What changed in this filing

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Item 9A. Controls and Procedures

2023-03-16 compared with 2022-03-11 · 254 added, 361 removed, 1257 unchanged (33% of the section changed)

CONTROLS AND PROCEDURES

On November 1, 2018, the Company filed a Current Report on Form 8-K (the “November 2018 Form 8-K”) to disclose deficiencies in internal control over financial reporting.

On November 1, 2018, the Company filed a Current Report on Form 8-K (the “November 2018 Form 8-K”) to disclose certain material weaknesses in internal control over financial reporting.

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

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

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

As of December 31, 2022, the Company continues to revise and execute management’s remediation plan, including the implementation of the new and revised internal controls over financial reporting.

The results of management’s testing of the design, implementation and operating effectiveness of controls identified that the Company continued to have material weaknesses in its internal control over financial reporting as of December 31, 2022;

however, the material weaknesses existing as of December 31, 2022 were limited to certain discrete items within the previously identified material weaknesses.

Evaluation of Disclosure Controls and Procedures

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

In connection with the preparation of this Form 10-K, pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company carried out an evaluation with the participation of its management, including its Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2022.

Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, because of the material weaknesses in internal control over financial reporting discussed below, the Company’s disclosure controls and procedures were not effective as of December 31, 2022, to ensure:

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

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

• Control Environment:

The Company did not have a sufficient number of trained resources with assigned responsibility and accountability for the design, operation and documentation of internal control over financial reporting in accordance with the 2013 COSO Framework.

• Risk Assessment:

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

• Information and Communication:

The Company did not have an effective information and communication process that identified and assessed the source of and controls necessary to ensure the reliability of information used in financial reporting and that communicates relevant information about roles and responsibilities for internal control over financial reporting.

• Monitoring Activities:

The Company did not have effective monitoring activities to assess the operation of internal control over financial reporting, including the continued appropriateness of control design and level of documentation maintained to support control effectiveness.

• Control Activities:

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

Based on management’s assessment, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2022.

The Company did not sufficiently attract, develop, and retain competent resources to fulfill internal control responsibilities and did not have an effective information and communication process that identified and assessed the source of and controls necessary to ensure the reliability of information used in financial reporting.

As a consequence of these material weaknesses, the Company did not effectively design, implement and operate process-level controls across its financial reporting processes.

While these material weaknesses did not result in material misstatements of the Company’s consolidated financial statements as of and for the year ended December 31, 2022, these material weaknesses create a reasonable possibility that a material misstatement of account balances or disclosures in annual or interim consolidated financial statements may not be prevented or detected in a timely manner.

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KPMG LLP’s report appears on page 42 of this Form 10-K.

Remediation Plan and Efforts to Address the Previously Identified Material Weaknesses

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• ongoing training with control owners, as necessary;

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

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

Remediation Plan and Efforts to Address the Identified Material Weaknesses

With the oversight of the Audit Committee of the Board of Directors (the “Audit Committee”), the Company commenced remediation efforts in the first quarter of 2019 pursuant to the original six step remediation plan that was designed with the assistance of management’s outside consultant, an internationally recognized accounting firm.

As of December 31, 2022, the Company continues to revise and execute management’s remediation plan to implement new and revised internal controls over financial reporting.

Since 2019, significant resources have been invested in the remediation efforts principally related to:

• the assistance from management’s outside consultant;

• the design of internal controls for various antiquated information technology systems that lead to highly manual processes supporting financial reporting objectives;

• the hiring of additional resources with technical internal control over financial reporting expertise;

• the establishment and execution of training programs for management on relevant internal control over financial reporting matters.

In addition, the Aluminum Extrusions business commenced the implementation of a new Board-approved enterprise resource planning and manufacturing execution systems (“ERP/MES”) in the first quarter of 2022, which is expected to cost approximately $30 million over a two-year time span.

The implementation will benefit the Aluminum Extrusion internal control environment by standardizing process-level controls and general information technology controls and significantly reduce the manual processes across the organization by replacing various antiquated information technology systems.

While progress has been made since 2019, including the remediation of a significant number of process-level control deficiencies throughout our financial reporting processes, the Company experienced significant turnover in positions relevant to its internal control over financial reporting during 2021 and 2022 that impacted the effectiveness of prior training programs and management’s ability to implement control activities that operated for a sufficient period of time to allow management, through testing, to conclude that the control activities were operating effectively during 2022.

To remediate the material weaknesses described above, the Company, with the oversight of the Audit Committee and the assistance of management’s outside consultant, has continued to revise its remediation strategy with the following remediation steps:

• Continue to hire, train and retain individuals with appropriate skills and experience related to designing, operating and documenting internal control over financial reporting;

• Continue to enhance controls as needed as the Company remediates control deficiencies identified;

• Develop a targeted training program to educate control owners on the principles and requirements of internal control activities associated with the material weaknesses above including, but not limited to;

◦ Addressing the reliability of the underlying information used in the performance of internal control activities;

◦ Retaining adequate documentary evidence for internal control activities, including the retention of evidence to support the precision of review and evidence of review procedures performed to demonstrate effective design, implementation and operation of such controls;

◦ Ensuring timely and consistent performance of the controls as designed.

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

The Company is committed to the improvement of its internal control over financial reporting and management continues to work with its outside consultant to assist in those efforts, as necessary.

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

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

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

“Risk Factors” of this Form 10-K for risks and uncertainties associated with management’s report on internal control over financial reporting as of and for the year ended December 31, 2022.

Changes in Internal Control Over Financial Reporting

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

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

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

Except as noted above with respect to the completion of certain steps in the remediation plan, there has been no change in the Company’s internal control over financial reporting during the quarter ended December 31, 2022, that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

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Election of Directors” and “Tredegar’s Board of Directors” is incorporated herein by reference.

The information concerning corporate governance to be included in the Proxy Statement under the headings “Board Meetings, Meetings of Non-Management Directors and the Board Committees” and “Corporate Governance” is incorporated herein by reference.

The information concerning corporate governance to be included in the Proxy Statement under the headings “Board Meetings, Meetings of Independent Directors and Board Committees” and “Corporate Governance and Risk Oversight” is incorporated herein by reference.

Set forth below are the names, ages and titles of the Company’s executive officers:

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from the University of Virginia.

Tredegar has adopted a Code of Conduct that applies to all of its directors, officers and employees (including its chief executive officer, chief financial officer and principal accounting officer) and has posted the Code of Conduct on its website.

Tredegar has a Code of Conduct that applies to all of its directors, officers and employees (including its chief executive officer, chief financial officer and principal accounting officer) and has posted the Code of Conduct on its website.

All amendments to or waivers from any provision of the Company’s Code of Conduct applicable to the chief executive officer, chief financial officer and principal accounting officer will be disclosed on the Company’s website.

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EXECUTIVE COMPENSATION

The information to be included in the Proxy Statement under the headings “Compensation of Directors,” “Board Meetings, Meetings of Non-Management Directors and Board Committees - Executive Compensation Committee Interlocks and Insider Participation,” “Compensation Discussion and Analysis,” “Executive Compensation Committee Report” and “Compensation of Executive Officers” is incorporated herein by reference.

The information to be included in the Proxy Statement under the headings “Compensation of Directors,” “Compensation Discussion and Analysis,” “Executive Compensation Committee Report” and “Compensation of Executive Officers” is incorporated herein by reference.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information to be included in the Proxy Statement under the headings “Certain Relationships and Related Transactions,” “Tredegar’s Board of Directors” and “Board Meetings, Meetings of Non-Management Directors and Board Committees” is incorporated herein by reference.

The information to be included in the Proxy Statement under the headings “Certain Relationships and Related Transactions,” “Tredegar’s Board of Directors” and “Board Meetings, Meetings of Independent Directors and Board Committees” is incorporated herein by reference.

PRINCIPAL ACCOUNTING FEES AND SERVICES

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Consolidated Balance Sheets

Consolidated Statements of Income

Consolidated Statements of Income (Loss)

Consolidated Statements of Comprehensive Income (Loss)

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Opinion on the Consolidated Financial Statements

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

We have audited the accompanying consolidated balance sheets of Tredegar Corporation and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of income (loss), comprehensive income (loss), cash flows, and shareholders’ equity for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with U.S.

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These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

Our responsibility is to express

an opinion on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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

Fair value of investments measured at net asset value

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

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

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

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

Additionally, specialized skills and

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

Goodwill impairment in the Surface Protection reporting unit

As discussed in Notes 1 and 5 to the consolidated financial statements, the Company’s goodwill balance as of December 31, 2022 was $70.6 million, including $57.3 million related to the Surface Protection reporting unit.

The Company assesses goodwill for impairment when events or circumstances indicate that the carrying value may not be recoverable, or, at a minimum, on an annual basis (December 1st of each year).

During the three months ended September 30, 2022, events and circumstances indicated that the Surface Protection reporting unit might be impaired.

The Company performed a quantitative impairment test of the Surface Protection reporting unit as of September 30, 2022, and concluded that no impairment existed.

Management estimated the fair value of the Surface Protection reporting unit based on a weighted average enterprise value utilizing the discounted cash flow and market multiple methods.

We identified the assessment of goodwill impairment in the Surface Protection reporting unit as a critical audit matter.

The estimation of fair value of the reporting unit is complex and includes estimation uncertainties that required a higher level of subjective auditor judgment.

Specifically, the discount rate and the revenue growth projections used in the discounted cash flow method required subjective and challenging auditor judgment as they represented subjective determinations of current and future market and economic conditions.

Additionally, the audit effort associated with the discount rate and the revenue growth projections required specialized skills and knowledge.

Changes to those assumptions could have had a significant effect on the Company’s estimate of the fair value of the reporting unit.

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

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

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

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

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

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

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

We performed sensitivity analyses over the Company’s discount rate and the revenue growth projections to assess their impact on the determination of the fair value of the Surface Protection reporting unit.

We compared the revenue growth projections used in the discounted cash flow model to underlying business strategies and growth plans of the Company.

In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:

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

● evaluating the Company’s revenue growth projections by comparing them to projections that were independently developed using external market and industry data.

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

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In our opinion, because of the effect of the material weaknesses, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of income (loss), comprehensive income (loss), cash flows, and shareholders’ equity for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements), and our report dated March 16, 2023 expressed an unqualified opinion on those consolidated financial statements.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

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

The material weaknesses related to the Company not sufficiently attracting, developing, and retaining competent resources to fulfill internal control responsibilities and not having an effective information and communication process that identified and assessed the source of and controls necessary to ensure the reliability of information used in financial reporting.

As a consequence, the Company did not effectively design, implement and operate process-level controls across its financial reporting processes.

The material weaknesses have been identified and included in management’s assessment.

The material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2022 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.

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Right-of-use leased assets 14,021 13,847

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

Identifiable intangible assets, net 11,690 14,152

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Other assets 2,879 2,460

Non-current assets of discontinued operations — 151

Total assets $ 542,093 $ 523,584

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Total liabilities 340,331 338,862

Contingencies (Note 18)

Shareholders’ equity:

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See accompanying notes to financial statements.

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

Tredegar Corporation and Subsidiaries

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Other comprehensive income (loss):

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

Unrealized foreign currency translation adjustment (net of tax expense of $ 290 in 2022, net of tax benefit of $ 365 in 2021 and net of tax benefit of $ 897 in 2020)

( 287 ) ( 1,643 ) ( 8,781 )

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

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

Derivative financial instruments adjustment (net of tax benefit of $ 336 in 2022, net of tax benefit of $ 351 in 2021 and net of tax expense of $ 790 in 2020)

( 3,381 ) ( 1,363 ) 3,571

Pension & other postretirement benefit adjustments:

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

Net gains (losses) and prior service costs (net of tax benefit of $ 1,400 in 2022, net of tax expense of $ 5,212 in 2021 and net of tax benefit of $ 4,228 in 2020)

( 5,064 ) 18,720 ( 12,197 )

Amortization of prior service costs and net gains or losses (net of tax of $ 3,676 in 2021, net of tax of $ 3,937 in 2020 and net of tax of $ 2,359 in 2019)

Amortization of prior service costs and net gains or losses (net of tax expense of $ 2,965 in 2022, net of tax expense of $ 3,676 in 2021 and net of tax expense of $ 3,937 in 2020)

10,641 13,186 11,359

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Loss on sale of divested businesses — — 52,326

Net gain on disposal of assets — — ( 6,334 )

Changes in assets and liabilities:

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Other, net 870 310 1,927

Net cash provided by operating activities 70,583 74,373 115,863

Net cash (used in) provided by operating activities ( 20,844 ) 70,583 74,373

Cash flows from investing activities:

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

Net cash provided by (used in) investing activities 24,450 32,881 ( 39,928 )

Net cash (used in) provided by investing activities ( 35,459 ) 24,450 32,881

Cash flows from financing activities:

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Other ( 396 ) 325 ( 850 )

Net cash used in financing activities:

Net cash provided by (used in) financing activities:

45,385 ( 76,842 ) ( 125,592 )

Effect of exchange rate changes on cash ( 371 ) 484 ( 1,238 )

Increase (decrease) in cash and cash equivalents 18,675 ( 19,576 ) ( 2,975 )

(Decrease) increase in cash and cash equivalents ( 11,289 ) 18,675 ( 19,576 )

Cash and cash equivalents at beginning of period 30,521 11,846 31,422

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Interest payments $ 4,423 $ 2,923 $ 1,679

Income tax payments (refunds), net $ 4,706 $ 1,670 $ 2,595

Income tax payments, net $ 10,814 $ 4,706 $ 1,670

See accompanying notes to financial statements.

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Tredegar Corporation and Subsidiaries

Accumulated Other Comprehensive Income (Loss)

Common Stock Retained

Earnings Trust for Savings Restoration Plan Foreign Currency Translation Gain (Loss) on Derivative Financial Instruments Pension & Other

Postretirement Benefit Adjust Total Shareholders’ Equity

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

(In thousands, except share and per-share data) Shares Amount

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

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

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

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

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

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

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

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

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

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

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

Tredegar common stock purchased by trust for savings restoration plan — — 48 ( 48 ) — —

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Stock-based compensation expense 294,764 4,046 — — — 4,046

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

Repurchase of employee common stock for tax withholdings ( 30,751 ) ( 396 ) — — — ( 396 )

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On October 30, 2020, the Company completed the sale of its personal care films business (“Personal Care Films”), which was part of its PE Films segment.

The transaction excluded the packaging film lines and related operations located at the Pottsville, Pennsylvania manufacturing site (“Pottsville Packaging”), which are now being reported within the Surface Protection component of PE Films.

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

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

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

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

For more information on this transaction, see Note 15.

Basis of Presentation and Principles of Consolidation.

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

References to Aluminum Extrusions for 2021, 2020 and 2019 relate to the 52-week fiscal year ended December 26, 2021, the 52-week fiscal year ended December 27, 2020 and the 52-week fiscal year ended December 29, 2019, respectively.

References to Aluminum Extrusions for 2022, 2021 and 2020 relate to the 52-week fiscal years ended December 25, 2022, December 26, 2021 and December 27, 2020, respectively.

The Company does not believe the impact of reporting the results of this segment in this manner is material to the consolidated financial results.

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

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

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

There was no intercompany funding with Aluminum Extrusions between December 25, 2022 and December 31, 2022 nor between December 27, 2021 and December 31, 2021.

Use of Estimates.

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Actual results could differ from those estimates.

Risk and Uncertainties.

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

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

The Company continues to monitor the impact of COVID-19 on the business and its effect on the consolidated financial statements.

Foreign Currency Translation.

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Dollar is the functional currency.

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

Transaction and remeasurement gains or losses included in income were losses of $ 0.4 million, losses of $ 0.5 million and gains of $ 0.6 million in 2022, 2021 and 2020, respectively.

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

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The allowance for doubtful accounts is determined based on an assessment of probable losses taking into account past due amounts, customer credit profile, historical experience and current economic conditions.

For receivables that do not have a specific allowance, the loss rate is computed by segment to apply to the remaining receivables balance, using each segment’s historic loss rate.

receivables that do not have a specific allowance, the loss rate is computed by segment to apply to the remaining receivables balance, using each segment’s historic loss rate.

Other receivables include value-added taxes related to certain foreign subsidiaries and other miscellaneous receivables due within one year.

For certain customers, the Company has arrangements in place with financial institutions whereby certain customer receivables are sold to the financial institution at a discount and without recourse.

Upon sale, the associated receivable is unrecognized and the discount is recognized as a reduction of sales.

Upon sale, the associated receivable is unrecognized and the discount is recognized.

For more information on accounts receivable and other receivables, net, see Note 2.

Inventories are stated at the lower of cost or market, with cost determined using the last in, first out (“LIFO”), the weighted average cost or the first in, first out method.

Inventories are stated at the lower of cost or market, with cost determined using the last in, first out (“LIFO”) method, the weighted average cost or the first in, first out (“FIFO”) method.

Cost elements included in work-in-process and finished goods inventories are raw materials, direct labor and manufacturing overhead.

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Capital expenditures for property, plant and equipment include capitalized interest.

Capitalized interest included in capital expenditures for property, plant and equipment was $ 0.1 million, $ 0.1 million and $ 0.3 million in 2021, 2020 and 2019, respectively.

Capitalized interest included in capital expenditures for property, plant and equipment was immaterial.

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

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The Company assesses goodwill for impairment when events or circumstances indicate that the carrying value may not be recoverable, or, at a minimum, on an annual basis (December 1st of each year).

When assessing goodwill for impairment, accounting guidance allows the Company to first perform a qualitative assessment about the likelihood of the carrying value of a reporting unit exceeding its fair value, referred to as the "Step 0" assessment.

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

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

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

The operations of the AACOA reporting unit, which includes the Niles, Michigan and Elkhart, Indiana facilities, were expected to be severely impacted by COVID-19, with over 80% of the aluminum extrusions manufactured at these facilities sold to customers that make consumer durable products, such as recreational boating and power sports vehicles, and to customers serving the building and construction and automotive markets.

When assessing goodwill for impairment, accounting guidance allows the Company to first perform a qualitative assessment (“Step 0 analysis”), which evaluates certain qualitative factors, including macroeconomic conditions, industry and market considerations, cost factors and overall financial performance, as well as company and reporting unit factors.

If the Company's Step 0 analysis indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company would perform a quantitative impairment test (“Step 1 analysis”).

During the three months ended September 30, 2022, events and circumstances indicated that the Surface Protection reporting unit (“Surface Protection”), which is also the asset group, might be impaired.

The Company performed a Step 1 analysis and long-lived impairment analysis for Surface Protection and determined that the fair value of Surface Protection exceeded its carrying value by 18.6 %.

Customer demand for electronics has continued to deteriorate since the third quarter of 2022, causing manufacturers in the supply chain to experience reduced capacity utilization and inventory corrections.

In addition, these depressed market conditions, which are expected to continue through the first half of 2023, are adversely impacting mix through reduced sales to our highest value-added customers and products.

Given the uncertain demand for Surface Protections products, it is reasonably possible that the cash flow estimates used in deriving such fair value measurements may change in the future.

As of December 1, 2022, the Company’s reporting units with goodwill were Surface Protection in PE Films and Futura in Aluminum Extrusions.

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

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

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

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

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

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

The Company's Step 0 analyses as of December 1, 2022 of these reporting units concluded that it is not more likely than not that the fair values of each reporting unit was less than its carrying amount.

Therefore, the Step 1 quantitative goodwill impairment tests for these reporting units were not necessary as of December 1, 2022.

As of December 31, 2022, Surface Protection had goodwill of $ 57.3 million and long-lived identifiable assets of $ 29.3 million.

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

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In connection therewith, on February 9, 2022, the Company contributed $ 50 million to the pension plan (the “Special Contribution”).

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

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

As a result, the Company expects there will be no required minimum contributions to the pension plan until final settlement.

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

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

Other comprehensive net actuarial losses associated with the pension plan were approximately $ 104 million on a pre-tax basis as of December 31, 2022.

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

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

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

The 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 2,760,983 and 1,582,222 for the year ended December 31, 2022 and 2021, respectively.

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

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

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

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

Stock-Based Employee Compensation Plans.

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A change in the fair value of the derivative that is highly effective and that is designated and qualifies as a cash flow hedge is recorded in other comprehensive income.

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

Gains and losses reported in other

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

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

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Accounting Standards Adopted .

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

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

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

Accounting Standards Not Yet Adopted .

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

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04 “Reference Rate Reform (Topic 848)”, 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, 2024.

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.

In the second quarter of 2022, the Company adopted ASU 2020-04, which did not have a material impact on the Company’s consolidated financial statements.

In September 2022, the FASB issued ASU 2022-04 “Liabilities - Supplier Finance Programs (Subtopic 405-50)”, which requires that a buyer in a supplier finance program disclose sufficient information about the program to allow users of the financial statements to understand the program’s nature, activity during the period, changes from period to period and potential magnitude.

The guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on roll forward information, which is effective for fiscal years beginning after December 15, 2023.

In the fourth quarter of 2022, the Company adopted ASU 2022-04, which did not have a material impact on the Company’s consolidated financial statements.

See Note 17 for more details.

ACCOUNTS AND OTHER RECEIVABLES

As of December 31, 2021 and 2020, accounts receivable and other receivables, net, were $ 103.3 million and $ 86.3 million, respectively, made up of the following:

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

(In thousands) 2022 2021

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Total accounts and other receivables 87,541 105,048

Allowance for bad debts (a)

( 1,736 ) ( 2,797 )

Allowance for bad debts ( 2,997 ) ( 1,736 )

Total accounts and other receivables, net $ 84,544 $ 103,312

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

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

A reconciliation of the beginning and ending balances of the allowance for doubtful accounts for the three years ended December 31, 2022 is as follows:

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Foreign exchange and other ( 28 ) ( 1,290 ) ( 209 )

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

Balance, end of year $ 2,997 $ 1,736 $ 2,797

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Inventories stated on the LIFO basis amounted to $ 25.3 million at December 31, 2022 and $ 18.8 million at December 31, 2021, which were below replacement costs by $ 15.6 million at December 31, 2022 and $ 27.5 million at December 31, 2021.

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

Inventories stated on the weighted average cost basis were $ 62.9 million and $ 30.9 million at December 31, 2022 and 2021, respectively, while inventories stated on the FIFO method amounted to $ 39.5 million and $ 38.9 million at December 31, 2022 and 2021, respective ly.

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

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

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

The following table presents a maturity analysis of the Company’s operating leases as of December 31, 2022:

(In thousands)

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Operating lease expense $ 2,718 $ 2,752

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

Other Information:

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GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS

The components of goodwill and identifiable intangibles at December 31, 2021 and 2020, and related amortization periods are as follows:

(In thousands) 2021 2020 Amortization Periods

Goodwill $ 70,608 $ 67,708 Not amortized

Identifiable intangible assets, net:

Customer relationships (cost basis of $ 26,526 in 2021 and $ 29,450 in 2020)

13,259 17,551 10-12 years

Proprietary technology (cost basis of $ 3,721 in 2021 and $ 3,726 in 2020)

118 194 Not more than 15 years

Trade names (cost basis of $ 13,338 in 2021 and $ 13,397 in 2020)

775 1,075 5 - 13 years

Total carrying value of identifiable intangibles 14,152 18,820

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

A reconciliation of goodwill at December 31, 2022 and 2021 is as follows:

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$ 10,370 $ 57,338 $ 67,708

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

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

Net carrying value of goodwill at December 31, 2021

13,270 57,338 70,608

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

Net carrying value of goodwill at December 31, 2022

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(In thousands) Customer Relationships Proprietary Technology Trade Names Total

Aluminum Extrusions:

Net carrying value at December 31, 2019

$ 19,644 $ 55 $ — $ 19,699

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

Net carrying value at December 31, 2020

17,164 35 — 17,199

Amortization expense (a)

( 2,239 ) ( 20 ) — ( 2,259 )

Out-of-period Adjustment (b)

( 1,953 ) — — (1,953)

Net carrying value at December 31, 2021

$ 12,972 $ 15 $ — $ 12,987

Net carrying value at December 31, 2019

$ — $ 610 $ — $ 610

Amortization expense — ( 120 ) — ( 120 )

Bright View disposal — ( 490 ) — ( 490 )

Net carrying value at December 31, 2020

Amortization expense — — — —

Net carrying value at December 31, 2021

Gross carrying value at December 31, 2022

$ 26,549 $ 3,726 $ 13,394 $ 43,669

Flexible Packaging Films:

Accumulated amortization ( 15,467 ) ( 3,672 ) ( 12,840 ) ( 31,979 )

Net carrying value at December 31, 2022

$ 11,082 $ 54 $ 554 $ 11,690

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

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

Net carrying value at December 31, 2020

Gross carrying value at December 31, 2021 (a)

$ 26,526 $ 3,721 $ 13,338 $ 43,585

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

Increase (decrease) due to foreign currency translation ( 18 ) ( 3 ) ( 43 ) ( 64 )

Accumulated amortization ( 13,267 ) ( 3,603 ) ( 12,563 ) ( 29,433 )

Net carrying value at December 31, 2021

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

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

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

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

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

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

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

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Vacation 3,502 3,452

Workers’ compensation and disabilities 2,422 2,986

Derivative contract liability 3,260 1,254

Accrued freight 2,298 2,337

Accrued utilities 2,099 1,938

Workers’ compensation and disabilities 2,051 2,422

Environmental liabilities 1,627 1,634

Customer rebates 1,154 1,857

Environmental liabilities (current) 1,634 2,066

Derivative contract liability 1,254 487

Accrued severance 445 1,894

Other 3,593 3,636

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DEBT AND CREDIT AGREEMENTS

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

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

Pricing Under Credit Agreement (Basis Points)

Indebtedness-to-Credit EBITDA Ratio Credit Spread

Over LIBOR Commitment

> 3.5x but <= 4.0x 200.0 40

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.

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)

Total Net Leverage Ratio Term Benchmark Spread Commitment

<= 1.0x 150.0 20

>1.0x but <=2.0x 162.5 25

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>3.5x 200.0 40

At December 31, 2021, the interest cost on debt borrowed under the Credit Agreement was priced at one-month LIBOR plus the applicable credit spread of 150.0 basis points.

The most restrictive covenants in the Credit Agreement include:

• Maximum indebtedness-to-Credit EBITDA (“Leverage Ratio”) of 4.00 x;

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

• Maximum aggregate distributions to shareholders over the remaining term of the Credit Agreement of $ 75 million;

provided, that if the Leverage Ratio of equal to or greater than 3.00 x, a limitation on such payments for the succeeding quarter at the greater of (i) $ 4.75 million and (ii) 50 % of consolidated net income for the most recent fiscal quarter.

The Credit Agreement is secured by substantially all of the Company’s and its domestic subsidiaries’ assets, including equity in certain material first-tier foreign subsidiaries.

At December 31, 2022, $ 137.0 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 162.5 basis points.

Prior to the Credit Agreement, the interest rate on borrowings was based on London Inter-Bank Offered Rate plus an applicable credit spread.

The primary restrictive covenants in the Credit Agreement include:

• Total Net Leverage Ratio of 4.00 x;

• Interest Coverage Ratio of 3.00 x;

• 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 2.00 x, 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 2.00 x).

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) EBITDA (as defined in Credit Agreement "Credit EBITDA");

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

The Credit Agreement is secured by substantially all assets of the Company and its domestic subsidiaries, including equity in certain material first-tier foreign subsidiaries.

At December 31, 2022, based upon the most restrictive covenant within the Credit Agreement, available credit under the Credit Agreement was approximately $ 201 million.

Total debt outstanding was $ 73 million and $ 134 million as of December 31, 2021 and 2020, respectively.

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

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

RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS

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The pre-tax a mounts recorded in 2022, 2021 and 2020 in accumulated other comprehensive income consist of:

Pension Other Post-Retirement

Pension Benefits Other Post-Retirement Benefits

(In thousands) 2022 2021 2020 2022 2021 2020

Net actuarial (gain) loss $ 103,998 $ 109,893 $ 150,267 $ ( 1,574 ) $ ( 320 ) $ 86

Pension expense is expected to be $ 13.9 million in 2022.

The amounts in accumulated other comprehensive income, before related deferred income taxes, that are expected to be recognized as components of net periodic cost during 2022 are $ 13.2 million of cost for the pension plan and $ 0.1 million of benefit for other post-retirement plans.

Pension expense is expected to be approximately $ 14 million in 2023.

The amounts in accumulated other comprehensive income, before related deferred income taxes, that are expected to be recognized as components of net periodic cost during 2023 are approximately $ 12 million of cost for the pension plan and approximately $ 0.2 million of benefit for other post-retirement plans.

The percentage composition of assets held by pension plans at December 31, 2022, 2021 and 2020 are as follows:

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Pension plans:

Fixed income mutual fund 13.9 % — —

Fixed income securities — 25.3 % 7.7 %

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Private equity and hedge funds 4.8 10.4 12.1

Collective investment trust 69.9 — —

Cash and cash equivalents 11.4 2.8 17.5

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Total 100.0 % 100.0 % 100.0 %

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

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

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

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

Following the announcement to terminate and settle the pension plan, the Company contributed $ 50 million to the pension plan and implemented (through consultation with its investment advisors) a liability-matching bond portfolio investment strategy (including a derivative overlay) that hedged the estimated settlement funding gap, which was approximately $ 24 million (before plan administration costs) at that time.

The overall objective of this hedging program is to minimize the volatility of the estimated settlement funding gap such that, as applicable interest rates move up or down causing a decrease or increase in the estimated value of the settlement liability, the value of the matching bond portfolio and derivative overlay decreases or increases by a similar amount.

A lower expected return on plan assets increases the amount of expense and vice versa.

Decreases in the level of actual plan assets will also serve to increase the amount of pension expense.

The total return on plan assets (net of fees and plan expenses), which is primarily affected by the change in fair value of plan assets, current year contributions and current year payments to participants, was approximately negative 15.1 % in 2022, positive 10.4 % in 2021 and positive 10.9 % in 2020.

The expected long-term rate return of 5.00 % used in both 2021 and 2020 were determined at the end of 2020 and 2019 and therefore did not contemplate the liability-driven investment strategy discussed above, however, the expected long-term rate return of 3.05 % used in 2022 and 4.99 % for 2023 does contemplate the liability-driven investment strategy discussed above.

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

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

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

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

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Balances at December 31, 2022

Cash and cash equivalents $ 6,943 $ 6,943 $ — $ —

Large/mid-capitalization equity securities 68,739 68,739 — —

Small-capitalization equity securities 16,588 16,588 — —

International and emerging market equity securities 25,174 25,174 — —

Fixed income securities 61,845 9,306 52,539 —

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

Other assets (a)

Cash and cash equivalents (a)

$ 24,796 $ 24,796 $ — $ —

Fixed income mutual fund 30,284 30,284 — —

Private equity and hedge funds (b)

10,250 — — 10,250

Total plan assets at fair value $ 65,330 $ 55,080 $ — $ 10,250

Investments measured at net asset value:

Collective investment trust (c)

Private equity and hedge funds 141

Total investments measured at net asset value $ 152,530

Securities sold and interest receivable 259

Total plan assets, December 31, 2022 $ 218,119

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

Other assets (a)

Other assets (d)

6,868 6,868 — —

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Total plan assets, December 31, 2021 $ 244,612

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

(a) This category represents investments in cash and cash equivalents, which includes:

1.) cash held in the plan used for investments in U.S.

Treasury futures which are entered into to minimize the volatility of the estimated settlement funding gap;

and 2.) short term money market fund in which the amortized cost approximates fair value.

These investments are highly liquid and therefore are classified as level 1 securities.

(b) Represents the estimated fair market value of the Company’s ownership in private equity and hedge funds which are probable of being sold for an amount different from the net asset value per share in connection with the expected termination of the pension plan.

(c) The collective investment trust contains liability hedging fixed income investments and are valued at the net asset value of the collective investment trust.

The net asset value is used as a practical expedient to estimate fair value.

The net asset value is based on the fair value of the underlying investments held by the fund less its liabilities.

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

OTHER INCOME (EXPENSE), NET

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

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

COVID-19-related expenses (b)

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

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

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

Other ( 121 ) ( 266 ) ( 1,864 )

Total $ 935 $ 20,376 $ ( 67,294 )

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

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

(a) In May 2022, additional cash consideration of $ 1.4 million was received related to customary post-closing adjustments.

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

See Note 16 for additional information.

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

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

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

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

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

In December 2020, the Company entered into a definitive agreement and completed the sale of Bright View Technologies, which resulted in the recognition of a pre-tax loss of $ 2.3 million ($ 1.8 million after-tax).

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

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Liability derivatives:

Aluminum futures contracts Accrued expenses ( 3,260 ) Accrued expenses ( 119 )

Aluminum futures contracts Other non-current liabilities ( 369 ) Other non-current liabilities —

Net asset (liability) $ ( 3,581 ) $ 1,966

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$ 1,786 5.8312 R$ 10,414 Dec-23 71 %

$ 659 5.7360 R$ 3,780 Jan-24 23 %

$ 659 5.7562 R$ 3,793 Feb-24 23 %

$ 659 5.7774 R$ 3,807 Mar-24 23 %

$ 659 5.8000 R$ 3,822 Apr-24 23 %

$ 659 5.8207 R$ 3,836 May-24 24 %

$ 659 5.8419 R$ 3,850 Jun-24 24 %

$ 659 5.8636 R$ 3,864 Jul-24 24 %

$ 659 5.8872 R$ 3,880 Aug-24 24 %

$ 659 5.9118 R$ 3,896 Sep-24 24 %

$ 659 5.9350 R$ 3,911 Oct-24 24 %

$ 659 5.9581 R$ 3,926 Nov-24 24 %

$ 659 5.9813 R$ 3,942 Dec-24 24 %

$ 31,145 5.6880 R$ 177,154 48 %

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Foreign currency forward contracts Prepaid expenses and other $ 781 Prepaid expenses and other $ —

Foreign currency forward contracts Other non-current assets 33 Other non-current assets —

Liability derivatives:

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

Foreign currency forward contracts Other non-current liabilities ( 3 ) Other non-current liabilities —

Net asset (liability) $ 811 $ ( 1,255 )

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

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

The pre-tax effect on net income (loss) from continuing operations and other comprehensive income (loss) of derivative instruments classified as cash flow hedges and described in the previous paragraphs for years ended December 31, 2022, 2021, and 2020 is summarized in the tables below:

(In thousands) Cash Flow Derivative Hedges

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Amount of pre-tax gain (loss) reclassified from accumulated other comprehensive income to net income (effective portion) $ 61 $ 1,378 $ 63 $ ( 337 ) $ 62 $ ( 6,069 )

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

As of December 31, 2022, the Company expects $ 2.0 million of unrealized after-tax net losses on aluminum and foreign currency derivative contracts reported in accumulated other comprehensive income (loss) to be reclassified to earnings within the next 12 months.

For the years ended December 31, 2022, 2021 and 2020, net gains or losses realized, from previously unrealized net gains or losses on hedges that had been discontinued, were not material.

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

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

Stock options granted by

the Company in 2022, 2021 and 2020 vest after 2 years and have a 7-year life or vest after 3 years and have a 5-year life.

Stock options exercisable totaled 2,719,919 and 1,762,190 shares at December 31, 2022 and 2021, respectively.

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

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

an ex-dividend date of December 21, 2020.

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

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

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Granted 638,074 10.75 to 14.62 11.90

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

Exercised ( 9,500 ) 19.40 to 19.40 19.40

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

Granted 638,074 10.75 to 14.62 11.90

Modification for special cash dividend (a)

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Exercised ( 67,705 ) 10.75 to 17.29 13.51

Outstanding at December 31, 2021

3,125,944 10.75 to 22.49 13.82

Forfeited and expired ( 17,203 ) 14.47 to 19.64 15.33

Outstanding at December 31, 2022 3,108,741 $ 10.75 to $ 22.49 $ 13.81

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

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

2021 2020 2019

The assumptions used in the Black-Scholes options-pricing model for valuing Tredegar stock options originally granted in 2021 and 2020, and the related estimated fair values at the date of grant, were as follows, no options were granted in 2022:

Dividend yield 2.6 % 2.5 %

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

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

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

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

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Total 3,108,741 3.3 years $ 13.82 $ — 2,719,919 $ 13.45 $ —

The total intrinsic value of stock options exercised is $ 0.2 million in 2021 and $ 0.1 million in 2019.

There were no stock options exercised in 2020.

The grant-date fair value of stock option-based awards vested was $ 3.5 million, $ 3.0 million, and $ 0.5 million in 2021, 2020, and 2019, respectively.

The total intrinsic value of stock options exercised was $ 0.2 million in 2021.

There were no stock options exercised in 2022 and 2020.

The grant-date fair value of stock option-based awards vested in 2022, 2021, and 2020 was $ 5.4 million, $ 3.5 million, and $ 3.0 million, respectively.

As of December 31, 2022, the unrecognized compensation cost for continuing operations related to stock option-based awards was $ 0.2 million.

This cost is expected to be recognized over the remaining weighted average period of 0.2 years.

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

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

There was no accelerated stock compensation expense in 2021.

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

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SARs granted by the Company in 2021 and 2020 vest after 2 years and have a 7-year life.

No SARs were granted prior to January 1, 2020 since 1992.

There were no SARs granted in 2022.

SARs may be settled in cash upon exercise and therefore are classified as liabilities and included in accrued expenses in the consolidated balance sheet.

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Outstanding at December 31, 2021 521,601 10.75 to 16.37 13.55

Forfeited and expired ( 22,914 ) 10.75 to 16.37 14.83

Outstanding at December 31, 2022 498,687 $ 10.75 to $ 16.37 $ 13.49

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

The grant-date fair value of SARs awards vested was $ 0.1 million and $ 0.6 million in 2021 and 2020, respectively.

As of December 31, 2021, the unrecognized compensation cost for continuing operations was $ 0.4 million.

The grant-date fair value of SARs awards vested in 2022, 2021 and 2020 was $ 0.5 million, $ 0.1 million and $ 0.6 million, respectively.

As of December 31, 2022, the unrecognized compensation cost for continuing operations was immaterial.

This cost is expected to be recognized over the remaining weighted average period of 0.2 years.

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Foreign rate differences 2,924 8.9 8,269 12.3 4,554 ( 18.2 )

Tax on Prodepe tax incentive 2,858 4.3 ( 801 ) 3.2 ( 714 ) ( 1.0 )

Foreign currency translation variation on intercompany loans 1,374 2.0 — — — —

tax on foreign branch income 1,390 4.1 ( 5,667 ) ( 8.4 ) 1,409 ( 5.6 )

Non-deductible other 381 1.2 1,053 1.6 208 ( 0.8 )

State taxes, net of federal income tax benefit 933 1.4 ( 373 ) 1.5 1,050 1.5

Tax contingency accruals and tax settlements 88 0.3 202 0.3 ( 58 ) 0.2

Foreign derived intangible income deduction — — — — ( 319 ) ( 0.4 )

Valuation allowance due to foreign losses and impairments — — — — ( 14,350 ) ( 19.9 )

State taxes, net of federal income tax benefit 48 0.1 933 1.4 ( 373 ) 1.5

Valuation allowance for capital loss carryforwards — — ( 5,415 ) ( 8.1 ) 52 ( 0.2 )

Foreign currency translation variation on intercompany loans — — 1,374 2.0 — —

Dividend received deduction net of foreign withholding tax — — ( 109 ) ( 0.2 ) ( 52 ) 0.2

Changes in estimates related to prior year tax provision ( 175 ) ( 0.5 ) ( 383 ) ( 0.6 ) ( 2,472 ) 9.9

Foreign derived intangible income deduction ( 763 ) ( 2.3 ) — — — —

Tax on Prodepe tax incentive ( 1,024 ) ( 3.1 ) 2,858 4.3 ( 801 ) 3.2

Research and development tax credit ( 1,489 ) ( 4.5 ) ( 928 ) ( 1.4 ) ( 633 ) 2.5

Valuation allowance for capital loss carryforwards ( 5,415 ) ( 8.1 ) 52 ( 0.2 ) 60 0.1

tax on foreign branch income ( 5,667 ) ( 8.4 ) 1,409 ( 5.6 ) 16,029 22.3

Brazilian tax incentive ( 3,873 ) ( 11.8 ) ( 7,019 ) ( 10.4 ) ( 4,787 ) 19.1

Income tax expense (benefit) at effective income tax rate $ 4,389 13.4 $ 9,284 13.8 $ ( 8,213 ) 32.8

Provision for income taxes for the year ended December 31, 2022 was $ 4.4 million compared to $ 9.3 million for the year ended December 31, 2021.

The effective tax rates for the years ended December 31, 2022 and 2021 were 13.4 % and 13.8 %, respectively.

The change in effective tax rate is primarily attributed to a discrete tax 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 (“IRS”) 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.

This discrete benefit was partially offset by an increase to the effective tax rate as the result of the Brazilian income tax no longer being creditable in the U.S.

for the foreseeable future.

Lastly, the effective tax rate changed due to foreign rate differences pertaining to the Company’s foreign operations and the benefit from tax incentives in Brazil.

Income taxes in 2021 are primarily due to the strong earnings of Terphane Ltda, which are included in Tredegar’s U.S.

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research and development tax credits.

During 2019, due to favorable earnings trends, the Company released a $ 12.4 million valuation allowance on the net deferred tax assets of its Brazilian subsidiary Terphane Ltda.

Because Terphane Ltda.

is taxed as a foreign branch for U.S.

tax purposes, Tredegar also recorded a related deferred tax liability of $ 12.4 million for the reduction in foreign tax credits that would result from Terphane Ltda.

realizing this net deferred tax asset.

Tredegar accrues U.S.

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federal income taxes and foreign withholding taxes on Terphane Ltda.’s undistributed earnings as of December 31, 2022 and 2021.

Beginning January 1, 2022, the TCJA eliminated the option to deduct research and development expenditures in the current year and requires taxpayers to capitalize such expenses as a result of amendments to Internal Revenue Code (“IRC”) Section 174.

As a result of this provision of the TCJA, deferred tax assets related to capitalized research expenses pursuant to the amended IRC Section 174 increased by a net $ 4.8 million.

The Brazilian federal statutory income tax rate is a composite of 34.0 % ( 25.0 % of income tax and 9.0 % of social contribution on income).

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Foregone tax credits on foreign branch income 719 4,796

Excess of carrying value over tax basis of investment in kaléo — 4,905

Right-of-use leased assets 3,147 2,767

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federal, state and foreign NOL and credit carryforwards 24,914 33,922

Section 174 Capitalized R&D expenditures 4,874 —

Other 1,220 146

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Valuation allowances of $ 10.3 million, $ 9.4 million and $ 5.5 million at December 31, 2022, 2021 and 2020, respectively, are recorded against the tax benefit on U.S.

federal, state and foreign tax credits and net operating loss carryforwards generated by certain foreign and domestic subsidiaries that may not be recoverable in the carryforward period.

federal, state and foreign tax credits and net operating loss carryforwards generated by domestic subsidiaries that may not be recoverable in the carryforward period.

The valuation allowance for excess capital losses from investments and other related items was $ 0.7 million, $ 0.7 million and $ 7.1 million at December 31, 2022, 2021 and 2020, respectively.

The 2021 balance decreased primarily due to utilization of capital losses as a result of the sale of the Company’s investment in kaléo.

The amount of the deferred income tax asset considered realizable, however, could be adjusted in the near term if estimates of the fair value of certain investments during the carryforward period change.

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Valuation allowances of $ 2.8 million, $ 2.5 million and $ 4.9 million at December 31, 2022, 2021 and 2020, respectively, were recorded against certain deferred state tax assets.

In 2019, the Company reversed a $ 12.4 million valuation allowance on the net deferred tax assets of its Brazilian subsidiary Terphane Ltda due to favorable earnings trends.

Since Terphane Ltda.

is taxed as a foreign branch for US tax purposes, Tredegar also recorded a related deferred tax liability of $ 12.4 million for the reduction in foreign tax credits that would result from Terphane Ltda.

realizing this net deferred tax asset.

A reconciliation of the Company’s unrecognized uncertain tax positions since January 1, 2020, is shown below:

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Prior period 44 40 —

Increase (decrease) due to settlements with taxing authorities — — ( 151 )

Reductions due to lapse of statute of limitations ( 66 ) ( 20 ) ( 265 )

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income tax examinations by tax authorities for years before 2019.

The Company anticipates that it is reasonably possible that Federal and state income tax audits or statutes may settle or close within the next 12 months, which could result in the recognition of up to approximately $ 0.5 million of the balance of unrecognized tax positions, including any payments that may be made.

The Company anticipates that it is reasonably possible that Federal and state income tax audits or statutes may settle or close within the next 12 months and are not expected to result in a material changes in unrecognized tax positions, including any payments that may be made.

BUSINESS SEGMENTS

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

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

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

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

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

PE Films produces surface protection films, polyethylene overwrap films and films for other markets.

Flexible Packaging Films produces polyester based films for use in packaging applications that have specialized properties, such as heat resistance, strength, barrier protection and the ability to accept high-quality print graphics.

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

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

Earnings before interest and taxes ("EBIT") from ongoing operations is a non-GAAP financial measure included in the reconciliation of segment financial information to consolidated results for the Company below.

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

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EBITDA $ 66,800 $ 55,948 $ 55,137

Depreciation & amortization (d) ( 16,272 ) ( 17,403 ) ( 16,719 )

Depreciation & amortization ( 17,414 ) ( 16,272 ) ( 17,403 )

EBIT 49,386 39,676 37,734

1 unchanged sentence

Goodwill impairment charge — — ( 13,696 )

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

Ongoing operations:

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Gain (loss) on investment in kaléo (a) 1,406 12,780 ( 60,900 )

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

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

Stock option-based compensation expense 1,424 2,495 2,161

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Subtotal 26,138 23,577 25,926 35,104 27,514 21,243

General corporate (e) 207 520 186 ( 153 ) 200 223

General corporate (d) 264 207 520 1,771 ( 153 ) 200

Discontinued operations — — 5,511 — — 1,912

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Brazil 117,896 96,792 93,511

China — — 220

Total $ 903,582 $ 798,223 $ 729,604

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of $ 10.3 million and $ 16.4 million at December 31, 2022 and 2021, respectively.

Export sales relate almost entirely to PE Films.

Operations in China relate to PE Films.

Operations in Brazil relate to Flexible Packaging Films.

(d) Depreciation and amortization for Aluminum Extrusions in 2019 excludes $ 10.0 million for accelerated amortization of trade names as a result of a rebranding initiative (see Note 5 for more information)

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

(f) In December 2020, the Company completed the sale of Bright View.

See Note 15 for more details.

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

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

Tredegar has a savings plan that allows eligible employees to voluntarily contribute a percentage of their compensation, up to IRS limitations.

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

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The Company’s liability under the restoration plan was $ 0.7 million at December 31, 2022 (consisting of 70,266 phantom shares of common stock) and $ 0.7 million at December 31, 2021 (consisting of 56,570 phantom shares of common stock) and valued at the closing market price on those dates.

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

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

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

The following table summarizes the financial results of discontinued operations reflected in the Consolidated Statements of Income for the year ended December 31, 2021, 2020 and 2019:

Years Ended December 31

The following table summarizes the financial results of discontinued operations reflected in the Consolidated Statements of Income for the year ended December 31 2020.

Net income (loss) from discontinued operations for the years ended December 31, 2022 and 2021 were immaterial.

Year Ended December 31,

(In thousands) 2020

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Other income (expense), net ( 333 )

— 109,913 152,458

Costs and expenses:

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Asset impairments and costs associated with exit and disposal activities, net of adjustments 1,529

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

( 1,118 ) — —

Loss on sale of business 50,027

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Income (loss) from discontinued operations, net of tax $ ( 58,611 )

(a) Represents a net increase to the estimated fair value of Personal Care Films primarily due to lower costs associated with IT transition-related services to provide the seller developed assets, which did not exist at the time of the sale, to support the seller’s IT infrastructure.

The assets and liabilities of the discontinued operations reflected in the Consolidated Balance Sheets as of December 31, 2021 and 2020, respectively were as follows:

(In thousands) 2021 2020

Prepaid expenses and other (a)

$ 178 $ 1,339

Other assets — 151

Total assets of discontinued operations $ 178 $ 1,490

Accrued expenses (a)

$ 193 $ 7,521

(a) The consolidated balance sheet of discontinued operations as of December 31, 2021 includes $ 0.2 million of other receivables related to the settlement of customary post-closing adjustments and other miscellaneous accrued expenses of $ 0.2 million.

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

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

The following table provides significant operating and investing cash flow information for discontinued operations for the year ended December 31, 2020.

There was no significant operating and investing cash flow information for the years ended December 31, 2022 and 2021.

Year Ended December 31,

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Depreciation and amortization $ 5,511

Gain from the sale of the Shanghai manufacturing facility assets

— — ( 6,316 )

Loss on sale of Personal Care Films 50,027

Other ( 1,118 ) — —

Total ( 1,118 ) 55,538 3,646

Investing activities:

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

Proceeds from the sale of the Shanghai manufacturing facility assets

Capital expenditures ( 1,912 )

Total $ 53,203

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

Assets Held For Sale

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Tredegar received closing cash proceeds of $ 47.1 million.

A pre-tax gain of $12.8 million on the Company’s investment in kaléo was recognized in the full year ended December 31, 2021 compared to a pre-tax loss of $60.9 million and pre-tax gain of $28.5 million in the full years ended December 31, 2020 and 2019, respectively, which are reported in “Other income (expense), net” in the consolidated statements of income.

The gain in 2021 includes a $ 0.3 million dividend received from kaléo in the first quarter of 2021 and the gain in 2019 includes a $ 17.6 million dividend received from kaléo.

ASSET IMPAIRMENTS AND COSTS ASSOCIATED WITH EXIT AND DISPOSAL ACTIVITIES

In connection with the anticipated customer product transitions in Surface Protection, the Company recognized severance and other employee-related expenses of $ 1.6 million in the fourth quarter of 2020.

The Company recognizes termination benefits that are covered by a contract or an ongoing benefit arrangement when it is probable that employees will be entitled to benefits and the amount can be reasonably estimated.

Other accrued expenses and losses related to asset impairments and costs associated with exit and disposal activities for continuing operations were not material for the years ended December 31, 2021, 2020 and 2019, respectively.

Subsequently, in May 2022, additional cash consideration of $ 1.4 million was received related to customary post-closing adjustments, which is reported in “Other income (expense), net” in the consolidated statements of income.

SUPPLY CHAIN FINANCING

The Company has supply chain finance service agreements with third-party financial institutions to provide platforms that facilitate the ability of participating suppliers to finance payment obligations from the Company with the third-party financial institution.

The Company’s obligations to its suppliers, including amounts due and scheduled payment dates, are not affected by suppliers’ decisions to finance amounts under the supply chain finance agreements.

As of December 31, 2022 and 2021, $ 25.9 million and $ 30.7 million, respectively, of the Company’s accounts payable were financed by participating suppliers through third-party financial institutions.

CONTINGENCIES

Tredegar is involved in various stages of investigation and remediation relating to environmental matters at certain current and former plant locations.

Where the Company has determined the nature and scope of any required environmental

remediation activity, estimates of cleanup costs have been obtained and accrued.

As efforts continue to maintain compliance with applicable environmental laws and regulations, additional contingencies may be identified.

Where the Company has determined the nature and scope of any required environmental remediation activity, estimates of cleanup costs have been obtained and accrued.

As efforts to maintain compliance with applicable environmental laws and regulations, additional contingencies may be identified continue.

If additional contingencies are identified in the future, the Company’s practice is to determine at that time the nature and scope of those contingencies, obtain and accrue estimates of the cost of remediation, and perform remediation.

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The Company does, however, accrue for losses for any known contingent liability, including those that may arise from indemnification provisions, when future payment is probable and the amount is reasonably estimable.

The Company discloses contingent liabilities if the probability of loss is reasonably possible and material.

SELECTED QUARTERLY FINANCIAL DATA

Tredegar Corporation and Subsidiaries

(In Thousands, Except Per-Share Amounts)

Quarter Second

Quarter Third

Quarter Fourth

For the year ended December 31, 2021

Sales $ 184,822 $ 211,129 $ 209,517 $ 220,986

Gross profit 37,313 45,394 31,497 34,328

Income (loss) from continuing operations, net of tax 9,618 20,728 6,229 21,358

Income (loss) from discontinued operations, net of tax ( 587 ) 508 ( 26 ) ( 6 )

Net income (loss) $ 9,031 $ 21,236 $ 6,203 $ 21,352

Earnings (loss) per share:

Continuing operations $ 0.29 $ 0.62 $ 0.19 $ 0.64

Discontinued operations ( 0.02 ) 0.02 — —

Basic $ 0.27 $ 0.64 $ 0.19 $ 0.64

Continuing operations $ 0.29 $ 0.61 $ 0.19 $ 0.63

Discontinued operations ( 0.02 ) 0.02 — —

Diluted $ 0.27 $ 0.63 $ 0.19 $ 0.63

For the year ended December 31, 2020

Sales $ 192,136 $ 186,260 $ 184,370 $ 192,524

Gross profit 40,092 46,331 41,909 42,305

Income (loss) from continuing operations, net of tax ( 20,663 ) 14,332 ( 16,976 ) 6,475

Income (loss) from discontinued operations, net of tax ( 1,658 ) ( 3,136 ) ( 48,237 ) ( 5,580 )

Net income $ ( 22,321 ) $ 11,196 $ ( 65,213 ) $ 895

Earnings per share:

Continuing operations $ ( 0.62 ) $ 0.43 $ ( 0.51 ) $ 0.19

Discontinued operations ( 0.05 ) ( 0.10 ) ( 1.44 ) ( 0.17 )

Basic $ ( 0.67 ) $ 0.33 $ ( 1.95 ) $ 0.02

Continuing operations $ ( 0.62 ) $ 0.43 $ ( 0.51 ) $ 0.19

Discontinued operations ( 0.05 ) ( 0.10 ) ( 1.44 ) ( 0.17 )

Diluted $ ( 0.67 ) $ 0.33 $ ( 1.95 ) $ 0.02

Due to rounding, the sum of quarterly amounts presented in the table above may not add up precisely to the corresponding full year amounts.

The Company discloses contingent liabilities if the probability of loss is reasonably possible and considered to be material.

FORM 10-K SUMMARY

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4.1 Description of Registered Securities (filed as Exhibit 4.1 to Tredegar’s Annual Report on Form 10-K (File No 1-10258) for the year ended December 31, 2019, and incorporated herein by reference)

10.1 Amended and Restated Credit Agreement, dated as of June 28, 2019, among Tredegar, as borrower, the lenders named therein, JPMorgan Chase Bank, N.A., as administrative agent, SunTrust Bank, Citizens Bank, N.A.

and PNC Bank, National Association, as co-syndication agents, and U.S.

Bank National Association, Bank of America, N.A.

and Wells Fargo Bank, National Association, as co-documentation agents, and the other lenders party thereto (filed as Exhibit 4.1 to Tredegar’s Current Report on Form 8-K (File No.

1-10258), filed on July 1, 2019, and incorporated herein by reference)

10.1.1 Amended and Restated Guaranty, dated as of June 28, 2019, by and among the subsidiaries of Tredegar listed on the signature pages thereto in favor of JPMorgan Chase Bank, N.A., as administrative agent, for the ratable benefit of the Holders of Guaranteed Obligations (as defined therein) (filed as Exhibit 4.2 to Tredegar’s Current Report on Form 8-K (File No.

1-10258), filed on July 1, 2019, and incorporated herein by reference)

10.1.2 Amended and Restated Pledge and Security Agreement, dated as of June 28, 2019, by and among Tredegar and the subsidiaries of Tredegar listed on the signature pages thereto and JPMorgan Chase Bank, N.A., as administrative agent, for the ratable benefit of the Secured Parties (as defined therein) (filed as Exhibit 4.3 to Tredegar’s Current Report on Form 8-K (File No.

1-10258), filed on July 1, 2019, and incorporated herein by reference)

10.1.3 Amendment No.

1 to the Amended and Restated Credit Agreement, dated as of December 1, 2020, among Tredegar Corporation, as borrower, the lenders named therein, JPMorgan Chase Bank, N.A., as administrative agent, Truist Bank, Citizens Bank, N.A.

and PNC Bank, National Association, as co-syndication agents, and U.S.

Bank National Association, Bank of America, N.A.

and Wells Fargo Bank, National Association, as co-documentation agents, and the other lenders party thereto (filed as Exhibit 4.1 to Tredegar’s Current Report on Form 8-K (File No.

1-10258), filed on December 3, 2020, and incorporated herein by reference)

10.1.4 Amendment No.

2 to the Amended and Restated Credit Agreement, dated as of November 22, 2021, among Tredegar Corporation, as borrower, the lenders named therein, JPMorgan Chase Bank, N.A., as administrative agent, Truist Bank, Citizens Bank, N.A.

and PNC Bank, National Association, as co-syndication agents, and U.S.

Bank National Association, Bank of America, N.A.

and Wells Fargo Bank, National Association, as co-documentation agents, and the other lenders party thereto

10.1 Second Amended and Restated Credit Agreement, dated as of June 29, 2022, among Tredegar, as borrower, the lenders named therein, JPMorgan Chase Bank N.A., as administrative agent, Citizens Bank N.A and PNC Bank, National Association, as co-syndication agents, and Bank of America, N.A., U.S.

Bank National Association and Wells Fargo Bank, National Association, as co-documentation agents, and the other lenders party thereto (filed as Exhibit 4.1 to Tredegar's Current Report on Form 8-K (File No.

1-10258), filed on June 30, 2022, and incorporated herein by reference)

10.1.1 Second Amended and Restated Guaranty, dated as of June 29, 2022, by and among the subsidiaries of Tredegar listed on the signature pages thereto in favor of JPMorgan C h ase Bank, N.A., as administrative agent, for the ratable benefit of the Holders of Guaranteed Obligations (as defined therein) (filed as Exhibit 4.2 to Tredegar's Current Report on Form 8-K (File No.

1-10258), filed on June 30, 2022, and incorporated herein by reference)

10.1.2 Second Amended and Restated Pledge Agreement, dated as of June 29, 2022, by and among Tredegar and the subsidiaries of Tredegar listed on the signature pages thereto and JPMorgan C h ase Bank, N.A., as administrative agent, for the ratable benefit of the Secured Parties (as defined therein) (filed as Exhibit 4.3 to Tredegar's Current Report on Form 8-K (File No.

1-10258), filed on June 30, 2022, and incorporated herein by reference)

10.2 Reorganization and Distribution Agreement, dated as of June 1, 1989, between Tredegar and Ethyl Corporation (filed as Exhibit 10.1 to Tredegar’s Annual Report on Form 10-K (File No.

62 unchanged sentences

Brickhouse, II) (Principal Accounting Officer)

Gottwald Chairman of the Board of Directors

/s/ Gregory A.

Pratt Lead Director

Pratt Chairman of the Board of Directors

/s/ George C.

1 unchanged sentence

Freeman, III)

/s/ William M.

Gottwald Director

/s/ Kenneth R.

4 unchanged sentences

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

What changed 10-K

Item 9A. Controls and Procedures