What changed in this filing

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Item 1. Financial Statements

2023-05-08 compared with 2022-11-09 · 100 added, 263 removed, 379 unchanged (49% of the section changed)

3 unchanged sentences

(In Thousands, Except Share Data)

September 30, December 31,

March 31, December 31,

Current assets:

4 unchanged sentences

Prepaid expenses and other 10,011 10,304

Current assets of discontinued operations 151 178

Total current assets 228,740 242,584

14 unchanged sentences

Income taxes payable 226 1,137

Current liabilities of discontinued operations 71 193

Total current liabilities 116,591 149,713

5 unchanged sentences

Shareholders’ equity:

Common stock, no par value (issued and outstanding 33,982,479 shares at September 30, 2022 and 33,736,629 shares at December 31, 2021)

Common stock, no par value (issued and outstanding 33,970,282 shares at March 31, 2023 and 34,000,642 shares at December 31, 2022)

59,423 58,824

Common stock held in trust for savings restoration plan ( 111,861 shares at September 30, 2022 and 108,433 shares at December 31, 2021)

Common stock held in trust for savings restoration plan ( 114,741 shares at March 31, 2023 and 113,316 shares at December 31, 2022)

( 2,203 ) ( 2,188 )

6 unchanged sentences

Total liabilities and shareholders’ equity $ 526,174 $ 542,093

See accompanying notes to financial statements.

See accompanying notes to the condensed consolidated financial statements.

Tredegar Corporation

1 unchanged sentence

(In Thousands, Except Per Share Data)

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

2022 2021 2022 2021

Three Months Ended March 31,

Revenues and other items:

12 unchanged sentences

Total 192,080 219,064

Income (loss) from continuing operations before income taxes 2,137 8,137 39,714 47,304

Income (loss) before income taxes ( 678 ) 17,200

Income tax expense (benefit) 331 778

Net income (loss) from continuing operations 1,012 6,229 32,254 36,576

Income (loss) from discontinued operations, net of tax 21 ( 26 ) 68 ( 104 )

Net income (loss) $ ( 1,009 ) $ 16,422

Earnings (loss) per share:

Continuing operations $ 0.03 $ 0.19 $ 0.96 $ 1.09

Discontinued operations — — — —

Basic earnings (loss) per share $ 0.03 $ 0.19 $ 0.96 $ 1.09

Continuing operations $ 0.03 $ 0.19 $ 0.96 $ 1.09

Discontinued operations — — — —

Diluted earnings (loss) per share $ 0.03 $ 0.19 $ 0.96 $ 1.09

Basic $ ( 0.03 ) $ 0.49

Diluted $ ( 0.03 ) $ 0.49

Shares used to compute earnings (loss) per share:

1 unchanged sentence

Diluted 33,895 33,696

See accompanying notes to financial statements.

See accompanying notes to the condensed consolidated financial statements.

Tredegar Corporation

1 unchanged sentence

(In Thousands)

Three Months Ended September 30,

Net income (loss) $ 1,033 $ 6,203

Other comprehensive income (loss):

Unrealized foreign currency translation adjustment (net of tax benefit of $ 148 in 2022 and net of tax benefit of $ 294 in 2021)

( 2,340 ) ( 2,788 )

Derivative financial instruments adjustment (net of tax benefit of $ 818 in 2022 and net of tax benefit of $ 174 in 2021)

( 2,547 ) ( 717 )

Amortization of prior service costs and net gains or losses (net of tax expense of $ 712 in 2022 and net of tax expense of $ 927 in 2021)

Other comprehensive income (loss) ( 2,331 ) ( 188 )

Comprehensive income (loss) $ ( 1,298 ) $ 6,015

Nine Months Ended September 30,

Three Months Ended March 31,

Net income (loss) $ ( 1,009 ) $ 16,422

Other comprehensive income (loss):

Unrealized foreign currency translation adjustment (net of tax expense of $ 98 in 2022 and net of tax benefit of $ 103 in 2021)

( 2,034 ) ( 1,443 )

Derivative financial instruments adjustment (net of tax benefit of $ 1,261 in 2022 and net of tax expense of $ 185 in 2021)

( 5,778 ) 515

Unrealized foreign currency translation adjustment (net of tax expense of $ 436 in 2023 and net of tax expense of $ 728 in 2022)

Derivative financial instruments adjustment (net of tax expense of $ 836 in 2023 and net of tax expense of $ 2,916 in 2022)

Amortization of prior service costs and net gains or losses (net of tax expense of $ 637 in 2023 and net of tax expense of $ 712 in 2022)

1 unchanged sentence

Comprehensive income (loss) $ 3,667 $ 30,426

See accompanying notes to financial statements.

See accompanying notes to the condensed consolidated financial statements.

Tredegar Corporation

1 unchanged sentence

(In Thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

21 unchanged sentences

Proceeds from the sale of kaléo 262 —

Proceeds from the sale of assets — 4,749

Net cash used in investing activities ( 24,121 ) ( 14,827 )

Net cash (used in) provided by investing activities ( 8,763 ) ( 5,086 )

Cash flows from financing activities:

2 unchanged sentences

Dividends paid ( 4,419 ) ( 4,059 )

Debt financing costs ( 1,245 ) —

Other — ( 396 )

4 unchanged sentences

Cash and cash equivalents at end of period $ 15,025 $ 25,648

See accompanying notes to financial statements.

See accompanying notes to the condensed consolidated financial statements.

Tredegar Corporation

1 unchanged sentence

(In Thousands, Except Share and Per Share Data)

The following summarizes the changes in shareholders’ equity for the three month period ended September 30, 2022:

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

Balance July 1, 2022

$ 56,911 $ 304,370 $ ( 2,161 ) $ ( 147,335 ) $ 211,785

Net income (loss) — 1,033 — — 1,033

Foreign currency translation adjustment — — — ( 2,340 ) ( 2,340 )

Derivative financial instruments adjustment — — — ( 2,547 ) ( 2,547 )

Amortization of prior service costs and net gains or losses — — — 2,556 2,556

Cash dividends declared ($ 0.13 per share)

— ( 4,420 ) — — ( 4,420 )

Stock-based compensation expense 991 — — — 991

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

Balance September 30, 2022

$ 57,902 $ 300,996 $ ( 2,174 ) $ ( 149,666 ) $ 207,058

The following summarizes the changes in shareholders’ equity for the nine month period ended September 30, 2022:

The following summarizes the changes in shareholders’ equity for the three month period ended March 31, 2023:

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

11 unchanged sentences

Tredegar common stock purchased by trust for savings restoration plan — 15 ( 15 ) — —

Balance September 30, 2022

$ 57,902 $ 300,996 $ ( 2,174 ) $ ( 149,666 ) $ 207,058

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

Stock Retained

Earnings Trust for

Plan Accumulated Other

Comprehensive Income (Loss) Total

Shareholders’

Balance at July 1, 2021 $ 52,940 $ 261,699 $ ( 2,109 ) $ ( 169,190 ) $ 143,340

Net income (loss) — 6,203 — — 6,203

Foreign currency translation adjustment — — — ( 2,788 ) ( 2,788 )

Derivative financial instruments adjustment — — — ( 717 ) ( 717 )

Amortization of prior service costs and net gains or losses — — — 3,317 3,317

Cash dividends declared ($ 0.12 per share)

Balance March 31, 2023

$ 59,423 $ 287,308 $ ( 2,203 ) $ ( 142,919 ) $ 201,609

Stock-based compensation expense 966 — — — 966

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

Balance at September 30, 2021 $ 53,906 $ 263,873 $ ( 2,122 ) $ ( 169,378 ) $ 146,279

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

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

Stock Retained

11 unchanged sentences

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

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

Repurchase of employee common stock for tax

withholdings ( 396 ) — — — ( 396 )

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

Balance at September 30, 2021 $ 53,906 $ 263,873 $ ( 2,122 ) $ ( 169,378 ) $ 146,279

See accompanying notes to financial statements.

Balance at March 31, 2022 $ 55,953 $ 293,563 $ ( 2,148 ) $ ( 135,500 ) $ 211,868

See accompanying notes to the condensed consolidated financial statements.

TREDEGAR CORPORATION

1 unchanged sentence

BASIS OF PRESENTATION

In the opinion of management, the accompanying condensed consolidated financial statements of Tredegar Corporation and its subsidiaries (“Tredegar,” “the Company,” “we,” “us” or “our”) contain all adjustments necessary to state fairly, in all material respects, Tredegar’s condensed consolidated financial position as of September 30, 2022, the condensed consolidated results of operations for the three and nine months ended September 30, 2022 and 2021, the condensed consolidated cash flows for the nine months ended September 30, 2022 and 2021, and the condensed consolidated changes in shareholders’ equity for the nine months ended September 30, 2022 and 2021, in accordance with U.S.

In the opinion of management, the accompanying condensed consolidated financial statements of Tredegar Corporation and its subsidiaries (“Tredegar,” “the Company,” “we,” “us” or “our”) contain all adjustments necessary to state fairly, in all material respects, Tredegar’s condensed consolidated financial position as of March 31, 2023, the condensed consolidated results of operations for the three months ended March 31, 2023 and 2022, the condensed consolidated cash flows for the three months ended March 31, 2023 and 2022, and the condensed consolidated changes in shareholders’ equity for the three months ended March 31, 2023 and 2022, in accordance with U.S.

generally accepted accounting principles (“GAAP”).

1 unchanged sentence

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

As such, the fiscal third quarter for 2022 and 2021 for this segment references 13-week periods ended September 25, 2022 and September 26, 2021.

As such, the fiscal first quarter for 2023 and 2022 for this segment references 13-week periods ended March 26, 2023 and March 27, 2022, respectively.

The Company does not believe the impact of reporting the results of this segment as stated above is material to the consolidated financial results.

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

There was no intercompany funding with Aluminum Extrusions between September 25, 2022 and September 30, 2022.

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

There was no intercompany funding with Aluminum Extrusions between March 26, 2023 and March 31, 2023.

The condensed consolidated financial statements as of December 31, 2022 that is included herein was derived from the audited consolidated financial statements provided in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (“2022 Form 10-K”) but does not include all disclosures required by GAAP.

These financial statements should be read in conjunction with the consolidated financial statements and related notes included in the 2022 Form 10-K.

The results of operations for the three and nine months ended September 30, 2022, are not necessarily indicative of the results to be expected for the full year.

Risks and Uncertainties

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 goodwill and long-lived impairment analysis for Surface Protection and determined that the fair value of Surface Protection exceeded its carrying value.

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 September 30, 2022, the Surface Protection reporting unit had goodwill of $ 57.3 million and long-lived identifiable assets of $ 29.5 million.

The results of operations for the three months ended March 31, 2023, are not necessarily indicative of the results to be expected for the full year.

Impairment of Goodwill and Long-Lived Assets

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).

In addition, the Company reviews long-lived assets for possible impairment when events indicate that an impairment may exist.

As of March 31, 2023, the Company’s reporting units with goodwill were Surface Protection in PE Films and Futura in Aluminum Extrusions.

No events or circumstances were identified during the first quarter of 2023 that indicate that it is not more likely than not that the fair values of each reporting unit was less than its carrying amount.

The valuation of both goodwill and long-lived assets depends on a variety of factors, including macroeconomic conditions, industry and market considerations, cost factors and overall financial performance.

Failure to successfully achieve projections could result in future impairments.

Furthermore, impairment to the Surface Protection reporting unit, which is also the asset group, may be caused by factors outside the Company’s control, such as increasing competitive pricing pressures, weak consumer electronic market demand, lower than expected sales and profit growth rates, and various other factors.

Consumer demand for electronics has significantly softened, causing manufacturers in the supply chain to experience reduced capacity utilization and inventory corrections.

In addition, these market conditions are adversely impacting mix through reduced sales to Surface Protection’s 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 impairment valuations may change in the future.

As of March 31, 2023, the Surface Protection reporting unit had goodwill of $ 57.3 million and long-lived identifiable assets of $ 28.5 million.

Accounting Standards Adopted

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

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

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

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.

Accounting Standards Not Yet Adopted

In September 2022, the FASB issued ASU 2022-04, which requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of 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 annual periods beginning after December 15, 2022, with early adoption permitted.

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.

No Accounting Standard Updates issued by the Financial Accounting Standards Board were adopted during the first quarter of 2023.

ACCOUNTS AND OTHER RECEIVABLES

As of September 30, 2022 and December 31, 2021, accounts receivable and other receivables, net include the following:

September 30, December 31,

As of March 31, 2023 and December 31, 2022, accounts receivable and other receivables, net include the following:

March 31, December 31,

(In thousands) 2023 2022

5 unchanged sentences

The components of inventories are as follows:

(In thousands) September 30, 2022 December 31, 2021

(In thousands) March 31, 2023 December 31, 2022

Finished goods $ 33,033 $ 34,686

6 unchanged sentences

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

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

On February 10, 2022, Tredegar announced the initiation of a process to terminate and settle its frozen defined benefit pension plan.

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

2 unchanged sentences

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

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

Pension expense recognized for this plan was immaterial in the first quarter of 2023 and 2022, respectively.

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

The components of net periodic benefit cost for the pension and other postretirement benefit programs reflected in the condensed consolidated statements of income for the three and nine months ended September 30, 2022 and 2021, are shown below:

Pension Benefits Other Post-Retirement Benefits

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

(In thousands) 2022 2021 2022 2021

Service cost $ — $ — $ 5 $ 9

Interest cost 2,226 2,101 51 50

Expected return on plan assets ( 2,044 ) ( 2,862 ) — —

Amortization of prior service costs, (gains) losses and net transition asset 3,301 4,268 ( 33 ) ( 24 )

Net periodic benefit cost $ 3,483 $ 3,507 $ 23 $ 35

The components of net periodic benefit cost for the pension and other postretirement benefit programs reflected in the condensed consolidated statements of income for the three months ended March 31, 2023 and 2022, are shown below:

Pension Benefits Other Post-Retirement Benefits

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

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

(In thousands) 2023 2022 2023 2022

4 unchanged sentences

Net periodic benefit cost $ 3,403 $ 3,454 $ 15 $ 22

Pension and other postretirement liabilities were $ 29.1 million and $ 78.9 million at September 30, 2022 and December 31, 2021, respectively ($ 0.7 million included in “Accrued expenses” at September 30, 2022 and December 31, 2021, respectively, with the remainder included in “Pension and other postretirement benefit obligations, net” in the condensed consolidated balance sheets).

Pension and other postretirement liabilities were $ 36.1 million and $ 35.7 million at March 31, 2023 and December 31, 2022, respectively ($ 0.7 million included in “Accrued expenses” at March 31, 2023 and December 31, 2022, respectively, with the remainder included in “Pension and other postretirement benefit obligations, net” in the condensed consolidated balance sheets).

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

2 unchanged sentences

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

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

Three Months Ended March 31,

(In thousands) 2023 2022

Gain on investment in kaléo (a)

$ — $ 279 $ 1,406 $ 1,197

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

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

Other 18 ( 90 )

Total $ 280 $ ( 302 )

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

See Note 12 for additional information on the sale of the investment in kaléo.

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

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

(a) In January 2023, additional cash consideration of $ 0.3 million was received related to the customary post-closing adjustments on the sale of the investment in kaleo, Inc ("kaléo"), which was sold in December 2021.

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

EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income (loss) from continuing and discontinued operations by the weighted average number of shares of common stock outstanding.

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

Three Months Ended Nine Months Ended

September 30, September 30,

Basic earnings per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding.

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

Three Months Ended

(In thousands) 2023 2022

3 unchanged sentences

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

The average out-of-the-money options to purchase shares that were excluded from the calculation of incremental shares attributable to stock options and restricted stock were 2,932,378 and 2,645,063 for the three and nine months ended September 30, 2022, respectively, and 2,433,213 and 1,280,376 for the three and nine months ended September 30, 2021, respectively.

The Company had a net loss for the three months ended March 31, 2023, so there is no dilutive impact for such shares.

If the Company had reported net income for the three months ended March 31, 2023, 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 would have been 2,642,365 .

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The changes in accumulated other comprehensive income (loss) by component for the three months ended September 30, 2022.

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

Balance at July 1, 2022 $ ( 85,486 ) $ ( 2,330 ) $ ( 59,519 ) $ ( 147,335 )

Other comprehensive income (loss) ( 2,488 ) ( 2,205 ) — ( 4,693 )

Income tax (expense) benefit 148 522 — 670

Other comprehensive income (loss), net of tax ( 2,340 ) ( 1,683 ) — ( 4,023 )

Reclassification adjustment to net income (loss) — ( 1,159 ) 3,268 2,109

Income tax (expense) benefit — 295 ( 712 ) ( 417 )

Reclassification adjustment to net income (loss), net of tax — ( 864 ) 2,556 1,692

Other comprehensive income (loss), net of tax ( 2,340 ) ( 2,547 ) 2,556 ( 2,331 )

Balance at September 30, 2022

$ ( 87,826 ) $ ( 4,877 ) $ ( 56,963 ) $ ( 149,666 )

The changes in accumulated other comprehensive income (loss) by component for the nine months ended September 30, 2022.

The changes in accumulated other comprehensive income (loss) by component for the three months ended March 31, 2023.

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

7 unchanged sentences

Other comprehensive income (loss), net of tax 1,120 1,269 2,287 4,676

Balance at September 30, 2022

$ ( 87,826 ) $ ( 4,877 ) $ ( 56,963 ) $ ( 149,666 )

The changes in accumulated other comprehensive income (loss) by component for the three months ended September 30, 2021.

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

Balance at July 1, 2021 $ ( 82,804 ) $ 3,496 $ ( 89,882 ) $ ( 169,190 )

Other comprehensive income (loss) ( 3,082 ) 1,245 — ( 1,837 )

Income tax (expense) benefit 294 ( 297 ) — ( 3 )

Other comprehensive income (loss), net of tax ( 2,788 ) 948 — ( 1,840 )

Reclassification adjustment to net income (loss) — ( 2,141 ) 4,244 2,103

Income tax (expense) benefit — 476 ( 927 ) ( 451 )

Reclassification adjustment to net income (loss), net of tax — ( 1,665 ) 3,317 1,652

Other comprehensive income (loss), net of tax ( 2,788 ) ( 717 ) 3,317 ( 188 )

Balance at September 30, 2021

Balance at March 31, 2023

$ ( 84,959 ) $ ( 1,211 ) $ ( 56,749 ) $ ( 142,919 )

The changes in accumulated other comprehensive income (loss) by component for the nine months ended September 30, 2021.

The changes in accumulated other comprehensive income (loss) by component for the three months ended March 31, 2022.

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

7 unchanged sentences

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

Balance at September 30, 2021

Balance at March 31, 2022

$ ( 80,256 ) $ 6,831 $ ( 62,075 ) $ ( 135,500 )

5 unchanged sentences

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

The fixed-price firm sales commitments and related hedging instruments

have durations generally no longer than 24 months.

The notional amount of aluminum futures contracts that hedged future purchases of aluminum to meet fixed-price forward sales contract obligations was $ 33.7 million ( 18.4 million pounds of aluminum) at September 30, 2022 and $ 22.1 million ( 14.9 million pounds of aluminum) at December 31, 2021.

The table below summarizes the location and gross amounts of aluminum futures contract fair values (Level 2) in the condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021:

September 30, 2022 December 31, 2021

The fixed-price firm sales commitments and related hedging instruments have durations generally no longer than 12 months.

The notional amount of aluminum futures contracts that hedged future purchases of aluminum to meet fixed-price forward sales contract obligations was $ 27.8 million ( 18.7 million pounds of aluminum) at March 31, 2023 and $ 30.7 million ( 20.3 million pounds of aluminum) at December 31, 2022.

The table below summarizes the location and gross amounts of aluminum futures contract fair values (Level 2) in the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022:

March 31, 2023 December 31, 2022

(In thousands) Balance Sheet

12 unchanged sentences

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

Dollars and its variable conversion, fixed conversion and sales, general and administrative costs (before depreciation and amortization) quoted or priced in Brazilian Real ("R$") is annual net costs of R$ 150 million for the full year of 2022.

Dollars and its variable conversion, fixed conversion and sales, general and administrative costs (before depreciation and amortization) quoted or priced in Brazilian Real ("R$") will be an annual net cost of R$ 177 million for the full year of 2023.

Terphane Ltda.

2 unchanged sentences

R$ Operating Cost Exposure Hedged

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

$ 1,784 5.6597 R$ 10,097 Nov-22 78 %

$ 1,659 5.6962 R$ 9,450 Dec-22 73 %

$ 1,728 5.4310 R$ 9,385 Jan-23 64 %

$ 1,822 5.4657 R$ 9,959 Feb-23 68 %

$ 1,921 5.4995 R$ 10,565 Mar-23 72 %

$ 1,903 5.5379 R$ 10,539 Apr-23 72 %

24 unchanged sentences

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

The table below summarizes the location and gross amounts of foreign currency forward contract fair values (Level 2) in the condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021:

September 30, 2022 December 31, 2021

The table below summarizes the location and gross amounts of foreign currency forward contract fair values (Level 2) in the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022:

March 31, 2023 December 31, 2022

(In thousands) Balance Sheet

7 unchanged sentences

Foreign currency forward contracts

Accrued expenses ( 363 ) Accrued expenses ( 1,255 )

Accrued expenses — Other non-current liabilities ( 3 )

Net asset (liability) $ 2,276 $ 811

3 unchanged sentences

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

The pre-tax effect on net income (loss) and other comprehensive income (loss) of derivative instruments classified as cash flow hedges and described in the previous paragraphs for the three and nine month periods ended September 30, 2022 and 2021 is summarized in the table below:

The pre-tax effect on net income (loss) and other comprehensive income (loss) of derivative instruments classified as cash flow hedges and described in the previous paragraphs for the three month periods ended March 31, 2023 and 2022 is summarized in the table below:

Cash Flow Derivative Hedges

Three Months Ended September 30,

Aluminum Futures Contracts Foreign Currency Forwards

(In thousands) 2022 2021 2022 2021

Amount of pre-tax gain (loss) recognized in other comprehensive income (loss) $ ( 2,320 ) $ 2,919 $ — $ 115 $ — $ ( 1,670 )

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

Amount of pre-tax gain (loss) reclassified from accumulated other comprehensive income (loss) to net income (effective portion) $ 837 $ 2,160 $ 16 $ 306 $ 15 $ ( 34 )

Nine Months Ended September 30,

Three Months Ended March 31,

Aluminum Futures Contracts Foreign Currency Forwards

3 unchanged sentences

Amount of pre-tax gain (loss) reclassified from accumulated other comprehensive income (loss) to net income (effective portion) $ 672 $ ( 1,005 ) $ 15 $ 286 $ ( 15 ) $ ( 137 )

As of September 30, 2022, the Company expects $ 3.7 million of unrealized after-tax losses on aluminum and foreign currency derivative instruments reported in accumulated other comprehensive income (loss) to be reclassified to earnings within the next 12 months.

For the three and nine month periods ended September 30, 2022 and 2021, net gains or losses realized, from previously unrealized net gains or losses on hedges that had been discontinued, were not material.

Tredegar recorded tax expense of $ 7.5 million on pre-tax income from continuing operations of $ 39.7 million in the first nine months of 2022.

Therefore, the effective tax rate in the first nine months of 2022 was 18.8 %, compared to 22.7 % in the first nine months of 2021.

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

As of March 31, 2023, the Company expects $ 0.9 million of unrealized after-tax losses on aluminum and foreign currency derivative instruments reported in accumulated other comprehensive income (loss) to be reclassified to earnings within the next 12 months.

For the three month periods ended March 31, 2023 and 2022, net gains or losses realized, from previously unrealized net gains or losses on hedges that had been discontinued, were not material.

Tredegar recorded tax expense of $ 0.3 million on pre-tax loss of $ 0.7 million in the first three months of 2023.

Therefore, the effective tax rate in the first three months of 2023 was ( 48.8 )%, compared to 4.5 % in the first three months of 2022.

The change in the effective tax rate is primarily due to a pre-tax loss in first three months of 2023 versus pre-tax income in first three months of 2022, lower Brazil tax incentives, and a large discrete benefit recorded in the first quarter of 2022, resulting from the implementation of new U.S.

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

Treasury and Internal Revenue Service on January 4, 2022.

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

These regulations overhauled 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.

4 unchanged sentences

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

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

for the foreseeable future.

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

Total deferred tax assets declined during the first quarter of 2023 compared to December 31, 2022 primarily due to changes in other comprehensive income.

Tredegar accrues U.S.

5 unchanged sentences

Terphane Ltda.’s manufacturing facility in Brazil is the beneficiary of certain income tax incentives that allow for a reduction in the statutory Brazilian federal income tax rate to 15.25 % levied on the operating profit on certain of its products.

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

The benefit from the tax incentives was $ 2.6 million in the first nine months of 2022 and $ 8.8 million in 2021.

The incentives have been granted for a 10-year period, from the commencement date of January 1, 2015 and expiring at the end of 2024.

The benefit from the tax incentives was $ 0.6 million and $ 1.5 million in the first three months of 2023 and 2022, respectively.

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

1 unchanged sentence

states and non-U.S.

jurisdictions, Tredegar and its subsidiaries as of September 30, 2022 are no longer subject to U.S.

jurisdictions, Tredegar and its subsidiaries as of March 31, 2023 are no longer subject to U.S.

federal, state or non-U.S.

7 unchanged sentences

EBITDA from ongoing operations is the key profitability measure used by the CODM (Tredegar’s President and Chief Executive Officer) for purposes of assessing financial performance.

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

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

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

The following table presents net sales and EBITDA from ongoing operations by segment for the three and nine months ended September 30, 2022 and 2021:

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

The following table presents net sales and EBITDA from ongoing operations by segment for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

(In thousands) 2023 2022

4 unchanged sentences

Add back freight 6,043 8,081

Sales as shown in the condensed consolidated statements of income $ 238,486 $ 209,517 $ 749,415 $ 605,468

Sales as shown in the condensed consolidated statements of income (loss) $ 191,122 $ 236,566

EBITDA from Ongoing Operations

22 unchanged sentences

Corporate expenses, net 8,956 10,757

Income (loss) from continuing operations before income taxes 2,137 8,137 39,714 47,304

Income (loss) before income taxes ( 678 ) 17,200

Income tax expense (benefit) 331 778

Income (loss) from continuing operations 1,012 6,229 32,254 36,576

Income (loss) from discontinued operations, net of tax 21 ( 26 ) 68 ( 104 )

Net income (loss) $ ( 1,009 ) $ 16,422

The following table presents identifiable assets by segment at September 30, 2022 and December 31, 2021:

(In thousands) September 30, 2022 December 31, 2021

The following table presents identifiable assets by segment at March 31, 2023 and December 31, 2022:

(In thousands) March 31, 2023 December 31, 2022

Aluminum Extrusions $ 296,861 $ 293,308

4 unchanged sentences

Cash and cash equivalents 15,025 19,232

Discontinued operations 151 178

Total $ 526,174 $ 542,093

The following tables disaggregate the Company’s revenue by geographic area and product group for the three and nine months ended September 30, 2022 and 2021:

The following tables disaggregate the Company’s revenue by geographic area and product group for the three months ended March 31, 2023 and 2022:

Net Sales by Geographic Area (a)

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

Three Months Ended March 31,

(In thousands) 2023 2022

8 unchanged sentences

Total $ 185,079 $ 228,485

(a) Export sales relate entirely to PE Films.

Operations in Brazil relate entirely to Flexible Packaging Films.

(a) Export sales relate mostly to PE Films.

Operations in Brazil relate to Flexible Packaging Films.

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

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

to Asia, and include net sales of $ 4.4 million and $ 7.4 million in the third quarters of 2022 and 2021, respectively, and $ 16.1 million and $ 25.0 million in the first nine months of 2022 and 2021, respectively.

to Asia, and include net sales of $ 3.4 million and $ 6.5 million in the first three months of 2023 and 2022, respectively.

Net Sales by Product Group

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

Three Months Ended March 31,

(In thousands) 2023 2022

13 unchanged sentences

Total $ 185,079 $ 228,485

Personal Care Films

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

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

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

The following table summarizes the financial results of discontinued operations reflected in the condensed consolidated statements of income for the three and nine months ended September 30, 2022 and 2021:

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

(In thousands) 2022 2021 2022 2021

Costs and expenses:

Selling, general and administrative ( 49 ) 33 ( 86 ) 1,251

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

— — — ( 1,118 )

Total ( 49 ) 33 ( 86 ) 133

Income (loss) from discontinued operations before income taxes 49 ( 33 ) 86 ( 133 )

Income tax expense (benefit) 28 ( 7 ) 18 ( 29 )

Income (loss) from discontinued operations, net of tax $ 21 $ ( 26 ) $ 68 $ ( 104 )

(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 condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021, respectively, were as follows:

September 30, December 31,

(In thousands) 2022 2021

Prepaid expenses and other (a)

Accrued expenses (a)

(a) The condensed consolidated balance sheet of discontinued operations as of September 30, 2022 includes $ 0.2 million of other receivables related to the settlement of customary post-closing adjustments and other miscellaneous accrued expenses of $ 0.1 million.

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

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

Nine Months Ended September 30,

(In thousands) 2022 2021

Operating activities

Other — ( 1,118 )

Assets Held For Sale

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

During the third quarter of 2020, the disposal group carrying value of $4.6 million was reported in "Prepaid expenses and other" in the consolidated balance sheet as the held for sale criteria was met.

During the third quarter of 2021, the Company completed the sale of the remaining assets in Lake Zurich, Illinois resulting in total cash proceeds of $4.7 million.

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

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

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

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

kaléo’s stock is not publicly traded.

In the first nine months ended September 30, 2021, a pre-tax gain of $ 1.2 million was recognized on the Company’s investment in kaléo, which included a $ 0.3 million dividend received from kaléo.

On December 27, 2021, the Company completed the sale of its investment interests in kaléo (Series A-3 Preferred Stock, Series B Preferred Stock and common stock) and received closing cash proceeds of $ 47.1 million.

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 condensed consolidated statements of income.

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

>2.0x but <=3.0x 175.0 30

>3.0x but <=3.5x 187.5 35

>3.5x 200.0 40

At September 30, 2022, $ 124.0 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 150.0 basis points.

Prior to the Credit Agreement, the interest rate 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 (a) Credit EBITDA to (b) interest expense.

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

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

Noncompliance with any of the debt covenants may have a material adverse effect on its financial condition or liquidity, in the event such noncompliance cannot be cured or should the Company be unable to obtain a waiver from the lenders.

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.

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 March 31, 2023 and December 31, 2022, $ 11.4 million and $ 25.9 million, respectively, of the Company’s accounts payable were financed by participating suppliers through third-party financial institutions.

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

What changed 10-Q

Item 1. Financial Statements