What changed in this filing

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Item 1. Financial Statements

2023-08-09 compared with 2023-05-08 · 185 added, 78 removed, 401 unchanged (40% of the section changed)

3 unchanged sentences

(In Thousands, Except Share Data)

March 31, December 31,

June 30, December 31,

Current assets:

27 unchanged sentences

Shareholders’ equity:

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)

Common stock, no par value (authorized shares 150,000,000 , issued and outstanding 34,363,845 shares at June 30, 2023 and 34,000,642 shares at December 31, 2022)

60,078 58,824

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

Common stock held in trust for savings restoration plan ( 116,336 shares at June 30, 2023 and 113,316 shares at December 31, 2022)

( 2,218 ) ( 2,188 )

10 unchanged sentences

(In Thousands, Except Per Share Data)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Revenues and other items:

11 unchanged sentences

Asset impairments and costs associated with exit and disposal activities, net of adjustments — 134 69 126

Goodwill impairment 15,413 — 15,413 —

Total 200,400 255,280 392,483 474,344

12 unchanged sentences

(In Thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Net income (loss) $ ( 18,922 ) $ 14,869

Other comprehensive income (loss):

Unrealized foreign currency translation adjustment (net of tax expense of $ 179 in 2023 and net of tax benefit of $ 482 in 2022)

1,621 ( 5,230 )

Derivative financial instruments adjustment (net of tax expense of $ 500 in 2023 and net of tax benefit of $ 3,359 in 2022)

368 ( 9,161 )

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)

Other comprehensive income (loss) 4,275 ( 11,835 )

Comprehensive income (loss) $ ( 14,647 ) $ 3,034

Six Months Ended June 30,

Net income (loss) $ ( 19,934 ) $ 31,292

Other comprehensive income (loss):

Unrealized foreign currency translation adjustment (net of tax expense of $ 615 in 2023 and net of tax expense of $ 246 in 2022)

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

Derivative financial instruments adjustment (net of tax expense of $ 1,336 in 2023 and net of tax benefit of $ 443 in 2022)

1,637 ( 3,231 )

Amortization of prior service costs and net gains or losses (net of tax expense of $ 1,274 in 2023 and net of tax expense of $ 1,424 in 2022)

5 unchanged sentences

(In Thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

4 unchanged sentences

Reduction of right-of-use lease asset 1,075 1,072

Goodwill impairment 15,413 —

Deferred income taxes ( 3,731 ) 2,516

11 unchanged sentences

Other, net ( 692 ) 1,781

Net cash (used in) provided by operating activities ( 9,108 ) ( 54,737 )

Net cash provided by (used in) operating activities 22,698 ( 9,429 )

Cash flows from investing activities:

1 unchanged sentence

Proceeds from the sale of kaléo 262 1,406

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

Net cash provided by (used in) investing activities ( 15,645 ) ( 12,108 )

Cash flows from financing activities:

2 unchanged sentences

Dividends paid ( 8,884 ) ( 8,135 )

Debt financing costs — ( 1,245 )

Other — ( 396 )

8 unchanged sentences

(In Thousands, Except Share and Per Share Data)

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

The following summarizes the changes in shareholders’ equity for the three month period ended June 30, 2023:

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

Balance April 1, 2023

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

Net income (loss) — ( 18,922 ) — — ( 18,922 )

Foreign currency translation adjustment — — — 1,621 1,621

Derivative financial instruments adjustment — — — 368 368

Amortization of prior service costs and net gains or losses — — — 2,286 2,286

Cash dividends declared ($ 0.13 per share)

— ( 4,468 ) — — ( 4,468 )

Stock-based compensation expense 655 — — — 655

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

Balance June 30, 2023

$ 60,078 $ 263,933 $ ( 2,218 ) $ ( 138,644 ) $ 183,149

The following summarizes the changes in shareholders’ equity for the six month period ended June 30, 2023:

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

Balance January 1, 2023

10 unchanged sentences

Tredegar common stock purchased by trust for savings restoration plan — 30 ( 30 ) — —

Balance March 31, 2023

Balance June 30, 2023

$ 60,078 $ 263,933 $ ( 2,218 ) $ ( 138,644 ) $ 183,149

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

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

Stock Retained

3 unchanged sentences

Shareholders’

Balance at April 1, 2022 $ 55,953 $ 293,563 $ ( 2,148 ) $ ( 135,500 ) $ 211,868

Net income (loss) — 14,869 — — 14,869

Foreign currency translation adjustment — — — ( 5,230 ) ( 5,230 )

Derivative financial instruments adjustment — — — ( 9,161 ) ( 9,161 )

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

Cash dividends declared ($ 0.12 per share)

— ( 4,075 ) — — ( 4,075 )

Stock-based compensation expense 958 — — — 958

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

Balance at June 30, 2022 $ 56,911 $ 304,370 $ ( 2,161 ) $ ( 147,335 ) $ 211,785

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

Stock Retained

Earnings Trust for

Plan Accumulated Other

Comprehensive Income (Loss) Total

Shareholders’

Balance at January 1, 2022 $ 55,174 $ 281,187 $ ( 2,135 ) $ ( 149,504 ) $ 184,722

9 unchanged sentences

Tredegar common stock purchased by trust for savings restoration plan — 26 ( 26 ) — —

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

Balance at June 30, 2022 $ 56,911 $ 304,370 $ ( 2,161 ) $ ( 147,335 ) $ 211,785

See accompanying notes to the condensed consolidated financial statements.

2 unchanged sentences

BASIS OF PRESENTATION

In the opinion of management, the accompanying condensed consolidated financial statements of Tredegar Corporation and its subsidiaries (“Tredegar,” “the Company,” “we,” “us” or “our”) contain all adjustments necessary to state fairly, in all material respects, Tredegar’s 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.

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 June 30, 2023, the condensed consolidated results of operations for the three and six months ended June 30, 2023 and 2022, the condensed consolidated cash flows for the six months ended June 30, 2023 and 2022, and the condensed consolidated changes in shareholders’ equity for the six months ended June 30, 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 first quarter for 2023 and 2022 for this segment references 13-week periods ended March 26, 2023 and March 27, 2022, respectively.

As such, the fiscal second quarter for 2023 and 2022 for this segment references 13-week periods ended June 25, 2023 and June 26, 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 March 26, 2023 and March 31, 2023.

There was no intercompany funding with Aluminum Extrusions between June 25, 2023 and June 30, 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 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

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

The results of operations for the three and six months ended June 30, 2023, are not necessarily indicative of the results to be expected for the full year.

Impairment of Goodwill

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

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.

As of June 30, 2023, the Company’s reporting units with goodwill were Surface Protection in PE Films ("Surface Protection") and Futura in Aluminum Extrusions (“Futura”).

No events or circumstances were identified during the second quarter of 2023 that indicate that Futura’s fair value is more likely than not less than its carrying amount.

However, manufacturers in the supply chain for consumer electronics continue to experience reduced capacity utilization and inventory corrections.

In light of the continued uncertainty about the timing of a recovery for this market and the expected adverse future impact to the Surface Protection business, the Company performed a Step 1 goodwill impairment analysis of the Surface Protection component of PE Films using projections that contemplate the expected market recovery and business conditions, as these events indicated Surface Protection’s fair value is more likely than not less than its carrying amount.

The Company estimated the fair value of Surface Protection at June 30, 2023 by:

(i) computing an estimated enterprise value (“EV”) utilizing the discounted cash flow method (the “DCF Method”), (ii) applying adjustments for any surplus or deficient working capital, (iii) adding cash and cash equivalents, and (iv) subtracting interest-bearing debt.

The DCF Method was used since Surface Protection’s projections reflect the expected recovery from the weak market demand, competitive pricing and cash flows associated with new surface protection products, applications, customers, production efficiencies, and cost savings.

The analysis concluded that the fair value of Surface Protection was less than its carrying value, thus a non-cash partial goodwill impairment of $ 15.4 million ($ 11.9 million after deferred income tax benefits) was recognized during the second quarter of 2023.

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.

The Surface Protection reporting unit had goodwill of $ 41.9 million and $ 57.3 million as of June 30, 2023 and December 31, 2022, respectively.

Accounting Standards Adopted

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

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

ACCOUNTS AND OTHER RECEIVABLES

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

As of June 30, 2023 and December 31, 2022, accounts receivable and other receivables, net include the following:

(In thousands) June 30, 2023 December 31, 2022

Customer receivables $ 79,112 $ 83,667

4 unchanged sentences

The components of inventories are as follows:

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

(In thousands) June 30, 2023 December 31, 2022

Finished goods $ 29,677 $ 34,686

11 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 first quarter of 2023 and 2022, respectively.

Pension expense recognized for this plan was immaterial in the three and six months ended June 30, 2023 and 2022.

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

The components of net periodic benefit cost for the pension and other postretirement benefit programs reflected in the condensed consolidated statements of income for the three months ended March 31, 2023 and 2022, are shown 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 six months ended June 30, 2023 and 2022, are shown below:

Pension Benefits Other Post-Retirement Benefits

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

Three Months Ended June 30, Three Months Ended June 30,

(In thousands) 2023 2022 2023 2022

4 unchanged sentences

Net periodic benefit cost $ 3,403 $ 3,484 $ 15 $ 22

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).

Pension Benefits Other Post-Retirement Benefits

Six Months Ended June 30, Six Months Ended June 30,

(In thousands) 2023 2022 2023 2022

Service cost $ — $ — $ 6 $ 10

Interest cost 6,056 4,450 142 102

Expected return on plan assets ( 5,214 ) ( 4,098 ) — —

Amortization of prior service costs, (gains) losses and net transition asset 5,965 6,586 ( 118 ) ( 68 )

Net periodic benefit cost $ 6,807 $ 6,938 $ 30 $ 44

Pension and other postretirement liabilities were $ 36.4 million and $ 35.7 million at June 30, 2023 and December 31, 2022, respectively ($ 0.7 million included in “Accrued expenses” at June 30, 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 March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2023 2022 2023 2022

Gain on investment in kaléo (a)

$ — $ 1,406 $ 262 $ 1,406

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

— ( 96 ) — ( 308 )

Other ( 20 ) 32 ( 2 ) ( 57 )

5 unchanged sentences

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

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands) 2023 2022 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 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 .

The average out-of-the-money options to purchase shares that were excluded from the calculation of incremental shares attributable to stock options and restricted stock were 2,477,708 for the three months ended March 31, 2022.

The Company had a net loss for the three and six months ended June 30, 2023, so there is no dilutive impact for such shares.

If the Company had reported net income for the three and six months ended June 30, 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 3,019,333 and 2,830,849 , respectively.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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

The changes in accumulated other comprehensive income (loss) by component for the three months ended June 30, 2023.

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

Balance at April 1, 2023 $ ( 84,959 ) $ ( 1,211 ) $ ( 56,749 ) $ ( 142,919 )

Other comprehensive income (loss) 1,800 2,488 — 4,288

Income tax (expense) benefit ( 179 ) ( 945 ) — ( 1,124 )

Other comprehensive income (loss), net of tax 1,621 1,543 — 3,164

Reclassification adjustment to net income (loss) — ( 1,621 ) 2,923 1,302

Income tax (expense) benefit — 446 ( 637 ) ( 191 )

Reclassification adjustment to net income (loss), net of tax — ( 1,175 ) 2,286 1,111

Other comprehensive income (loss), net of tax 1,621 368 2,286 4,275

Balance at June 30, 2023

$ ( 83,338 ) $ ( 843 ) $ ( 54,463 ) $ ( 138,644 )

The changes in accumulated other comprehensive income (loss) by component for the six months ended June 30, 2023.

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

Balance at January 1, 2023 $ ( 86,079 ) $ ( 2,480 ) $ ( 59,036 ) $ ( 147,595 )

6 unchanged sentences

Other comprehensive income (loss), net of tax 2,741 1,637 4,573 8,951

Balance at March 31, 2023

Balance at June 30, 2023

$ ( 83,338 ) $ ( 843 ) $ ( 54,463 ) $ ( 138,644 )

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

The changes in accumulated other comprehensive income (loss) by component for the three months ended June 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 April 1, 2022 $ ( 80,256 ) $ 6,831 $ ( 62,075 ) $ ( 135,500 )

Other comprehensive income (loss) ( 5,712 ) ( 11,681 ) — ( 17,393 )

Income tax (expense) benefit 482 3,110 — 3,592

Other comprehensive income (loss), net of tax ( 5,230 ) ( 8,571 ) — ( 13,801 )

Reclassification adjustment to net income (loss) — ( 840 ) 3,268 2,428

Income tax (expense) benefit — 250 ( 712 ) ( 462 )

Reclassification adjustment to net income (loss), net of tax — ( 590 ) 2,556 1,966

Other comprehensive income (loss), net of tax ( 5,230 ) ( 9,161 ) 2,556 ( 11,835 )

Balance at June 30, 2022

$ ( 85,486 ) $ ( 2,330 ) $ ( 59,519 ) $ ( 147,335 )

The changes in accumulated other comprehensive income (loss) by component for the six months ended June 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 January 1, 2022 $ ( 85,792 ) $ 901 $ ( 64,613 ) $ ( 149,504 )

6 unchanged sentences

Other comprehensive income (loss), net of tax 306 ( 3,231 ) 5,094 2,169

Balance at March 31, 2022

Balance at June 30, 2022

$ ( 85,486 ) $ ( 2,330 ) $ ( 59,519 ) $ ( 147,335 )

The amounts reclassified out of accumulated other comprehensive income (loss) related to pension and other postretirement benefits is included in the computation of net periodic pension costs, see Note 4 for additional details.

The amounts reclassified out of accumulated other comprehensive income (loss) related to pension and other postretirement benefits is included in the computation of net periodic pension costs.

See Note 4 for additional details.

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

4 unchanged sentences

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

The notional amount of aluminum futures contracts that hedged future purchases of aluminum to meet fixed-price forward sales contract obligations was $ 17.0 million ( 11.1 million pounds of aluminum) at June 30, 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 June 30, 2023 and December 31, 2022:

June 30, 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$") will be an annual net cost of R$ 177 million for the full year of 2023.

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

Terphane Ltda.

has the following outstanding foreign exchange average forward rate contracts to purchase Brazilian Real and sell U.S.

had the following outstanding foreign exchange average forward rate contracts to purchase Brazilian Real and sell U.S.

Dollars as of June 30, 2023:

USD Notional Amount (000s) Average Forward Rate Contracted on USD/BRL R$ Equivalent Amount (000s) Applicable Month Estimated % of Terphane Ltda.

R$ Operating Cost Exposure Hedged

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

$ 1,873 5.5753 R$ 10,443 May-23 71 %

$ 1,928 5.6118 R$ 10,820 Jun-23 74 %

$ 2,154 5.6378 R$ 12,144 Jul-23 83 %

21 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 March 31, 2023 and December 31, 2022:

March 31, 2023 December 31, 2022

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 June 30, 2023 and December 31, 2022:

June 30, 2023 December 31, 2022

(In thousands) Balance Sheet

13 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 month periods ended March 31, 2023 and 2022 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 and six month periods ended June 30, 2023 and 2022 is summarized in the table below:

Cash Flow Derivative Hedges

Three Months Ended March 31,

Three Months Ended June 30,

Aluminum Futures Contracts Foreign Currency Forwards

(In thousands) 2023 2022 2023 2022

Amount of pre-tax gain (loss) recognized in other comprehensive income (loss) $ 557 $ ( 9,923 ) $ — $ 1,931 $ — $ ( 1,758 )

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) $ 885 $ 293 $ 15 $ 721 $ 15 $ 532

Six Months Ended June 30,

Aluminum Futures Contracts Foreign Currency Forwards

2023 2022 2023 2022

2 unchanged sentences

Amount of pre-tax gain (loss) reclassified from accumulated other comprehensive income (loss) to net income (effective portion) $ 1,557 $ 1,298 $ 30 $ 1,007 $ 30 $ 669

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.

As of June 30, 2023, the Company expects $ 1.8 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 six month periods ended June 30, 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 benefit of $ 3.0 million on pre-tax loss of $ 22.9 million in the first six months of 2023.

Therefore, the effective tax rate in the first six months of 2023 was 13.1 %, compared to 16.9 % in the first six months of 2022.

The change in the effective tax rate is primarily due to a pre-tax loss in first six months of 2023 versus pre-tax income in first six months of 2022, lower Brazil tax incentives, a discrete charge in the second quarter of 2023 for a Brazil tax law change 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.

2 unchanged sentences

income taxes.

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

As the result of these regulations, future Brazilian income tax under Brazil tax law in place at that time would have been deductible, but not creditable, in the U.S.

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

2 unchanged sentences

deferred tax liability resulted in the discrete tax benefit described 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.

In the second quarter of 2023, Brazil enacted new tax legislation which will likely cause the Brazil income tax to once again be creditable after 2023.

This law change caused a partial reversal of the discrete tax benefit recognized in the first quarter of 2022 described above, which increased the deferred tax liability related to anticipated future income from Brazil.

Total deferred tax assets increased during the second quarter of 2023 compared to December 31, 2022 primarily due to changes in other comprehensive income, increase in net operational loss and decrease in deferred tax liability related to the goodwill impairment that took place in second quarter of 2023.

Tredegar accrues U.S.

6 unchanged sentences

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.

The benefit from the tax incentives was $ 0.4 million and $ 2.6 million in the first six 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 March 31, 2023 are no longer subject to U.S.

jurisdictions, Tredegar and its subsidiaries as of June 30, 2023 are no longer subject to U.S.

federal, state or non-U.S.

9 unchanged sentences

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

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

Three Months Ended March 31,

The following table presents net sales and EBITDA from ongoing operations by segment for the three and six months ended June 30, 2023 and 2022:

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2023 2022 2023 2022

17 unchanged sentences

Plant shutdowns, asset impairments, restructurings and other — ( 50 ) 2 ( 153 )

Goodwill impairment ( 15,413 ) — ( 15,413 ) —

Flexible Packaging Films:

13 unchanged sentences

Net income (loss) $ ( 18,922 ) $ 14,869 $ ( 19,934 ) $ 31,292

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

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

The following table presents identifiable assets by segment at June 30, 2023 and December 31, 2022:

(In thousands) June 30, 2023 December 31, 2022

Aluminum Extrusions $ 266,426 $ 293,308

5 unchanged sentences

Total $ 484,869 $ 542,093

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

The following tables disaggregate the Company’s revenue by geographic area and product group for the three and six months ended June 30, 2023 and 2022:

Net Sales by Geographic Area (a)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2023 2022 2023 2022

7 unchanged sentences

Brazil 24,975 28,189 46,603 55,074

Asia 55 — 160 —

Total $ 170,968 $ 263,327 $ 356,046 $ 491,811

3 unchanged sentences

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 $ 3.4 million and $ 6.5 million in the first three months of 2023 and 2022, respectively.

to Asia, and include net sales of $ 3.4 million and $ 5.3 million in the second quarter of 2023 and 2022, respectively, and $ 6.8 million and $ 11.7 million in the first six months of 2023 and 2022, respectively.

Net Sales by Product Group

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(In thousands) 2023 2022 2023 2022

16 unchanged sentences

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.

As of June 30, 2023 and December 31, 2022, $ 14.6 million and $ 25.9 million, respectively, of the Company’s accounts payable were financed by participating suppliers through third-party financial institutions.

SUBSEQUENT EVENTS

Closure of PE Films Technical Center

On August 3, 2023, the Company adopted a plan to close the PE Films technical center in Richmond, VA and reduce its efforts to develop and sell films supporting the semiconductor market.

Future research & development activities for PE Films will be performed at the facility in Pottsville, PA.

PE Films continues to have new business opportunities primarily relating to surface protection films that protect components of flat panel and flexible displays.

The Company anticipates all activities to cease at the PE Films technical center in Richmond, VA, by the end of 2023.

The Company expects to recognize cash costs associated with exit activities of $ 1.8 million for:

(i) severance and related costs ($ 0.9 million), (ii) vacating the facility lease ($ 0.6 million payable through June 2025), and (iii) building closure costs ($ 0.3 million).

In addition, the Company expects non-cash asset write-offs and accelerated depreciation of up to $ 4.5 million.

Net annual cash savings of $ 3.4 million are anticipated, beginning in the fourth quarter of 2023.

Entry into an Amendment to the Credit Agreement and Suspension of Regular Quarterly Dividend

Subsequent to June 30, 2023, to reduce the risk of potential violations of the primary financial restrictive covenants in its five-year, revolving, secured credit facility that matures on June 29, 2027 (the "Credit Agreement"), the Company (i) suspended its regular quarterly dividend (which had an annual cash outlay of approximately $ 17.7 million) and (ii) amended the Credit Agreement, effective August 3, 2023, to:

Change the fiscal quarter maximum Total Net Leverage Ratio covenant from 4.0 x to:

(i) 5.0 x for the quarters ending September 30, 2023 through March 31, 2024, (ii) 4.75 x for the quarter ending June 30, 2024, (iii) 4.25 for the quarter ending September 30, 2024, and (iv) 4.0 x for the quarter ending December 31, 2024 and thereafter.

Change the fiscal quarter minimum Interest Coverage Ratio covenant from 3.0 x to:

(i) 2.50 x for the quarters ending September 30, 2023 through June 30, 2024, (ii) 2.75 x for the quarter ending September 30, 2024, and (iii) 3.0 x for the quarter ending December 31, 2024 and thereafter.

Reduce the maximum borrowing availability from $ 375 million to $ 200 million.

Increase the drawn spread by 25 basis points across all levels of the interest rate pricing grid, beginning the quarter ending September 30, 2023.

Amend the restricted payments covenant to prohibit dividends and share repurchases during fiscal quarters ending September 30, 2023 through December 31, 2024.

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