What changed in this filing

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Item 1. Financial Statements

2022-05-09 compared with 2021-11-05 · 212 added, 379 removed, 305 unchanged (66% of the section changed)

3 unchanged sentences

(In Thousands, Except Share Data)

September 30, December 31,

March 31, December 31,

Current assets:

7 unchanged sentences

Property, plant and equipment, at cost 506,511 498,311

Less accumulated depreciation ( 325,141 ) ( 309,074 )

accumulated depreciation ( 333,944 ) ( 327,930 )

Net property, plant and equipment 172,567 170,381

Right-of-use leased assets 13,385 13,847

Investment in kaléo (cost basis of $ 7,500 )

35,479 34,600

Identifiable intangible assets, net 13,632 14,152

2 unchanged sentences

Other assets 3,457 2,460

Non-current assets of discontinued operations 151 151

Total assets $ 564,671 $ 523,584

13 unchanged sentences

Shareholders’ equity:

Common stock, no par value (issued and outstanding 33,727,317 shares at September 30, 2021 and 33,457,176 shares at December 31, 2020)

Common stock, no par value (issued and outstanding 33,837,815 shares at March 31, 2022 and 33,736,629 shares at December 31, 2021)

55,953 55,174

Common stock held in trust for savings restoration plan ( 107,397 shares at September 30, 2021 and 105,067 shares at December 31, 2020)

Common stock held in trust for savings restoration plan ( 109,494 shares at March 31, 2022 and 108,433 shares at December 31, 2021)

( 2,148 ) ( 2,135 )

10 unchanged sentences

(In Thousands, Except Per Share Data)

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Revenues and other items:

11 unchanged sentences

Asset impairments and costs associated with exit and disposal activities, net of adjustments ( 9 ) 169

Goodwill impairment

Total 219,064 172,867

18 unchanged sentences

(In Thousands)

Three Months Ended September 30,

Three Months Ended March 31,

Net income (loss) $ 16,422 $ 9,031

Other comprehensive income (loss):

Unrealized foreign currency translation adjustment (net of tax benefit of $ 294 in 2021 and net of tax benefit of $ 19 in 2020)

( 2,788 ) 927

Derivative financial instruments adjustment (net of tax benefit of $ 174 in 2021 and net of tax of $ 618 in 2020)

Unrealized foreign currency translation adjustment (net of tax expense of $ 728 in 2022 and net of tax benefit of $ 272 in 2021)

5,536 ( 2,648 )

Amortization of prior service costs and net gains or losses (net of tax of $ 927 in 2021 and net of tax of $ 836 in 2020)

Other comprehensive income (loss) ( 188 ) 6,071

Comprehensive income (loss) $ 6,015 $ ( 59,142 )

Nine Months Ended September 30,

Net income (loss) $ 36,472 $ ( 76,339 )

Other comprehensive income (loss):

Unrealized foreign currency translation adjustment (net of tax benefit of $ 103 in 2021 and net of tax benefit of $ 1,125 in 2020)

Derivative financial instruments adjustment (net of tax expense of $ 2,916 in 2022 and net of tax benefit of $ 188 in 2021)

5,930 ( 236 )

Derivative financial instruments adjustment (net of tax of $ 185 in 2021 and net of tax benefit of $ 269 in 2020)

Amortization of prior service costs and net gains or losses (net of tax of $ 2,773 in 2021 and net of tax of $ 2,507 in 2020)

Amortization of prior service costs and net gains or losses (net of tax expense of $ 712 in 2022 and net of tax of $ 924 in 2021)

Other comprehensive income (loss) 14,004 435

4 unchanged sentences

(In Thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

4 unchanged sentences

Reduction of right-of-use lease asset 500 549

Goodwill impairment — 13,696

Deferred income taxes 552 1,017

1 unchanged sentence

Stock-based compensation expense 1,295 576

(Gain) loss on investment in kaléo accounted for under the fair value method ( 879 ) 61,000

Held for sale impairment loss on divested assets — 45,054

Gain on investment in kaléo — ( 400 )

Changes in assets and liabilities:

7 unchanged sentences

Other, net ( 742 ) ( 23 )

Net cash provided by operating activities 51,487 66,326

Net cash (used in) provided by operating activities ( 54,737 ) 9,870

Cash flows from investing activities:

Capital expenditures ( 5,086 ) ( 5,259 )

Proceeds from the sale of assets 4,749 —

Net cash used in investing activities ( 5,086 ) ( 5,259 )

4 unchanged sentences

Other ( 396 ) 915

Net cash used in financing activities ( 18,199 ) ( 47,634 )

Net cash provided by financing activities 53,795 5,890

Effect of exchange rate changes on cash 1,155 ( 488 )

Increase in cash & cash equivalents 18,407 3,600

Increase (decrease) in cash & cash equivalents ( 4,873 ) 10,013

Cash and cash equivalents at beginning of period 30,521 11,846

4 unchanged sentences

(In Thousands, Except Share and Per Share Data)

The following summarizes the changes in shareholders’ equity for the three month period ended September 30, 2021:

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 Post-retirement Benefit Adjustment Total Shareholders’ Equity

Balance July 1, 2021 $ 52,940 $ 261,699 $ ( 2,109 ) $ ( 82,804 ) $ 3,496 $ ( 89,882 ) $ 143,340

Net income (loss) — 6,203 — — — — 6,203

Foreign currency translation adjustment (net of tax benefit of $ 294 )

— — — ( 2,788 ) — — ( 2,788 )

Derivative financial instruments adjustment (net of tax benefit of $ 174 )

— — — — ( 717 ) — ( 717 )

Amortization of prior service costs and net gains or losses (net of tax of $ 927 )

— — — — — 3,317 3,317

Cash dividends declared ($ 0.12 per share)

— ( 4,042 ) — — — — ( 4,042 )

Stock-based compensation expense 966 — — — — — 966

Tredegar common stock purchased by trust for savings restoration plan — 13 ( 13 ) — — — —

Balance September 30, 2021

$ 53,906 $ 263,873 $ ( 2,122 ) $ ( 85,592 ) $ 2,779 $ ( 86,565 ) $ 146,279

The following summarizes the changes in shareholders’ equity for the nine month period ended September 30, 2021:

Accumulated Other Comprehensive Income (Loss)

The following summarizes the changes in shareholders’ equity for the three month period ended March 31, 2022:

Common Stock Retained Earnings Trust for Savings Restoration Plan Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity

Balance January 1, 2022

Net income (loss) — 36,472 — — — — 36,472

Foreign currency translation adjustment (net of tax benefit of $ 103 )

$ 55,174 $ 281,187 $ ( 2,135 ) $ ( 149,504 ) $ 184,722

Derivative financial instruments adjustment (net of tax of $ 185 )

— — — — 515 — 515

Amortization of prior service costs and net gains or losses (net of tax of $ 2,773 )

— — — — — 9,954 9,954

Cash dividends declared ($ 0.36 per share)

— ( 12,114 ) — — — — ( 12,114 )

Stock-based compensation expense 2,925 — — — — — 2,925

Issued upon exercise of stock options 915 — — — — — 915

Tredegar common stock purchased by trust for savings restoration plan — 35 ( 35 ) — — — —

Balance September 30, 2021

$ 53,906 $ 263,873 $ ( 2,122 ) $ ( 85,592 ) $ 2,779 $ ( 86,565 ) $ 146,279

The following summarizes the changes in shareholders’ equity for the three month period ended September 30, 2020:

Accumulated Other Comprehensive Income (Loss)

Balance July 1, 2020 $ 47,448 $ 511,345 $ ( 1,610 ) $ ( 112,666 ) $ ( 3,824 ) $ ( 89,819 ) $ 350,874

Net income (loss) — 16,422 — — 16,422

Foreign currency translation adjustment (net of tax benefit of $ 19 )

— — — 927 — — 927

Derivative financial instruments adjustment (net of tax of $ 618 )

— — — — 2,213 — 2,213

Amortization of prior service costs and net gains or losses (net of tax of $ 836 )

— — — — — 2,931 2,931

Foreign currency translation adjustment — — — 5,536 5,536

Derivative financial instruments adjustment — — — 5,930 5,930

Amortization of prior service costs and net gains or losses — — — 2,538 2,538

Cash dividends declared ($ 0.12 per share)

1 unchanged sentence

Stock-based compensation expense 1,175 — — — 1,175

Repurchase of employee common stock for tax

withholdings ( 396 ) — — — ( 396 )

Tredegar common stock purchased by trust for savings restoration plan — 13 ( 13 ) — —

Balance September 30, 2020

Balance March 31, 2022

$ 55,953 $ 293,563 $ ( 2,148 ) $ ( 135,500 ) $ 211,868

The following summarizes the changes in shareholders’ equity for the nine month period ended September 30, 2020:

Accumulated Other

Comprehensive Income (Loss)

The following summarizes the changes in shareholders’ equity for the three month period ended March 31, 2021:

Stock Retained

Earnings Trust for

Translation Gain

Instruments Pension & Other Post-retirement Benefit Adjustment Total

Plan Accumulated Other

Comprehensive Income (Loss) Total

Shareholders’

1 unchanged sentence

Net income (loss) — 9,031 — — 9,031

Foreign currency translation adjustment (net of tax benefit of $ 1,125 )

— — — ( 11,076 ) — — ( 11,076 )

Derivative financial instruments adjustment (net of tax benefit of $ 269 )

— — — — ( 304 ) — ( 304 )

Amortization of prior service costs and net gains or losses (net of tax of $ 2,507 )

— — — — — 8,793 8,793

Foreign currency translation adjustment — — — ( 2,648 ) ( 2,648 )

Derivative financial instruments adjustment — — — ( 236 ) ( 236 )

Amortization of prior service costs and net gains or losses — — — 3,319 3,319

Cash dividends declared ($ 0.12 per share)

1 unchanged sentence

Stock-based compensation expense 576 — — — 576

Repurchase of employee common stock for tax withholdings ( 586 ) — — — — — ( 586 )

Shares issued upon exercise of stock options 915 — — — 915

Tredegar common stock purchased by trust for savings restoration plan — 10 ( 10 ) — —

Balance at September 30, 2020 $ 49,048 $ 442,118 $ ( 1,619 ) $ ( 111,739 ) $ ( 1,611 ) $ ( 86,888 ) $ 289,309

Balance at March 31, 2021 $ 51,557 $ 244,496 $ ( 2,097 ) $ ( 177,969 ) $ 115,987

See accompanying notes to financial statements.

2 unchanged sentences

BASIS OF PRESENTATION

In the opinion of management, the accompanying condensed consolidated financial statements of Tredegar Corporation and its subsidiaries (“Tredegar,” “the Company,” “we,” “us” or “our”) contain all adjustments necessary to state fairly, in all material respects, Tredegar’s consolidated financial position as of September 30, 2021, the consolidated results of operations for the three and nine months ended September 30, 2021 and 2020, the consolidated cash flows for the nine months ended September 30, 2021 and 2020, and the consolidated changes in shareholders’ equity for the three and nine months ended September 30, 2021 and 2020, in accordance with U.S.

In the opinion of management, the accompanying condensed consolidated financial statements of Tredegar Corporation and its subsidiaries (“Tredegar,” “the Company,” “we,” “us” or “our”) contain all adjustments necessary to state fairly, in all material respects, Tredegar’s condensed consolidated financial position as of March 31, 2022, the condensed consolidated results of operations for the three months ended March 31, 2022 and 2021, the condensed consolidated cash flows for the three months ended March 31, 2022 and 2021, and the condensed consolidated changes in shareholders’ equity for the three months ended March 31, 2022 and 2021, in accordance with U.S.

generally accepted accounting principles (“GAAP”).

1 unchanged sentence

The Company operates on a calendar fiscal year except for the Aluminum Extrusions segment, which operates on a 52/53-week fiscal year basis.

As such, the fiscal third quarter for 2021 and 2020 for this segment references 13-week periods ended September 25, 2021 and September 27, 2020.

As such, the fiscal first quarter for 2022 and 2021 for this segment references 13-week periods ended March 27, 2022 and March 28, 2021.

The Company does not believe the impact of reporting the results of this segment as stated above 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 quarter end and the Company’s fiscal quarter end.

There was no intercompany funding with Aluminum Extrusions between September 25, 2021 and September 30, 2021.

As of September 30, 2021 and December 31, 2020, the Company’s cash and cash equivalents declined by $ 0.5 million and $ 3.8 million, respectively, since the Company made payments to the Aluminum Extrusions segment to fund its working capital during the intervening period.

There was no intercompany funding with Aluminum Extrusions between March 27, 2022 and March 31, 2022.

The financial position data as of December 31, 2021 that is included herein was derived from the audited consolidated financial statements provided in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 Form 10-K”) but does not include all disclosures required by GAAP.

These financial statements should be read in conjunction with the consolidated financial statements and related notes included in the 2021 Form 10-K.

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.

All historical results for Personal Care Films have been presented as discontinued operations.

On December 31, 2020, the Company completed the sale of Bright View Technologies, which was part of its PE Films segment.

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 Technologies has been presented in continuing operations.

The results of operations for the three and nine months ended September 30, 2021, are not necessarily indicative of the results to be expected for the full year.

Accounting Standards Adopted:

In December 2019, the Financial Accounting Standards Board 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.

2 DIVESTITURES AND ASSETS HELD FOR SALE

Personal Care Films

In 2020, the Company completed the sale of Personal Care Films for an aggregate purchase price of $ 60.5 million, subject to customary adjustments.

The Company agreed to provide certain transition services related to finance, human resources and information technology ("IT") that ended during the second quarter of 2021, resulting in final cash proceeds of $ 64.1 million.

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

The following table summarizes the financial results of discontinued operations reflected in the consolidated statements of income for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands) 2021 2020 2021 2020

Revenues and other items:

Sales $ — $ 29,509 $ — $ 98,053

Other income (expense), net — ( 37 ) — ( 298 )

— 29,472 — 97,755

Costs and expenses:

Cost of goods sold — 25,481 — 83,408

Freight — 1,436 — 4,711

Selling, general and administrative 33 6,502 1,251 13,649

Research and development — 3,138 — 8,451

Asset impairments and costs associated with exit and disposal activities, net of adjustments — 801 — 1,327

Adjustment to the fair value estimates used in the disposal of Personal Care Films (a)

— — ( 1,118 ) —

Held for sale impairment loss on divested assets — 45,054 — 45,054

Total 33 82,412 133 156,600

Income (loss) from discontinued operations before income taxes ( 33 ) ( 52,940 ) ( 133 ) ( 58,845 )

Income tax expense (benefit) ( 7 ) ( 4,703 ) ( 29 ) ( 5,814 )

Income (loss) from discontinued operations, net of tax $ ( 26 ) $ ( 48,237 ) $ ( 104 ) $ ( 53,031 )

(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 September 30, 2021 and December 31, 2020, respectively, were as follows:

September 30, December 31,

(In thousands) 2021 2020

Prepaid expenses and other (a)

$ 151 $ 1,339

Other non-current assets 151 151

Total assets of discontinued operations $ 302 $ 1,490

Accrued expenses (a)

$ 370 $ 7,521

(a) The consolidated balance sheet of discontinued operations as of September 30, 2021 includes $ 0.2 million of other receivables related to the settlement of customary post-closing adjustments, accrued severance of $ 0.3 million, and other miscellaneous accrued expenses of $ 0.1 million.

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

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

Nine Months Ended September 30,

The results of operations for the three months ended March 31, 2022, are not necessarily indicative of the results to be expected for the full year.

Accounting Standards Not Yet Adopted .

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

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

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

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

ACCOUNTS AND OTHER RECEIVABLES

As of March 31, 2022 and December 31, 2021, accounts receivable and other receivables, net include the following:

March 31, December 31,

(In thousands) 2022 2021

Operating activities

Depreciation and amortization $ — $ 6,625

Held for sale impairment loss on divested assets — 45,054

Other ( 1,118 ) —

Total ( 1,118 ) 51,679

Investing activities

Capital expenditures $ — $ 2,989

Assets Held For Sale

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

During the third quarter of 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.

3 LONG-LIVED ASSETS & GOODWILL IMPAIRMENT

The Company assesses its long-lived assets for impairment when events and circumstances indicate that the carrying amount of the assets may not be recoverable.

Long-lived assets consist primarily of buildings, machinery and equipment.

During the three months ended September 30, 2021, the Company did not identify any indicators of impairment for long-lived assets.

The Company annually assesses goodwill for impairment on December 1st of each year or more frequently when events or circumstances indicate that the carrying amount of a reporting unit that includes goodwill exceeds its fair value.

The Company evaluated whether triggering events occurred during the three months ended September 30, 2021 and 2020 for all reporting units that include goodwill and determined no events or circumstances existed that indicated the fair value of the reporting units are below their carrying amounts.

During the first three months of 2020, the Company determined that trigger events did occur for the Aluminum Extrusions’ reporting units created as a result of acquisitions in 2012 (“AACOA”) and in 2017 (“Futura”).

As a result of the impairment testing performed, the Company recognized a goodwill impairment charge of $ 13.7 million ($ 10.5 million after taxes), which represented the entire amount of goodwill associated with the AACOA reporting unit.

No impairment was identified for Futura.

The Company continues to monitor developments related to the coronavirus ("COVID-19") pandemic and may perform updated event-driven analyses during 2021, as necessary.

4 INVENTORIES

Customer receivables $ 128,930 $ 102,090

Other receivables 2,517 2,958

Total accounts and other receivables 131,447 105,048

Allowance for bad debts ( 1,888 ) ( 1,736 )

Total accounts and other receivables, net $ 129,559 $ 103,312

The components of inventories are as follows:

(In thousands) September 30, 2021 December 31, 2020

(In thousands) March 31, 2022 December 31, 2021

Finished goods $ 26,796 $ 25,199

3 unchanged sentences

Total $ 104,560 $ 88,569

PENSION AND OTHER POSTRETIREMENT BENEFITS

Tredegar sponsors a noncontributory defined benefit (pension) plan covering certain current and former U.S.

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

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

In connection therewith, on February 9, 2022, the Company 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.

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.

Pension expense recognized for this plan was immaterial in the first quarter of 2022 and 2021, respectively.

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

The components of net periodic benefit cost for the pension and other postretirement benefit programs reflected in the condensed consolidated statements of income for the three months ended March 31, 2022 and 2021, are shown below:

Pension Benefits Other Post-Retirement Benefits

Three Months Ended March 31, Three Months Ended March 31,

(In thousands) 2022 2021 2022 2021

Service cost $ — $ — $ 5 $ 9

Interest cost 2,225 2,102 51 50

Expected return on plan assets ( 2,055 ) ( 2,862 ) — —

Amortization of prior service costs, (gains) losses and net transition asset

3,284 4,265 ( 34 ) ( 24 )

Net periodic benefit cost $ 3,454 $ 3,505 $ 22 $ 35

Pension and other postretirement liabilities were $ 29.0 million and $ 78.9 million at March 31, 2022 and December 31, 2021, respectively ($ 0.7 million included in “Accrued expenses” at March 31, 2022 and December 31, 2021, respectively, with the remainder included in “Pension and other postretirement benefit obligations, net” in the condensed consolidated balance sheets).

Tredegar funds its other postretirement benefits on a claims-made basis;

for 2022, the Company anticipates the amount will be consistent with amounts paid for the year ended December 31, 2021, or approximately $ 0.5 million.

OTHER INCOME (EXPENSE), NET

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

Three Months Ended March 31,

(In thousands) 2022 2021

Gain on investment in kaléo (a)

Transition service fees, net of corporate costs associated with the divested Personal Care business ( 32 ) 304

COVID-19-related expenses, net of relief (b)

( 212 ) ( 19 )

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

( 7 ) ( 148 )

Other ( 16 ) ( 95 )

Total $ ( 267 ) $ 760

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

(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 Fund L.P.

that had a fair value of $ 0.2 million as of March 31, 2022 and $ 0.2 million as of December 31, 2021 reported in "Other assets" in the condensed consolidated balance sheet.

EARNINGS PER SHARE

1 unchanged sentence

Diluted earnings per share is computed by dividing net income (loss) from continuing and discontinued operations by the weighted average common and potentially dilutive common equivalent shares outstanding, determined as follows:

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended

(In thousands) 2022 2021

3 unchanged sentences

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

The 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 2,433,213 and 1,280,376 , respectively, for the three and nine months ended September 30, 2021.

The Company had a net loss from continuing operations for the three and nine months ended September 30, 2020, so there was no dilutive impact for such shares.

If the Company had reported net income from continuing operations for the three and nine months ended September 30, 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 1,509,429 and 1,253,278 , respectively.

The 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 2,477,708 and 411,516 for the three months ended March 31, 2022 and 2021, respectively.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Reclassifications of balances out of accumulated other comprehensive income (loss) into net income (loss) for the three months ended September 30, 2021 are summarized as follows:

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

Gain (loss) on derivative financial instruments:

Aluminum future contracts, before taxes $ 2,160 Cost of goods sold

Foreign currency forward contracts, before taxes ( 34 ) Selling, general & administrative

Foreign currency forward contracts, before taxes 15 Cost of goods sold

Total, before taxes 2,141

Income tax expense (benefit) 476 Income tax expense (benefit)

Total, net of tax $ 1,665

Amortization of pension and other post-retirement benefits:

Actuarial gain (loss) and prior service costs, before taxes $ ( 4,244 ) (a)

Income tax expense (benefit) ( 927 ) Income tax expense (benefit)

Total, net of tax $ ( 3,317 )

(a) This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost (see Note 9 for additional detail).

Reclassifications of balances out of accumulated other comprehensive income (loss) into net income (loss) for the nine months ended September 30, 2021 are summarized as follows:

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

Gain (loss) on derivative financial instruments:

Aluminum future contracts, before taxes $ 4,172 Cost of goods sold

Foreign currency forward contracts, before taxes ( 183 ) Selling, general & administrative

Foreign currency forward contracts, before taxes 48 Cost of goods sold

Total, before taxes 4,037

Income tax expense (benefit) 880 Income tax expense (benefit)

Total, net of tax $ 3,157

Amortization of pension and other post-retirement benefits:

Actuarial gain (loss) and prior service costs, before taxes $ ( 12,727 ) (a)

Income tax expense (benefit) ( 2,773 ) Income tax expense (benefit)

Total, net of tax $ ( 9,954 )

(a) This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost (see Note 9 for additional detail).

Reclassifications of balances out of accumulated other comprehensive income (loss) into net income for the three months ended September 30, 2020 are summarized as follows:

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

Gain (loss) on derivative financial instruments:

Aluminum future contracts, before taxes $ ( 575 ) Cost of goods sold

Foreign currency forward contracts, before taxes ( 1,767 ) Selling, general & administrative

Foreign currency forward contracts, before taxes 15 Cost of goods sold

Total, before taxes ( 2,327 )

Income tax expense (benefit) ( 496 ) Income tax expense (benefit)

Total, net of tax $ ( 1,831 )

Amortization of pension and other post-retirement benefits:

Actuarial gain (loss) and prior service costs, before taxes $ ( 3,767 ) (a)

Income tax expense (benefit) ( 836 ) Income tax expense (benefit)

Total, net of tax $ ( 2,931 )

(a) This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost (see Note 9 for additional detail).

Reclassifications of balances out of accumulated other comprehensive income (loss) into net income for the nine months ended September 30, 2020 are summarized as follows:

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

Gain (loss) on derivative financial instruments:

Aluminum future contracts, before taxes $ ( 2,766 ) Cost of goods sold

Foreign currency forward contracts, before taxes ( 4,359 ) Selling, general & administrative

Foreign currency forward contracts, before taxes 46 Cost of goods sold

Total, before taxes ( 7,079 )

Income tax expense (benefit) ( 1,523 ) Income tax expense (benefit)

Total, net of tax $ ( 5,556 )

Amortization of pension and other post-retirement benefits:

Actuarial gain (loss) and prior service costs, before taxes $ ( 11,300 ) (a)

Income tax expense (benefit) ( 2,507 ) Income tax expense (benefit)

Total, net of tax $ ( 8,793 )

(a) This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost (see Note 9 for additional detail).

7 INVESTMENTS

The Company's aggregate investment of $ 7.5 million, for an approximate 18 % ownership interest, in kaleo, Inc.

(“kaléo”), a privately held specialty pharmaceutical company dedicated to building innovative solutions for serious and life-threatening medical conditions, is accounted for under the fair value method in the condensed consolidated financial statements.

The estimated fair value of the Company’s investment was $35.5 million as of September 30, 2021 and $34.6 million as of December 31, 2020.

kaléo’s stock is not publicly traded.

The ultimate value of the Company’s ownership interest in kaléo could be materially different from the estimated fair value and will ultimately be determined and realized only if and when a liquidity event occurs.

Amounts recognized associated with the Company’s investment in kaléo are included in “Other income (expense), net” in the consolidated statements of income and separately stated in the net sales and earnings before interest, taxes, depreciation and amortization ("EBITDA") from ongoing operations by segment table in Note 11.

The Company estimated the fair value of its investment in kaléo at September 30, 2021 by:

(i) computing the weighted average estimated enterprise value (“EV”) utilizing both the discounted cash flow method (the “DCF Method”) and the application of a market multiple to EBITDA (the “EBITDA Multiple Method”), (ii) applying adjustments for any surplus or deficient working capital and estimates of contingent liabilities, (iii) adding cash and cash equivalents, (iv) subtracting interest-bearing debt, (v) subtracting a private company liquidity discount estimated at approximately 20 % at September 30, 2021 (consistent with 20 % at both December 31, 2020 and September 30, 2020) of the net result of (i) through (iv), and (vi) applying liquidation preferences and fully diluted ownership percentages to the estimated equity value computed in (i) through (v).

The Company’s estimate of kaléo’s EV as of September 30, 2021 and December 31, 2020 was determined by weighting the EBITDA Multiple Method by 20 % and the DCF Method by 80 %.

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

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

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

8 DERIVATIVES

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, 2022 ( 85,792 ) 901 ( 64,613 ) ( 149,504 )

Other comprehensive income (loss) 6,264 10,003 — 16,267

Income tax (expense) benefit ( 728 ) ( 3,190 ) — ( 3,918 )

Other comprehensive income (loss), net of tax 5,536 6,813 — 12,349

Reclassification adjustment to net income (loss) — ( 1,157 ) 3,250 2,093

Income tax (expense) benefit — 274 ( 712 ) ( 438 )

Reclassification adjustment to net income (loss), net of tax — ( 883 ) 2,538 1,655

Other comprehensive income (loss), net of tax 5,536 5,930 2,538 14,004

Balance at March 31, 2022 $ ( 80,256 ) $ 6,831 $ ( 62,075 ) $ ( 135,500 )

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

Balance at January 1, 2021 ( 84,149 ) 2,264 ( 96,519 ) ( 178,404 )

Other comprehensive income (loss) ( 2,920 ) 231 — ( 2,689 )

Income tax (expense) benefit 272 42 — 314

Other comprehensive income (loss), net of tax ( 2,648 ) 273 — ( 2,375 )

Reclassification adjustment to net income (loss) — ( 655 ) 4,243 3,588

Income tax (expense) benefit — 146 ( 924 ) ( 778 )

Reclassification adjustment to net income (loss), net of tax — ( 509 ) 3,319 2,810

Other comprehensive income (loss), net of tax ( 2,648 ) ( 236 ) 3,319 435

Balance at March 31, 2021 $ ( 86,797 ) $ 2,028 $ ( 93,200 ) $ ( 177,969 )

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 4 for additional details.

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 exists as part of ongoing business operations 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 is recorded on the consolidated balance sheets.

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

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.

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.

The notional amount of aluminum futures contracts that hedged future purchases of aluminum to meet fixed-price forward sales contract obligations was $ 18.7 million ( 13.9 million pounds of aluminum) at September 30, 2021 and $ 12.1 million ( 13.0 million pounds of aluminum) at December 31, 2020.

The table below summarizes the location and gross amounts of aluminum futures contract fair values (Level 2) in the consolidated balance sheets as of September 30, 2021 and December 31, 2020:

September 30, 2021 December 31, 2020

The notional amount of aluminum futures contracts that hedged future purchases of aluminum to meet fixed-price forward sales contract obligations was $ 24.2 million ( 14.3 million pounds of aluminum) at March 31, 2022 and $ 22.1 million ( 14.9 million pounds of aluminum) at December 31, 2021.

The table below summarizes the location and gross amounts of aluminum futures contract fair values (Level 2) in the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021:

March 31, 2022 December 31, 2021

(In thousands) Balance Sheet

4 unchanged sentences

Prepaid expenses and other $ 6,665 Prepaid expenses and other $ 2,085

Aluminum futures contracts Other assets 521 Other assets —

Liability derivatives:

4 unchanged sentences

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

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

Dollars and its variable conversion, fixed conversion and sales, general and administrative costs (before depreciation and amortization) quoted or priced in Brazilian Real ("R$") is annual net costs of R$ 150 million.

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.

Terphane Ltda.

2 unchanged sentences

R$ Operating Cost Exposure Hedged

$ 1,615 5.4247 R$ 8,761 Apr-22 68 %

$ 1,647 5.4545 R$ 8,984 May-22 70 %

$ 1,596 5.4890 R$ 8,760 Jun-22 68 %

$ 1,719 5.5200 R$ 9,489 Jul-22 74 %

$ 1,708 5.5560 R$ 9,490 Aug-22 74 %

$ 1,780 5.5915 R$ 9,953 Sep-22 77 %

$ 1,793 5.6264 R$ 10,088 Oct-22 78 %

16 unchanged sentences

Dollars over that period.

By changing the currency risk associated with

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.

Pre-tax accumulated gains of $ 0.9 million related to the net fair value of the open forward contracts is reported in accumulated other comprehensive income (loss) as of September 30, 2021.

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 September 30, 2021 and December 31, 2020:

September 30, 2021 December 31, 2020

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 condensed consolidated statements of income.

The table below summarizes the location and gross amounts of foreign currency forward contract fair values (Level 2) in the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021:

March 31, 2022 December 31, 2021

(In thousands) Balance Sheet

4 unchanged sentences

Prepaid expenses and other $ 2,127 Prepaid expenses and other $ —

Foreign currency forward contracts Other assets 481 Other assets —

Liability derivatives:

2 unchanged sentences

Net asset (liability) $ 2,608 $ ( 1,255 )

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.

These derivative contracts involve elements of market risk that are not reflected on the condensed 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.

1 unchanged sentence

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

The pretax effect on net income (loss) and other comprehensive income (loss) of derivative instruments classified as cash flow hedges and described in the previous paragraphs for the three and nine month periods ended September 30, 2021 and 2020 is summarized in the table below:

The pre-tax effect on net income (loss) and other comprehensive income (loss) of derivative instruments classified as cash flow hedges and described in the previous paragraphs for the three month periods ended March 31, 2022 and 2021 is summarized in the table below:

Cash Flow Derivative Hedges

Three Months Ended September 30,

Aluminum Futures Contracts Foreign Currency Forwards

(In thousands) 2021 2020 2021 2020

Amount of pretax gain (loss) recognized in other comprehensive income (loss) $ 2,919 $ 1,158 $ — $ ( 1,670 ) $ — $ ( 655 )

Location of gain (loss) reclassified from accumulated other comprehensive income (loss) into net income (effective portion) Cost of goods sold Cost of goods sold Cost of goods sold Selling, general & admin Cost of goods sold Selling, general & admin

Amount of pretax gain (loss) reclassified from accumulated other comprehensive income (loss) to net income (effective portion) $ 2,160 $ ( 575 ) $ 15 $ ( 34 ) $ 15 $ ( 1,767 )

Nine Months Ended September 30,

Three Months Ended March 31,

Aluminum Futures Contracts Foreign Currency Forwards

1 unchanged sentence

Amount of pre-tax gain (loss) recognized in other comprehensive income (loss) $ 6,182 $ 1,515 $ — $ 3,821 $ — $ ( 1,283 )

$ 6,629 $ ( 1,637 ) $ — $ ( 1,892 ) $ — $ ( 6,015 )

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

Cost of goods sold Cost of goods sold 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 (loss) to net income (effective portion) $ ( 1,005 ) $ 640 $ ( 15 ) $ ( 137 ) $ 17 $ ( 2 )

$ 4,172 $ ( 2,766 ) $ 48 $ ( 183 ) $ 46 $ ( 4,359 )

As of September 30, 2021, the Company expects $ 2.9 million of unrealized after-tax gains on Aluminum Extrusions derivative instruments reported in accumulated other comprehensive income (loss) to be reclassified to earnings within the next 12 months.

For the three and nine month periods ended September 30, 2021 and 2020, net gains or losses realized, from previously unrealized net gains or losses on hedges that had been discontinued, were not material.

9 PENSION AND OTHER POSTRETIREMENT BENEFITS

Tredegar sponsors a noncontributory defined benefit (pension) plan covering certain current and former U.S.

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.

The components of net periodic benefit cost for the pension and other postretirement benefit programs reflected in the consolidated statements of income for the three and nine months ended September 30, 2021 and 2020, are shown below:

Pension Benefits Other Post-Retirement Benefits

Three Months Ended September 30, Three Months Ended September 30,

(In thousands) 2021 2020 2021 2020

Service cost $ — $ — $ 9 $ 9

Interest cost 2,101 2,535 50 60

Expected return on plan assets ( 2,862 ) ( 2,804 ) — —

Amortization of prior service costs, (gains) losses and net transition asset 4,268 3,814 ( 24 ) ( 47 )

Net periodic benefit cost $ 3,507 $ 3,545 $ 35 $ 22

Pension Benefits Other Post-Retirement Benefits

Nine Months Ended September 30, Nine Months Ended September 30,

(In thousands) 2021 2020 2021 2020

Service cost $ — $ — $ 26 $ 28

Interest cost 6,305 7,605 151 180

Expected return on plan assets ( 8,587 ) ( 8,412 ) — —

Amortization of prior service costs, (gains) losses and net transition asset

12,799 11,441 ( 72 ) ( 141 )

Net periodic benefit cost $ 10,517 $ 10,634 $ 105 $ 67

Pension and other postretirement liabilities were $ 103.7 million and $ 111.3 million at September 30, 2021 and December 31, 2020, respectively ($ 0.7 million included in “Accrued expenses” at September 30, 2021 and December 31, 2020, with the remainder included in “Pension and other postretirement benefit obligations, net” in the consolidated balance sheets).

As of December 31, 2020, the required minimum pension contributions were $ 11.7 million for 2021.

Contributions to the pension plan during the first nine months of 2021 were $ 5.1 million.

In addition, the United States government enacted the American Rescue Plan Act of 2021 in March 2021, which, among other impacts, has reduced the Company's 2021 required minimum pension contributions to zero as a result of the Company's election of the interest rate relief used in the present value of the pension obligation and extension of the shortfall amortization period that is used to determine the minimum pension funding requirements.

Tredegar funds its other postretirement benefits on a claims-made basis;

for 2021, the Company anticipates the amount will be consistent with amounts paid for the year ended December 31, 2020, or approximately $ 0.5 million.

10 OTHER INCOME (EXPENSE), NET

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

Three Months Ended September 30, Nine Months Ended September 30,

(In thousands) 2021 2020 2021 2020

Gain (loss) on investment in kaléo accounted for under fair value method (a)

$ 279 $ ( 36,200 ) $ 1,197 $ ( 61,000 )

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 (b)

Transition service fees, net of corporate costs associated with the divested Personal Care business ( 85 ) ( 1,130 ) 486 ( 1,130 )

COVID-19-related expenses, net of relief (c)

( 159 ) ( 494 ) ( 594 ) ( 1,594 )

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

( 6 ) ( 115 ) ( 517 ) ( 296 )

Gain associated with the sale of Lake Zurich manufacturing facility assets 377 — 377 —

Other ( 15 ) 5 ( 163 ) 122

Total $ 391 $ ( 37,934 ) $ 9,272 $ ( 63,898 )

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

(b) See Note 13 for additional information.

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

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

that had a fair value of $ 0.2 million and $ 0.8 million as of September 30, 2021 and 2020, respectively, and $ 0.7 million as of December 31, 2020 reported in "Other assets" in the condensed consolidated balance sheet.

As of March 31, 2022, the Company expects $ 3.5 million of unrealized after-tax gains on aluminum and foreign currency derivative instruments reported in accumulated other comprehensive income (loss) to be reclassified to earnings within the next 12 months.

For the three month periods ended March 31, 2022 and 2021, net gains or losses realized, from previously unrealized net gains or losses on hedges that had been discontinued, were not material.

Tredegar recorded tax expense of $ 0.8 million on pre-tax income from continuing operations of $ 17.2 million in the first three months of 2022.

Therefore, the effective tax rate in the first three months of 2022 was 4.5 %, compared to 24.4 % in the first three months of 2021.

The decrease in the effective tax rate for continuing operations is primarily due to a discrete benefit recorded in the first quarter of 2022 resulting from the implementation of new U.S.

tax regulations associated with foreign tax credits published by the U.S.

Treasury and Internal Revenue Service on January 4, 2022.

These regulations overhaul various components of the foreign tax credit regime including the determination of creditable foreign taxes and limit the amount of foreign taxes that are creditable against U.S.

income taxes.

As the result of these regulations, future Brazilian income tax will be deductible, but not creditable, in the U.S.

The accounting rules require a reduction of the U.S.

deferred tax liability previously established related to anticipated future income from Brazil.

The tax effect of the reduction of the U.S.

deferred tax liability resulted in the discrete tax benefit described above.

This one-time discrete benefit is expected to reduce the effective tax rate for the remainder of 2022, which will be offset by an expected increase to the effective tax rate as the result of Brazilian income tax no longer being creditable in the U.S.

for the foreseeable future.

Total deferred tax assets declined during the first quarter of 2022 compared to December 31, 2021 primarily due to changes in other comprehensive income and the projected utilization of foreign tax credits partially offset by the change in the deferred tax liability discussed above.

Tredegar accrues U.S.

federal income taxes on unremitted earnings of foreign subsidiaries where required.

However, due to changes in the taxation of dividends under the U.S.

Tax Cuts and Jobs Act of 2017, 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.

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 Ltda.’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 to 15.25 % levied on the operating profit on certain of its products.

The incentives have been granted for a 13-year period, from the commencement date of January 1, 2015.

The benefit from the tax incentives was $ 1.5 million in the first three months of 2022 and 2021.

Tredegar and its subsidiaries file income tax returns in the U.S., various states, and jurisdictions outside the U.S.

With exceptions for some U.S.

states and non-U.S.

jurisdictions, Tredegar and its subsidiaries are no longer subject to U.S.

federal, state or non-U.S.

income tax examinations by tax authorities for years before 2018.

BUSINESS SEGMENTS

2 unchanged sentences

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

All historical results for Personal Care Films have been presented as discontinued operations.

The Surface Protection component of the PE Films segment now includes Pottsville Packaging.

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

3 unchanged sentences

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

The following table presents net sales and EBITDA from ongoing operations by segment for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended September 30, Nine Months Ended September 30,

The following table presents net sales and EBITDA from ongoing operations by segment for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

(In thousands) 2022 2021

4 unchanged sentences

Add back freight 8,081 6,223

Sales as shown in the consolidated statements of income $ 209,517 $ 184,370 $ 605,468 $ 562,766

Sales as shown in the condensed consolidated statements of income $ 236,566 $ 184,822

EBITDA from Ongoing Operations

5 unchanged sentences

Plant shutdowns, asset impairments, restructurings and other ( 105 ) 183

Goodwill impairment — — — ( 13,696 )

Ongoing operations:

12 unchanged sentences

Interest expense 786 822

Gain (loss) on investment in kaléo accounted for under fair value method 279 ( 36,200 ) 1,197 ( 61,000 )

Gain on investment in kaléo — 718

Stock option-based compensation costs 631 468

5 unchanged sentences

Net income (loss) $ 16,422 $ 9,031

The following table presents identifiable assets by segment at September 30, 2021 and December 31, 2020:

(In thousands) September 30, 2021 December 31, 2020

The following table presents identifiable assets by segment at March 31, 2022 and December 31, 2021:

(In thousands) March 31, 2022 December 31, 2021

Aluminum Extrusions $ 311,971 $ 280,521

6 unchanged sentences

Total $ 564,671 $ 523,584

The following tables disaggregate the Company’s revenue by geographic area and product group for the three and nine months ended September 30, 2021 and 2020:

The following tables disaggregate the Company’s revenue by geographic area and product group for the three months ended March 31, 2022 and 2021:

Net Sales by Geographic Area (a)

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands) 2022 2021

9 unchanged sentences

(a) Export sales relate entirely to PE Films.

Operations in Brazil are related to Flexible Packaging Films.

Operations in Brazil relate entirely to Flexible Packaging Films.

The Company’s facilities in Pottsville, PA (“PV”) and Guangzhou, China (“GZ”) have a tolling arrangement whereby certain surface protection films are manufactured in GZ for a fee with raw materials supplied from PV that are then shipped by GZ directly to customers principally in the Asian market, but paid by customers directly to PV.

Amounts associated with this intercompany tolling arrangement are reported in the table above as export sales from the U.S.

to Asia, and include net sales of $ 7.4 million and $ 5.9 million in the third quarters of 2021 and 2020, respectively, and $ 25.0 million and $ 25.1 million in the first nine months of 2021 and 2020, respectively.

to Asia, and include net sales of $ 6.5 million and $ 6.9 million in the first three months of 2022 and 2021, respectively.

Net Sales by Product Group

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands) 2022 2021

10 unchanged sentences

Packaging 8,983 7,352

LED lighting products — 1,530 — 6,263

Subtotal 31,131 27,953

1 unchanged sentence

Total $ 228,485 $ 178,599

12 INCOME TAXES

Tredegar recorded tax expense of $ 10.7 million pretax income from continuing operations of $ 47.3 million in the first nine months of 2021.

Therefore, the effective tax rate in the first nine months of 2021 was 22.7 %, compared to 26.2 % in the first nine months of 2020.

The quarterly effective tax rate is an estimate based on a proration of the components of the Company’s estimated annual effective tax rate and discrete items recorded during the first nine months of the year.

The significant differences between the U.S.

federal statutory rate and the effective income tax rate for the nine months ended September 30, 2021 and 2020 are as follows:

(In thousands, except percentages) 2021 2020

Nine Months Ended September 30, Amount % Amount %

Income tax (benefit) expense at federal statutory rate $ 9,934 21.0 % $ ( 6,639 ) 21.0 %

Foreign rate differences 4,787 10.1 % 2,772 ( 8.8 ) %

Tax on Foreign Branch Income 4,124 8.7 % 656 ( 2.1 ) %

State taxes, net of federal income tax benefit 829 1.8 % ( 537 ) 1.7 %

Stock-based compensation 616 1.3 % 240 ( 0.8 ) %

Non-deductible expenses 544 1.2 % 312 ( 1.0 ) %

Valuation allowance for capital loss carry-forwards 74 0.2 % 61 ( 0.2 ) %

Unremitted earnings from foreign operations 117 0.2 % — — %

Tax contingency accruals and tax settlements — — % ( 148 ) 0.5 %

Tax impact of dividend received ( 33 ) ( 0.1 ) % — — %

Changes in estimates related to prior year tax provision ( 501 ) ( 1.1 ) % ( 1,001 ) 3.2 %

Research and development tax credit ( 925 ) ( 2.0 ) % ( 612 ) 1.9 %

Foreign tax incentives ( 8,838 ) ( 18.7 ) % ( 3,412 ) 10.8 %

Income tax expense (benefit) at effective income tax rate $ 10,728 22.7 % $ ( 8,308 ) 26.2 %

Tredegar accrues U.S.

federal income taxes on unremitted earnings of foreign subsidiaries where required.

However, due to changes in the taxation of dividends under the U.S.

Tax Cuts and Jobs Act of 2017, 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.

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).

The incentives have been granted for a 13-year period, from the commencement date of January 1, 2015.

The benefit from the tax incentives was $ 8.8 million and $ 3.4 million in the first nine months of 2021 and 2020, respectively.

Tredegar and its subsidiaries file income tax returns in the U.S., various states, and jurisdictions outside the U.S.

With exceptions for some U.S.

states and non-U.S.

jurisdictions, Tredegar and its subsidiaries are no longer subject to U.S.

federal, state or non-U.S.

income tax examinations by tax authorities for years before 2018.

13 ACCOUNTS AND OTHER RECEIVABLES

As of September 30, 2021 and December 31, 2020, accounts receivable and other receivables include the following:

September 30, December 31,

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.

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

The following table summarizes the financial results of discontinued operations reflected in the condensed consolidated statements of income for the three and three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

(In thousands) 2022 2021

Customer receivables $ 95,773 $ 85,274

Other receivables 3,984 3,850

Total accounts and other receivables 99,757 89,124

Allowance for bad debts and sales returns ( 2,572 ) ( 2,797 )

Total accounts and other receivables, net $ 97,185 $ 86,327

As of September 30, 2021, other receivables include $ 1.5 million related to a one-time tax credit in Brazil for unemployment/social security insurance non-income taxes ("PIS/COFINS") that is available and expected to be applied to future required Brazilian federal tax payments in 2021.

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 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 expects to apply to future required Brazilian federal tax payments.

The pretax gain was recorded in “Other income (expense), net” in the condensed consolidated statements of income.

Costs and expenses:

Selling, general and administrative 45 1,050

Adjustment to the fair value estimates used in the disposal of Personal Care Films (a)

Income (loss) from discontinued operations before income taxes ( 45 ) ( 751 )

Income tax expense (benefit) ( 10 ) ( 164 )

Income (loss) from discontinued operations, net of tax $ ( 35 ) $ ( 587 )

The assets and liabilities of the discontinued operations reflected in the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021, respectively, were as follows:

March 31, December 31,

(In thousands) 2022 2021

Prepaid expenses and other (a)

Accrued expenses (a)

(a) The condensed consolidated balance sheet of discontinued operations as of March 31, 2022 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 condensed 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 following table provides significant operating and investing cash flow information for discontinued operations:

Three Months Ended March 31,

(In thousands) 2022 2021

Operating activities

Other — ( 299 )

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 $ 0.7 million on the Company’s investment in kaléo was recognized in the first quarter ended March 31, 2021 which is reported in “Other income (expense), net” in the condensed consolidated statements of income.

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

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

What changed 10-Q

Item 1. Financial Statements