What changed in this filing

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Item 1. Financial Statements

2024-11-08 compared with 2024-08-07 · 144 added, 114 removed, 515 unchanged (33% of the section changed)

3 unchanged sentences

(In Thousands, Except Share Data)

June 30, December 31,

September 30, December 31,

Current assets:

20 unchanged sentences

Lease liability, short-term 2,824 2,107

Short-term debt 1,356 —

ABL revolving facility (matures June 30, 2026) 122,000 126,322

7 unchanged sentences

Shareholders’ equity:

Common stock, no par value (authorized shares 150,000,000 , issued and outstanding 34,484,893 shares at June 30, 2024 and 34,408,638 shares at December 31, 2023)

Common stock, no par value (authorized shares 150,000,000 , issued and outstanding 34,510,556 shares at September 30, 2024 and 34,408,638 shares at December 31, 2023)

63,031 61,606

Common stock held in trust for savings restoration plan ( 118,543 shares at June 30, 2024 and December 31, 2023)

Common stock held in trust for savings restoration plan ( 118,543 shares at September 30, 2024 and December 31, 2023)

( 2,233 ) ( 2,233 )

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,

2024 2023 2024 2023

12 unchanged sentences

Asset impairments and costs associated with exit and disposal activities, net of adjustments — 4,633 587 4,702

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) $ ( 3,946 ) $ ( 50,380 )

Other comprehensive income (loss):

Unrealized foreign currency translation adjustment (net of tax benefit of $ 691 in 2024 and net of tax expense of $ 179 in 2023)

Unrealized foreign currency translation adjustment (net of tax expense of $ 4 in 2024 and net of tax expense of $ 25 in 2023)

1,496 ( 1,818 )

Derivative financial instruments adjustment (net of tax benefit of $ 253 in 2024 and net of tax expense of $ 500 in 2023)

Derivative financial instruments adjustment (net of tax expense of $ 120 in 2024 and net of tax benefit of $ 538 in 2023)

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 benefit of $ 7 in 2024 and net of tax expense of $ 637 in 2023)

1 unchanged sentence

Comprehensive income (loss) $ ( 2,054 ) $ ( 29,707 )

Six Months Ended June 30,

Nine Months Ended September 30,

Net income (loss) $ 8,134 $ ( 70,314 )

4 unchanged sentences

( 942 ) 1,706

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 benefit of $ 23 in 2024 and net of tax expense of $ 1,911 in 2023)

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 163 9,955

Pension settlement loss — 25,612

Stock-based compensation expense 1,950 1,196

Gain on investment in kaléo ( 144 ) ( 262 )

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, 2024:

The following summarizes the changes in shareholders’ equity for the three month period ended September 30, 2024:

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

Balance April 1, 2024

Balance July 1, 2024

$ 62,493 $ 190,057 $ ( 2,233 ) $ ( 90,353 ) $ 159,964

4 unchanged sentences

Stock-based compensation expense 538 — — — 538

Balance June 30, 2024

Balance September 30, 2024

$ 63,031 $ 186,111 $ ( 2,233 ) $ ( 88,461 ) $ 158,448

The following summarizes the changes in shareholders’ equity for the six month period ended June 30, 2024:

The following summarizes the changes in shareholders’ equity for the nine month period ended September 30, 2024:

Stock Retained

11 unchanged sentences

Repurchase of employee common stock for tax withholdings ( 226 ) — — — ( 226 )

Balance June 30, 2024

Balance September 30, 2024

$ 63,031 $ 186,111 $ ( 2,233 ) $ ( 88,461 ) $ 158,448

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:

Stock Retained

3 unchanged sentences

Shareholders’

Balance at April 1, 2023 $ 59,423 $ 287,308 $ ( 2,203 ) $ ( 142,919 ) $ 201,609

Balance at July 1, 2023 $ 60,078 $ 263,933 $ ( 2,218 ) $ ( 138,644 ) $ 183,149

Net income (loss) — ( 50,380 ) — — ( 50,380 )

2 unchanged sentences

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

Cash dividends declared (0.13 per share)

— ( 4,468 ) — — ( 4,468 )

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

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

Stock-based compensation expense 749 — — — 749

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

Balance at 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:

Balance at September 30, 2023 $ 60,827 $ 213,568 $ ( 2,233 ) $ ( 117,971 ) $ 154,191

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

Stock Retained

8 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)

3 unchanged sentences

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

Balance at June 30, 2023 $ 60,078 $ 263,933 $ ( 2,218 ) $ ( 138,644 ) $ 183,149

Balance at September 30, 2023 $ 60,827 $ 213,568 $ ( 2,233 ) $ ( 117,971 ) $ 154,191

See accompanying notes to the condensed consolidated financial statements.

2 unchanged sentences

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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, 2024, the condensed consolidated results of operations for the three and six months ended June 30, 2024 and 2023, the condensed consolidated cash flows for the six months ended June 30, 2024 and 2023, and the condensed consolidated changes in shareholders’ equity for the six months ended June 30, 2024 and 2023, 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, 2024, the condensed consolidated results of operations for the three and nine months ended September 30, 2024 and 2023, the condensed consolidated cash flows for the nine months ended September 30, 2024 and 2023, and the condensed consolidated changes in shareholders’ equity for the three and nine months ended September 30, 2024 and 2023, 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 2024 and 2023 for this segment references 13-week periods ended June 30, 2024 and June 25, 2023, respectively.

As such, the fiscal third quarter for 2024 and 2023 for this segment references 13-week periods ended September 29, 2024 and September 24, 2023, 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.

2 unchanged sentences

These financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the 2023 Form 10-K.

The results of operations for the three and six months ended June 30, 2024, 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, 2024, 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 (also referred to as "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 Colombia.

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

As part of the Brazilian merger review process regarding the sale of Terphane to Oben Group, on May 13, 2024, the General Superintendence of the Administrative Council for Economic Defense ("SG-CADE") issued a non-binding opinion ("SG Opinion") recommending the rejection of the transaction.

Following this first stage of the two-stage Brazilian merger review process for complex transactions, the case has been submitted to the CADE Tribunal, in accordance with the customary Brazilian merger review process.

The parties are given a full opportunity to present evidence in favor of clearing the transaction.

The final decision regarding the transaction will eventually be rendered by the Tribunal, which has begun its independent analysis.

CADE's maximum deadline for completing its review is no later than November 18, 2024.

The Colombian authority cleared the merger review regarding the transaction in early February 2024.

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

As part of the Brazilian merger review process regarding the sale of Terphane to Oben Group ("Oben"), on May 13, 2024, the General Superintendence of the Administrative Council for Economic Defense ("SG-CADE") issued a non-binding opinion ("SG Opinion") recommending the rejection of the transaction.

Following this first stage of the two-stage Brazilian merger review process for complex transactions, the case was submitted to the CADE Tribunal, in accordance with the customary Brazilian merger review process.

As of September 30, 2024, the Company reported results for Terphane as a continuing operation, due to the uncertainty related to the Brazilian merger review process.

On October 16, 2024, CADE approved a merger control agreement allowing Tredegar to proceed with the sale of Terphane to Oben.

This approval was the indication that the sale of Terphane was probable.

Refer to Note 11 for additional information.

Closure of PE Films Technical Center

In August 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.

Research & development activities for PE Films are now being 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.

All activities ceased at the PE Films technical center in Richmond, VA as of the end of the first quarter of 2024.

The Company recognized expense incurred through June 30, 2024 associated with the exit activities of $ 0.2 million for building closure costs.

The Company recognized expense incurred through September 30, 2024 associated with the exit activities of $ 0.2 million for building closure costs.

In addition, the Company recognized a non-cash loss on the lease abandonment ($ 0.3 million).

Supply Chain Financing

As of June 30, 2024 and December 31, 2023, $ 6.8 million and $ 15.8 million, respectively, of the Company’s accounts payable were financed by participating suppliers through third-party financial institutions.

Impairment of Goodwill

As of September 30, 2024 and December 31, 2023, $ 11.8 million and $ 15.8 million, respectively, of the Company’s accounts payable were financed by participating suppliers through third-party financial institutions.

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 indicated that Futura’s fair value was 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 was 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, 2024, 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 2024 that indicate that Surface Protection's fair value is more likely than not less than its carrying amount.

No events or circumstances were identified during the third quarter of 2023 that indicated that Futura’s fair value was 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, as of September 30, 2023.

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.

No events or circumstances were identified during the second quarter of 2024 that indicate that Surface Protection's fair value is more likely than not less than its carrying amount.

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.

Accounting standards not yet adopted

7 unchanged sentences

ASU 2023-07 expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets.

This ASU is effective for fiscal years beginning after December 15, 2023 and interim period beginning after December 15, 2024, with early adoption permitted.

This ASU is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024, with early adoption permitted.

The amendments in this ASU are to be applied retrospectively to all prior periods presented in the financial statements.

7 unchanged sentences

ACCOUNTS AND OTHER RECEIVABLES

As of June 30, 2024 and December 31, 2023, accounts and other receivables, net include the following:

(In thousands) June 30, 2024 December 31, 2023

As of September 30, 2024 and December 31, 2023, accounts and other receivables, net include the following:

(In thousands) September 30, 2024 December 31, 2023

Customer receivables $ 81,735 $ 67,183

4 unchanged sentences

The components of inventories are as follows:

(In thousands) June 30, 2024 December 31, 2023

(In thousands) September 30, 2024 December 31, 2023

Finished goods $ 31,782 $ 29,821

8 unchanged sentences

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

During 2023, the Company recognized a pre-tax pension settlement loss of $ 92.3 million.

During 2023, the Company recognized a total pre-tax pension settlement loss of $ 92.3 million.

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.

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, 2024 and 2023.

Pension expense recognized for this plan was immaterial in the three and nine months ended September 30, 2024 and 2023.

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, 2024 and 2023, 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, 2024 and 2023, 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) 2024 2023 2024 2023

2 unchanged sentences

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

Pension settlement loss (a)

Amortization of prior service costs, (gains) losses and net transition asset 3 2,644 ( 37 ) ( 58 )

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) 2024 2023 2024 2023

2 unchanged sentences

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

Pension settlement loss (a)

Amortization of prior service costs, (gains) losses and net transition asset 15 8,609 ( 120 ) ( 176 )

Net periodic benefit cost $ 72 $ 35,521 $ 91 $ 46

Pension and other postretirement liabilities were $ 7.2 million and $ 7.3 million at June 30, 2024 and December 31, 2023, respectively ($ 0.7 million included in “Accrued expenses” at June 30, 2024 and December 31, 2023 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 consolidated statements of operation, represents pension settlement charges due to lump sum payments to participants.

Pension and other postretirement liabilities were $ 7.1 million and $ 7.3 million at September 30, 2024 and December 31, 2023, respectively ($ 0.7 million included in “Accrued expenses” at September 30, 2024 and December 31, 2023 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;

3 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 June 30, Six Months Ended June 30,

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

(In thousands) 2024 2023 2024 2023

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.

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 2,427,051 and 2,648,861 for the three and six months ended June 30, 2024, respectively.

If the Company had reported net income for the three and six months ended June 30, 2023, the average out-of-the-money options to purchase shares that would be 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.

If the Company had reported net income for the three months ended September 30, 2024, 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 2,353,905 .

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 2,550,542 for the nine months ended September 30, 2024.

If the Company had reported net income for the three and nine months ended September 30, 2023, the average out-of-the-money options to purchase shares that would be 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.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The changes in accumulated other comprehensive income (loss) by component for the three months ended June 30, 2024.

The changes in accumulated other comprehensive income (loss) by component for the three months ended September 30, 2024.

(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, 2024 $ ( 84,985 ) $ 297 $ 512 $ ( 84,176 )

Balance at July 1, 2024 $ ( 90,273 ) $ ( 564 ) $ 484 $ ( 90,353 )

Other comprehensive income (loss) 1,500 262 — 1,762

5 unchanged sentences

Other comprehensive income (loss), net of tax 1,496 423 ( 27 ) 1,892

Balance at June 30, 2024

Balance at September 30, 2024

$ ( 88,777 ) $ ( 141 ) $ 457 $ ( 88,461 )

The changes in accumulated other comprehensive income (loss) by component for the six months ended June 30, 2024.

The changes in accumulated other comprehensive income (loss) by component for the nine months ended September 30, 2024.

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

7 unchanged sentences

Other comprehensive income (loss), net of tax ( 5,740 ) ( 942 ) ( 82 ) ( 6,764 )

Balance at June 30, 2024

Balance at September 30, 2024

$ ( 88,777 ) $ ( 141 ) $ 457 $ ( 88,461 )

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 )

7 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 $ 4.9 million ( 3.6 million pounds of aluminum) at June 30, 2024 and $ 7.7 million ( 5.6 million pounds of aluminum) at December 31, 2023.

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, 2024 and December 31, 2023:

June 30, 2024 December 31, 2023

The notional amount of aluminum futures contracts that hedged future purchases of aluminum to meet fixed-price forward sales contract obligations was $ 6.0 million ( 4.3 million pounds of aluminum) at September 30, 2024 and $ 7.7 million ( 5.6 million pounds of aluminum) at December 31, 2023.

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, 2024 and December 31, 2023:

September 30, 2024 December 31, 2023

(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, 2024:

Dollars as of September 30, 2024:

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

$ 1,804 5.3848 R$ 9,714 Jul-24 84 %

$ 1,806 5.4014 R$ 9,755 Aug-24 84 %

$ 1,857 5.4107 R$ 10,048 Sep-24 87 %

$ 1,851 5.4225 R$ 10,037 Oct-24 87 %

6 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, 2024 and December 31, 2023:

June 30, 2024 December 31, 2023

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, 2024 and December 31, 2023:

September 30, 2024 December 31, 2023

(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 and six month periods ended June 30, 2024 and 2023 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, 2024 and 2023 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) $ ( 153 ) $ 1,716 $ 16 $ ( 144 ) $ 16 $ 1,024

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) $ ( 662 ) $ 3,273 $ 46 $ 396 $ 46 $ 2,031

As of June 30, 2024, the Company expects $ 0.2 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, 2024 and 2023, 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 (benefit) of $ 2.6 million on pre-tax income (loss) of $ 14.7 million in the first six months of 2024.

The effective tax rate in the first six months of 2024 was 17.9 % and 13.1 % in the first six months of 2023.

The change in effective tax rate was primarily due to pre-tax income in the first six months of 2024 versus a pre-tax loss in the first six months of 2023.

The effective tax rate for the first six months of 2024 varies from the 21% statutory rate primarily due to foreign rate differences and non-deductible expenses offset by Brazilian tax incentives and federal tax credits.

Brazil income tax was deemed deductible but not creditable in the U.S.

in the first six months of 2023.

As a result of guidance released by the U.S.

Treasury and Internal Revenue Service ("IRS") in the fourth quarter of 2023, and new Brazil tax legislation effective January 1, 2024, Brazil income tax is deemed creditable in the U.S.

As of September 30, 2024, the Company expects $ 0.1 million of unrealized after-tax gains 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, 2024 and 2023, 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 (benefit) of $ 3.6 million on pre-tax income (loss) of $ 11.7 million in the first nine months of 2024.

The effective tax rate in the first nine months of 2024 was 30.5 % and 18.8 % in the first nine months of 2023.

The change in effective tax rate was primarily due to pre-tax income in the first nine months of 2024 versus a pre-tax loss in the first nine months of 2023.

During the first nine months of 2024, Tredegar increased the valuation allowance on existing deferred tax assets as a result of the sale of Terphane by $1.0 million.

The effective tax rate for the first nine months of 2024 varies from the 21% statutory rate primarily due to foreign rate differences and non-deductible expenses offset by Brazilian tax incentives and federal tax credits.

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

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

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

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

Terphane Ltda.

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, 2024 and 2023:

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, 2024 and 2023:

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

(In thousands) 2024 2023 2024 2023

28 unchanged sentences

Gain on investment in kaleo, Inc.

144 — 144 262

Stock option-based compensation costs — — — 231

Pension settlement loss — 25,612 — 25,612

Corporate expenses, net 6,644 11,633 16,411 30,100

2 unchanged sentences

Net income (loss) $ ( 3,946 ) $ ( 50,380 ) $ 8,134 $ ( 70,314 )

The following table presents identifiable assets by segment at June 30, 2024 and December 31, 2023:

(In thousands) June 30, 2024 December 31, 2023

The following table presents identifiable assets by segment at September 30, 2024 and December 31, 2023:

(In thousands) September 30, 2024 December 31, 2023

Aluminum Extrusions $ 258,410 $ 255,756

5 unchanged sentences

Total $ 442,540 $ 446,461

The following tables disaggregate the Company’s revenue by geographic area and product group for the three and six months ended June 30, 2024 and 2023:

The following tables disaggregate the Company’s revenue by geographic area and product group for the three and nine months ended September 30, 2024 and 2023:

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) 2024 2023 2024 2023

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 $ 6.7 million and $ 3.4 million in the second quarter of 2024 and 2023, respectively, and $ 12.8 million and $ 6.8 million in the first six months of 2024 and 2023, respectively.

to Asia, and include net sales of $ 6.5 million and $ 4.8 million in the third quarter of 2024 and 2023, respectively, and $ 19.1 million and $ 11.7 million in the first nine months of 2024 and 2023, 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) 2024 2023 2024 2023

14 unchanged sentences

On December 27, 2023, the Company entered into Amendment No.

3 (the “ABL Facility”) to the Second Amended and Restated Credit Agreement, which provides the Company with a $ 180 million senior secured asset-based revolving credit facility that will mature on June 30, 2026.

3 to the Second Amended and Restated Credit Agreement (the "Credit Agreement"), which provides the Company with a $ 180 million senior secured asset-based revolving credit facility that will mature on June 30, 2026.

On April 16, 2024, the Company entered into Amendment No.

4 (the "Amendment") that, among other items:

(i) moves the ABL Adjustment Date (defined below) from March 31, 2025 to September 30, 2025 and (ii) requires weekly reporting of the borrowing base financial covenant.

4 to the Credit Agreement (as amended by Amendment No.

3 and Amendment No.

4, the “ABL Facility”) that, among other items:

(i) moves the ABL Adjustment Date (defined below) from March 31, 2025 to September 30, 2025 and (ii) requires weekly reporting of the borrowing base financial covenant until the ABL Adjustment Date.

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

1 unchanged sentence

Upon the earlier of September 30, 2025 or the date the Company receives the proceeds from the sale of Terphane (the “ABL Adjustment Date”), the $ 180 million ABL Facility will be reduced to $ 125 million.

As of June 30, 2024, Minimum Liquidity (as defined in the ABL Facility) of $ 45.1 million, after reducing the borrowing base by the aggregate outstanding borrowings of $ 122.0 million and standby letters of credit of $ 12.9 million, was in excess of the $10 million Minimum Liquidity financial covenant.

As of September 30, 2024, Minimum Liquidity (as defined in the ABL Facility) of $ 45.1 million, after reducing the borrowing base by the aggregate outstanding borrowings of $ 122.0 million and standby letters of credit of $ 12.9 million, was in excess of the $10 million Minimum Liquidity financial covenant.

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

23 unchanged sentences

Minimum Credit EBITDA (In thousands)

June 2024 $ 19,450

July 2024 21,860

August 2024 22,830

September 2024 $ 25,370

13 unchanged sentences

In addition to the financial covenants, the ABL Facility contains restrictive covenants, including covenants that restrict the Company’s ability to pay dividends and repurchase shares of its common stock.

After the ABL Adjustment Date, the Company is no longer prohibited from making dividend payments and share repurchases.

All decisions with respect to the declaration and payment of future dividends and share repurchases will be made by the Board in its sole discretion based upon earnings, financial condition, anticipated cash needs and other such considerations as the Board deems relevant.

If at any time the availability under the ABL facility after the ABL Adjustment Date is less than 20% of the maximum aggregate principal amount in effect at such time or an Event of Default occurs, the Company’s current weekly reporting requirements to lenders will continue until the Event of Default is waived, cured or the availability under the ABL facility is above 20% of the maximum aggregate principal amount for 30 consecutive days.

1 unchanged sentence

In the event that the Company cannot certify that all conditions to the borrowing have been met, the lenders can restrict the Company’s future borrowings under the ABL Facility.

Because a Cash Dominion Period is currently in effect and the Company is required to represent that no Material Adverse Effect has occurred as a condition to borrowing, the outstanding debt under the ABL Facility (all contractual payments due on June 30, 2026) is classified as a current liability in the condensed consolidated balance sheets.

Because a Cash Dominion Period was in effect as of September 30, 2024 and December 31, 2023 and the Company was required to represent that no Material Adverse Effect has occurred as a condition to borrowing, the outstanding debt under the ABL Facility (all contractual payments due on June 30, 2026) was classified as a current liability in the condensed consolidated balance sheets as of the dates presented.

In accordance with the ABL Facility, the lenders have been provided with the Company’s financial statements, covenant compliance certificates and projections to facilitate their ongoing assessment of the Company.

Accordingly, the Company believes the likelihood that lenders would exercise the subjective acceleration clause whereby prohibiting future borrowings is remote.

As of June 30, 2024, the Company was in compliance with all debt covenants.

As of September 30, 2024, the Company was in compliance with all debt covenants.

On November 1, 2024, with the closing of the Terphane Sale, the ABL Adjustment Date has occurred.

Terphane Brazil Loan

On October 26, 2023, Flexible Packaging Film's business unit in Brazil (“Terphane Ltda.”), the Company’s wholly owned subsidiary in Brazil, borrowed $ 20 million secured by certain of its assets (“Terphane Brazil Loan”).

On October 26, 2023, Flexible Packaging Film's business unit (“Terphane Ltda.”), the Company’s wholly owned subsidiary in Brazil, borrowed $ 20 million secured by certain of its assets (“Terphane Brazil Loan”).

Dollar borrowing matures on October 30, 2028, with interest payable quarterly at an annual floating interest rate of the SOFR plus 5.99 %.

The SOFR rate was 5.35 % as of June 30, 2024.

The SOFR rate was 5.35 % as of September 30, 2024.

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 the closing of the Contingent Terphane Sale.

On October 26, 2023, the Company borrowed $ 20 million from Terphane Ltda.

(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.

In connection with the closing of the Terphane Sale, both the Terphane Brazil Loan and the Intercompany Loan were assumed by Oben.

PE Films Guangzhou Loan

On June 25, 2024, PE Films' business location in Guangzhou, China, Guangzhou Tredegar Film Products Co., Ltd.

(“Guangzhou Tredegar”), entered into a 9.5 million Chinese Yuan, which is equivalent to $ 1.3 million as of June 30, 2024, revolving loan with the Industrial and Commercial Bank of China.

The loan matures one year after the first withdrawal, which occurred on July 4, 2024, in the amount of 5 million Chinese Yuan.

(“Guangzhou Tredegar”), entered into a 9.5 million Chinese Yuan, which is equivalent to $ 1.4 million as of September 30, 2024, revolving loan with the Industrial and Commercial Bank of China.

The loan matures on July 3, 2025.

The interest rate is the one year loan prime rate published by the National Interbank Funding Center for the working day immediately preceding the drawdown date, minus 0.45 %.

As of June 30, 2024, the National Interbank Funding Center rate was 3.45 %.

As of September 30, 2024, the National Interbank Funding Center rate was 3.35 %.

The revolving loan is secured by a mortgage contract listing the Guangzhou Tredegar factory building as collateral.

The mortgage contract has a maximum value of 30 million Chinese Yuan and is effective from June 25, 2024 through May 31, 2027.

SUBSEQUENT EVENTS

On September 1, 2023, the Company entered into an agreement to sell Terphane, headquartered in Brazil, to Oben for net cash-free and debt-free base consideration of $ 116 million.

On November 1, 2024, Tredegar completed the sale of Terphane to Oben.

At closing, Tredegar received $ 60 million in cash, which is net of Terphane debt assumed by Oben of $ 20 million and Terphane cash retained by Oben of $ 2 million.

Accordingly, on a cash-free and debt-free basis, the enterprise value of the Terphane transaction at closing for Tredegar was $ 78 million.

Tredegar anticipates receiving an additional $ 7 million in cash following the release of certain escrow funds within 120 days of closing.

The cash proceeds received by Tredegar at closing are after deducting projected Brazil withholding taxes, net working capital adjustments, escrow funds, U.S.

capital gains taxes and transaction expenses.

The total estimated proceeds from the sale of Terphane are required to be used to pay down the outstanding ABL Facility debt.

An estimated pre-tax loss on the sale of $ 72.5 million ($ 65.5 million after-tax) is expected to be recognized in the fourth quarter of 2024.

The estimated net loss on sale includes $ 100 million of estimated cumulative translation adjustment losses and gains on derivative financial instruments reclassified from other comprehensive income (loss).

Expected amounts are based on Terphane’s estimated closing balance sheet, which are subject to change.

As of and for the nine months ended September 30, 2024, the Flexible Packaging Films business had net assets of approximately $ 36 million and EBITDA from ongoing operations of $ 8.9 million.

See Note 9 where Flexible Packing Films is presented as a reportable segment.

As a result of the completion of the sale, the Company will classify and report Terphane as discontinued operations in the fourth quarter of 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