 25,174 — — Fixed income securities 61,845 9,306 52,539 — Contracts with insurance companies 9,438 — — 9,438 Other assets (a) 6,868 6,868 — — Total plan assets at fair value $ 195,595 $ 133,618 $ 52,539 $ 9,438 Investments measured at net asset value 49,017 Total plan assets, December 31, 2021 $ 244,612 Balances at December 31, 2020 Cash and cash equivalents $ 40,890 $ 40,890 $ — $ — Large/mid-capitalization equity securities 63,146 63,146 — — Small-capitalization equity securities 19,932 19,932 — — International and emerging market equity securities 24,325 24,325 — — Fixed income securities 18,008 6,690 11,318 — Contracts with insurance companies 9,118 — — 9,118 Other assets (a) 5,629 5,629 — — Total plan assets at fair value $ 181,048 $ 160,612 $ 11,318 $ 9,118 Investments measured at net asset value 52,027 Total plan assets, December 31, 2020 $ 233,075 (a) Represents investments in certain commodity funds measured using quoted market prices. 61 9. OTHER INCOME (EXPENSE), NET Other income (expense), net consists of the following: (In thousands) 2021 2020 2019 Gain (loss) on investment in kaléo (a) $ 12,780 $ ( 60,900 ) $ 28,482 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) ( 517 ) — — 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. 10. DERIVATIVES 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 $ 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. 62 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 Account Fair Value Balance Sheet Account Fair Value Derivatives Designated as Hedging Instruments Asset derivatives: Aluminum futures contracts Prepaid expenses & other $ 2,085 Prepaid expenses & other $ 1,560 Liability derivatives: Liability derivatives: Aluminum futures contracts Accrued expenses ( 119 ) Accrued expenses ( 22 ) Net asset (liability) $ 1,966 $ 1,538 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. 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. Dollar. 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$ 150 million Brazilian Real ("R$"). Terphane Ltda. has the following outstanding foreign exchange average forward rate contracts to purchase Brazilian Real and sell U.S. Dollars: USD Notional Amount (000s) Average Forward Rate Contracted on USD/BRL R$ 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. 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. 63 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 Account Fair Value Balance Sheet Account Fair Value 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 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, 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 goods sold Cost of goods sold 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 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. 11. 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 64 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 Number of Options Range Weighted Average 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. 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. 65 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 Range of 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. 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. 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 Number of Shares Weighted Avg. Grant Date Fair Value/Share Grant Date Fair Value (In thousands) Number of Shares Weighted Avg. Grant Date Fair Value/Share Grant Date Fair Value (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. 66 A summary of SARs outstanding at December 31, 2021 and 2020, and changes during those years, is presented below: Exercise Price/Share Number of SARs Range Weighted Average Outstanding at January 1, 2020 — $ — to $ — $ — Granted (a) 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. 12. INCOME TAXES Income (loss) from continuing operations before income taxes and income tax expense (benefit) for continuing operations are as follows: (In thousands) 2021 2020 2019 Income (loss) from continuing operations before income taxes: Domestic $ 22,885 $ ( 58,033 ) $ 52,536 Foreign 44,336 32,987 19,470 Total $ 67,221 $ ( 25,046 ) $ 72,006 Current income tax expense (benefit): Federal $ 1,232 $ 4,777 $ 7,551 State 764 136 1,558 Foreign 13,521 2,374 579 Total 15,517 7,287 9,688 Deferred income tax expense (benefit): Federal ( 7,862 ) ( 18,191 ) 15,298 State 125 ( 640 ) 187 Foreign 1,504 3,331 ( 11,628 ) Total ( 6,233 ) ( 15,500 ) 3,857 Total income tax expense (benefit) $ 9,284 $ ( 8,213 ) $ 13,545 67 The significant differences between the U.S. federal statutory rate and the effective income tax rate related to continuing operations are as follows: 2021 2020 2019 (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 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 ) Dividend received deduction net of foreign withholding tax ( 109 ) ( 0.2 ) ( 52 ) 0.2 ( 1,016 ) ( 1.4 ) 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 U.S. 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 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. being included in Tredegar’s U.S. consolidated tax return as a foreign branch, the tax impact of the local statutory tax rates of Tredegar’s foreign subsidiaries being higher than the current US tax rate of 21%, the benefit of tax incentives in Brazil, and by claims for prior years’ U.S. research and development tax credits. During 2019, due to favorable earnings trends, the Company released a $ 12.4 million valuation allowance on the net deferred tax assets of its Brazilian subsidiary Terphane Ltda. Because Terphane Ltda. is taxed as a foreign branch for U.S. tax purposes, Tredegar also recorded a related deferred tax liability of $ 12.4 million for the reduction in foreign tax credits that would result from Terphane Ltda. realizing this net deferred tax asset. Tredegar accrues U.S. federal income taxes on unremitted earnings of all foreign subsidiaries where required. However, due to changes in the taxation of dividends under TCJA, Tredegar will only record U.S. federal income taxes on unremitted earnings of its foreign subsidiaries where Tredegar cannot take steps to eliminate any potential tax on future distributions from its foreign subsidiaries. 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 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). Terphane’s manufacturing facility in Brazil is the beneficiary of certain income tax incentives that allow for a reduction in the statutory Brazilian federal income tax rate levied on the operating profit of its products. These incentives produce a current tax rate of 15.25 % for Terphane ( 6.25 % of income tax and 9.0 % social contribution on income). The incentives were originally granted for a 10-year period commencing January 1, 2015 and expiring at the end of 2024. Terphane Brazil has been granted an additional three years of tax incentives through the end of 2027. The benefit from the tax incentives was $ 7.0 million, $ 4.8 million and $ 2.0 million in 2021, 2020 and 2019, respectively. 68 Deferred income tax liabilities and deferred income tax assets at December 31, 2021 and 2020, are as follows: (In thousands) 2021 2020 Deferred income tax liabilities: Amortization of goodwill and identifiable intangibles $ 10,215 $ 9,520 Depreciation 12,902 10,844 Foregone tax credits on foreign branch income 4,796 5,714 Excess of carrying value over tax basis of investment in kaléo — 4,905 Right-of-use leased assets 2,767 2,979 Other 520 944 Total deferred income tax liabilities 31,200 34,906 Deferred income tax assets: Pensions 5,632 25,576 Employee benefits 7,791 9,757 Excess capital losses 1,097 7,462 Inventory 3,775 2,613 Asset write-offs, divestitures and environmental accruals 1,173 2,904 Tax benefit on U.S. federal, state and foreign NOL and credit carryforwards 33,922 18,305 Other 146 275 Lease liabilities 2,977 3,144 Tax basis remaining for installment sale - kaléo 1,092 — Foreign currency translation gain adjustment 1,970 1,423 Deferred income tax assets before valuation allowance 59,575 71,459 Less: Valuation allowance 12,652 17,485 Total deferred income tax assets 46,923 53,974 Net deferred income tax (assets) liabilities $ ( 15,723 ) $ ( 19,068 ) Amounts recognized in the consolidated balance sheets: Deferred income tax assets (noncurrent) $ 15,723 $ 19,068 Deferred income tax liabilities (noncurrent) — — Net deferred income tax assets (liabilities) $ 15,723 $ 19,068 Except as noted below, the Company believes that it is more likely than not that future taxable income will exceed future tax-deductible amounts thereby resulting in the realization of deferred income tax assets. 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. 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. The U.S. state carryforwards expire at different points over the next 20 years. Valuation allowances of $ 9.4 million, $ 5.5 million and $ 2.5 million at December 31, 2021, 2020 and 2019, respectively, are recorded against the tax benefit on U.S. federal, state and foreign tax credits and net operating loss carryforwards generated by certain foreign and domestic subsidiaries that may not be recoverable in the carryforward period. 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 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. 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. 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. Since Terphane Ltda. is taxed as a foreign branch for US tax purposes, Tredegar also recorded a related deferred tax liability of $ 12.4 million for the reduction in foreign tax credits that would result from Terphane Ltda. realizing this net deferred tax asset. 69 A reconciliation of the Company’s unrecognized uncertain tax positions since January 1, 2019, is shown below: Years Ended December 31, (In thousands) 2021 2020 2019 Balance at beginning of period $ 628 $ 881 $ 3,361 Increase (decrease) due to tax positions taken in: Current period — 12 12 Prior period 40 — 49 Increase (decrease) due to settlements with taxing authorities — — ( 151 ) Reductions due to lapse of statute of limitations ( 20 ) ( 265 ) ( 2,390 ) Balance at end of period $ 648 $ 628 $ 881 Additional information related to unrecognized uncertain tax positions since January 1, 2019 is summarized below: Years Ended December 31, (In thousands) 2021 2020 2019 Gross unrecognized tax benefits on uncertain tax positions (reflected in current income tax, other noncurrent liability accounts, or deferred tax assets in the balance sheet) $ 648 $ 628 $ 881 Deferred income tax assets related to unrecognized tax benefits on uncertain tax positions (reflected in deferred income tax accounts in the balance sheet) 48 ( 110 ) ( 163 ) Net unrecognized tax benefits on uncertain tax positions, which would impact the effective tax rate if recognized 696 518 718 Interest and penalties accrued on deductions taken relating to uncertain tax positions (approximately $ 26 , $ 2 and $( 144 ) reflected in income tax expense in the income statement in 2021, 2020 and 2019, respectively, with the balance shown in current income tax and other noncurrent liability accounts in the balance sheet) 133 102 100 Related deferred income tax assets recognized on interest and penalties ( 31 ) ( 24 ) ( 23 ) Interest and penalties accrued on uncertain tax positions net of related deferred income tax benefits, which would impact the effective tax rate if recognized 102 78 77 Total net unrecognized tax benefits on uncertain tax positions reflected in the balance sheet, which would impact the effective tax rate if recognized $ 798 $ 596 $ 795 Tredegar, or one of its subsidiaries, files income tax returns in the U.S. federal jurisdiction, various states and jurisdictions outside the U.S. With few exceptions, Tredegar is no longer subject to U.S. federal, state or non-U.S. income tax examinations by tax authorities for years before 2018. 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. 13. 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. 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. 70 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. Net Sales (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 ) PE Films: 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. 71 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. 72 The Company’s facilities in Pottsville, PA (“PV”) and Guangzhou, China (“GZ”) have a tolling arrangement whereby certain surface protection films are manufactured in GZ for a fee with raw materials supplied from PV that are then shipped by GZ directly to customers principally in the Asian market but paid by customers directly to PV. Amounts associated with this intercompany tolling arrangement are reported in the table above as export sales from the U.S. to Asia, and include net sales of $ 32.7 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 PE Films: 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. (c) Information on exports and foreign operations are provided on the previous page. 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 5 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 completed the sale of Bright View. See Note 15 for more details. 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 $ 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. 73 15. DIVESTITURES AND ASSETS HELD FOR SALE Divestitures 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: December 31 (In thousands) 2021 2020 Assets Prepaid expenses and other (a) $ 178 $ 1,339 Other assets — 151 Total assets of discontinued operations $ 178 $ 1,490 Liabilities 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. 74 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 — — 10,936 Capital expenditures — ( 1,912 ) ( 15,353 ) Total $ — $ 53,203 $ ( 4,417 ) Bright View 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. 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 within 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 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. 16. 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 historically accounted 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. 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. 17. ASSET IMPAIRMENTS AND COSTS ASSOCIATED WITH EXIT AND DISPOSAL ACTIVITIES In connection with the anticipated customer product transitions in Surface Protection, the Company recognized severance and other employee-related expenses of $ 1.6 million in the fourth quarter of 2020. The Company recognizes termination benefits that are covered by a contract or an ongoing benefit arrangement when it is probable that employees will be entitled to benefits and the amount can be reasonably estimated. Other accrued expenses and losses related to asset impairments and costs associated with exit and disposal activities for continuing operations were not material for the years ended December 31, 2021, 2020 and 2019, respectively. 18. CONTINGENCIES 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 75 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. If additional contingencies are identified in the future, the Company’s practice is to determine at that time the nature and scope of those contingencies, obtain and accrue estimates of the cost of remediation, and perform remediation. While the Company believes it is currently adequately accrued for known environmental issues, it is possible that unexpected future costs for known or unknown environmental issues could have a material adverse effect on its financial condition, results of operations and cash flows at that time. The Company is involved in various other legal actions arising in the normal course of business. After taking into consideration the relevant information, the Company believes that it has sufficiently accrued for probable losses and that the actions will not have a material adverse effect on its financial position. From time to time, the Company enters into transactions with third parties in connection with the sale of assets or businesses in which it agrees to indemnify the buyers or third parties involved in the transaction, or in which the sellers or third parties involved in the transaction agree to indemnify Tredegar, for certain liabilities or risks related to the assets or business. Also, in the ordinary course of its business, the Company may enter into agreements with third parties for the sale of goods or services that may contain indemnification provisions. In the event that an indemnification claim is asserted, liability for indemnification would be subject to an assessment of the underlying facts and circumstances under the terms of the applicable agreement. For these reasons, Tredegar is unable to estimate the maximum amount of the potential future liability under the indemnity provisions of these agreements. The Company does, however, accrue for losses for any known contingent liability, including those that may arise from indemnification provisions, when future payment is probable and the amount is reasonably estimable. The Company discloses contingent liabilities if the probability of loss is reasonably possible and material. 76 19. SELECTED QUARTERLY FINANCIAL DATA Tredegar Corporation and Subsidiaries (In Thousands, Except Per-Share Amounts) (Unaudited) First Quarter Second Quarter Third Quarter Fourth Quarter For the year ended December 31, 2021 Sales $ 184,822 $ 211,129 $ 209,517 $ 220,986 Gross profit 37,313 45,394 31,497 34,328 Income (loss) from continuing operations, net of tax 9,618 20,728 6,229 21,358 Income (loss) from discontinued operations, net of tax ( 587 ) 508 ( 26 ) ( 6 ) Net income (loss) $ 9,031 $ 21,236 $ 6,203 $ 21,352 Earnings (loss) per share: Basic: Continuing operations $ 0.29 $ 0.62 $ 0.19 $ 0.64 Discontinued operations ( 0.02 ) 0.02 — — Basic $ 0.27 $ 0.64 $ 0.19 $ 0.64 Diluted: Continuing operations $ 0.29 $ 0.61 $ 0.19 $ 0.63 Discontinued operations ( 0.02 ) 0.02 — — Diluted $ 0.27 $ 0.63 $ 0.19 $ 0.63 For the year ended December 31, 2020 Sales $ 192,136 $ 186,260 $ 184,370 $ 192,524 Gross profit 40,092 46,331 41,909 42,305 Income (loss) from continuing operations, net of tax ( 20,663 ) 14,332 ( 16,976 ) 6,475 Income (loss) from discontinued operations, net of tax ( 1,658 ) ( 3,136 ) ( 48,237 ) ( 5,580 ) Net income $ ( 22,321 ) $ 11,196 $ ( 65,213 ) $ 895 Earnings per share: Basic: Continuing operations $ ( 0.62 ) $ 0.43 $ ( 0.51 ) $ 0.19 Discontinued operations ( 0.05 ) ( 0.10 ) ( 1.44 ) ( 0.17 ) Basic $ ( 0.67 ) $ 0.33 $ ( 1.95 ) $ 0.02 Diluted: Continuing operations $ ( 0.62 ) $ 0.43 $ ( 0.51 ) $ 0.19 Discontinued operations ( 0.05 ) ( 0.10 ) ( 1.44 ) ( 0.17 ) Diluted $ ( 0.67 ) $ 0.33 $ ( 1.95 ) $ 0.02 Due to rounding, the sum of quarterly amounts presented in the table above may not add up precisely to the corresponding full year amounts. Item 16. FORM 10-K SUMMARY Not Applicable. 77 EXHIBIT INDEX 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. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference) 3.1.1 Articles of Amendment to Amended and Restated Articles of Incorporation of Tredegar (filed as Exhibit 3.3 to Tredegar’s Annual Report on Form 10-K (File No. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference) 3.1.2 Articles of Amendment to Amended and Restated Articles of Incorporation of Tredegar, as of May 24, 2013 (filed as Exhibit 3.1 to Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on May 29, 2013 and incorporated herein by reference) 3.1.3 Articles of Amendment to Amended and Restated Articles of Incorporation of Tredegar, as of May 4, 2016 (filed as Exhibit 3.1 to Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on May 6, 2016, and incorporated herein by reference) 3.2 Amended and Restated Bylaws of Tredegar (filed as Exhibit 3.1 to Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on March 30, 2020, and incorporated herein by reference) 4.1 Description of Registered Securities (filed as Exhibit 4.1 to Tredegar’s Annual Report on Form 10-K (File No 1-10258) for the year ended December 31, 2019, and incorporated herein by reference) 10.1 Amended and Restated Credit Agreement, dated as of June 28, 2019, among Tredegar, as borrower, the lenders named therein, JPMorgan Chase Bank, N.A., as administrative agent, SunTrust 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 (filed as Exhibit 4.1 to Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on July 1, 2019, and incorporated herein by reference) 10.1.1 Amended and Restated Guaranty, dated as of June 28, 2019, by and among the subsidiaries of Tredegar listed on the signature pages thereto in favor of JPMorgan Chase Bank, N.A., as administrative agent, for the ratable benefit of the Holders of Guaranteed Obligations (as defined therein) (filed as Exhibit 4.2 to Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on July 1, 2019, and incorporated herein by reference) 10.1.2 Amended and Restated Pledge and Security Agreement, dated as of June 28, 2019, by and among Tredegar and the subsidiaries of Tredegar listed on the signature pages thereto and JPMorgan Chase Bank, N.A., as administrative agent, for the ratable benefit of the Secured Parties (as defined therein) (filed as Exhibit 4.3 to Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on July 1, 2019, and incorporated herein by reference) 10.1.3 Amendment No. 1 to the Amended and Restated Credit Agreement, dated as of December 1, 2020, 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 (filed as Exhibit 4.1 to Tredegar’s Current Report on Form 8-K (File No. 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. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference) *10.3 Employee Benefits Agreement, dated as of June 1, 1989, between Tredegar and Ethyl Corporation (filed as Exhibit 10.2 to Tredegar’s Annual Report on Form 10-K (File No. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference) 10.4 Tax Sharing Agreement, dated as of June 1, 1989, between Tredegar and Ethyl Corporation (filed as Exhibit 10.3 to Tredegar’s Annual Report on Form 10-K (File No. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference) 10.5 Indemnification Agreement, dated as of June 1, 1989, between Tredegar and Ethyl Corporation (filed as Exhibit 10.4 to Tredegar’s Annual Report on Form 10-K (File No. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference) *10.6 Tredegar Industries, Inc. Retirement Benefit Restoration Plan (filed as Exhibit 10.7 to Tredegar’s Annual Report on Form 10-K (File No. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference) *10.6.1 Amendment to the Tredegar Industries, Inc. Retirement Benefit Restoration Plan (filed as Exhibit 10.7.1 to Tredegar’s Annual Report on Form 10-K (File No. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference) *10.7 Tredegar Industries, Inc. Savings Plan Benefit Restoration Plan (filed as Exhibit 10.6 to Tredegar’s Annual Report on Form 10-K (File No. 1-10258) for the year ended December 31, 2013, and incorporated herein by reference) 78 *10.7.1 Resolutions of the Executive Committee of the Board of Directors of Tredegar adopted on December 28, 2004 (effective as of December 31, 2004) amending the Tredegar Corporation Retirement Savings Plan Benefit Restoration Plan (filed as Exhibit 10.9.1 to Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on December 30, 2004, and incorporated herein by reference) *10.8 Tredegar 2004 Equity Incentive Plan as Amended and Restated Effective March 27, 2009 (filed as Annex 1 to Tredegar’s Definitive Proxy Statement on Schedule 14A (File No. 1-10258) filed on April 14, 2009 and incorporated herein by reference) *10.9 Form of Notice of Nonstatutory Stock Option Grant and Nonstatutory Stock Option Terms and Conditions (filed as Exhibit 10.3 to Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on February 27, 2013, and incorporated herein by reference) *10.10 Form of Notice of Stock Unit Award and Stock Unit Award Terms and Conditions (filed as Exhibit 10.1 to Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on March 1, 2016, and incorporated herein by reference) *10.11 Form of Notice of Stock Award and Stock Award Terms and Conditions (filed as Exhibit 10.2 to Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on March 1, 2016, and incorporated herein by reference) *10.12 Form of Notice of Stock Award and Stock Award Terms and Conditions (filed as Exhibit 10.18 to Tredegar’s Quarterly Report on Form 10-Q (File No. 1-10258) for the quarterly period ended March 31, 2020, and incorporated herein by reference) *10.13 Form of Notice of Stock Appreciation Right Grant and Stock Appreciation Right Terms and Conditions (filed as Exhibit 10.19 to Tredegar’s Quarterly Report on Form 10-Q (File No. 1-10258) for the quarterly period ended March 31, 2020, and incorporated herein by reference) *10.14 Form of Notice of Nonstatutory Stock Option Grant and Nonstatutory Stock Option Terms and Conditions (filed as Exhibit 10.20 to Tredegar’s Quarterly Report on Form 10-Q (File No. 1-10258) for the quarterly period ended March 31, 2020, and incorporated herein by reference) *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) *10.16 Form of Notice of Nonstatutory Stock Option Grant and Nonstatutory Stock Option Terms and Conditions (filed as Exhibit 10.1 to Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on May 7, 2018, and incorporated herein by reference) *10.17 Form of Notice of Nonstatutory Stock Option Grant and Nonstatutory Stock Option Terms and Conditions (filed as Exhibit 10.3 to Tredegar Corporation’s Registration Statement on Form S-8 (Registration No. 333-230386), filed on March 19, 2019, and incorporated herein by reference) +21 Subsidiaries of Tredegar +23 Consent of KPMG LLP, Independent Registered Public Accounting Firm +31.1 Certification of President and Chief Executive Officer (Principal Executive Officer) of Tredegar, pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 +31.2 Certification of Vice President and Chief Financial Officer (Principal Financial Officer) of Tredegar, pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 +32.1 Certification of President and Chief Executive Officer (Principal Executive Officer) of Tredegar, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 +32.2 Certification of Vice President and Chief Financial Officer (Principal Financial Officer) of Tredegar, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 +101 XBRL Instance Document and Related Items +104 Cover Page Interactive Data File (formatted in iXBRL and contained in Exhibit 101) * Denotes compensatory plans or arrangements or management contracts. + Filed herewith 79 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. TREDEGAR CORPORATION (Registrant) Dated: March 11, 2022 By /s/ John M. Steitz John M. Steitz President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 11, 2022. Signature Title /s/ John M. Steitz President, Chief Executive Officer and Director (John M. Steitz) (Principal Executive Officer) /s/ D. Andrew Edwards Executive Vice President and Chief Financial Officer (D. Andrew Edwards) (Principal Financial Officer) /s/ Frasier W. Brickhouse, II Corporate Treasurer and Controller (Frasier W. Brickhouse, II) (Principal Accounting Officer) /s/ John D. Gottwald Chairman of the Board of Directors (John D. Gottwald) /s/ Gregory A. Pratt Lead Director (Gregory A. Pratt) /s/ George C. Freeman, III Director (George C. Freeman, III) /s/ William M. Gottwald Director (William M. Gottwald) /s/ Kenneth R. Newsome Director (Kenneth R. Newsome) /s/ Thomas G. Snead, Jr. Director (Thomas G. Snead, Jr.) /s/ Carl E. Tack, III Director (Carl E. Tack, III) /s/ Anne G. Waleski Director (Anne G. Waleski) 80