What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-08 compared with 2022-05-09 · 267 added, 133 removed, 241 unchanged (62% of the section changed)

1 unchanged sentence

Forward-looking and Cautionary Statements

Some of the information contained in this Quarterly Report on Form 10-Q ("Form 10-Q") press release may constitute “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

Some of the information contained in this Quarterly Report on Form 10-Q ("Form 10-Q") may constitute “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

When the Company uses the words “believe,” “estimate,” “anticipate,” “appear to,” “expect,” “project,” “plan,” “likely,” “may” and similar expressions, it does so to identify forward-looking statements.

2 unchanged sentences

In addition, the Company's current projections for its businesses could be materially affected by the highly uncertain impact of the COVID-19 pandemic.

As a consequence, the Company's results could differ significantly from its projections, depending on, among other things, the ultimate impact of the pandemic on employees, supply chains, customers and the U.S.

As a consequence, the Company's results could differ materially from its projections, depending on, among other things, the ultimate impact of the pandemic on employees, supply chains, customers and the U.S.

and world economies.

Accordingly, you should not place undue reliance on these forward-looking statements.

Factors that could cause actual results to differ from expectations include, without limitation, the following:

Factors that could cause actual results to differ materially from expectations include, without limitation, the following:

• loss or gain of sales to significant customers on which the Company’s business is highly dependent;

14 unchanged sentences

• disruptions to the Company’s manufacturing facilities, including those resulting from labor shortages;

• failure to continue to attract, develop and retain certain key officers or employees;

• the impact of public health epidemics on employees, production and the global economy, such as the COVID-19 pandemic;

5 unchanged sentences

• failure to establish and maintain effective internal control over financial reporting;

and the other factors discussed in the reports Tredegar files with or furnishes to the Securities and Exchange Commission (the “SEC”) from time to time, including the risks and important factors set forth in additional detail in Part I, Item 1A of Tredegar’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”).

Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”).

Readers are urged to review and consider carefully the disclosures Tredegar makes in its filings with the SEC.

19 unchanged sentences

We believe that EBIT is a widely understood and utilized metric that is meaningful to certain investors and that including this financial metric in the reconciliation of management’s performance metric, EBITDA from ongoing operations, provides useful information to those investors that primarily utilize EBIT to analyze the Company’s core operations.

First Quarter Financial Results Highlights

First quarter 2022 net income from continuing operations was $16.5 million ($0.49 per diluted share) compared with net income from continuing operations of $9.6 million ($0.29 per diluted share) in the first quarter of 2021.

• EBITDA from ongoing operations for Aluminum Extrusions of $23.9 million was $10.6 million higher than the first quarter of 2021

• EBITDA from ongoing operations for PE Films of $7.0 million was $0.2 million lower than the first quarter of 2021

• EBITDA from ongoing operations for Flexible Packaging Films of $5.0 million was $4.6 million lower than the first quarter of 2021

Second Quarter Financial Results Highlights

Second quarter 2022 net income from continuing operations was $14.8 million ($0.44 per diluted share) compared with net income from continuing operations of $20.7 million ($0.61 per diluted share) in the second quarter of 2021.

• EBITDA from ongoing operations for Aluminum Extrusions of $21.9 million was $2.2 million higher than the second quarter of 2021

• EBITDA from ongoing operations for PE Films of $7.1 million was $1.9 million lower than the second quarter of 2021

• EBITDA from ongoing operations for Flexible Packaging Films of $7.6 million was $0.6 million lower than the second quarter of 2021

All three of the Company's business segments continue to manage through supply chain disruptions and inflationary cost pressures, including raw material cost increases, shortages, transportation cost increases and delays.

2 unchanged sentences

At Bonnell Aluminum, labor shortages associated with the COVID-19 operating environment have resulted in production challenges and inefficiencies.

However, current bookings and backlog remain at record high levels.

Other losses related to asset impairments and costs associated with exit and disposal activities for continuing operations were not material for the three months ended March 31, 2022 and 2021, respectively.

However, current bookings and backlog remain at high levels.

Other losses related to asset impairments and costs associated with exit and disposal activities for continuing operations were not material for the three ended June 30, 2022 and 2021, respectively.

Gains and losses associated with plant shutdowns, asset impairments, restructurings and other items are described in Results of Operations below.

Results of Operations

First Quarter of 2022 Compared with the First Quarter of 2021

The following table presents a bridge of consolidated net income (loss) from continuing operations from first quarter of 2021 to first quarter of 2022 with related management's discussion and analysis below the table.

Second Quarter of 2022 Compared with the Second Quarter of 2021

The following table presents a bridge of consolidated net income (loss) from continuing operations from second quarter of 2021 to second quarter of 2022 with related management's discussion and analysis below the table.

(In thousands)

Net income from continuing operations for the three months ended March 31, 2021 $ 9,618

Net income from continuing operations for the three months ended June 30, 2021

Income tax expense (benefit) 5,723

Income (loss) from continuing operations before income taxes 12,715

Income (loss) from continuing operations before income taxes for the three months ended June 30, 2021

Increase (decrease) in income from increases (decreases) in the following items:

5 unchanged sentences

Total (62,480)

Income (loss) from continuing operations before income taxes 17,235

Income (loss) from continuing operations before income taxes for the three months ended June 30, 2022

Income tax expense (benefit) 5,556

Net income from continuing operations for the three months ended March 31, 2022 $ 16,457

Sales in the first quarter of 2022 increased by $51.7 million compared with the first quarter of 2021.

Net income from continuing operations for the three months ended June 30, 2022

Sales in the second quarter of 2022 increased by $63.2 million compared with the second quarter of 2021.

Net sales (sales less freight) in Aluminum Extrusions increased $51.0 million, primarily due to an increase in average selling prices to cover significantly higher aluminum raw material costs and higher operating costs.

Net sales were flat in PE Films.

Net sales in Flexible Packaging Films increased $8.2 million, primarily due to higher sales volume and higher selling prices from the pass-through of higher resin costs.

For more information on net sales and volume, see the Segment Operations Review below.

Other income decreased $6.9 million in the second quarter of 2022 compared to the second quarter of 2021, primarily due to a 2021 gain of $8.5 million associated with a 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, partially offset by a gain realized during the three months ended June 30, 2022 related to additional cash consideration of $1.4 million received in connection with the Company's sale of its investment interests in kaleo, Inc.

("kaléo") due to customary post-closing adjustments.

See Note 5 for additional information.

Consolidated gross profit (sales minus cost of goods sold and freight) as a percentage of sales (gross profit margin) was 16.5% in the second quarter of 2022 compared to 21.5% in the second quarter of 2021.

The gross profit margin in Aluminum Extrusions decreased primarily due to higher labor and employee-related costs, lower labor productivity, higher supply expense, higher utility costs, and higher freight rates.

Additionally, the timing of the flow through under the first-in first-out method of aluminum raw material costs passed through to customers, previously acquired at higher prices in a quickly changing commodity pricing environment, resulted in a charge in the second quarter of 2022 versus a benefit in the second quarter of 2021.

The gross profit margin in PE Films decreased primarily due to lower Surface Protection contribution margin related to previously disclosed customer product transitions and pricing pressures for products unrelated to the customer product transitions, partially offset by higher contribution margin related to non-transitioning products.

The gross profit margin in Flexible Packaging Films decreased primarily due to higher raw material costs, higher fixed and variable costs, partially offset by higher selling prices from the pass-through of higher resin costs, higher sales volume, and favorable product mix.

As a percentage of sales, selling, general and administrative (“SG&A”) and research and development ("R&D") expenses were 7.5% in the second quarter of 2022, compared with 10.3% in the second quarter of 2021.

While second quarter SG&A expenses declined and sales increased year-over-year, R&D expenses remained consistent with prior year.

Lower SG&A spending is primarily due to lower stock-based compensation and lower professional fees associated with business development activities.

The effective tax rate used to compute income taxes for continuing operations in the second quarter of 2022 was 27.3%, compared to 21.9% in the second quarter of 2021.

The increase in the effective tax rate for continuing operations is primarily due to 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.

The effective tax rate increases as the result of Brazilian income tax no longer being creditable in the U.S.

for the foreseeable future under these regulations.

See Note 9 for additional information.

Pre-tax gains and losses associated with plant shutdowns, asset impairments, restructurings and other items for continuing operations in the second quarters of 2022 and 2021 detailed below are shown in the statements of net sales and EBITDA from ongoing operations by segment table in Note 10 and are included in “Asset impairments and costs associated with exit and disposal activities, net of adjustments” in the condensed consolidated statements of income, unless otherwise noted.

Three Months Ended June 30,

(In millions) 2022 2021

Aluminum Extrusions:

(Gains) losses from sale of assets, investment writedowns and other items:

COVID-19-related expenses, net of relief 1

Total for Aluminum Extrusions $ — $ 0.3

(Gains) losses from sale of assets, investment writedowns and other items:

COVID-19-related expenses 1

Total for PE Films $ 0.1 $ 0.1

Flexible Packaging Films:

(Gain) losses from sale of assets, investment writedowns and other items:

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 taxes 1,4

Total for Flexible Packaging Films $ — $ (8.5)

(Gains) losses associated with plant shutdowns, asset impairments and restructurings:

(Gain), net of costs associated with the sale of the Lake Zurich manufacturing facility assets $ — $ 0.2

Other restructuring costs - severance 0.1 —

(Gains) losses from sale of assets, investment writedowns and other items:

Professional fees associated with business development activities and other 2

Professional fees associated with internal control over financial reporting 2

Write-down of investment in Harbinger Capital Partners Special Situations Fund 1

Stock-based compensation expense associated with the fair value remeasurement of awards granted at the time of the 2020 special dividend 2

Transition service fees, net of corporate costs associated with the divested Personal Care Films business 1

Net periodic benefit cost for the frozen defined benefit pension plan in process of termination 3

Total for Corporate $ 4.3 $ 2.1

Included in “Other income (expense), net” in the condensed consolidated statements of income.

Included in “Selling, general and administrative expenses” in the condensed consolidated statements of income.

Prior to the $50 million contribution made to the pension plan ("Special Contribution") (see “Corporate Expenses, Interest, & Other” section of this Form 10-Q), GAAP pension expense was a reasonable proxy for the Company’s required minimum cash contribution to the pension plan.

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

Pension expense under GAAP is projected to be approximately $14 million in 2022, which is mainly comprised of non-cash amortization of deferred net actuarial losses reflected in the Company’s shareholders’ equity as accumulated other comprehensive losses.

Beginning in 2022, and consistent with no expected required minimum cash contributions, no pension expense is included in calculating earnings before interest, taxes, depreciation and amortization as defined in the Company’s revolving credit agreement, which is used to compute certain borrowing ratios.

See Note 4 for additional information.

See Note 5 for additional information.

Average debt outstanding and interest rates were as follows:

Three Months Ended June 30,

(In millions, except percentages) 2022 2021

Floating-rate debt with interest charged on a rollover basis plus a credit spread 1 :

Average outstanding debt balance $ 109.9 $ 133.8

Average interest rate 2.4 % 1.8 %

In connection with the Second Amended and Restated Credit Agreement dated June 29, 2022 as defined below, borrowings bear an interest rate equal to Secured Overnight Financing Rate ("SOFR") plus a credit spread adjustment of 10 basis points and an amount depending on the type of borrowing and commitment fees charged on the unused amount under the Credit Agreement.

Prior to Second Amended and Restated Credit Agreement, the interest rate was based on London Inter-Bank Offered Rate ("LIBOR") plus an applicable credit spread.

See " Liquidity and Capital Resources " section below for additional information.

First Six Months of 2022 Results vs.

First Six Months of 2021 Results

The following table presents a bridge of consolidated net income (loss) from continuing operations from first six months of 2021 to first six months of 2022 with related management's discussion and analysis below the table.

(In thousands)

Net income from continuing operations for the first six months ended June 30, 2021

Income tax expense (benefit) 8,820

Income (loss) from continuing operations before income taxes for the first six months ended June 30, 2021

Increase (decrease) in income from increases (decreases) in the following items:

Sales 114,978

Other income (expense), net (7,888)

Total 107,090

Increase (decrease) in income from (increases) decreases in the following items:

Cost of goods sold (101,371)

Freight (5,851)

Selling, general and administrative (1,484)

Total (108,677)

Income (loss) from continuing operations before income taxes for the first six months ended June 30, 2022

Income tax expense (benefit) 6,334

Net income from continuing operations for the first six months ended June 30, 2022

Sales in the first six months of 2022 increased by $115.0 million compared with the first six months of 2021.

Net sales (sales less freight) in Aluminum Extrusions increased $91.0 million, primarily due to an increase in average selling prices to cover significantly higher aluminum raw material costs and higher operating costs, partially offset by lower sales volume.

Net sales increased $3.2 million in PE Films, primarily due to higher volume in Surface Protection and higher selling prices for overwrap films.

Net sales in Flexible Packaging Films increased $6.7 million, primarily due to higher selling prices from the pass-through of higher resin costs and favorable product mix, partially offset by lower sales volume.

Net sales increased $3.2 million in PE Films, primarily due to an increase in average selling prices associated with the pass-through of higher market-driven raw material costs.

Net sales in Flexible Packaging Films increased $14.9 million, primarily due to higher selling prices from the pass-through of higher resin costs, favorable product mix and higher sales volume.

For more information on net sales and volume, see the Segment Operations Review below.

Other income decreased $1.0 million in the first quarter of 2022 compared to the first quarter of 2021, primarily due to a 2021 gain on the Company's investment in kaléo inc., which was historically accounted for under the fair value option and sold in the fourth quarter of 2021, and the non-recurring 2021 transition service fee income, net of corporate costs associated with the divested Personal Care Films business.

Other income decreased $7.9 million in the first six months of 2022 compared to the first six months of 2021, primarily due to a 2021 gain of $8.5 million associated with a 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 and a decline in unrealized losses of $0.5 million on the Company’s investment in Harbinger Capital Partners Special Situations Fund L.P., partially offset by a gain realized during the three months ended June 30, 2022 related to additional cash consideration of $1.4 million received in connection with the Company's sale of its investment interests kaléo due to customary post-closing adjustments.

See Note 5 for additional information.

Consolidated gross profit (sales minus cost of goods sold and freight) as a percentage of sales (gross profit margin) was 19.1% in the first quarter of 2022 compared to 20.2% in the first quarter of 2021.

The gross profit margin in Aluminum Extrusions increased primarily due to an increase in average selling prices to cover significantly higher aluminum raw material costs and higher operating costs.

The gross profit margin in PE Films decreased primarily due to lower Surface Protection sales related to previously disclosed customer product transitions, pricing pressures for products unrelated to the customer product transitions, higher freight expense, partially offset by higher volume, favorable mix and the pass-through lag associated with resin costs.

The gross profit margin in Flexible Packaging Films decreased primarily due to higher raw material costs, higher variable costs and lower sales volume, partially offset by higher selling prices from the pass-through of higher resin costs, favorable absorption of fixed costs and favorable product mix.

As a percentage of sales, selling, general and administrative (“SG&A”) and research and development ("R&D") expenses were 9.6% in the first quarter of 2022, compared with 10.9% in the first quarter of 2021.

Consolidated gross profit (sales minus cost of goods sold and freight) as a percentage of sales (gross profit margin) was 17.7% in the first six months of 2022 compared to 20.9% in the first six months of 2021.

The gross profit margin in Aluminum Extrusions increased primarily due to higher pricing, net of the pass-through of aluminum raw material costs, partially offset by lower volume, higher labor and employee-related costs, lower labor productivity, higher maintenance costs, higher supply expense, higher utilities, and higher freight rates.

The gross profit margin in PE Films decreased primarily due to lower Surface Protection contribution margin related to previously disclosed customer product transitions and competitive pricing pressures for products unrelated to the customer product transitions, partially offset by higher contribution margin for non-transitioning products and the pass-through lag associated with resin costs.

As a percentage of SG&A and R&D expenses were 8.5% in the first six months of 2022, compared with 10.6% in the first six months of 2021.

SG&A expenses and net sales increased year-over-year, while R&D expenses remained consistent with prior year.

Increased SG&A spending is primarily due to higher employee-related compensation, higher professional fees associated with business development activities, higher professional fees associated with internal controls over financial reporting, net unfavorable foreign currency translation of Real-denominated operating costs, partially offset by lower stock-based compensation.

The effective tax rate used to compute income taxes for continuing operations in the first three months of 2022 was 4.5%, compared to 24.4% in the first three months of 2021.

Increased SG&A spending is primarily due to higher employee-related compensation.

The effective tax rate used to compute income taxes for continuing operations in the first six months of 2022 was 16.9%, compared to 22.5% in the first six 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.

6 unchanged sentences

See Note 9 for additional information.

Pre-tax gains and losses associated with plant shutdowns, asset impairments, restructurings and other items for continuing operations in the first quarters of 2022 and 2021 detailed below are shown in the statements of net sales and EBITDA from ongoing operations by segment table in Note 10 and are included in “Asset impairments and costs associated with exit and disposal activities, net of adjustments” in the condensed consolidated statements of income, unless otherwise noted.

Three Months Ended March 31,

Pre-tax gains and losses associated with plant shutdowns, asset impairments, restructurings and other items for continuing operations in the first six months of 2022 and 2021 detailed below are shown in the statements of net sales and EBITDA from ongoing operations by segment table in Note 10 and are included in “Asset impairments and costs associated with exit and disposal activities, net of adjustments” in the condensed consolidated statements of income, unless otherwise noted.

Six Months Ended June 30,

(In millions) 2022 2021

6 unchanged sentences

Total for PE Films $ 0.2 $ 0.3

Flexible Packaging Films:

(Gain) losses from sale of assets, investment writedowns and other items:

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 taxes 1,4

COVID-19-related expenses 1

Total for Flexible Packaging Films $ — $ (8.4)

(Gains) losses associated with plant shutdowns, asset impairments and restructurings:

(Gain), net of costs associated with the sale of the Lake Zurich manufacturing facility assets $ — $ 0.4

Other restructuring costs - severance 0.1 —

(Gains) losses from sale of assets, investment writedowns and other items:

2 unchanged sentences

Write-down of investment in Harbinger Capital Partners Special Situations Fund 1

Stock compensation expense associated with the fair value remeasurement of awards granted at the time of the 2020 special dividend 1

Stock-based compensation expense associated with the fair value remeasurement of awards granted at the time of the 2020 special dividend 2

Transition service fees, net of corporate costs associated with the divested Personal Care Films business 1

1 unchanged sentence

Total for Corporate $ 9.6 $ 3.4

Included in “Selling, general and administrative expenses” in the condensed consolidated statements of income.

Included in “Other income (expense), net” in the condensed consolidated statements of income.

Included in “Cost of goods sold” in the condensed consolidated statements of income.

Prior to the $50 million contribution made to the pension plan ("Special Contribution") (see “Corporate Expenses, Interest, & Other” section of this report), GAAP pension expense was a reasonable proxy for the Company’s required minimum cash contribution to the pension plan.

Included in “Selling, general and administrative expenses” in the condensed consolidated statements of income.

Prior to the Special Contribution (see “Corporate Expenses, Interest, & Other” section of this Form 10-Q), GAAP pension expense was a reasonable proxy for the Company’s required minimum cash contribution to the pension plan.

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

2 unchanged sentences

See Note 4 for additional information.

See Note 5 for additional information.

Average debt outstanding and interest rates were as follows:

Three Months Ended March 31,

(In millions) 2022 2021

Floating-rate debt with interest charged on a rollover basis at one-month LIBOR plus a credit spread:

Six Months Ended June 30,

(In millions, except percentages) 2022 2021

Floating-rate debt with interest charged on a rollover basis plus a credit spread 1 :

Average outstanding debt balance $ 106.9 $ 136.1

Average interest rate 2.1 % 1.7 %

In connection with the Second Amended and Restated Credit Agreement dated June 29, 2022 as defined below, borrowings bear an interest rate equal to SOFR plus a credit spread adjustment of 10 basis points and an amount depending on the type of borrowing and commitment fees charged on the unused amount under the Credit Agreement.

Prior to Second Amended and Restated Credit Agreement, the interest rate was based on LIBOR plus an applicable credit spread.

See " Liquidity and Capital Resources " section below for additional information.

Segment Operations Review

3 unchanged sentences

(Unfavorable)

(In thousands, except percentages) March 31,

% Change Six Months Ended Favorable/

(Unfavorable)

(In thousands, except percentages) June 30, June 30,

2022 2021 2022 2021

Sales volume (lbs) 48,960 49,021 (0.1)% 91,970 93,387 (1.5)%

5 unchanged sentences

Capital expenditures $ 3,989 $ 4,326 $ 6,870 $ 6,773

*See the table in Note 10, "Business Segments," of this Form 10-Q ("Note 10") for a reconciliation of this non-GAAP measure to the most comparable measure calculated in accordance with GAAP.

First Quarter 2022 Results vs.

First Quarter 2021 Results

Net sales (sales less freight) in the first quarter of 2022 increased by 33.8 % versus 2021 primarily due to an increase in average selling prices to cover significantly higher aluminum raw material costs and higher operating costs, partially offset by lower sales volume.

Sales volume in the first quarter of 2022 decreased by 3.1% versus 2021.

Sales volume in the specialty market, which represented 34% of total volume in 2021, decreased 5.2% in the first quarter of 2022 versus 2021.

Sales volume in the automotive market, which represented 8% of total volume in 2021, declined 20.0% versus the first quarter of 2021.

Non-residential B&C sales volume, which represented 51 % o f 2021 volume, increased 1.3% in the first quarter of 2022 versus 2021.

Strong market demand in this sector has not been fully reflected in Bonnell Aluminum's first quarter 2022 results, due to pandemic-related labor shortages and resulting production inefficiencies.

While the average number of direct labor employees at Bonnell Aluminum facilities increased approximately 5% and 3% in the first quarter of 2022 compared to the first and fourth quarters of 2021, respectively, the estimated average labor shortage levels was 143, 133 and 147 workers in the first quarter of 2022 and first and fourth quarters of 2021, respectively.

*See the table in Note 10 for a reconciliation of this non-GAAP measure to the most comparable measure calculated in accordance with GAAP.

Second Quarter 2022 Results vs.

Second Quarter 2021 Results

Net sales (sales less freight) in the second quarter of 2022 increased by 36.6% versus 2021 primarily due to an increase in average selling prices to cover significantly higher aluminum raw material costs and higher operating costs.

Sales volume in the second quarter of 2022 was flat versus 2021.

Sales volume in the specialty market, which represented 34% of total volume in 2021, decreased 8.8% in the second quarter of 2022 versus 2021.

Sales volume in the automotive market, which represented 8% of total volume in 2021, declined 6.6% versus the second quarter of 2021.

Nonresidential B&C sales volume, which represented 51% of 2021 volume, increased 5.6% in the second quarter of 2022 versus 2021.

The Company believes that actual sales volume during the first six months of 2022 was lower than demand due to pandemic-related labor shortages and resulting production inefficiencies.

While the average number of direct labor employees at Bonnell Aluminum facilities increased approximately 9% in t he second quarter of 2022 compared to the second quarter of 2021, the estimated average labor shortage levels were 101, 171 and 203 w orkers in the second and first quarters of 2022 and second quarter of 2021, respectively.

Moreover, onboarding new employees has resulted in higher hiring and training costs in 2022 versus last year.

However, current bookings and backlog remain at record high levels.

EBITDA from ongoing operations in the first quarter of 2022 increased by $10.6 million in comparison to the first quarter of 2021 primarily due to:

Although bookings have slowed in the second quarter of 2022 versus the first quarter of 2022 and the second quarter of 2021, backlog remains at historically high levels.

EBITDA from ongoing operations in the second quarter of 2022 increased by $2.2 million in comparison to the second quarter of 2021 primarily due to:

• Higher pricing ($20.1 million, net of the pass-through of aluminum raw material costs), partially offset by:

higher labor and employee-related costs ($2.6 million) and lower labor productivity ($2.2 million);

higher supply expense, including significant price increases in paint, chemicals, packaging and other supplies ($2.5 million);

higher utility costs ($1.7 million);

higher freight rates ($2.9 million);

and increased selling, general and administrative ("SG&A") expenses ($1.2 million);

• The timing of the flow through under the first-in first-out method of aluminum raw material costs passed through to customers, previously acquired at higher prices in a quickly changing commodity pricing environment, resulted in a charge of $1.6 million in the second quarter of 2022 versus a benefit of $3.1 million in the second quarter of 2021.

The charge in the second quarter of 2022 was net of a favorable impact from the lag in pricing ($0.3 million), in which products committed to customers at a specified price were shipped in a later period.

First Six Months of 2022 Results vs.

First Six Months of 2021 Results

Net sales in the first six months of 2022 increased by 35.4% versus 2021 primarily due to an increase in average selling prices to cover significantly higher aluminum raw material costs and higher operating costs, partially offset by lower sales volume.

Sales volume in the first six months of 2022 decreased by 1.5% versus 2021.

EBITDA from ongoing operations in the first six months of 2022 increased by $12.8 million in comparis on to the first six months of 2021 prim arily due to:

• Higher pricing ($34.8 million, net of the pass-through of aluminum raw material costs), partially offset by:

lower volume ($0.7 million);

2 unchanged sentences

higher supply expense, including significant price increases in paint, chemicals, packaging and other supplies ($5.9 million);

higher utilities ($1.7 million);

higher freight rates ($4.1 million);

and increased selling, general and administrative expenses ($1.5 million);

• The timing of the flow through under the first-in first-out method of aluminum raw material costs passed through to customers, previously acquired at lower prices in a quickly rising commodity pricing environment, resulted in a benefit of $7.1 million in the first quarter of 2022 versus a benefit of $1.0 million in the first quarter of 2021.

The benefit in the first quarter of 2022 was net of an adverse impact from the lag in pricing ($1.8 million), in which products promised to customers at a specified price were shipped in a later period.

and increased SG&A expenses ($2.4 million);

• The timing of the flow through under the first-in first-out method of aluminum raw material costs passed through to customers, previously acquired at lower prices in a quickly changing commodity pricing environment, resulted in a benefit of $5.5 million in the first six months of 2022 versus a benefit of $4.2 million in the first six months of 2021.

The benefit in the first six months of 2022 was net of an adverse impact from the lag in pricing ($1.5 million), in which products committed to customers at a specified price were shipped in a later period.

Aluminum Extrusions believes that it has adequate supply agreements for aluminum raw materials in 2022 and is in the process of securing supply sources to meet expected needs in 2023.

10 unchanged sentences

(Unfavorable)

(In thousands, except percentages) March 31,

% Change Six Months Ended Favorable/

(Unfavorable)

(In thousands, except percentages) June 30, June 30,

2022 2021 2022 2021

Sales volume (lbs) 9,639 10,538 (8.5)% 20,192 20,782 (2.8)%

6 unchanged sentences

* See the table in Note 10 for a reconciliation of this non-GAAP measure to the most comparable measure calculated in accordance with GAAP.

First Quarter 2022 Results vs.

First Quarter 2021 Results

Net sales increased by $3.2 million in the first quarter of 2022 versus the first quarter of 2021 primarily due to higher volume in Surface Protection and higher selling prices for overwrap films.

Sales volume in Surface Protection increased 5% versus the first quarter of 2021.

EBITDA from ongoing operations in the first quarter of 2022 decreased by $0.2 million versus the first quarter of 2021, primarily due to:

• A $0.9 million decrease from Surface Protection associated with lower sales related to previously disclosed customer product transitions ($1.5 million), competitive pricing pressures for products unrelated to the customer product transitions ($1.4 million) and higher freight expense ($0.2 million), partially offset by higher volume, favorable mix ($1.0 million) and the pass-through lag associated with resin costs (benefit of $0.6 million in the first quarter of 2022 vs.

charge of $0.5 million in the first quarter of 2021);

• A $0.7 million increase from overwrap films primarily related to a benefit from the pass-through lag associated with resin costs (benefit of $0.3 million in the first quarter of 2022 versus a charge of $0.3 million in the first quarter of 2021) and favorable selling, general and administrative expenses ($0.4 million), partially offset by unfavorable mix ($0.2 million).

Second Quarter 2022 Results vs.

Second Quarter 2021 Results

Net sales were flat in the second quarter of 2022 compared to the second quarter of 2021;

s ales volume decreased in both Surface Protection and overwrap films versus the second quarter of 2021.

EBITDA from ongoing operations in the second quarter of 2022 decreased by $1.9 million versus the second quarter of 2021, primarily due to:

• A $1.6 million decrease from Surface Protection associated with lower contribution margin related to previously disclosed customer product transitions ($2.2 million) and competitive pricing pressures for products unrelated to the customer product transitions ($1.9 million), partially offset by higher sales related to non-transitioning products ($1.8 million) and a foreign currency transaction gain of $0.5 million in the second quarter of 2022 versus a charge of $0.1 million in the second quarter of 2021;

• A $0.3 million decrease from overwrap films primarily due to lower sales volume ($0.3 million) and higher SG&A expenses ($0.4 million), partially offset by a benefit from the pass-through lag associated with resin costs (charge of $0.2 million in the second quarter of 2022 versus a charge of $0.6 million in the second quarter of 2021).

First Six Months of 2022 Results vs.

First Six Months of 2021 Results

Net sale s increased by $3.2 million in the first six months of 2022 versus the first six months of 2021 primarily due to an increase in average selling prices associated with the pass-through of higher market-driven raw material costs .

Sales volume declined in overwrap films and revenue and volume in Surface Protection were flat versus the first six months of 2021.

EBITDA from ongoing operations in the first six months of 2022 decreased by $2.1 million versus the first six months of 2021, primarily due to:

• A $2.5 million decrease from Surface Protection associated with lower contribution margin related to previously disclosed customer product transitions ($3.7 million) and competitive pricing pressures for products unrelated to the customer product transitions ($3.3 million), partially offset by higher contribution margin for non-transitioning products ($2.5 million), lower SG&A expenses ($0.3 million), foreign currency transaction gain ($0.5 million) in the first six months of 2022 versus a charge ($0.1 million) in the first six months of 2021, and the pass-through lag associated with resin costs (benefit of $0.3 million in the first six months of 2022 versus a charge of $0.7 million in the first six months of 2021);

• A $0.4 million increase from overwrap films primarily related to a benefit from the pass-through lag associated with resin costs (benefit of $0.2 million in the first six months of 2022 versus a charge of $0.9 million in the first six months of 2021), partially offset by lower sales volume ($0.3 million) and higher freight and other operating expenses ($0.3 million).

R efer to Item 3.

6 unchanged sentences

A total decline of $7 million in pre-tax income from continuing operations as reported under GAAP and EBITDA from ongoing operations due to the transitions is expected in 2022 versus 2021, at which time the transitions are expected to be complete.

The Surface Protection business is also experiencing competitive pricing pressures, unrelated to the customer product transitions, that are expected to adversely impact pre-tax income from continuing operations as reported under GAAP and

EBITDA from ongoing operations by approximately $6 million for full year 2022 versus 2021.

The Surface Protection business is continuing to experience competitive pricing pressures, unrelated to the customer product transitions, that are expected to adversely impact pre-tax income from continuing operations as reported under GAAP and EBITDA from ongoing operations by approximatel y $6 million for full year 2022 versus 2021.

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

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

Projected Capital Expenditures and Depreciation & Amortization

6 unchanged sentences

(Unfavorable)

(In thousands, except percentages) March 31,

% Change Six Months Ended Favorable/

(Unfavorable)

(In thousands, except percentages) June 30, June 30,

2022 2021 2022 2021

Sales volume (lbs) 27,315 24,230 12.7% 53,321 51,638 3.3%

6 unchanged sentences

* See the table in Note 10 for a reconciliation of this non-GAAP measure to the most comparable measure calculated in accordance with GAAP.

First Quarter 2022 Results vs.

First Quarter 2021 Results

Sales volume declined by 5.1% during the first quarter of 2022 versus the first quarter of 2021, which reflected the surge in pandemic-related demand.

Net sales in the first quarter of 2022 increased 20.7% compared to the first quarter of 2021, primarily due to higher selling prices from the pass-through of higher resin costs and favorable product mix, partially offset by lower sales volume.

EBITDA from ongoing operations in the first quarter of 2022 decreased by $4.6 million versus the first quarter of 2021 primarily due to:

• Higher raw material costs ($6.0 million), higher variable costs ($1.6 million) and lower sales volume ($0.8 million), partially offset by higher selling prices ($4.9 million) from the pass-through of higher resin costs, favorable absorption of fixed costs ($0.4 million) and favorable product mix ($0.3 million);

Second Quarter 2022 Results vs.

Second Quarter 2021 Results

Net sales in the second quarter of 2022 increased 24.6% compared to the second quarter of 2021, primarily due to higher sales volume and higher selling prices from the pass-through of higher resin costs.

EBITDA from ongoing operations in the second quarter of 2022 decreased by $0.6 million versus the second quarter of 2021 primarily due to:

• Higher raw material costs ($5.4 million), higher SG&A expenses ($0.7 million), and higher fixed ($0.6 million) and variable costs ($0.3 million), partially offset by higher selling prices ($4.2 million) from the pass-through of higher resin costs, higher sales volume ($1.7 million), and favorable product mix ($0.5 million);

• Net unfavorable foreign currency translation of Real-denominated operating costs ($1.2 million);

• Foreign currency transaction losses ($0.9 million) in the first quarter of 2022 compared to foreign currency transaction gains ($0.4 million) in the first quarter of 2021.

• Foreign currency transaction gains ($0.6 million) in the second quarter of 2022 compared to foreign currency transaction losses ($0.5 million) in the second quarter of 2021.

First Six Months of 2022 Results vs.

First Six Months of 2021 Results

Net sales in the first six months of 2022 increased 22.7% compared to the first six months of 2021, primarily due to higher selling prices from the pass-through of higher resin costs, favorable product mix and higher sales volume.

EBITDA from ongoing operations in the first six months of 2022 decreased by $5.2 million versus the first six months of 2021 primarily due to:

• Higher raw material costs ($10.8 million), higher fixed ($0.3 million) and variable costs ($1.5 million), and higher SG&A expenses ($0.7 million), partially offset by higher selling prices ($8.0 million) from the pass-through of higher resin costs, higher sales volume ($0.9 million) and favorable product mix ($0.8 million);

• Net unfavorable foreign currency translation of Real-denominated operating costs ($1.5 million);

• Foreign currency transaction losses ($0.3 million) in the first six months of 2022 compared to foreign currency transaction losses ($0.1 million) in the first six months of 2021.

Refer to Item 3.

5 unchanged sentences

Corporate Expenses, Interest & Other

Corporate expenses, net in the first three months of 2022 remained consistent with the first three months of 2021 as lower stock-based compensation ($0.8 million) was substantially offset by higher professional fees associated with remediation

activities related to the Company's previously disclosed material weaknesses in internal control over financial reporting ($0.3 million), non-recurring 2021 transition service fee income, net of corporate costs associated with the divested Personal Care Films business ($0.3 million) and higher professional fees associated with business development activities ($0.1 million).

Interest expense of $0.8 million in the first three months of 2022 remained consistent with the first three months of 2021 as lower average debt levels were offset by higher average interest rates.

Pension expense under GAAP of $3.5 million in the first three months of 2022 remained consistent with the first three months of 2021.

Corporate expenses, net in the first six months of 2022 decreased $1.4 million compared to first six months of 2021 primarily due to lower stock-based compensation ($1.0 million) and lower professional fees associated with remediation activities related to the Company's previously disclosed material weaknesses in internal control over financial reporting ($0.5 million).

Interest expense of $2.0 million in the first six months of 2022 increased $0.3 million compared to the first six months of 2021 due to higher average interest rates during the second quarter of 2022, partially offset by lower average debt levels.

Pension expense under GAAP of $6.9 million in the first six months of 2022 remained consistent with the first six months of 2021.

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.

4 unchanged sentences

GAAP accounting requires adjustment for changes in values of assets and the PBO only at the end of each year, even though these values change daily.

The Company estimates that the Special Contribution and changes to the values of pension plan assets and liabilities resulted in a decrease in the underfunding on a GAAP basis from $69 million at December 31, 2021 to approximately $13 million at March 31, 2022.

The ultimate settlement benefit obligation may differ from the PBO, depending on market factors for buyers of pension obligations at the time of settlement.

2 unchanged sentences

Net capitalization and other credit measures are provided in Liquidity and Capital Resources below.

2 unchanged sentences

Measures such as days sales outstanding (“DSO”), days inventory outstanding (“DIO”) and days payables outstanding (“DPO”) are used to evaluate changes in working capital.

Changes in operating assets and liabilities from continuing operations from December 31, 2021 to March 31, 2022 are summarized below.

Changes in operating assets and liabilities from continuing operations from December 31, 2021 to June 30, 2022 are summarized below.

Cash flows for discontinued operations have not been separately disclosed in the condensed consolidated statements of cash flows.

• Accounts and other receivables increased $24.7 million (23.9%).

◦ Accounts and other receivables in Aluminum Extrusions increased by $20.1 million primarily due to an increase in average selling prices to cover significantly higher aluminum raw material costs and higher operating costs, partially offset by lower sales volume.

DSO (represents trailing 12 months net sales divided by a rolling 12-month average of accounts and other receivables balances) was approximately 48.2 days for the 12 months ended March 31, 2022 and 47.6 days for the 12 months ended December 31, 2021.

◦ Accounts and other receivables in PE Films increased by $1.9 million due to higher volume in Surface Protection and the timing of cash receipts.

DSO was approximately 27.9 days for the 12 months ended March 31, 2022 and 28.5 days for the 12 months ended December 31, 2021.

◦ Accounts and other receivables in Flexible Packaging Films increased by $4.3 million primarily due to higher selling prices from the pass-through of higher resin costs and favorable product mix, partially offset by lower sales volume.

DSO was approximately 41.4 days for the 12 months ended March 31, 2022 and 40.0 days for the 12 months ended December 31, 2021.

◦ Accounts and other receivables in Aluminum Extrusions increased $21.5 million primarily due to an increase in average selling prices to cover significantly higher aluminum raw material costs and higher operating costs, partially offset by lower sales volume.

DSO (represents trailing 12 months net sales divided by a rolling 12-month average of accounts and other receivables balances) was approximately 48.2 days for the 12 months ended June 30, 2022 and 47.6 days for the 12 months ended December 31, 2021.

◦ Accounts and other receivables in PE Films decreased $0.9 million due to lower sales volume in both overwrap films and surface protection films.

DSO was approximately 28.4 days for the 12 months ended June 30, 2022 remained flat in comparison to the DSO for the 12 months ended December 31, 2021.

◦ Accounts and other receivables in Flexible Packaging Films increased $4.1 million primarily due to higher sales volume and higher selling prices from the pass-through of higher resin costs.

DSO was approximately 41.8 days for the 12 months ended June 30, 2022 and 40.0 days for the 12 months ended December 31, 2021.

• Inventories increased $32.8 million (37.0%).

◦ Inventories in Aluminum Extrusions increased by $8.1 million due to higher average aluminum prices and the impact of COVID-19-related operational and production inefficiencies on the timing of shipments.

DIO (represents trailing 12 months costs of goods sold calculated on a first-in first-out basis divided by a rolling 12-month average of inventory balances calculated on the first-in first-out basis) was approximately 43.9 days for the 12 months ended March 31, 2022 and 41.4 days for the 12 months ended December 31, 2021.

◦ Inventories in PE Films increased $1.2 million due to higher planned raw material levels.

DIO (represents trailing 12 months costs of goods sold calculated on a first-in first-out basis divided by a rolling 12-month average of inventory balances calculated on the first-in first-out basis) was approximately 59.2 days for the 12 months ended March 31, 2022 and 62.8 days for the 12 months ended December 31, 2021.

◦ Inventories in Flexible Packaging Films increased by $6.7 million primarily due to the impact of higher average resin prices on raw materials and higher finished good levels due to lower than anticipated sales demand.

DIO was approximately 95.0 days for the 12 months ended March 31, 2022 and 93.1 days for the 12 months ended December 31, 2021.

• Net property, plant and equipment increased $2.2 million primarily due to capital expenditures of $4.7 million and a change in the value of the U.S.

dollar relative to foreign currencies (an increase of approximately $3.5 million), partially offset by depreciation expense of $5.8 million.

• Identifiable intangible assets, net decreased by $0.5 million (3.7%) due to amortization expense.

• Deferred income tax assets decreased $4.3 million 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 as a result of the implementation of new U.S.

◦ Inventories in Aluminum Extrusions increased $19.8 million due to higher average aluminum prices and the impact of COVID-19-related operational and production inefficiencies on the timing of shipments.

DIO (represents trailing 12 months costs of goods sold calculated on a first-in first-out basis divided by a rolling 12-month average of inventory balances calculated on the first-in first-out basis) was approximately 45.9 days for the 12 months ended June 30, 2022 and 41.4 days for the 12 months ended December 31, 2021.

◦ Inventories in PE Films increased $5.9 million due to lower sales volume and higher planned raw material levels.

DIO was approximately 60.1 days for the 12 months ended June 30, 2022 was lower compared to 62.8 days for the 12 months ended December 31, 2021 due to the higher Surface Protection 12-month average of costs of goods sold as a result of higher resin costs.

◦ Inventories in Flexible Packaging Films increased $7.1 million primarily due to the impact of higher average resin prices on raw materials, higher finished good levels due to lower than anticipated sales demand and the impact from the change in the U.S.

dollar value of currencies related to operations outside of the U.S.

DIO was approximately 95.1 days for the 12 months ended June 30, 2022 and 93.1 days for the 12 months ended December 31, 2021.

• Net property, plant and equipment increased $3.4 million primarily due to capital expenditures of $15.2 million, partially offset by depreciation expense of $11.5 million.

• Identifiable intangible assets, net decreased $1.3 million (9.0%) due to amortization expense.

• Deferred income tax assets decreased $3.5 million 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 as a result of the implementation of new U.S.

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

2 unchanged sentences

• Accounts payable increased $50.9 million (41.1%).

◦ Accounts payable in Aluminum Extrusions increased by $15.7 million primarily due to higher average aluminum prices.

DPO (represents trailing 12 months costs of goods sold calculated on a first-in first-out basis divided by a rolling 12-month average of accounts payable balances) was approximately 61.0 days for the 12 months ended March 31, 2022 and 60.1 days for the 12 months ended December 31, 2021.

◦ Accounts payable in PE Films increased by $2.8 million primarily due to higher resin costs related to raw material purchases.

DPO was approximately 47.0 days for the 12 months ended March 31, 2022 and 44.0 days for the 12 months ended December 31, 2021.

◦ Accounts payable in Aluminum Extrusions increased $42.7 million primarily due to higher average aluminum prices.

DPO (represents trailing 12 months costs of goods sold calculated on a first-in first-out basis divided by a rolling 12-month average of accounts payable balances) was approximately 63.6 days for the 12 months ended June 30, 2022 and 60.1 days for the 12 months ended December 31, 2021.

◦ Accounts payable in PE Films increased $4.4 million primarily due to higher resin costs related to raw material purchases.

DPO was approximately 50.7 days for the 12 months ended June 30, 2022 and 44.0 days for the 12 months ended December 31, 2021.

◦ Accounts payable in Flexible Packaging Films increased $2.8 million due to higher resin costs related to raw material purchases and the impact from the change in the U.S.

dollar value of currencies related to operations outside of the U.S.

DPO was approximately 69.2 days for the 12 months ended March 31, 2022 and 68.2 days for the 12 months ended December 31, 2021.

Net cash used in operating activities was $54.7 million in the first three months of 2022 compared to net cash provided by operating activities of $9.9 million in the first three months of 2021.

The change in operating activities is primarily due to the Special Contribution ($50 million) to the pension plan and lower net working capital ($16.0 million).

Net cash used in investing activities decreased during the first three months of 2022 compared to the first three months of 2021 due to lower capital expenditure spending ($0.2 million).

Net cash provided by financing activities of $53.8 million in the first three months of 2022, compared to $5.9 million in the first three months of 2021, increased primarily due to higher net borrowings ($49.3 million) under the Credit Agreement (as defined below) to fund the $50 million Special Contribution to the pension plan.

The Company believes that existing borrowing availability, current cash balances and cash flow from operations will be sufficient to satisfy short term material cash requirements related to working capital, capital expenditure, debt repayments and dividend requirements for at least the next twelve months.

DPO was approximately 67.2 days for the 12 months ended June 30, 2022 and 68.2 days for the 12 months ended December 31, 2021.

Net cash used in operating activities was $9.4 million in the first six months of 2022 compared to net cash provided by operating activities of $41.5 million in the first six months of 2021.

The change in operating activities is primarily due to the Special Contribution ($50 million).

Net cash used in investing activities increased during the first six months of 2022 compared to the first six months of 2021 due to higher capital expenditure spending ($2.2 million), partially offset by a gain realized during the three months ended June 30, 2022 related to additional cash consideration of $1.4 million received in connection with the Company's sale of its investment interests kaléo due to customary post-closing adjustments.

Net cash provided by financing activities was $18.7 million in the first six months of 2022, compared to net cash used in financing activities of $24.2 million in the first six months of 2021.

The change in financing activities is primarily due to higher net borrowings ($45.5 million) under the Credit Agreement (as defined below) to fund the $50 million Special Contribution to the pension plan and higher deferred financing costs ($1.2 million).

The Company believes that existing borrowing availability, current cash balances and cash flow from operations will be sufficient to satisfy short term material cash requirements related to working capital, capital expenditures, debt repayments and dividend requirements for at least the next twelve months.

In the longer term, liquidity will depend on many factors, including results of operations, the timing and extent of capital expenditures, changes in operating plans, or other events that would cause the Company to seek additional financing in future periods.

At March 31, 2022, the Company had cash and cash equivalents of $25.6 million, including cash and cash equivalents held by locations outside the U.S.

At June 30, 2022, the Company had cash and cash equivalents of $27.5 million, including cash and cash equivalents held in locations outside the U.S.

of $10.2 million.

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.

Net capitalization and indebtedness as defined under the Credit Agreement as of March 31, 2022 were as follows:

Net Capitalization and Indebtedness as of March 31, 2022

On June 29, 2022, Tredegar entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) that replaced its existing $375 million five-year, secured revolving credit facility that was due to expire on June 28, 2024.

The Credit Agreement is a five-year, revolving, secured credit facility that permits aggregate borrowings of $375 million and matures on June 29, 2027.

Net capitalization and indebtedness as defined under the Credit Agreement as of June 30, 2022 were as follows:

Net Capitalization and Indebtedness as of June 30, 2022

(In thousands)

8 unchanged sentences

Indebtedness $ 101,500

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:

Borrowings under the Credit Agreement bear an interest rate equal to Secured Overnight Financing Rate ("SOFR") plus a credit spread adjustment of 10 basis points ("Adjusted Term SOFR Rate") and an amount depending on the type of borrowing and commitment fees charged on the unused amount under the Credit Agreement at various Total Net Leverage Ratio levels as follows:

Pricing Under the Credit Agreement (Basis Points)

Indebtedness-to-Credit EBITDA Ratio Credit Spread

Over LIBOR Commitment

> 3.5x but <= 4.0x 200.0 40

Total Net Leverage Ratio Term Benchmark Spread Commitment

<= 1.0x 150.0 20

>1.0x but <=2.0x 162.5 25

2 unchanged sentences

>3.5x 200.0 40

At March 31, 2022, the interest rate on debt under the Credit Agreement existing at that date 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 4.00x;

• Minimum Credit EBITDA-to-interest expense of 3.00x;

• 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 3.00x, 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.

At June 30, 2022, $101.5 million of the outstanding debt was principally priced at an interest rate equal to the Adjusted Term SOFR Rate plus the applicable credit spread of 150.0 basis points.

Prior to the Credit Agreement, the interest rate was based on LIBOR plus an applicable credit spread.

The primary restrictive covenants in the Credit Agreement include:

• Total Net Leverage Ratio of 4.00x;

• Interest Coverage Ratio of 3.00x;

• Unlimited payments for dividends and stock repurchases during the term of the Credit Agreement so long as the Total Net Leverage Ratio is equal to or less than 2.00x, and otherwise restrictions on payments for dividends and

stock repurchases for the term of the Credit Agreement at $75 million (provided that the $75 million basket will reset at the end of each fiscal quarter when the Total Net Leverage ratio is less than or equal to 2.00x).

Under the Credit Agreement:

• Total Net Leverage Ratio is defined as the ratio of (a)(i) total indebtedness minus (ii) liquidity (the lesser of $50,000,000 and the aggregate amount of cash and cash equivalents) to (b) Credit EBITDA;

• Interest Coverage Ratio is defined as the ratio of (a) Credit EBITDA to (b) interest expense.

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 March 31, 2022, based upon the most restrictive covenant within the Credit Agreement, available credit under the Credit Agreement was approximately $244 million.

Total debt outstanding was $131 million and $73 million as of March 31, 2022 and December 31, 2021, respectively.

At June 30, 2022, based upon the restrictive covenants within the Credit Agreement, available credit under the Credit Agreement was approximately $273 million.

Total debt outstanding was $101.5 million and $73.0 million as of June 30, 2022 and December 31, 2021, respectively.

Credit EBITDA is not intended to represent net income (loss) or cash flow from operations as defined by GAAP and should not be considered as an alternative to either net income (loss) or to cash flow.

The computations of Credit EBITDA and the leverage ratio and interest coverage ratio as defined in the Credit Agreement are presented below.

Computations of Credit EBITDA and Leverage Ratio and Interest Coverage Ratio as Defined in the Credit Agreement Along with Related Most Restrictive Covenants as of and for the Twelve Months Ended March 31, 2022 (In Thousands)

Computation of Credit EBITDA for the twelve months ended March 31, 2022:

The computations of Credit EBITDA, the Total Net Leverage Ratio and Interest Coverage Ratio as defined in the Credit Agreement are presented below.

Computations of Credit EBITDA, Total Net Leverage Ratio and Interest Coverage Ratio (in each case, as Defined in the Credit Agreement) Along with Related Primary Restrictive Covenants as of and for the Twelve Months Ended June 30, 2022

Computation of Credit EBITDA for the twelve months ended June 30, 2022 (In Thousands):

Net income (loss) $ 58,852

17 unchanged sentences

Plus or minus, as applicable, pro forma EBITDA adjustments to pension expense associated with the early payment of pension obligations 13,804

Credit EBITDA as defined in Credit Agreement $ 109,934

Computations of leverage and interest coverage ratios as defined in the Credit Agreement at March 31, 2022:

Leverage ratio (indebtedness-to-Credit EBITDA) 1.19x

Interest coverage ratio (Credit EBITDA-to-interest expense) 32.82x

Most restrictive covenants as defined in the Credit Agreement:

Available balance of maximum permitted aggregate amount of dividends that can be paid by Tredegar during the remaining term of the Credit Agreement ($75,000 minus $24,246 of dividends paid after December 1, 2020)

Maximum leverage ratio permitted 4.00x

Credit EBITDA $ 101,012

Computations of Total Net Leverage Ratio and Interest Coverage Ratio at June 30, 2022:

Total Net Leverage Ratio .73x

Interest Coverage Ratio 27.35x

Primary restrictive covenants:

Unlimited payments for dividends and stock repurchases during the term of the Credit Agreement so long as the Total Net Leverage Ratio is equal to or less than 2.00x, and otherwise restrictions on payments for dividends and stock repurchases for the term of the Credit Agreement at $75 million

Maximum Total Net Leverage Ratio permitted 4.00x

Minimum Interest Coverage Ratio permitted 3.00x

Tredegar was in compliance with all of its debt covenants as of March 31, 2022.

Tredegar was in compliance with all of its debt covenants as of June 30, 2022.

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.

1 unchanged sentence

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 2. Management’s Discussion and Analysis