What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-08 compared with 2024-08-07 · 204 added, 198 removed, 303 unchanged (57% of the section changed)

7 unchanged sentences

Factors that could cause actual results to differ materially from expectations include, without limitation, the following:

• inability to successfully complete strategic dispositions, including the Contingent Terphane Sale, failure to realize the expected benefits of such dispositions and assumption of unanticipated risks in such dispositions;

• inability to successfully transition into an asset-based revolving lending facility;

• inability to successfully complete strategic dispositions, failure to realize the expected benefits of such dispositions and assumption of unanticipated risks in such dispositions;

• failure by governmental entities to prevent foreign companies from evading anti-dumping and countervailing duties;

• noncompliance with any of the financial and other restrictive covenants in the Company's asset-based credit facility;

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• the impact of the imposition of tariffs and sanctions on imported aluminum ingot used by Bonnell Aluminum;

• failure by governmental entities to prevent foreign companies from evading anti-dumping and countervailing duties;

• unanticipated problems or delays with the implementation of the enterprise resource planning and manufacturing executions systems, or security breaches and other disruptions to the Company's information technology infrastructure;

• loss or gain of sales to significant customers on which the Company’s business is highly dependent;

• loss of sales to significant customers on which the Company’s business is highly dependent;

• inability to achieve sales to new customers to replace lost business;

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• impact of fluctuations in foreign exchange rates;

• the termination of anti-dumping duties on products imported to Brazil that compete with products produced by Flexible Packaging;

• an information technology system failure or breach;

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Business Overview

Tredegar Corporation is an industrial manufacturer with three primary businesses:

Tredegar Corporation is an industrial manufacturer.

As of September 30, 2024, we had three primary businesses:

custom aluminum extrusions for the North American building and construction ("B&C"), automotive and specialty end-use markets through its Aluminum Extrusions segment;

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and specialized polyester films primarily for the Latin American flexible packaging market through its Flexible Packaging Films segment.

With approximately 1,900 employees, the Company operates manufacturing facilities in North America, South America, and Asia.

Earnings before interest, taxes, depreciation and amortization ("EBITDA") from ongoing operations is the measure of segment profit and loss used by Tredegar’s chief operating decision maker ("CODM") for purposes of assessing financial

On November 1, 2024, we completed the sale of our Flexible Packaging Film business ("Terphane") to Oben Group ("Oben").

For more information, see Note 11.

Since the sale was completed after September 30, 2024, the historical financial results of Terphane are reported as continuing operations in this Form 10-Q.

In all future public filings, the historical financial results of Terphane will be reflected as discontinued operations under GAAP for all periods.

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

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We believe that EBIT is a widely understood and utilized metric that is meaningful to certain investors and that including this financial metric in the reconciliation of management’s performance metric, EBITDA from ongoing operations, provides useful information to those investors that primarily utilize EBIT to analyze the Company’s core operations.

Second quarter 2024 net income (loss) was $8.8 million ($0.26 per diluted share) compared to $(18.9) million ($(0.56) per diluted share) in the second quarter of 2023.

Second Quarter Financial Results Highlights

• EBITDA from ongoing operations for Aluminum Extrusions (also referred to as "Bonnell Aluminum") was $12.9 million in the second quarter of 2024 versus $10.2 million in the second quarter of last year and $12.5 million in the first quarter of 2024.

◦ Sales volume was 34.9 million pounds in the second quarter of 2024 versus 35.5 million pounds in the second quarter of last year and 33.8 million pounds in the first quarter of 2024.

◦ Open orders at the end of the second quarter of 2024 were approximately 14 million pounds (versus 20 million pounds in the second quarter of 2023 and 15 million pounds at the end of the first quarter of 2024).

Net new orders increased 17% in the second quarter of 2024 versus the second quarter of 2023 and were relatively flat versus the first quarter of 2024.

• EBITDA from ongoing operations for PE Films was $10.1 million in the second quarter of 2024 versus $0.8 million in the second quarter of 2023 and $6.9 million in the first quarter of 2024.

Sales volume was 10.5 million pounds in the second quarter of 2024 versus 6.2 million pounds in the second quarter of 2023 and 10.0 million pounds in the first quarter of 2024.

• EBITDA from ongoing operations for Flexible Packaging Films (also referred to as "Terphane") was $3.2 million during the second quarter of 2024 versus $0.2 million in the second quarter of 2023 and $2.0 million during the first quarter of 2024.

Sales volume was 25.1 million pounds in the second quarter of 2024 versus 23.7 million pounds in the second quarter 2023 and 22.0 million pounds in the first quarter of 2024.

See the "Status of Agreement to Sell Terphane" in Results of Operations below for information on the planned sale of Terphane.

Performance of EBITDA from ongoing operations continued to improve sequentially after suffering a period of losses in 2023.

In Aluminum Extrusions, net new orders and sales volume have increased since the third quarter of 2023, which the Company views as the bottom of the recent severe down cycle.

EBITDA from ongoing operations and sales volume in PE Films exceeded normal levels in the second quarter of 2024 due to the restocking of Surface Protection customer inventories, which were abnormally low.

Terphane’s profitability showed improvement from depressed levels for the fourth straight quarter while the review process of the agreement to sell it to Oben Group continues to reside with competition authorities in Brazil with a maximum deadline of November 18, 2024.

While the recent business rebound has had a positive impact on overall operating results and overall net financial leverage, the Company continues to focus on prudently managing costs, working capital and capital spending.

Third quarter 2024 net income (loss) was $(3.9) million ($(0.11) per diluted share) compared to $(50.4) million ($(1.47) per diluted share) in the third quarter of 2023.

Third Quarter Financial Results Highlights

• EBITDA from ongoing operations for Aluminum Extrusions (also referred to as "Bonnell Aluminum") was $6.2 million in the third quarter of 2024 versus $5.1 million in the third quarter of last year and $12.9 million in the second quarter of 2024.

◦ Sales volume was 34.6 million pounds in the third quarter of 2024 versus 32.5 million pounds in the third quarter of last year and 34.9 million pounds in the second quarter of 2024.

◦ Open orders at the end of the third quarter of 2024 were approximately 15.5 million pounds (versus 17 million pounds in the third quarter of 2023 and 14 million pounds at the end of the second quarter of 2024).

Net new orders increased 27% in the third quarter of 2024 versus the third quarter of 2023 and increased 7% versus the second quarter of 2024.

• EBITDA from ongoing operations for PE Films was $5.9 million in the third quarter of 2024 versus $4.0 million in the third quarter of 2023 and $10.1 million in the second quarter of 2024.

Sales volume was 9.6 million pounds in the third quarter of 2024 versus 7.2 million pounds in the third quarter of 2023 and 10.5 million pounds in the second quarter of 2024.

• EBITDA from ongoing operations for Terphane was $3.7 million during the third quarter of 2024 versus $0.5 million in the third quarter of 2023 and $3.2 million during the second quarter of 2024.

Sales volume was 25.3 pounds in the third quarter of 2024 versus 22.2 million pounds in the third quarter 2023 and 25.1 million pounds in the second quarter of 2024.

Aluminum Extrusions experienced unfavorable costs, including manufacturing inefficiencies, a shift in mix and margin pressures from imports and excess industry capacity.

PE Films EBITDA performance during the third quarter moderated as expected versus the first two quarters of 2024.

Tredegar closed on the sale of Terphane on November 1, 2024.

Results of Operations

Second Quarter of 2024 Compared with the Second Quarter of 2023

The following table presents a bridge of consolidated net income (loss) from the second quarter of 2023 to the second quarter of 2024 with management's related discussion and analysis below the table.

Third Quarter of 2024 Compared with the Third Quarter of 2023

The following table presents a bridge of consolidated net income (loss) from the third quarter of 2023 to the third quarter of 2024 with management's related discussion and analysis below the table.

(In thousands)

Net income (loss) for the three months ended June 30, 2023

Net income (loss) for the three months ended September 30, 2023

Income tax expense (benefit) (13,307)

Income (loss) before income taxes for the three months ended June 30, 2023

Income (loss) before income taxes for the three months ended September 30, 2023

Change in income (loss) from increases (decreases) in the following items:

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Cost of goods sold (7,137)

Freight (352)

Selling, general and administrative (445)

1 unchanged sentence

Pension and postretirement benefits 3,064

Interest expense (1,005)

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

Pension settlement loss 25,612

Goodwill impairment 19,478

Income (loss) before income taxes for the three months ended June 30, 2024

Income (loss) before income taxes for the three months ended September 30, 2024

Income tax expense (benefit) 948

Net income (loss) for the three months ended June 30, 2024

Sales in the second quarter of 2024 increased by $12.1 million compared with the second quarter of 2023.

Net sales (sales less freight) in Aluminum Extrusions decreased $2.4 million, primarily due to lower sales volume, the pass-through of slightly lower metal costs and pricing pressure.

Net sales in PE Films increased $13.3 million, primarily due to volume increases in Surface Protection.

Net sales in Flexible Packaging Films increased $1.3 million, primarily due to higher sales volume and favorable product mix, partially offset by lower selling prices that the Company believes are driven by excess global capacity and strong competition in Brazil, Latin America and the U.S.

Net income (loss) for the three months ended September 30, 2024

Sales in the third quarter of 2024 increased by $15.9 million compared with the third quarter of 2023.

Net sales (sales less freight) in Aluminum Extrusions increased $6.3 million, primarily due to higher sales volume and the pass-through of higher metal costs, partially offset by lower pricing associated with a shift in mix.

Net sales in PE Films increased $4.9 million, primarily due to volume increases in both Surface Protection and overwrap films.

Net sales in Flexible Packaging Films increased $4.3 million, primarily due to higher sales volume.

For more information on net sales and volume, see the Segment Operations Review below.

Consolidated gross profit (sales minus cost of goods sold and freight) as a percentage of sales (gross profit margin) was 18.1% in the second quarter of 2024 compared to 9.9% in the second quarter of 2023.

The gross profit margin in Aluminum Extrusions increased compared to the prior year period primarily due to higher net net pricing after the pass-through of metal cost changes, manufacturing cost improvements, including lower supply expense and lower freight rates, partially offset by lower volume.

Additionally, the timing of the flow through under the first-in first-out method ("FIFO") of aluminum raw material costs, which were previously acquired at lower prices in a quickly changing commodity pricing environment and passed through to customers, resulted in a benefit of $1.2 million in the second quarter of 2024 versus a charge of $1.3 million in the second quarter of 2023.

The gross profit margin in PE Films increased due to a higher Surface Protection contribution margin associated with substantially higher volume, favorable pricing, operating efficiencies and manufacturing costs savings and lower fixed costs.

The gross profit margin in Flexible Packaging Films increased primarily due to lower raw material costs, lower fixed costs, favorable product mix and higher sales volume, partially offset by lower selling prices from global excess capacity and margin pressures.

As a percentage of sales, selling, general and administrative (“SG&A”) and research and development ("R&D") expenses of 10.5% in the second quarter of 2024 remained consistent with the second quarter of 2023.

During 2023, the Company settled its pension plan, which decreased the pension and other postretirement expenses for the second quarter of 2024 compared to the second quarter of 2023.

See Note 4 for additional information.

Interest expense of $3.4 million in the second quarter of 2024 increased $1.0 million compared to the second quarter of 2023 due to higher interest rates.

See Note 10 for additional information.

In the second quarter of 2023, a non-cash partial goodwill impairment of $15.4 million was recognized, see Note 1 for more information.

The effective tax rate used to compute income taxes was 18.3% in the second quarter of 2024 compared to 15.0% in the second quarter of 2023.

Consolidated gross profit (sales minus cost of goods sold and freight) as a percentage of sales (gross profit margin) was 12.8% in the third quarter of 2024 compared to 9.0% in the third quarter of 2023.

The gross profit margin in Aluminum Extrusions increased compared to the prior year period primarily due to higher volume, favorable variable manufacturing costs, lower labor-related costs, and lower freight rates, partially offset by lower net pricing after the pass-through of metal cost changes associated with a shift in mix and manufacturing inefficiencies.

Additionally, the timing of the flow-through under the first-in first-out ("FIFO") method of aluminum raw material costs, which were previously acquired at higher prices in a quickly changing commodity pricing environment and passed through to customers, resulted in a charge of $1.0 million in the third quarter of 2024 versus a charge of $1.2 million in the third quarter of 2023.

The gross profit margin in PE Films increased due to a higher Surface Protection contribution margin associated with higher volume and manufacturing costs savings, partially offset by unfavorable pricing.

The gross profit margin in Flexible Packaging Films increased primarily due to lower variable costs, lower raw material costs, higher volume, favorable product mix, and lower fixed costs, partially offset by lower selling prices from global excess capacity and margin pressures.

As a percentage of sales, selling, general and administrative (“SG&A”) and research and development ("R&D") expenses of 12.2% in the third quarter of 2024 remained consistent with the third quarter of 2023.

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.

See Note 4 for additional information.

Pre-tax gains and losses associated with plant shutdowns, asset impairments, restructurings and other items for the second quarters of 2024 and 2023 detailed below are shown in the statements of net sales and EBITDA from ongoing operations by segment in Note 9 and are included in “Asset impairments and costs associated with exit and disposal activities, net of adjustments” in the condensed consolidated statements of income, unless otherwise noted.

Three Months Ended June 30,

The decrease in asset impairments and costs associated with exit and disposal activities, net of adjustments is primarily related to closure of the PE Films technical center in Richmond, VA.

See Note 1 for more information.

In the third quarter of 2023, a non-cash partial goodwill impairment of $19.5 million was recognized.

See Note 1 for more information.

The effective tax rate used to compute income taxes was (31.6)% in the third quarter of 2024 compared to 20.9% in the third quarter of 2023.

Pre-tax gains and losses associated with plant shutdowns, asset impairments, restructurings and other items for the third quarters of 2024 and 2023 detailed below are shown in the statements of net sales and EBITDA from ongoing operations by segment in Note 9 and are included in “Asset impairments and costs associated with exit and disposal activities, net of adjustments” in the condensed consolidated statements of income, unless otherwise noted.

Three Months Ended September 30,

(In millions) 2024 2023

Aluminum Extrusions:

(Gains) losses associated with plant shutdowns, asset impairments and restructurings:

Other restructuring costs - severance $ — $ 0.1

(Gains) losses from sale of assets, investment writedowns and other items:

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Legal fees associated with the Aluminum Extruders Trade Case 1

Resolution of customer quality complaint 2

Total for Aluminum Extrusions $ 1.9 $ 1.4

(Gains) losses associated with plant shutdowns, asset impairments and restructurings:

Write-down of Richmond, Virginia Technical Center assets 4

Richmond, Virginia Technical Center closure expenses, including severance 4

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Total for PE Films $ — $ 24.0

Flexible Packaging Films:

(Gains) losses from sale of assets, investment writedowns and other items:

Professional fees associated with business development activities 1

Total for Flexible Packaging Films $ 0.1 $ —

(Gains) losses from sale of assets, investment writedowns and other items:

Professional fees associated with business development activities 1

Professional fees associated with remediation activities related to internal control over financial reporting 1

Professional fees associated with the transition to the ABL Facility 1

Group annuity contract premium expense adjustment 2

Write-down of investment in Harbinger Capital Partners Special Situations Fund 2

Stock-based compensation expense associated with the fair value remeasurement of awards granted at the time of the 2020 special dividend 1

Net periodic benefit cost for the frozen defined benefit pension plan in process of termination 3

Pension settlement loss 3

Total for Corporate $ 1.1 $ 31.8

Included in “Selling, general and administrative expenses” in the condensed consolidated statements of income.

Included in “Other income (expense), net” in the condensed consolidated statements of income.

Included in “Sales” in the condensed consolidated statements of income.

See Note 4 for additional information.

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Average total debt outstanding and interest rates were as follows:

Three Months Ended June 30,

Three Months Ended September 30,

(In millions, except percentages) 2024 2023

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Average interest rate 9.4 % 7.4 %

First Six Months of 2024 Compared with the First Six Months of 2023

The following table presents a bridge of consolidated net income (loss) from the first six months of 2023 to the first six months of 2024 with management's related discussion and analysis below the table.

First Nine Months of 2024 Compared with the First Nine Months of 2023

The following table presents a bridge of consolidated net income (loss) from the first nine months of 2023 to the first nine months of 2024 with management's related discussion and analysis below the table.

(In thousands)

Net income (loss) for the six months ended June 30, 2023

Net income (loss) for the nine months ended September 30, 2023

Income tax expense (benefit) (16,307)

Income (loss) before income taxes for the six months ended June 30, 2023

Income (loss) before income taxes for the nine months ended September 30, 2023

Change in income (loss) from increases (decreases) in the following items:

Sales (3,318)

Other income (expense), net 100

Total (3,247)

Change in income (loss) from (increases) decreases in the following items:

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Interest expense (2,523)

Asset impairments and costs associated with exit and disposal activities, net of adjustments 4,115

Pension settlement loss 25,612

Goodwill impairment 34,891

Income (loss) before income taxes for the six months ended June 30, 2024

Income (loss) before income taxes for the nine months ended September 30, 2024

Income tax expense (benefit) 3,573

Net income (loss) for the six months ended June 30, 2024

Sales in the first six months of 2024 decreased by $3.3 million compared with the first six months of 2023.

Net income (loss) for the nine months ended September 30, 2024

Sales in the first nine months of 2024 increased by $12.5 million compared with the first nine months of 2023.

Net sales in Aluminum Extrusions decreased $15.3 million, primarily due to lower sales volume and the pass-through of lower metal costs.

Net sales in PE Films increased $22.8 million, primarily due to an increase in sales volume in Surface Protection.

Net sales in Flexible Packaging Films were relatively flat, primarily due to lower selling prices that the Company believes are driven by excess global capacity and strong competition in Brazil, Latin America and the U.S, offset by higher sales volume.

Net sales in Flexible Packaging Films increased $4.2 million primarily due to higher volume, partially offset by lower selling prices that the Company believes are driven by excess global capacity and strong competition in Brazil, Latin America and the U.S and unfavorable product mix.

For more information on net sales and volume, see the Segment Operations Review below.

Consolidated gross profit (sales minus cost of goods sold and freight) as a percentage of sales (gross profit margin) was 16.8% in the first six months of 2024 compared to 11.7% in the first six months of 2023.

The gross profit margin in Aluminum Extrusions increased compared to the prior year period primarily due to higher net pricing after the pass-through of metal cost changes, manufacturing cost improvements, including lower supply expense, and lower freight rates, partially offset by lower volume.

Additionally, the timing of the flow through under the FIFO method of aluminum raw material costs, which were previously acquired at lower prices in a quickly changing commodity pricing environment and passed through to customers, resulted in a charge of $0.1 million in the first six months of 2024 versus a benefit of $0.4 million in the first six months of 2023.

Consolidated gross profit (sales minus cost of goods sold and freight) as a percentage of sales (gross profit margin) was 15.5% in the first nine months of 2024 compared to 10.9% in the first nine months of 2023.

The gross profit margin in Aluminum Extrusions increased compared to the prior year period primarily due to higher net pricing after the pass-through of metal cost changes and mix, favorable variable manufacturing costs, lower utilities and lower freight rates, partially offset by lower volume, manufacturing inefficiencies and higher labor and employee-related costs.

Additionally, the timing of the flow-through under the FIFO method of aluminum raw material costs, which were previously acquired at higher prices in a quickly changing commodity pricing environment and passed through to customers, resulted in a charge of $1.0 million in the first nine months of 2024 versus a charge of $0.8 million in the first nine months of 2023.

The gross profit margin in PE Films increased due to a higher Surface Protection contribution margin associated with substantially higher volume, operating efficiencies and manufacturing costs savings, favorable pricing, and lower fixed costs.

The gross profit margin in Flexible Packaging Films increased primarily due to lower raw material costs, lower fixed costs, higher sales volume, and favorable product mix, partially offset by lower selling prices from global excess capacity and margin pressures and higher variable costs.

As a percentage of sales, SG&A and R&D expenses of 10.6% in the first six months of 2024 remained consistent with the first six months of 2023.

During 2023, the Company settled its pension plan, which decreased the pension and other postretirement expenses for the first six months of 2024 compared to the first six months of 2023.

As a percentage of sales, SG&A and R&D expenses of 11.1% in the first nine months of 2024 remained consistent with the first nine months of 2023.

During the first nine months 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.

See Note 4 for additional information.

Interest expense of $6.8 million in the first six months of 2024 increased $2.1 million compared to the first six months of 2023 due to higher average debt levels and interest rates.

Interest expense of $10.3 million in the first nine months of 2024 increased $2.5 million compared to the first nine months of 2023 due to higher average debt and higher interest rates.

See Note 10 for additional information.

In the first half of 2023, a non-cash partial goodwill impairment of $15.4 million was recognized, see Note 1 for more information.

The effective tax rate used to compute income taxes was 17.9% in the first six months of 2024 compared to 13.1% in the first six months of 2023.

The decrease in asset impairments and costs associated with exit and disposal activities, net of adjustments is primarily related to closure of the PE Films technical center in Richmond, VA.

See Note 1 for more information.

In the first nine months of 2023, a non-cash partial goodwill impairment of $34.9 million was recognized.

See Note 1 for more information.

The effective tax rate used to compute income taxes was 30.5% in the first nine months of 2024 compared to 18.8% in the first nine months of 2023.

See Note 8 for additional information.

Pre-tax gains and losses associated with plant shutdowns, asset impairments, restructurings and other items for the first six months of 2024 and 2023 detailed below are shown in the statements of net sales and EBITDA from ongoing operations by segment in Note 9 and are included in “Asset impairments and costs associated with exit and disposal activities, net of adjustments” in the condensed consolidated statements of income, unless otherwise noted.

Six Months Ended June 30,

Pre-tax gains and losses associated with plant shutdowns, asset impairments, restructurings and other items for the first nine months of 2024 and 2023 detailed below are shown in the statements of net sales and EBITDA from ongoing operations by segment in Note 9 and are included in “Asset impairments and costs associated with exit and disposal activities, net of adjustments” in the condensed consolidated statements of income, unless otherwise noted.

Nine Months Ended September 30,

(In millions) 2024 2023

Aluminum Extrusions:

(Gains) losses associated with plant shutdowns, asset impairments and restructurings:

Other restructuring costs - severance $ — $ 0.1

(Gains) losses from sale of assets, investment writedowns and other items:

2 unchanged sentences

Legal fees associated with the Aluminum Extruders Trade Case 1

Resolution of customer quality complaint 5

Total for Aluminum Extrusions $ 4.1 $ 1.8

(Gains) losses associated with plant shutdowns, asset impairments and restructurings:

Write-down of Richmond, Virginia Technical Center assets 4

Richmond, Virginia Technical Center closure expenses, including severance 4

5 unchanged sentences

Other restructuring costs - severance $ — $ 0.1

(Gains) losses from sale of assets, investment writedowns and other items:

Professional fees associated with business development activities 1

Total for Flexible Packaging Films $ 0.1 $ 0.1

7 unchanged sentences

Net periodic benefit cost for the frozen defined benefit pension plan in process of termination 3

Pension settlement loss 3

Total for Corporate $ 3.3 $ 41.5

3 unchanged sentences

See Note 1 for additional information.

Included in “Sales” in the condensed consolidated statements of income.

Average total debt outstanding and interest rates were as follows:

Six Months Ended June 30,

Nine Months Ended September 30,

(In millions, except percentages) 2024 2023

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(Unfavorable)

% Change Six Months Ended Favorable/

% Change Nine Months Ended Favorable/

(Unfavorable)

(In thousands, except percentages) June 30, June 30,

(In thousands, except percentages) September 30, September 30,

2024 2023 2024 2023

4 unchanged sentences

Depreciation & amortization (4,404) (4,683) 6.0% (13,392) (13,252) (1.1)%

EBIT* $ 8,461 $ 6,059 39.6% $ 16,459 $ 16,286 1.1%

EBIT* $ 1,773 $ 430 NM** $ 18,232 $ 16,716 9.1%

Capital expenditures $ 1,449 $ 4,489 $ 4,461 $ 17,862

*See the table in Note 9 for a reconciliation of this non-GAAP measure to the most comparable measure calculated in accordance with GAAP.

Second Quarter 2024 Results vs.

Second Quarter 2023 Results

Net sales (sales less freight) in the second quarter of 2024 decreased 2.0% versus the second quarter of 2023 primarily due to lower sales volume, the pass-through of slightly lower metal costs and pricing pressure.

Sales volume in the second quarter of 2024 decreased 1.7% versus the second quarter of 2023 but increased 3.3% versus the first quarter 2024.

Net new orders, which remain low compared to pre-pandemic levels, increased 17% in the second quarter of 2024 versus the second quarter of 2023 and were relatively flat compared to the first quarter of 2024.

**Not meaningful ("NM")

Third Quarter 2024 Results vs.

Third Quarter 2023 Results

Net sales (sales less freight) in the third quarter of 2024 increased 5.8% versus the third quarter of 2023 primarily due to higher sales volume and the pass-through of higher metal costs, partially offset by lower pricing associated with a shift in mix.

Sales volume in the third quarter of 2024 increased 6.5% versus the third quarter of 2023 but decreased 0.9% versus the second quarter 2024.

Net new orders, which remain low compared to pre-pandemic levels, increased 27.3% in the third quarter of 2024 versus the third quarter of 2023 and increased 7% versus the second quarter of 2024.

Since January 2021, net new orders for the Company's aluminum extruded products have generally tracked the ISM ® Manufacturing PMI ® .

In addition, the Architecture Billings Index (ABI), a key leading indicator for non-residential B&C, has demonstrated a decline in billings (i.e., an index below 50) for the last 20 months ended September 2024.

The Company believes that net new orders continue to be below pre-pandemic levels due to higher interest rates, tighter lender requirements and the increase in remote working, which particularly impacts the non-residential B&C end-use market.

In addition, data indicates that aluminum extrusion imports have increased significantly in recent years, especially during the pandemic, and some of Bonnell Aluminum’s customers have increased their sourcing of aluminum extrusions from producers outside of the U.S.

Open orders at the end of the second quarter of 2024 were 14 million pounds (versus 15 million pounds at the end of the first quarter of 2024 and 20 million pounds at the end of the second quarter of 2023).

Open orders at the end of the third quarter of 2024 were 15.5 million pounds (versus 14 million pounds at the end of the second quarter of 2024 and 17 million pounds at the end of the third quarter of 2023).

This level is below the quarterly range of 21 to 27 million pounds in 2019 before pandemic-related disruptions (particularly starting in early 2021 with the re-opening of markets following the rollout of vaccines) that resulted in long lead times, driving a peak in open orders of approximately 100 million pounds during the first quarter of 2022.

The Company is part of a coalition of members of the Aluminum Extruders Council who have filed a trade case with the Department of Commerce (“DOC”) and the U.S.

International Trade Commission (“ITC”) against 15 countries in response to alleged large and increasing volumes of unfairly priced imports of aluminum extrusions since 2019.

In November 2023, the ITC found that there is a reasonable indication that the American aluminum extrusions industry is materially injured or threatened with injury due to imports from 14 countries, including China.

The ITC’s preliminary determination found that subject import volumes were significant and increasing, and that with regard to pricing, subject imports predominantly undersold the domestic product by volume in each year of the period of investigation.

On May 2, 2024, the DOC announced its preliminarily determination that aluminum extrusion producers and exporters in 14 countries, including China, sold aluminum extrusions at less-than-fair value in the U.S.

Final determinations, which are expected by the end of the third quarter of 2024, should provide an additional opportunity for Bonnell Aluminum to regain market share.

The Company's analysis of recent U.S.

import data of aluminum extrusions indicates that the preliminary determinations of duties are starting to have the desired behavioral impact of shifting related customer purchases back to U.S.

EBITDA from ongoing operations in the second quarter of 2024 increased $2.7 million versus the second quarter of 2023 primarily due to:

• Higher net pricing after the pass-through of metal cost changes and mix ($1.3 million), manufacturing cost improvements, including lower supply expense ($2.0 million) and lower freight rates ($0.5 million), partially offset by lower volume ($0.1 million), higher labor and employee-related costs ($0.8 million), higher utility expense ($0.4 million), and higher SG&A expenses, including other employee-related compensation ($2.0 million);

resulted in a benefit of $1.2 million in the second quarter of 2024 versus a charge of $1.3 million in the second quarter of 2023.

First Six Months of 2024 Results vs.

First Six Months of 2023 Results

Net sales in the first six months of 2024 decreased 8.4% versus the first six months of 2023 primarily due to lower sales volume and the pass-through of lower metal costs.

Sales volume in the first six months of 2024 decreased 5.9% versus the first six months of 2023.

EBITDA from ongoing operations in the first six months of 2024 increased $0.6 million in comparison to the first six months of 2023 primarily due to:

• Higher net pricing after the pass-through of metal cost changes and mix ($3.3 million), manufacturing cost improvements, including lower supply expense ($2.6 million) and lower freight rates ($0.7 million), partially offset by lower volume ($3.4 million), higher labor and employee-related costs ($0.2 million), and higher SG&A, including other employee-related compensation ($1.7 million);

• The timing of the flow-through under the FIFO method of aluminum raw material costs, which were previously acquired at lower prices in a quickly changing commodity pricing environment and passed through to customers, resulted in a charge of $0.1 million in the first six months of 2024 versus a benefit of $0.4 million in the first six months of 2023.

The Company is part of a coalition of members of the Aluminum Extruders Council that filed a trade case with the U.S.

Department of Commerce (“USDOC”) and the U.S.

International Trade Commission (“USITC”) against 15 countries in response to alleged large and increasing volumes of unfairly priced imports of aluminum extrusions since 2019.

In November 2023, the USITC found that there is a reasonable indication that the American aluminum extrusions industry is materially injured or threatened with injury due to imports from 14 countries, including China.

On September 27, 2024, the USDOC announced its final determinations that aluminum extrusion producers and exporters in 14 countries, including China, sold aluminum extrusions at less-than-fair value in the U.S.

The final USITC vote on October 30, 2024, indicated that it believes that the industry was not materially injured by reason of the subject imports, despite the USDOC determinations of pricing below fair value and receiving unfair subsidies.

The coalition is evaluating next steps for challenging the decision.

EBITDA from ongoing operations in the third quarter of 2024 increased $1.1 million versus the third quarter of 2023 primarily due to:

• Higher volume ($1.8 million), favorable variable manufacturing costs ($1.7 million), lower labor-related costs ($0.1 million) and lower freight rates ($0.2 million), partially offset by unfavorable net pricing after the pass-through of metal cost and changes associated with a shift in mix ($1.1 million), manufacturing inefficiencies ($0.8 million), higher maintenance expense ($0.4 million) and higher SG&A expenses, including other employee-related compensation ($0.8 million);

• The timing of the flow-through under the FIFO method of aluminum raw material costs, which were previously acquired at higher prices in a quickly changing commodity pricing environment and passed through to customers, resulted in a charge of $1.0 million in the third quarter of 2024 versus a charge of $1.2 million in the third quarter of 2023.

First Nine Months of 2024 Results vs.

First Nine Months of 2023 Results

Net sales in the first nine months of 2024 decreased 4.2% versus the first nine months of 2023 primarily due to lower sales volume and the pass-through of lower metal costs.

Sales volume in the first nine months of 2024 decreased 2.1% versus the first nine months of 2023.

EBITDA from ongoing operations in the first nine months of 2024 increased $1.7 million in comparison to the first nine months of 2023 primarily due to:

• Higher net pricing after the pass-through of metal cost changes and mix ($2.0 million), favorable variable manufacturing costs ($3.7 million), lower utilities ($0.2 million) and lower freight rates ($0.9 million), partially offset by lower volume ($1.6 million), manufacturing inefficiencies ($0.8 million), higher labor and employee-related costs ($0.1 million), and higher SG&A, including other employee-related compensation ($2.4 million);

• The timing of the flow-through under the FIFO method of aluminum raw material costs, which were previously acquired at higher prices in a quickly changing commodity pricing environment and passed through to customers, resulted in a charge of $1.0 million in the first nine months of 2024 versus a charge of $0.8 million in the first nine months of 2023.

R efer to Item 3.

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Capital expenditures for Bonnell Aluminum are projected to be $8 million in 2024, including $4 million for productivity projects and $4 million for capital expenditures required to support continuity of operations.

The projected spending reflects stringent spending measures that the Company has implemented to control its financial leverage.

The multi-year implementation for new enterprise resource planning and manufacturing execution systems ("ERP/MES") has been reorganized with an extended implementation period.

As a result, the earliest "go-live" date for the net ERP/MES is 2025.

The projected spending reflects stringent spending measures that the Company has implemented to control its financial leverage (See "Liquidity and Capital Resources" section below for more information).

The multi-year implementation of new enterprise resource planning and manufacturing execution systems ("ERP/MES") has been reorganized with the timing for the go-live date being uncertain.

The ERP/MES project commenced in 2022, with spending to-date of approximately $21 million.

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(Unfavorable)

% Change Six Months Ended Favorable/

% Change Nine Months Ended Favorable/

(Unfavorable)

(In thousands, except percentages) June 30, June 30,

(In thousands, except percentages) September 30, September 30,

2024 2023 2024 2023

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Ongoing operations:

EBITDA $ 10,133 $ 814 NM** $ 17,037 $ 2,663 NM**

EBITDA $ 5,876 $ 4,037 45.6% $ 22,913 $ 6,700 NM**

Depreciation & amortization (1,299) (2,111) 38.5% (3,944) (5,305) 25.7%

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**Not meaningful ("NM")

Second Quarter 2024 Results vs.

Second Quarter 2023 Results

Net sales in the second quarter of 2024 were 83.4% higher compared to the second quarter of 2023, with volume increases in Surface Protection.

Surface Protection sales volume in the second quarter of 2024 increased 123% versus the second quarter of 2023 (which reflected weak market conditions in consumer electronics) and 14% versus the first quarter of 2024.

EBITDA from ongoing operations during the second quarter of 2024 of $10.1 million was exceptional, primarily due to the restocking of Surface Protection customer inventories, which were abnormally low.

While market indicators and recent volume improvements indicate a positive outlook for the consumer electronics market, EBITDA from ongoing operations performance is expected to moderate in the third quarter of 2024 as customer inventories and the Company's sales volume stabilize.

Third Quarter 2024 Results vs.

Third Quarter 2023 Results

Net sales in the third quarter of 2024 were 24.8% higher c ompared to the third quarter of 2023, with volu me increases in Surface Protection and overwrap films.

Surface Protection sales volume in the third quarter of 2024 increased 37.5% versus the third quarter of 2023 and declined 16.5% versus the second quarter of 2024.

Surface Protection sales volume began to moderate during the third quarter of 2024, following extremely high sales volume in the second quarter associated with the restocking of Surface Protection customer inventories.

EBITDA from ongoing operations in the third quarter of 2024 increased $1.8 million versus the third quarter of 2023, primarily due to:

• A $2.4 million increase in Surface Protection primarily due to higher contribution margin associated with higher volume ($2.0 million) and manufacturing costs savings ($1.1 million), partially offset by unfavorable pricing ($0.2 million) and higher SG&A ($0.1 million);

• A foreign currency transaction loss of $0.2 million in the third quarter of 2024 versus no gain or loss in the third quarter of 2023;

• The pass-through lag associated with resin costs (a charge of $0.2 million in the third quarter of 2024 versus a benefit of $0.1 million in the third quarter of 2023);

• A $0.6 million decrease in overwrap films, primarily due to pricing and mix.

There have been significant cyclical swings in the sales volume and EBITDA from ongoing operations for PE Films in the past 2.5 years, largely due to the unprecedented downturn in the display industry during the second half of 2022 and first half of 2023.

EBITDA from ongoing operations for the first half of 2024, the second and first halves of 2023 and the second and first halves of 2022 were $17.0 million, $8.6 million, $2.7 million, $(2.2) million and $14.1 million, respectively, which averages approximately $4 million per quarter.

EBITDA from ongoing operations in the second quarter of 2024 increased $9.3 million versus the second quarter of 2023, primarily due to:

• A $9.6 million increase in Surface Protection primarily due to higher contribution margin associated with substantially higher volume ($6.4 million), favorable pricing ($0.2 million), operating efficiencies and manufacturing costs savings ($2.3 million), lower fixed costs ($0.2 million) and lower SG&A ($0.6 million, including $0.8 million associated with the closure of the Richmond Technical Center in 2023);

• A foreign currency transaction gain of $0.1 million in the second quarter of 2024 versus a gain of $0.5 million in the second quarter of 2023;

• A $0.1 million increase in overwrap films.

First Six Months of 2024 Results vs.

First Six Months of 2023 Results

Net sales in the first six months of 2024 increased 49.4% compared to the first six months of 2023 primarily due to an increase in sales volume in Surface Protection, as a result of factors noted above.

Sales volume increased 77% in Surface Protection in the first six months of 2024 versus the first six months of 2023.

EBITDA from ongoing operations in the first six months of 2024 increased by $14.4 million versus the first six months of 2023, primarily due to:

• A $14.1 million increase in Surface Protection primarily due to higher contribution margin associated with substantially higher volume ($7.4 million), favorable pricing ($0.5 million), operating efficiencies and manufacturing costs savings ($4.2 million), lower fixed costs ($0.6 million) and lower SG&A ($1.4 million, which was associated with the closure of the Richmond Technical Center in 2023);

• A foreign currency transaction gain of $0.1 million in the first six months of 2024 versus a gain of $0.4 million in the first six months of 2023;

• The pass-through lag associated with resin costs (a charge of $0.4 million in the first six months of 2024 versus a charge of $0.2 million in the first six months of 2023);

• A $0.8 million increase from overwrap films primarily due to cost improvements.

First Nine Months of 2024 Results vs.

First Nine Months of 2023 Results

Net sales in the first nine months of 2024 increased 40.6% compared to the first nine months of 2023 primarily due to an increase in sales volume in Surface Protection, as a result of factors noted above.

Sales volume increased 62.3% in Surface Protection in the first nine months of 2024 versus the first nine months of 2023.

EBITDA from ongoing operations in the first nine months of 2024 increased $16.2 million versus the first nine months of 2023, primarily due to:

• A $16.0 million increase in Surface Protection primarily due to higher contribution margin associated with substantially higher volume ($9.4 million), operating efficiencies and manufacturing costs savings ($5.9 million), favorable pricing ($0.3 million), lower fixed costs ($0.2 million) and lower SG&A, including lower costs associated with the closure of the Richmond Technical Center in 2023 ($1.2 million);

• A foreign currency transaction loss of $0.1 million in the first nine months of 2024 versus a gain of $0.3 million in the first nine months of 2023;

• The pass-through lag associated with resin costs (a charge of $0.7 million in the first nine months of 2024 versus a charge of $0.1 million in the first nine months of 2023);

• A $0.2 million increase from overwrap films, primarily due to cost improvements ($1.0 million), partially offset by a shift in mix ($0.8 million).

R efer to Item 3.

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(Unfavorable)

% Change Six Months Ended Favorable/

% Change Nine Months Ended Favorable/

(Unfavorable)

(In thousands, except percentages) June 30, June 30,

(In thousands, except percentages) September 30, September 30,

2024 2023 2024 2023

8 unchanged sentences

**Not meaningful ("NM")

Second Quarter 2024 Results vs.

Second Quarter 2023 Results

Net sales in the second quarter of 2024 increased 4.0% compared to the second quarter of 2023 primarily due to higher sales volume and favorable product mix, partially offset by lower selling prices that the Company believes are driven by excess global capacity and strong competition in Brazil, Latin America and the U.S.

EBITDA from ongoing operations in the second quarter of 2024 increased $3.0 million versus the second quarter of 2023, primarily due to:

• Lower raw material costs ($2.5 million), lower fixed costs ($1.1 million), favorable product mix ($1.1 million), higher sales volume ($0.5 million) and lower SG&A ($0.3 million), partially offset by lower selling prices from global excess capacity and margin pressures ($1.5 million);

• Foreign currency transaction losses ($0.2 million) in the second quarter of 2024 remained consistent with the second quarter of 2023;

Third Quarter 2024 Results vs.

Third Quarter 2023 Results

Net sales in the third quarter of 2024 increased 14.1% compared to the third quarter of 2023 primarily due to higher sales volume.

EBITDA from ongoing operations in the third quarter of 2024 increased $3.3 million versus the third quarter of 2023, primarily due to:

• Lower variable costs ($1.5 million), lower raw material costs ($1.1 million), higher volume ($1.0 million), favorable product mix ($0.8 million), lower fixed costs ($0.2 million), and lower SG&A ($0.2 million), partially offset by lower selling prices from global excess capacity and margin pressures ($0.6 million);

• Foreign currency transaction gains ($0.1 million) in the third quarter of 2024 compared to foreign currency transaction gains ($0.2 million) in the third quarter of 2023;

• Net unfavorable foreign currency translation of Real-denominated operating costs ($0.8 million).

First Six Months of 2024 Results vs.

First Six Months of 2023 Results

Net sales in the first six months of 2024 remained consistent with the first six months of 2023 primarily due to lower selling prices that the Company believes are driven by excess global capacity and strong competition in Brazil, Latin America and the U.S, offset by higher sales volume.

EBITDA from ongoing operations in the first six months of 2024 increased $3.6 million versus the first six months of 2023 primarily due to:

First Nine Months of 2024 Results vs.

First Nine Months of 2023 Results

Net sales in the first nine months of 2024 increased 4.4% compared to the first nine months of 2023 primarily due to higher volume partially offset by lower selling prices that the Company believes are driven by excess global capacity and strong competition in Brazil, Latin America and the U.S and unfavorable product mix.

EBITDA from ongoing operations in the first nine months of 2024 increased $6.8 million versus the first nine months of 2023 primarily due to:

• Lower raw material costs ($5.1 million), lower fixed costs ($3.1 million), higher sales volume ($2.5 million), favorable product mix ($1.4 million), and lower SG&A ($0.6 million), partially offset by lower selling prices from global excess capacity and margin pressures ($4.0 million) and higher variable costs ($0.4 million);

• Foreign currency transaction losses ($0.1 million) in the first six months of 2024 compared to foreign currency transaction losses ($0.2 million) in the first six months of 2023;

• Foreign currency transaction gains ($0.1 million) in the first nine months of 2024 compared to foreign currency transaction losses ($0.1 million) in the first nine months of 2023;

• Net unfavorable foreign currency translation of Real-denominated operating costs ($1.6 million).

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Corporate Expenses, Interest & Other

Corporate expenses, net in the first six months of 2024 decreased $8.7 million compared to the first six months of 2023 primarily due to lower pension expense as a result of the pension plan termination completed in 2023 ($6.7 million), foreign

currency transaction gains related to the remeasurement of intercompany receivables ($2.3 million) and lower business development activities ($1.2 million), partially offset by higher incentive compensation accruals ($1.0 million) and higher stock-based compensation ($0.6 million).

Interest expense of $6.8 million in the first six months of 2024 increased $2.1 million compared to the first six months of 2023 due to higher average debt levels and interest rates.

Status of Agreement to Sell Terphane

On September 1, 2023, the Company announced that it had entered into a definitive agreement to sell 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.

As of June 30, 2024, the Company has reported results for Terphane as a continuing operation, given the status of the approval process by authorities.

If the sale transaction is completed, the Company expects to realize after-tax net debt-free cash proceeds of $85 million after deducting projected Brazil withholding taxes, escrow funds, U.S.

capital gains taxes and transaction costs.

Actual after-tax proceeds may differ from estimates due to possible changes in deductions and the Company's tax situation during the potentially lengthy interim period to the closing date.

Corporate expenses, net in the first nine months of 2024 decreased $13.7 million compared to the first nine months of 2023 primarily due to lower pension expense as a result of the pension plan termination completed in 2023 ($10.1 million) and lower business development activities ($3.4 million).

Interest expense of $10.3 million in the first nine months of 2024 increased $2.5 million compared to the first nine months of 2023 due to higher average debt and higher interest rates.

Net capitalization and other credit measures are provided in Liquidity and Capital Resources below.

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Measures such as days sales outstanding (“DSO”), days inventory outstanding (“DIO”) and days payables outstanding (“DPO”) are used to evaluate changes in working capital.

Changes in operating assets and liabilities from December 31, 2023 to June 30, 2024 are summarized below.

Changes in operating assets and liabilities from December 31, 2023 to September 30, 2024 are summarized below.

• Accounts and other receivables increased $13.7 million (20.2%).

◦ Accounts and other receivables in Aluminum Extrusions increased $10.5 million primarily due to increased sales volume.

DSO (represents trailing 12 months net sales divided by a rolling 12-month average of accounts and other receivables balances) was approximately 43.6 days for the 12 months ended June 30, 2024 and 45.1 days for the 12 months ended December 31, 2023.

◦ Accounts and other receivables in Aluminum Extrusions increased $7.3 million primarily due to higher sales volume in the third quarter of 2024, partially offset by lower pricing associated with a shift in mix.

DSO (represents trailing 12 months net sales divided by a rolling 12-month average of accounts and other receivables balances) was approximately 44.1 days for the 12 months ended September 30, 2024 and 45.1 days for the 12 months ended December 31, 2023.

◦ Accounts and other receivables in PE Films increased $2.8 million primarily due to increased sales volume.

DSO was approximately 24.6 days for the 12 months ended June 30, 2024 and 26.3 for the 12 months ended December 31, 2023.

DSO was approximately 24.2 days for the 12 months ended September 30, 2024 and 26.3 days for the 12 months ended December 31, 2023.

◦ Accounts and other receivables in Flexible Packaging Films increased $3.7 million primarily due to increased sales volume.

DSO was approximately 35.8 days for the 12 months ended June 30, 2024 and 38.1 days for the 12 months ended December 31, 2023.

DSO was approximately 36.0 days for the 12 months ended September 30, 2024 and 38.1 days for the 12 months ended December 31, 2023.

• Inventories increased $6.0 million (7.3%).

◦ Inventories in Aluminum Extrusions increased $4.7 million primarily due to higher average aluminum prices and higher overall inventory levels to align with higher demand.

DIO (represents trailing 12 months costs of goods sold calculated on a first-in first-out basis divided by a rolling 12-month average of inventory balances calculated on the first-in first-out basis) was approximately 47.4 days for the 12 months ended June 30, 2024 and 51.6 days for the 12 months ended December 31, 2023.

◦ Inventories in PE Films increased $2.0 million due to higher raw materials and finished goods levels to support increased sales volume during the first six months of 2024.

DIO was approximately 51.3 days for the 12 months ended June 30, 2024 and 57.2 days for the 12 months ended December 31, 2023.

◦ Inventories in Flexible Packaging Films remained relatively flat.

DIO of approximately 104.6 days for the 12 months ended June 30, 2024 compared to 117.7 days for the 12 months ended December 31, 2023 due to the lower 12-month average of costs of goods sold as a result of overall lower resin costs and higher sales volume.

◦ Inventories in Aluminum Extrusions increased $1.3 million primarily due to higher average aluminum prices.

DIO (represents trailing 12 months costs of goods sold calculated on a FIFO basis divided by a rolling 12-month average of inventory balances calculated on the FIFO basis) was approximately 47.3 days for the 12 months ended September 30, 2024 and 51.6 days for the 12 months ended December 31, 2023.

◦ Inventories in PE Films increased $1.8 million primarily due to higher raw materials and finished goods levels to support increased sales volume during the first nine months of 2024.

DIO was approximately 50.1 days for the 12 months ended September 30, 2024 and 57.2 days for the 12 months ended December 31, 2023.

◦ Inventories in Flexible Packaging Films increased $2.8 million primarily due to higher raw materials and finished goods levels to support increased sales volume during the first nine months of 2024.

DIO was approximately 104.0 days for the 12 months ended September 30, 2024 and 117.7 days for the 12 months ended December 31, 2023.

• Net property, plant and equipment decreased $14.8 million primarily due to depreciation expense of $18.4 million and a $3.0 million unfavorable change in the value of the U.S.

5 unchanged sentences

◦ Accounts payable in Aluminum Extrusions decreased $10.3 million primarily due to the timing of payments.

DPO (represents trailing 12 months costs of goods sold calculated on a first-in first-out basis divided by a rolling 12-month average of accounts payable balances) was approximately 48.1 days for the 12 months ended June 30, 2024 and 49.8 days for the 12 months ended December 31, 2023.

◦ Accounts payable in PE Films increased $0.4 million primarily due to higher inventory levels and the timing of payments.

DPO was approximately 43.7 days for the 12 months ended June 30, 2024 and 43.4 days for the 12 months ended December 31, 2023.

◦ Accounts payable in Flexible Packaging Films decreased $1.5 million primarily due to lower raw material purchases and timing of payments.

DPO was approximately 71.2 days for the 12 months ended June 30, 2024 and 61.7 days for the 12 months ended December 31, 2023.

Net cash provided by operating activities was $7.3 million in the first six months of 2024 compared to net cash provided by operating activities of $22.7 million in the first six months of 2023.

The decrease was primarily due to lower working capital and lower accrued pension benefits as a result of the pension plan termination in 2023, partially offset by higher EBITDA from ongoing operations for all reportable segments in the first 6 months of 2024 versus last year.

Net cash used in investing activities was $4.6 million in the first six months of 2024 compared to $15.6 million the first six months of 2023.

DPO (represents trailing 12 months costs of goods sold calculated on a FIFO basis divided by a rolling 12-month average of accounts payable balances) was approximately 45.7 days for the 12 months ended September 30, 2024 and 49.8 days for the 12 months ended December 31, 2023.

◦ Accounts payable in PE Films increased $1.3 million primarily due to higher raw material purchases.

DPO was approximately 42.9 days for the 12 months ended September 30, 2024 and 43.4 days for the 12 months ended December 31, 2023.

◦ Accounts payable in Flexible Packaging Films increased $3.4 million primarily due to higher raw material purchases and favorable payment terms.

DPO was approximately 75.4 days for the 12 months ended September 30, 2024 and 61.7 days for the 12 months ended December 31, 2023.

Net cash provided by operating activities was $6.1 million in the first nine months of 2024 compared to net cash provided by operating activities of $44.2 million in the first nine months of 2023.

The decrease was primarily due to lower working capital, partially offset by higher EBITDA from ongoing operations for all reportable segments in the first nine months of 2024 versus prior year.

Net cash used in investing activities was $7.5 million in the first nine months of 2024 compared to $22.0 million the first nine months of 2023.

The decrease was primarily due to lower capital expenditures ($14.6 million).

Net cash used in financing activities of $4.9 million in the first six months of 2024 remained consistent with the first six months of 2023.

At June 30, 2024, the Company had cash, cash equivalents and restricted cash of $8.7 million, including cash and cash equivalents held in locations outside the U.S.

Net cash used in financing activities of $3.6 million in the first nine months of 2024 compared to net cash provided by financing activities of $7.7 million in the first nine months of 2023.

The change was primarily due to higher net debt principal payments ($21.0 million) under the ABL Facility (as defined below) during the first nine months of 2024 as compared to the first nine months of 2023 and dividends paid ($8.9 million) during the first nine months of 2023.

At September 30, 2024, the Company had cash, cash equivalents and restricted cash of $6.6 million, including cash and cash equivalents held in locations outside the U.S.

of $2.7 million.

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

3 (the “ABL Facility”) 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.

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.

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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.

Under the terms of the ABL Facility, certain domestic bank accounts are subject to blocked account agreements, each of which contains a springing feature whereby the lenders may exercise control over those accounts during a cash dominion period (any such period, a “Cash Dominion Period”).

6 unchanged sentences

Minimum Credit EBITDA (In thousands)

June 2024 $ 19,450

July 2024 21,860

August 2024 22,830

September 2024 $ 25,370

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Computations of Credit EBITDA (as defined in the ABL Facility) as of and for the

Twelve Months Ended June 30, 2024 *

Computations of Credit EBITDA for the twelve months ended June 30, 2024 (in thousands):

Twelve Months Ended September 30, 2024 *

Computations of Credit EBITDA for the twelve months ended September 30, 2024 (in thousands):

Net income (loss) $ (27,456)

22 unchanged sentences

The computation of the ABL Facility Minimum Liquidity financial covenant, as defined in the ABL Facility, is presented below.

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

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

Maximum aggregate principal $ 180,000 $ 180,000

Maximum borrowing limit per the Borrowing base as defined in the ABL Facility (includes eligible domestic cash and cash equivalents of $3,691 as of June 30, 2024 and $3,846 as of December 31, 2023)

Maximum borrowing limit per the Borrowing base as defined in the ABL Facility (includes eligible domestic cash and cash equivalents of $4,282 as of September 30, 2024 and $3,846 as of December 31, 2023)

$ 180,000 $ 172,286

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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.

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

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.

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

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Dollar borrowing matures on October 30, 2028.

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.

3 unchanged sentences

In the longer term, liquidity will depend on many factors, including the results of operations, the timing and extent of capital expenditures, changes in operating plans, or other events that would cause the Company to seek additional financing in future periods.

In addition, the completion of the Contingent Terphane Sale would provide additional liquidity.

In addition, the completion of the Terphane Sale has provided additional liquidity.

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 2. Management’s Discussion and Analysis