What changed in this filing

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Item 1. Financial Statements

2023-11-09 compared with 2023-08-09 · 216 added, 112 removed, 474 unchanged (41% of the section changed)

3 unchanged sentences

(In Thousands, Except Share Data)

June 30, December 31,

September 30, December 31,

Current assets:

27 unchanged sentences

Shareholders’ equity:

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)

Common stock, no par value (authorized shares 150,000,000 , issued and outstanding 34,384,677 shares at September 30, 2023 and 34,000,642 shares at December 31, 2022)

60,827 58,824

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

Common stock held in trust for savings restoration plan ( 118,543 shares at September 30, 2023 and 113,316 shares at December 31, 2022)

( 2,233 ) ( 2,188 )

10 unchanged sentences

(In Thousands, Except Per Share Data)

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

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

2023 2022 2023 2022

12 unchanged sentences

Asset impairments and costs associated with exit and disposal activities, net of adjustments 4,633 495 4,702 621

Pension settlement loss 25,612 — 25,612 —

Goodwill impairment 19,478 — 34,891 —

13 unchanged sentences

(In Thousands)

Three Months Ended June 30,

Three Months Ended September 30,

Net income (loss) $ ( 50,380 ) $ 1,033

2 unchanged sentences

( 1,818 ) ( 2,340 )

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 )

Derivative financial instruments adjustment (net of tax benefit of $ 538 in 2023 and net of tax benefit of $ 818 in 2022)

Pension & other postretirement benefit adjustment:

Net gains (losses) and prior service costs 442 —

Recognition in earnings of net actuarial loss for pension settlement and related tax of $ 5,581

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) $ ( 29,707 ) $ ( 1,298 )

Six Months Ended June 30,

Nine Months Ended September 30,

Net income (loss) $ ( 70,314 ) $ 32,322

1 unchanged sentence

Unrealized foreign currency translation adjustment (net of tax expense of $ 640 in 2023 and net of tax expense of $ 98 in 2022)

923 ( 2,034 )

Derivative financial instruments adjustment (net of tax expense of $ 798 in 2023 and net of tax benefit of $ 1,261 in 2022)

1,706 ( 5,778 )

Pension & other postretirement benefit adjustment:

Net gains (losses) and prior service costs 442 —

Recognition in earnings of net actuarial loss for pension settlement and related tax of $ 5,581

Amortization of prior service costs and net gains or losses (net of tax expense of $ 1,911 in 2023 and net of tax expense of $ 2,136 in 2022)

5 unchanged sentences

(In Thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

7 unchanged sentences

Accrued pension and post-retirement benefits 9,955 10,519

Pension settlement loss 25,612 —

Stock-based compensation expense 1,196 2,575

Gain on investment in kaléo ( 262 ) ( 1,406 )

Write-down of Richmond, Virginia Technical Center assets 3,387 —

Changes in assets and liabilities:

27 unchanged sentences

(In Thousands, Except Share and Per Share Data)

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

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

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

Balance April 1, 2023

Balance July 1, 2023

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

3 unchanged sentences

Amortization of prior service costs and net gains or losses — — — 1,949 1,949

Net gains or (losses) and prior service costs — — — 442 442

Recognition in earnings of net actuarial loss for pension settlement — — — 20,031 20,031

Cash dividends declared ($ — per share)

— ( 4,468 ) — — ( 4,468 )

Stock-based compensation expense 749 — — — 749

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

Balance June 30, 2023

Balance September 30, 2023

$ 60,827 $ 213,568 $ ( 2,233 ) $ ( 117,971 ) $ 154,191

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

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

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

5 unchanged sentences

Amortization of prior service costs and net gains or losses — — — 6,522 6,522

Net gains or (losses) and prior service costs — — — 442 442

Recognition in earnings of net actuarial loss for pension settlement — — — 20,031 20,031

Cash dividends declared ($ 0.26 per share)

4 unchanged sentences

Tredegar common stock purchased by trust for savings restoration plan — 45 ( 45 ) — —

Balance June 30, 2023

Balance September 30, 2023

$ 60,827 $ 213,568 $ ( 2,233 ) $ ( 117,971 ) $ 154,191

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

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

Stock Retained

3 unchanged sentences

Shareholders’

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

Balance at July 1, 2022 $ 56,911 $ 304,370 $ ( 2,161 ) $ ( 147,335 ) $ 211,785

Net income (loss) — 1,033 — — 1,033

6 unchanged sentences

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:

Balance at 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:

Stock Retained

14 unchanged sentences

Tredegar common stock purchased by trust for savings restoration plan — 39 ( 39 ) — —

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

Balance at September 30, 2022 $ 57,902 $ 300,996 $ ( 2,174 ) $ ( 149,666 ) $ 207,058

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 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.

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, 2023, the condensed consolidated results of operations for the three and nine months ended September 30, 2023 and 2022, the condensed consolidated cash flows for the nine months ended September 30, 2023 and 2022, and the condensed consolidated changes in shareholders’ equity for the nine months ended September 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 second quarter for 2023 and 2022 for this segment references 13-week periods ended June 25, 2023 and June 26, 2022, respectively.

As such, the fiscal third quarter for 2023 and 2022 for this segment references 13-week periods ended September 24, 2023 and September 25, 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 June 25, 2023 and June 30, 2023.

There was no intercompany funding with Aluminum Extrusions between September 24, 2023 and September 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 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.

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

Sale of Flexible Packaging Films

On September 1, 2023, the Company announced that it had entered into a definitive agreement to sell its flexible packaging films business (“Terphane”) to Oben Group (the "Contingent Terphane Sale").

Completion of the sale is contingent upon the satisfaction of customary closing conditions, including the receipt of certain competition filing approvals by authorities in Brazil and Columbia.

On October 27, 2023, the Company filed the requisite competition forms with the Administrative Council for Economic Defense (“CADE”) in Brazil.

CADE published related materials for public comment on November 6, 2023.

CADE’s deadline for completing its review is no later than September 23, 2024.

As of September 30, 2023, the Company has reported results for Terphane as a continuing operation, given the early stage of the approval process by authorities.

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 production 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.

Including costs incurred through the first nine months ended September 30, 2023, the Company expects to recognize cash costs associated with exit activities of $ 1.7 million for:

(i) severance and related costs ($ 0.8 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-downs and accelerated depreciation of up to $ 3.7 million.

A reconciliation of the beginning and ending balances of accrued expense associated with exit and disposal activities and charges associated with asset impairments reported as "Asset impairments and costs associated with exit and disposal activities, net of adjustments" in the condensed consolidated statements of income for the three and nine months ended September 30, 2023 is shown below.

(in thousands) Severance Asset write-downs Other Total

Balance at January 1, 2023 $ — $ — $ — $ —

Richmond Technical Center 846 3,387 340 4,573

Charges 846 3,387 340 4,573

Cash Spend 236 — 149 385

Charges against assets — 3,387 — 3,387

Balance at September 30, 2023 $ 610 $ — $ 191 $ 801

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).

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:

As of September 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 third quarter of 2023 that indicate that Futura’s fair value is more likely than not less than its carrying amount.

Uncertainty about the timing of a recovery in the consumer electronics market persists, and manufacturers in the supply chain for consumer electronics continue to experience reduced capacity utilization and inventory corrections.

In light of the limited visibility on the timing of a recovery and the expected adverse future impact to the Surface Protection business, coupled with a cautious outlook on new product development opportunities, the Company performed a Step 1 goodwill impairment analysis of the Surface Protection component of PE Films.

This analysis utilized projections that contemplate the expected market recovery and business conditions, including for its three significant customers, 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 September 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.

The DCF Method was used, incorporating Surface Protection’s latest projections which reflect updated expected market recovery levels, feasibility of launching new product applications, competitive pricing and cash flows associated with production efficiencies, as well as consideration of cost savings and inventory corrections.

The analysis concluded that the fair value of Surface Protection was less than its carrying value, thus a non-cash partial goodwill impairment of $ 19.5 million ($ 15.1 million after deferred income tax benefits) was recognized during the third quarter of 2023 and $34.9 million ($27.0 million after deferred income tax benefits) during the first nine months 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.

The Surface Protection reporting unit had goodwill of $ 22.4 million and $ 57.3 million as of September 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 second quarter of 2023.

In July 2023, the Financial Accounting Standard Board issued Accounting Standards Updated ("ASU") 2023-03 to amend various SEC paragraphs in the Accounting Standards Codification to primarily reflect the issuance of SEC Staff Accounting Bulletin No.

2023-03, “Presentation of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718):

Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

120, SEC Staff Announcement at the March 24, 2022 Emerging Issues Task Force ("EITF") Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X:

Income or Loss Applicable to Common Stock.” ASU 2023-03 amends the ASC for SEC updates pursuant to SEC Staff Accounting Bulletin No.

SEC Staff Announcement at the March 24, 2022 EITF Meeting;

and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X:

Income or Loss Applicable to Common Stock.

These updates were immediately effective and did not have a material impact to the Company's consolidated financial statements.

ACCOUNTS AND OTHER RECEIVABLES

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

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

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

Customer receivables $ 69,945 $ 83,667

4 unchanged sentences

The components of inventories are as follows:

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

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

Finished goods $ 28,664 $ 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.

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.

On February 10, 2022, Tredegar announced the initiation of a process to terminate and settle its frozen defined benefit pension plan through lump sum distributions and the purchase of annuity contracts.

In connection therewith, on February 9, 2022, the Company contributed $ 50 million to the pension plan.

During the third quarter of 2023, the Company remeasured the pension plan, which resulted in a pre-tax pension settlement loss in the condensed consolidated results of operation of $ 25.6 million.

The remeasurement of the pension benefit obligation and plan assets was triggered by $ 64.5 million of lump sum distributions from the pension plan assets which exceeded the pension plan's service and interest cost.

On September 27, 2023, the Company borrowed $ 30 million under its revolving credit agreement in anticipation of the final funding expected for terminating its defined benefit pension plan obligation.

On October 31, 2023, the Company contributed $27.7 million to fully fund the pension plan with the amount necessary to allow for the subsequent transfer of the final annuity premium to Massachusetts Mutual Life Insurance Company, the selected insurer for the plan.

On November 3, 2023, the pension plan termination and settlement process for the Company was completed, and the relevant pension plan obligation was transferred to Massachusetts Mutual Life Insurance Company.

As of September 30, 2023, the remaining unrecognized pre-tax actuarial losses reported in the accumulated other comprehensive income (loss) was $ 69.0 million.

Tredegar also has a non-qualified supplemental pension plan covering certain employees.

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

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

Pension expense recognized for this plan was immaterial in the three and nine months ended September 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 and six months ended June 30, 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 nine months ended September 30, 2023 and 2022, are shown below:

Pension Benefits Other Post-Retirement Benefits

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

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

(In thousands) 2023 2022 2023 2022

2 unchanged sentences

Expected return on plan assets ( 2,328 ) ( 2,044 ) — —

Pension settlement loss (a)

Amortization of prior service costs, (gains) losses and net transition asset 2,644 3,301 ( 58 ) ( 33 )

1 unchanged sentence

Pension Benefits Other Post-Retirement Benefits

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

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

(In thousands) 2023 2022 2023 2022

2 unchanged sentences

Expected return on plan assets ( 7,542 ) ( 6,141 ) — —

Pension settlement loss (a)

Amortization of prior service costs, (gains) losses and net transition asset 8,609 9,887 ( 176 ) ( 101 )

Net periodic benefit cost $ 35,521 $ 10,422 $ 46 $ 67

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).

(a)Pension settlement loss, included in the condensed consolidated statements of operation, represents pension settlement charges due to lump sum payments to participants.

Pension and other postretirement liabilities were $ 36.3 million and $ 35.7 million at September 30, 2023 and December 31, 2022, respectively ($ 0.7 million included in “Accrued expenses” at September 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 June 30, Six Months Ended June 30,

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

(In thousands) 2023 2022 2023 2022

1 unchanged sentence

$ — $ — $ 262 $ 1,406

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

— ( 96 ) — ( 308 )

Other ( 51 ) 140 ( 52 ) ( 225 )

1 unchanged sentence

(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

1 unchanged sentence

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 Six Months Ended

June 30, June 30,

Three Months Ended September 30, Nine Months Ended September 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 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.

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 2,525,104 and 2,501,406 for the three and six months ended June 30, 2022, respectively.

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

If the Company had reported net income for the three and nine months ended September 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 2,893,677 , respectively.

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

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

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

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

Balance at July 1, 2023 $ ( 83,338 ) $ ( 843 ) $ ( 54,463 ) $ ( 138,644 )

Other comprehensive income (loss) ( 1,793 ) 2,287 442 936

5 unchanged sentences

Other comprehensive income (loss), net of tax ( 1,818 ) 69 22,422 20,673

Balance at June 30, 2023

Balance at September 30, 2023

$ ( 85,156 ) $ ( 774 ) $ ( 32,041 ) $ ( 117,971 )

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

The changes in accumulated other comprehensive income (loss) by component for the nine months ended September 30, 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 923 1,706 26,995 29,624

Balance at June 30, 2023

Balance at September 30, 2023

$ ( 85,156 ) $ ( 774 ) $ ( 32,041 ) $ ( 117,971 )

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

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 April 1, 2022 $ ( 80,256 ) $ 6,831 $ ( 62,075 ) $ ( 135,500 )

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

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

5 unchanged sentences

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

Balance at June 30, 2022

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 six months ended June 30, 2022.

The changes in accumulated other comprehensive income (loss) by component for the nine 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)

7 unchanged sentences

Other comprehensive income (loss), net of tax ( 2,034 ) ( 5,778 ) 7,650 ( 162 )

Balance at June 30, 2022

Balance at September 30, 2022

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

4 unchanged sentences

If individual derivative instruments with the same counterparty can be settled on a net basis, the Company records the corresponding derivative fair values as a net asset or net liability.

In the normal course of business, Aluminum Extrusions enters into fixed-price forward sales contracts with certain customers for the future sale of fixed quantities of aluminum extrusions at scheduled intervals.

In the normal course of business, Aluminum Extrusions enters into fixed-price forward sales contracts with a small subset of its customers for the future sale of fixed quantities of aluminum extrusions at scheduled intervals.

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

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 $ 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

The notional amount of aluminum futures contracts that hedged future purchases of aluminum to meet fixed-price forward sales contract obligations was $ 10.9 million ( 7.4 million pounds of aluminum) at September 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 September 30, 2023 and December 31, 2022:

September 30, 2023 December 31, 2022

(In thousands) Balance Sheet

15 unchanged sentences

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

Dollars as of June 30, 2023:

Dollars as of September 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

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

$ 2,020 5.6831 R$ 11,480 Aug-23 78 %

$ 2,071 5.7174 R$ 11,841 Sep-23 80 %

$ 2,013 5.7556 R$ 11,586 Oct-23 79 %

18 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 June 30, 2023 and December 31, 2022:

June 30, 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 September 30, 2023 and December 31, 2022:

September 30, 2023 December 31, 2022

(In thousands) Balance Sheet

8 unchanged sentences

Accrued expenses ( 109 ) Other non-current liabilities ( 3 )

Foreign currency forward contracts Other non-current liabilities (89) Other non-current liabilities —

Net asset (liability) $ 1,937 $ 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 six month periods ended June 30, 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 nine month periods ended September 30, 2023 and 2022 is summarized in the table below:

Cash Flow Derivative Hedges

Three Months Ended June 30,

Three Months Ended September 30,

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) $ 1,716 $ 837 $ 16 $ 1,024 $ 16 $ 306

Six Months Ended June 30,

Nine Months Ended September 30,

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) $ 3,273 $ 2,135 $ 46 $ 2,031 $ 46 $ 975

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.

As of September 30, 2023, the Company expects $ 1.1 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, 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 $ 16.3 million on pre-tax loss of $ 86.6 million in the first nine months of 2023.

Therefore, the effective tax rate in the first nine months of 2023 was 18.8 %, unchanged compared to the effective tax rate in the first nine months of 2022.

The effective tax rate in the first nine months of 2022 was impacted by 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.

7 unchanged sentences

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

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.

In the second quarter of 2023, Brazil enacted new tax legislation that causes the Brazil income tax to once again be creditable after 2023.

This law change caused a 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.

In the third quarter of 2023, the Internal Revenue Service released Notice 2023-55 which provides temporary relief for tax years 2022 and 2023 from the regulations published by the U.S.

Treasury and Internal Revenue Service on January 4, 2022.

Notice 2023-55 allows Tredegar to treat Brazil income tax as creditable in 2022 and 2023.

The effective tax rate in the first nine months of 2023 was impacted by tax benefits related to the goodwill impairment, the pension settlement loss, and the treatment of Brazil income tax as creditable in 2022 and 2023.

These benefits were offset by the reversal of the discrete tax benefit recorded in the first quarter of 2022 and an increase in the valuation allowance related to deferred tax assets.

Total deferred tax assets increased during the first nine months of 2023 compared to December 31, 2022 primarily due to changes in other comprehensive income, the pre-tax loss, and decrease in deferred tax liability related to the goodwill impairment incurred during the first nine months 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 $ 0.4 million and $ 2.6 million in the first six months of 2023 and 2022, respectively.

The benefit from the tax incentives was $ 0.5 million and $ 2.6 million in the first nine 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 June 30, 2023 are no longer subject to U.S.

jurisdictions, Tredegar and its subsidiaries as of September 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 and six months ended June 30, 2023 and 2022:

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

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

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

(In thousands) 2023 2022 2023 2022

29 unchanged sentences

Stock option-based compensation costs — 271 231 1,153

Pension settlement loss 25,612 — 25,612 —

Corporate expenses, net 11,633 9,653 30,100 30,119

2 unchanged sentences

Net income (loss) $ ( 50,380 ) $ 1,033 $ ( 70,314 ) $ 32,322

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

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

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

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

Aluminum Extrusions $ 256,671 $ 293,308

5 unchanged sentences

Total $ 479,517 $ 542,093

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:

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

Net Sales by Geographic Area (a)

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

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

(In thousands) 2023 2022 2023 2022

13 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 $ 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.

to Asia, and include net sales of $ 4.8 million and $ 4.4 million in the third quarter of 2023 and 2022, respectively, and $ 11.7 million and $ 16.1 million in the first nine months of 2023 and 2022, respectively.

Net Sales by Product Group

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

Three Months Ended September 30, Nine Months Ended September 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 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:

As of September 30, 2023 and December 31, 2022, $ 14.2 million and $ 25.9 million, respectively, of the Company’s accounts payable were financed by participating suppliers through third-party financial institutions.

On June 29, 2022, Tredegar entered into a Second Amended and Restated Credit Agreement, which is a five-year, revolving, secured credit facility that matures on June 29, 2027.

On August 3, 2023, the Company entered into Amendment No.

2 to the Second Amended and Restated Credit Agreement (collectively the "Credit Agreement"), which amended the primary restrictive covenants and decreased aggregate borrowings from $ 375 million to $ 200 million.

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"), plus a credit spread depending on the type of borrowings 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 175.0 20

>1.0x but <=2.0x 187.5 25

>2.0x but <=3.0x 200.0 30

>3.0x but <=3.5x 212.5 35

>3.5x 225.0 40

At September 30, 2023, $ 155.0 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 200.0 basis points.

The primary restrictive covenants in the Credit Agreement include:

• Total Net Leverage Ratio covenant of:

(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) 4.0x for the quarter ending December 31, 2024 and thereafter;

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

• Interest Coverage Ratio covenant of:

(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.

• Prohibiting dividend payments and share repurchases during fiscal quarters ending September 30, 2023 through December 31, 2024.

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 the Credit Agreement as "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 September 30, 2023, based upon the most restrictive covenants within the Credit Agreement, available credit under the Credit Agreement was approximately $ 4.7 million.

Tredegar was in compliance with all of its debt covenants as of September 30, 2023.

SUBSEQUENT EVENTS

The Company previously disclosed its intent to reduce the risk of a debt covenant violation during a severe cyclical downturn impacting all of its businesses at the same time (like the Company is currently experiencing) by investigating a transition from the existing “cash flow” based revolving credit facility (which uses Credit EBITDA) to an asset based revolving credit facility (“ABL”).

The Company has contemplated this strategic transition, as described further below, as part of its on-going evaluation of liquidity, as required by ASC 205-40, Presentation of Financial Statements – Going Concern.

The Company took its first step in the planned migration to ABL financing on October 26, 2023, when Terphane Limitada, the Company’s wholly owned subsidiary in Brazil, borrowed $ 20 million secured by certain of its assets (the “Terphane Brazil Loan”).

Dollar borrowing has a maturity date in five years, on October 30, 2028, with interest payable quarterly at an annual floating interest rate of the SOFR plus 5.99 %.

The SOFR rate was 5.31 % as of October 26, 2023.

Quarterly principal payments of $ 1.7 million begin starting in year 3 of the loan.

There are no prepayment penalties.

The Company expects that the Terphane Brazil Loan will be repaid (and collateral released) upon a closing of the Contingent Terphane Sale.

On October 26, 2023, the Company borrowed $ 20 million from Terphane Brazil (the “Intercompany Loan”) at the same interest rate as the Terphane Brazil Loan, thereby transferring the funds to the U.S.

The Company will repay the Intercompany Loan in conjunction with the closing of the Contingent Terphane Sale.

Between the dates of November 4, 2023 and November 8, 2023, the Company oversaw the execution of consent advice letters by a majority of the lending group to the Credit Agreement (collectively, the “Advice Letters”).

Pursuant to the Advice Letters, subject only to satisfactory documentation, these lending group members confirmed their agreement to consent to an amendment to the Credit Agreement (the “Credit Agreement Amendment”) that amends the Credit Agreement to implement a senior secured asset-based revolving credit facility (the “ABL Credit Facility”), which would expire on June 30, 2026.

The permitted borrowings under the ABL Credit Facility will be based on a portion of eligible receivables, inventories, property, plant and equipment and cash and cash equivalents, as reduced by certain reserves.

Financial highlights of the ABL Credit Facility include the following:

• Initial borrowing availability under the ABL Credit Facility of $ 180 million, which will be reduced to $ 125 million upon the earlier of March 31, 2025 and the date the Company receives the proceeds from the Contingent Terphane Sale (the “ABL Adjustment Date”).

• Outstanding borrowings to accrue interest at the rates elected by the Company depending on the type of loan and denomination of such borrowing:

◦ With respect to revolving loans denominated in U.S.

Dollars, the Company may elect interest rates at ABR plus the Applicable Margin (defined below) or the Adjusted Term SOFR Rate plus the Applicable Margin.

◦ The “Applicable Margin” is a set margin prior to the ABL Adjustment Date;

on and after the ABL Adjustment Date, the margin is determined in accordance with an excess availability-based pricing grid.

◦ Interest rate indices for select non-U.S.

dollar borrowings, including borrowings denominated in euro, Pounds Sterling, Swiss Francs and Japanese Yen, will be consistent with the existing Credit Agreement.

• Debt covenants including, among others:

◦ until the ABL Adjustment Date, the ABL Credit Facility will contain financial covenants that require the Company to maintain (i) a minimum consolidated EBITDA (as defined by the Credit Agreement), as of the end of each fiscal month for the twelve month period then ended, of the following:

Minimum EBITDA (In thousands)

November 2023 $ 22,060

December 2023 $ 21,070

January 2024 $ 21,110

February 2024 $ 18,750

March 2024 $ 16,640

April 2024 $ 19,780

May 2024 $ 19,660

June 2024 $ 19,450

July 2024 $ 21,860

August 2024 $ 22,830

September 2024 $ 25,370

October 2024 $ 26,070

November 2024 $ 27,640

December 2024 $ 29,640

January 2025 $ 29,740

February 2025 $ 29,850

March 2025 $ 29,980

and (ii) a minimum liquidity of $ 10 million (defined as the sum of a portion of eligible receivables, inventories and property, plant and equipment under the ABL Credit Facility plus domestic unrestricted and unencumbered cash and cash equivalents).

• Following the ABL Adjustment Date, the forgoing financial covenants will cease to exist and will be replaced with a minimum fixed charge coverage ratio of 1.00:1.00 that will be triggered in the event that availability is less than 10% of the ABL Credit Facility commitment amount and continuing thereafter until availability is greater than 10% of the ABL Credit Facility commitment amount for 30 consecutive days.

The Company is targeting the execution of the Credit Agreement Amendment by the end of 2023.

The agreement to consent to the Credit Agreement Amendment by the majority of the lender group members expires on December 31, 2023.

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