TREDEGAR CORP 10-Q

Item 1. Financial Statements. Tredegar Corporation Condensed Consolidated Balance Sheets (In Thousands, Except Share Data) (Unaudited) September 30, December 31, 2024 2023 Assets Current assets: Cash and cash equivalents $ 2,724 $ 9,660 Restricted cash 3,864 3,795 Accounts and other receivables, net 81,636 67,938 Income taxes recoverable 954 1,182 Inventories 88,058 82,037 Prepaid expenses and other 11,026 12,065 Total current assets 188,262 176,677 Property, plant and equipment, at cost 541,608 541,046 Less: accumulated depreciation ( 372,920 ) ( 357,591 ) Net property, plant and equipment 168,688 183,455 Right-of-use leased assets 15,663 11,848 Identifiable intangible assets, net 8,361 9,851 Goodwill 35,717 35,717 Deferred income taxes 22,765 25,034 Other assets 3,085 3,879 Total assets $ 442,541 $ 446,461 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 89,070 $ 95,023 Accrued expenses 24,000 24,442 Lease liability, short-term 2,824 2,107 Short-term debt 1,356 — ABL revolving facility (matures June 30, 2026) 122,000 126,322 Income taxes payable 8 1,210 Total current liabilities 239,258 249,104 Lease liability, long-term 13,963 10,942 Long-term debt 20,000 20,000 Pension and other postretirement benefit obligations, net 6,464 6,643 Other non-current liabilities 4,408 4,119 Total liabilities 284,093 290,808 Shareholders’ equity: 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 September 30, 2024 and December 31, 2023) ( 2,233 ) ( 2,233 ) Accumulated other comprehensive income (loss): Foreign currency translation adjustment ( 88,777 ) ( 83,037 ) Gain (loss) on derivative financial instruments ( 141 ) 801 Pension and other postretirement benefit adjustments 457 539 Retained earnings 186,111 177,977 Total shareholders’ equity 158,448 155,653 Total liabilities and shareholders’ equity $ 442,541 $ 446,461 See accompanying notes to the condensed consolidated financial statements. 2 Tredegar Corporation Condensed Consolidated Statements of Income (Loss) (In Thousands, Except Per Share Data) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Revenues and other items: Sales $ 182,051 $ 166,192 $ 548,022 $ 535,481 Other income (expense), net ( 22 ) ( 51 ) 310 210 182,029 166,141 548,332 535,691 Costs and expenses: Cost of goods sold 151,676 144,539 442,384 457,332 Freight 7,085 6,733 20,833 19,977 Selling, general and administrative 21,795 21,350 59,940 57,244 Research and development 475 794 994 3,375 Amortization of identifiable intangibles 462 465 1,410 1,433 Pension and postretirement benefits 54 3,118 163 9,955 Interest expense 3,480 3,106 10,314 7,791 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 Total 185,027 229,828 536,625 622,312 Income (loss) before income taxes ( 2,998 ) ( 63,687 ) 11,707 ( 86,621 ) Income tax expense (benefit) 948 ( 13,307 ) 3,573 ( 16,307 ) Net income (loss) $ ( 3,946 ) $ ( 50,380 ) $ 8,134 $ ( 70,314 ) Earnings (loss) per share: Basic $ ( 0.11 ) $ ( 1.47 ) $ 0.24 $ ( 2.06 ) Diluted $ ( 0.11 ) $ ( 1.47 ) $ 0.24 $ ( 2.06 ) Shares used to compute earnings (loss) per share: Basic 34,391 34,264 34,364 34,081 Diluted 34,391 34,264 34,364 34,081 See accompanying notes to the condensed consolidated financial statements. 3 Tredegar Corporation Condensed Consolidated Statements of Comprehensive Income (Loss) (In Thousands) (Unaudited) Three Months Ended September 30, 2024 2023 Net income (loss) $ ( 3,946 ) $ ( 50,380 ) Other comprehensive income (loss): 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 expense of $ 120 in 2024 and net of tax benefit of $ 538 in 2023) 423 69 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 — 20,031 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) ( 27 ) 1,949 Other comprehensive income (loss) 1,892 20,673 Comprehensive income (loss) $ ( 2,054 ) $ ( 29,707 ) Nine Months Ended September 30, 2024 2023 Net income (loss) $ 8,134 $ ( 70,314 ) Other comprehensive income (loss): Unrealized foreign currency translation adjustment (net of tax benefit of $ 466 in 2024 and net of tax expense of $ 640 in 2023) ( 5,740 ) 923 Derivative financial instruments adjustment (net of tax benefit of $ 273 in 2024 and net of tax expense of $ 798 in 2023) ( 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 — 20,031 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) ( 82 ) 6,522 Other comprehensive income (loss) ( 6,764 ) 29,624 Comprehensive income (loss) $ 1,370 $ ( 40,690 ) See accompanying notes to the condensed consolidated financial statements. 4 Tredegar Corporation Condensed Consolidated Statements of Cash Flows (In Thousands) (Unaudited) Nine Months Ended September 30, 2024 2023 Cash flows from operating activities: Net income (loss) $ 8,134 $ ( 70,314 ) Adjustments for noncash items: Depreciation 18,372 19,516 Amortization of identifiable intangibles 1,410 1,433 Reduction of right-of-use lease asset 1,735 1,633 Goodwill impairment — 34,891 Deferred income taxes 2,975 ( 16,820 ) 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: Accounts and other receivables ( 14,683 ) 14,630 Inventories ( 8,711 ) 49,589 Income taxes recoverable/payable ( 952 ) ( 1,688 ) Prepaid expenses and other ( 286 ) ( 142 ) Accounts payable and accrued expenses ( 3,454 ) ( 27,970 ) Lease liability ( 2,118 ) ( 1,669 ) Pension and postretirement benefit plan contributions ( 455 ) ( 455 ) Other, net 2,117 1,716 Net cash provided by (used in) operating activities 6,053 44,238 Cash flows from investing activities: Capital expenditures ( 7,696 ) ( 22,270 ) Proceeds from the sale of kaléo 144 262 Proceeds from the sale of assets 83 — Net cash provided by (used in) investing activities ( 7,469 ) ( 22,008 ) Cash flows from financing activities: Borrowings 519,274 87,000 Debt principal payments ( 522,240 ) ( 69,000 ) Dividends paid — ( 8,884 ) Debt financing costs ( 587 ) ( 1,404 ) Net cash provided by (used in) financing activities ( 3,553 ) 7,712 Effect of exchange rate changes on cash ( 1,898 ) ( 570 ) Increase (decrease) in cash, cash equivalents and restricted cash ( 6,867 ) 29,372 Cash, cash equivalents and restricted cash at beginning of period 13,455 19,232 Cash, cash equivalents and restricted cash at end of period $ 6,588 $ 48,604 See accompanying notes to the condensed consolidated financial statements. 5 Tredegar Corporation Condensed Consolidated Statements of Shareholders’ Equity (In Thousands, Except Share and Per Share Data) (Unaudited) 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 July 1, 2024 $ 62,493 $ 190,057 $ ( 2,233 ) $ ( 90,353 ) $ 159,964 Net income (loss) — ( 3,946 ) — — ( 3,946 ) Foreign currency translation adjustment — — — 1,496 1,496 Derivative financial instruments adjustment — — — 423 423 Amortization of prior service costs and net gains or losses — — — ( 27 ) ( 27 ) Stock-based compensation expense 538 — — — 538 Balance September 30, 2024 $ 63,031 $ 186,111 $ ( 2,233 ) $ ( 88,461 ) $ 158,448 The following summarizes the changes in shareholders’ equity for the nine month period ended September 30, 2024: Common Stock Retained Earnings Trust for Savings Restoration Plan Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity Balance January 1, 2024 $ 61,606 $ 177,977 $ ( 2,233 ) $ ( 81,697 ) $ 155,653 Net income (loss) — 8,134 — — 8,134 Foreign currency translation adjustment — — — ( 5,740 ) ( 5,740 ) Derivative financial instruments adjustment — — — ( 942 ) ( 942 ) Amortization of prior service costs and net gains or losses — — — ( 82 ) ( 82 ) Stock-based compensation expense 1,651 — — — 1,651 Repurchase of employee common stock for tax withholdings ( 226 ) — — — ( 226 ) 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 September 30, 2023: Common Stock Retained Earnings Trust for Savings Restoration Plan Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity Balance at July 1, 2023 $ 60,078 $ 263,933 $ ( 2,218 ) $ ( 138,644 ) $ 183,149 Net income (loss) — ( 50,380 ) — — ( 50,380 ) Foreign currency translation adjustment — — — ( 1,818 ) ( 1,818 ) Derivative financial instruments adjustment — — — 69 69 Amortization of prior service costs and net gains or losses — — — 1,949 1,949 Net gains or (losses) and prior service costs — — — 442 442 Recognition in earnings of net actuarial loss for pension settlement — — — 20,031 20,031 Stock-based compensation expense 749 — — — 749 Tredegar common stock purchased by trust for savings restoration plan — 15 ( 15 ) — — Balance at September 30, 2023 $ 60,827 $ 213,568 $ ( 2,233 ) $ ( 117,971 ) $ 154,191 6 The following summarizes the changes in shareholders’ equity for the nine month period ended September 30, 2023: Common Stock Retained Earnings Trust for Savings Restoration Plan Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity Balance at January 1, 2023 $ 58,824 $ 292,721 $ ( 2,188 ) $ ( 147,595 ) $ 201,762 Net income (loss) — ( 70,314 ) — — ( 70,314 ) Foreign currency translation adjustment — — — 923 923 Derivative financial instruments adjustment — — — 1,706 1,706 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) — ( 8,884 ) — — ( 8,884 ) Stock-based compensation expense 2,257 — — — 2,257 Repurchase of employee common stock for tax withholdings ( 254 ) — — — ( 254 ) Tredegar common stock purchased by trust for savings restoration plan — 45 ( 45 ) — — Balance at September 30, 2023 $ 60,827 $ 213,568 $ ( 2,233 ) $ ( 117,971 ) $ 154,191 See accompanying notes to the condensed consolidated financial statements. 7 TREDEGAR CORPORATION NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. 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 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”). All such adjustments, unless otherwise detailed in the notes to the condensed consolidated financial statements, are deemed to be of a normal, recurring nature. The Company operates on a calendar fiscal year except for the Aluminum Extrusions segment, which operates on a 52/53-week fiscal year basis. As such, the fiscal third quarter for 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. The Company may fund or receive cash from the Aluminum Extrusions segment based on Aluminum Extrusion’s cash flows from operations during the intervening period from Aluminum Extrusion’s fiscal quarter end and the Company’s fiscal quarter end. The condensed consolidated financial statements as of December 31, 2023 that is included herein was derived from the audited consolidated financial statements provided in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”) but does not include all disclosures required by GAAP. These financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the 2023 Form 10-K. 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 "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. 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. 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 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). 8 Supply Chain Financing 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. Goodwill The Company assesses goodwill for impairment when events or circumstances indicate that the carrying value may not be recoverable, or, at a minimum, on an annual basis (December 1st of each year). As of 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, 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 In October 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-06 to amend various paragraphs in the Accounting Standards Codification ("ASC") to primarily reflect the issuance of U.S. Securities and Exchange Commission ("SEC") Staff Bulletin No. 33-10532. ASU 2023-06 will impact various disclosure areas, including the statement of cash flows, accounting changes and error corrections, earnings per share, debt, equity, derivatives, and transfers of financial assets. The amendments in this ASU 2023-06 will be effective on the date the related disclosures are removed from Regulation S-X or Regulation S-K by the SEC and will no longer be effective if the SEC has not removed the applicable disclosure requirement by June 30, 2027. Early adoption is not permitted. The Company does not expect a material impact from the adoption of this standard on our consolidated financial statements and related disclosures. In November 2023, the FASB issued ASU 2023-07 to improve reportable segment disclosure and requirements, primarily through the enhanced disclosures about significant segment expenses. 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 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. The Company has three reportable segments and continues to evaluate additional disclosures that may be required in its Form 10-K for the year ended December 31, 2024. In December 2023, the FASB issued ASU 2023-09 to improve the income tax disclosures related to the rate reconciliation and income taxes paid information and to improve the effectiveness of income tax disclosures. The amendments in this ASU will require the Company to disclose specified additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 will also require the Company to disaggregate its income taxes paid disclosure by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions. This ASU is effective for annual periods beginning after December 15, 2024; early adoption is permitted. The Company is currently evaluating the impact of this standard on our consolidated financial statements and related disclosures. 9 2. ACCOUNTS AND OTHER RECEIVABLES 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 Other receivables 2,327 3,056 Total accounts and other receivables 84,062 70,239 Less: Allowance for bad debts ( 2,426 ) ( 2,301 ) Total accounts and other receivables, net $ 81,636 $ 67,938 3. INVENTORIES The components of inventories are as follows: (In thousands) September 30, 2024 December 31, 2023 Finished goods $ 31,782 $ 29,821 Work-in-process 8,332 7,830 Raw materials 23,497 21,939 Stores, supplies and other 24,447 22,447 Total $ 88,058 $ 82,037 4. PENSION AND OTHER POSTRETIREMENT BENEFITS Tredegar sponsored a noncontributory defined benefit (pension) plan covering certain current and former U.S. employees. As of January 31, 2018, the plan no longer accrued benefits associated with crediting employees for service, thereby freezing all future benefits under the plan. On February 10, 2022, Tredegar announced the initiation of a process to terminate and settle its frozen defined benefit pension plan through lump sum distributions and the purchase of annuity contracts. 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 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 nine months ended September 30, 2024 and 2023. This information has been included in the pension benefit table below. 10 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 September 30, Three Months Ended September 30, (In thousands) 2024 2023 2024 2023 Service cost $ — $ — $ 3 $ 3 Interest cost 20 2,786 65 71 Expected return on plan assets — ( 2,328 ) — — Pension settlement loss (a) — 25,612 — — Amortization of prior service costs, (gains) losses and net transition asset 3 2,644 ( 37 ) ( 58 ) Net periodic benefit cost $ 23 $ 28,714 $ 31 $ 16 Pension Benefits Other Post-Retirement Benefits Nine Months Ended September 30, Nine Months Ended September 30, (In thousands) 2024 2023 2024 2023 Service cost $ — $ — $ 8 $ 9 Interest cost 57 8,842 203 213 Expected return on plan assets — ( 7,542 ) — — Pension settlement loss (a) — 25,612 — — 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 (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; for 2024, the Company anticipates the amount will be consistent with amounts paid for the year ended December 31, 2023, or approximately $ 0.4 million. 5. EARNINGS PER SHARE Basic earnings per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding. Diluted earnings per share is computed by dividing net income (loss) by the weighted average common and potentially dilutive common equivalent shares outstanding, determined as follows: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2024 2023 2024 2023 Weighted average shares outstanding used to compute basic earnings per share 34,391 34,264 34,364 34,081 Incremental dilutive shares attributable to stock options and restricted stock — — — — Shares used to compute diluted earnings per share 34,391 34,264 34,364 34,081 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. 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 11 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. 6. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) 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 July 1, 2024 $ ( 90,273 ) $ ( 564 ) $ 484 $ ( 90,353 ) Other comprehensive income (loss) 1,500 262 — 1,762 Income tax (expense) benefit ( 4 ) ( 41 ) — ( 45 ) Other comprehensive income (loss), net of tax 1,496 221 — 1,717 Reclassification adjustment to net income (loss) — 281 ( 34 ) 247 Income tax (expense) benefit — ( 79 ) 7 ( 72 ) Reclassification adjustment to net income (loss), net of tax — 202 ( 27 ) 175 Other comprehensive income (loss), net of tax 1,496 423 ( 27 ) 1,892 Balance at September 30, 2024 $ ( 88,777 ) $ ( 141 ) $ 457 $ ( 88,461 ) 12 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) Balance at January 1, 2024 $ ( 83,037 ) $ 801 $ 539 $ ( 81,697 ) Other comprehensive income (loss) ( 6,206 ) ( 1,435 ) — ( 7,641 ) Income tax (expense) benefit 466 275 — 741 Other comprehensive income (loss), net of tax ( 5,740 ) ( 1,160 ) — ( 6,900 ) Reclassification adjustment to net income (loss) — 220 ( 105 ) 115 Income tax (expense) benefit — ( 2 ) 23 21 Reclassification adjustment to net income (loss), net of tax — 218 ( 82 ) 136 Other comprehensive income (loss), net of tax ( 5,740 ) ( 942 ) ( 82 ) ( 6,764 ) 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 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 July 1, 2023 $ ( 83,338 ) $ ( 843 ) $ ( 54,463 ) $ ( 138,644 ) Other comprehensive income (loss) ( 1,793 ) 2,287 442 936 Income tax (expense) benefit ( 25 ) ( 197 ) — ( 222 ) Other comprehensive income (loss), net of tax ( 1,818 ) 2,090 442 714 Reclassification adjustment to net income (loss) — ( 2,756 ) 28,198 25,442 Income tax (expense) benefit — 735 ( 6,218 ) ( 5,483 ) Reclassification adjustment to net income (loss), net of tax — ( 2,021 ) 21,980 19,959 Other comprehensive income (loss), net of tax ( 1,818 ) 69 22,422 20,673 Balance at September 30, 2023 $ ( 85,156 ) $ ( 774 ) $ ( 32,041 ) $ ( 117,971 ) 13 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) Balance at January 1, 2023 $ ( 86,079 ) $ ( 2,480 ) $ ( 59,036 ) $ ( 147,595 ) Other comprehensive income (loss) 1,563 7,852 442 9,857 Income tax (expense) benefit ( 640 ) ( 2,228 ) — ( 2,868 ) Other comprehensive income (loss), net of tax 923 5,624 442 6,989 Reclassification adjustment to net income (loss) — ( 5,350 ) 34,045 28,695 Income tax (expense) benefit — 1,432 ( 7,492 ) ( 6,060 ) Reclassification adjustment to net income (loss), net of tax — ( 3,918 ) 26,553 22,635 Other comprehensive income (loss), net of tax 923 1,706 26,995 29,624 Balance at September 30, 2023 $ ( 85,156 ) $ ( 774 ) $ ( 32,041 ) $ ( 117,971 ) The amounts reclassified out of accumulated other comprehensive income (loss) related to pension and other postretirement benefits is included in the computation of net periodic pension costs. See Note 4 for additional details. 7. DERIVATIVES Tredegar uses derivative financial instruments for the purpose of hedging margin exposure from fixed-price forward sales contracts in Aluminum Extrusions and exposure from currency volatility that exists as part of ongoing business operations in Flexible Packaging Films. These derivative financial instruments are designated as and qualify as cash flow hedges and are recognized in the condensed consolidated balance sheet at fair value. If individual derivative instruments with the same counterparty can be settled on a net basis, the Company records the corresponding derivative fair values as a net asset or net liability. In the normal course of business, Aluminum Extrusions enters into fixed-price forward sales contracts with a small subset of its customers for the future sale of fixed quantities of aluminum extrusions at scheduled intervals. In order to hedge margin exposure created from the fixing of future sales prices relative to volatile raw material (aluminum) costs, Aluminum Extrusions enters into a combination of forward purchase commitments and futures contracts to acquire or hedge aluminum, based on the scheduled purchases for the firm sales commitments. The fixed-price firm sales commitments and related hedging instruments have durations generally no longer than 12 months. The notional amount of aluminum futures contracts that hedged future purchases of aluminum to meet fixed-price forward sales contract obligations was $ 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 Account Fair Value Balance Sheet Account Fair Value Derivatives Designated as Hedging Instruments Asset derivatives: Aluminum futures contracts Prepaid expenses and other $ 354 Prepaid expenses and other $ — Liability derivatives: Aluminum futures contracts Accrued expenses ( 128 ) Accrued expenses ( 483 ) Aluminum futures contracts Other non-current liabilities — Other non-current liabilities ( 9 ) Net asset (liability) $ 226 $ ( 492 ) In the event that a counterparty to an aluminum fixed-price forward sales contract chooses not to take delivery of its aluminum extrusions, the customer is contractually obligated to compensate Aluminum Extrusions for any losses on the related aluminum futures and/or forward contracts through the date of cancellation. 14 The Company's earnings are exposed to foreign currency exchange risk primarily through the translation of the financial statements of subsidiaries that have a functional currency other than the U.S. Dollar. The Company estimates that the net mismatch translation exposure for the Flexible Packaging Film's business unit in Brazil (“Terphane Ltda.”) of its sales and raw materials quoted or priced in U.S. Dollars and its variable conversion, fixed conversion and sales, general and administrative costs (before depreciation and amortization) quoted or priced in Brazilian Real ("R$") will result in an annual net cost of R$ 139 million for the full year of 2024. Terphane Ltda. had the following outstanding foreign exchange average forward rate contracts to purchase Brazilian Real and sell U.S. 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 $ 1,851 5.4225 R$ 10,037 Oct-24 87 % $ 1,837 5.4403 R$ 9,994 Nov-24 86 % $ 1,801 5.4580 R$ 9,830 Dec-24 85 % $ 5,489 5.4402 R$ 29,861 85 % These foreign currency exchange contracts have been designated and qualify as cash flow hedges of Terphane Ltda.’s forecasted sales to customers quoted or priced in U.S. Dollars over that period. By changing the currency risk associated with these U.S. Dollar sales, the derivatives have the effect of offsetting operating costs quoted or priced in Brazilian Real and decreasing the net exposure to Brazilian Real in the condensed consolidated statements of income. The table below summarizes the location and gross amounts of foreign currency forward contract fair values (Level 2) in the condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023: September 30, 2024 December 31, 2023 (In thousands) Balance Sheet Account Fair Value Balance Sheet Account Fair Value Derivatives Designated as Hedging Instruments Asset derivatives: Foreign currency forward contracts Prepaid expenses and other $ 219 Prepaid expenses and other $ 2,050 Foreign currency forward contracts Other assets — Other assets 146 Liability derivatives: Foreign currency forward contracts Accrued expenses ( 299 ) Other non-current liabilities — Net asset (liability) $ ( 80 ) $ 2,196 These derivative contracts involve elements of market risk that are not reflected on the condensed consolidated balance sheet, including the risk of dealing with counterparties and their ability to meet the terms of the contracts. The counterparties to any forward purchase commitments are major aluminum brokers and suppliers, and the counterparties to any aluminum futures contracts are major financial institutions. Fixed-price forward sales contracts are only made available to the most credit-worthy customers. The counterparties to the Company’s foreign currency cash flow hedge contracts are major financial institutions. 15 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 September 30, Aluminum Futures Contracts Foreign Currency Forwards (In thousands) 2024 2023 2024 2023 Amount of pre-tax gain (loss) recognized in other comprehensive income (loss) $ 10 $ 2,908 $ — $ 252 $ — $ ( 621 ) Location of gain (loss) reclassified from accumulated other comprehensive income (loss) into net income (effective portion) Cost of goods sold Cost of goods sold Cost of goods sold Selling, general & admin Cost of goods sold Selling, general & admin Amount of pre-tax gain (loss) reclassified from accumulated other comprehensive income (loss) to net income (effective portion) $ ( 153 ) $ 1,716 $ 16 $ ( 144 ) $ 16 $ 1,024 Nine Months Ended September 30, Aluminum Futures Contracts Foreign Currency Forwards 2024 2023 2024 2023 Amount of pre-tax gain (loss) recognized in other comprehensive income (loss) $ 56 $ 4,867 $ — $ ( 1,491 ) $ — $ 2,985 Location of gain (loss) reclassified from accumulated other comprehensive income (loss) into net income (effective portion) Cost of goods sold Cost of goods sold Cost of goods sold Selling, general & admin Cost of goods sold Selling, general & admin Amount of pre-tax gain (loss) reclassified from accumulated other comprehensive income (loss) to net income (effective portion) $ ( 662 ) $ 3,273 $ 46 $ 396 $ 46 $ 2,031 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. 8. INCOME TAXES 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 were to expire at the end of 2024. Terphane Ltda. has been granted an additional three years of tax incentives through the end of 2027. 9. BUSINESS SEGMENTS The Company’s business segments are Aluminum Extrusions, PE Films, and Flexible Packaging Films. Information by business segment is reported below. There are no accounting transactions between segments and no allocations to segments. 16 The Company’s reportable segments are based on its method of internal reporting, which is generally segregated by differences in products. Accounting standards for presentation of segments require an approach based on the way the Company organizes the segments for making operating decisions and how the CODM assesses performance. Earnings before interest, taxes, depreciation and amortization ("EBITDA") from ongoing operations is the key profitability measure used by the CODM (Tredegar’s President and Chief Executive Officer) for purposes of assessing financial performance. The Company uses sales less freight (“net sales”) as its measure of revenues from external customers at the segment level. This measure is separately included in the financial information regularly provided to the CODM. The following table presents net sales and EBITDA from ongoing operations by segment for the three and nine months ended September 30, 2024 and 2023: 17 Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2024 2023 2024 2023 Net Sales Aluminum Extrusions $ 115,717 $ 109,410 $ 349,353 $ 364,607 PE Films 24,879 19,938 78,811 56,036 Flexible Packaging Films 34,370 30,111 99,025 94,861 Total net sales 174,966 159,459 527,189 515,504 Add back freight 7,085 6,733 20,833 19,977 Sales as shown in the condensed consolidated statements of income (loss) $ 182,051 $ 166,192 $ 548,022 $ 535,481 EBITDA from Ongoing Operations Aluminum Extrusions: Ongoing operations: EBITDA $ 6,177 $ 5,113 $ 31,624 $ 29,968 Depreciation & amortization ( 4,404 ) ( 4,683 ) ( 13,392 ) ( 13,252 ) EBIT 1,773 430 18,232 16,716 Plant shutdowns, asset impairments, restructurings and other ( 2,170 ) ( 1,483 ) ( 4,986 ) ( 1,821 ) PE Films: Ongoing operations: EBITDA 5,876 4,037 22,913 6,700 Depreciation & amortization ( 1,299 ) ( 2,111 ) ( 3,944 ) ( 5,305 ) EBIT 4,577 1,926 18,969 1,395 Plant shutdowns, asset impairments, restructurings and other — ( 4,566 ) ( 584 ) ( 4,565 ) Goodwill impairment — ( 19,478 ) — ( 34,891 ) Flexible Packaging Films: Ongoing operations: EBITDA 3,749 477 8,915 2,076 Depreciation & amortization ( 708 ) ( 704 ) ( 2,191 ) ( 2,115 ) EBIT 3,041 ( 227 ) 6,724 ( 39 ) Plant shutdowns, asset impairments, restructurings and other ( 103 ) — ( 103 ) ( 79 ) Total 7,118 ( 23,398 ) 38,252 ( 23,284 ) Interest income 8 62 36 135 Interest expense 3,480 3,106 10,314 7,791 Gain on investment in kaleo, Inc. — — 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 Income (loss) before income taxes ( 2,998 ) ( 63,687 ) 11,707 ( 86,621 ) Income tax expense (benefit) 948 ( 13,307 ) 3,573 ( 16,307 ) Net income (loss) $ ( 3,946 ) $ ( 50,380 ) $ 8,134 $ ( 70,314 ) 18 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 PE Films 57,989 56,536 Flexible Packaging Films 85,297 84,062 Subtotal 401,696 396,354 General corporate 34,256 36,652 Cash, cash equivalents and restricted cash 6,588 13,455 Total $ 442,540 $ 446,461 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 September 30, Nine Months Ended September 30, (In thousands) 2024 2023 2024 2023 United States $ 133,157 $ 125,407 $ 407,465 $ 409,433 Exports from the United States to: Asia 11,875 7,873 34,534 19,082 Latin America 1,395 1,764 4,121 5,440 Canada 3,437 3,640 10,459 12,879 Europe 405 282 1,053 1,414 Operations outside the United States: Brazil 24,408 20,351 69,002 66,954 Asia 289 142 555 302 Total $ 174,966 $ 159,459 $ 527,189 $ 515,504 (a) Export sales relate mostly to PE Films. Operations in Brazil relate to Flexible Packaging Films. The Company’s facilities in Pottsville, PA (“PV”) and Guangzhou, China (“GZ”) have a tolling arrangement whereby certain surface protection films are manufactured in GZ for a fee with raw materials supplied from PV that are then shipped by GZ directly to customers principally in the Asian market, but paid by customers directly to PV. Amounts associated with this intercompany tolling arrangement are reported in the table above as export sales from the U.S. to Asia, and include net sales of $ 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. 19 Net Sales by Product Group Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2024 2023 2024 2023 Aluminum Extrusions: Nonresidential building & construction $ 61,988 $ 59,476 $ 195,603 $ 203,889 Consumer durables 8,581 8,662 25,487 30,723 Automotive 11,060 13,025 31,793 36,916 Residential building & construction 9,790 7,999 27,575 29,658 Electrical 8,926 2,016 21,983 16,223 Machinery & equipment 13,131 14,202 37,995 36,008 Distribution 2,241 4,030 8,917 11,190 Subtotal 115,717 109,410 349,353 364,607 PE Films: Surface protection films 17,516 12,755 56,241 34,251 Overwrap packaging 7,363 7,183 22,570 21,785 Subtotal 24,879 19,938 78,811 56,036 Flexible Packaging Films 34,370 30,111 99,025 94,861 Total $ 174,966 $ 159,459 $ 527,189 $ 515,504 10. DEBT ABL Facility On December 27, 2023, the Company entered into Amendment No. 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 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. Availability for borrowings under the ABL Facility is governed by a borrowing base, determined by the application of specified advance rates against eligible assets, including a portion of trade accounts receivable, inventory, cash and cash equivalents, owned real properties, and owned machinery and equipment. 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 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. With respect to revolving loans denominated in U.S. Dollars, the Company may elect interest rates at: • Alternate Base Rate (“ABR”) plus 2.50 % before the ABL Adjustment Date and the applicable ABR Spread (as defined in the ABL Facility) after the ABL Adjustment Date are determined in accordance with an excess availability-based pricing grid. ABR is defined, in part, as the greater of (a) the Prime Rate in effect on such day, (b) the Federal Reserve Bank of New York Rate in effect on such day plus ½ of 1% and (c) the Adjusted Term SOFR Rate (defined below) for a one-month period plus 1%; or • The Adjusted Term Secured Overnight Financing Rate ("SOFR") Rate plus 3.50 % before the ABL Adjustment Date and the applicable Term Benchmark Spread (as defined in the ABL Facility) are determined in accordance with an excess availability-based pricing grid after the ABL Adjustment Date. Adjusted Term SOFR Rate is defined as the Term SOFR Rate plus 0.10%, subject to an initial Floor (as defined in the ABL Facility) of 0%. Interest rate indices for select non-U.S. dollar borrowings, including borrowings denominated in Euro, Pounds Sterling, Swiss Francs and Japanese Yen, remain consistent with the Second Amended and Restated Credit Agreement. 20 Based upon the quarterly average of daily availability under the ABL Facility, the interest rate pricing grid applicable after the ABL Adjustment Date will be as follows: Pricing under the ABL Facility (Basis Points) Quarter Average of Daily Availability Term Benchmark Spread ABR Spread Commitment Fee* > 66% of $125 million aggregate commitment 225.0 125.0 40.0 ≤ 66% but > 33% of $125 million aggregate commitment 250.0 150.0 40.0 ≤ 33% of $125 million aggregate commitment 275.0 175.0 40.0 * The Commitment Fee before the ABL Adjustment Date and after the ABL Adjustment Date remain the same as reflected in this table. 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”). A Cash Dominion Period was implemented on the date of the closing of the ABL Facility and will remain in effect at all times prior to the ABL Adjustment Date. After the ABL Adjustment Date, a Cash Dominion Period goes into effect if availability under the ABL Facility falls below 12.5 % or an Event of Default (as defined in the ABL Facility) occurs. The Company would then be subject to the Cash Dominion Period until the Event of Default is waived or ABL Facility availability is above 12.5 % of the $ 125 million aggregate commitment for 30 consecutive days. Receipts that have not yet been applied to the ABL Facility are classified as restricted cash in the Company’s consolidated balance sheets. The financial covenants in the ABL Facility are as follows: • Until the ABL Adjustment Date, the Company is required to maintain (i) a minimum Credit EBITDA (as defined in the ABL Facility), as of the end of each fiscal month for the 12-month period then ended (presented below) and (ii) a Minimum Liquidity of $ 10.0 million. Minimum Credit EBITDA (In thousands) September 2024 $ 25,370 October 2024 26,070 November 2024 27,640 December 2024 29,640 January 2025 29,740 February 2025 29,850 March 2025 29,980 April 2025 30,340 May 2025 30,700 June 2025 31,030 July 2025 31,370 August 2025 31,710 September 2025 $ 32,080 • Following the ABL Adjustment Date, the foregoing financial covenants will cease to exist and will be replaced with a minimum fixed charge coverage ratio of 1.00:1.00 that will be triggered in the event that availability is less than 10 % of $ 125 million commitment amount and continuing thereafter until availability is greater than 10 % of the $ 125 million commitment amount for 30 consecutive days. 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. 21 The ABL Facility has customary representations and warranties including, as a condition to each borrowing, that all such representations and warranties are true and correct in all material respects (including a representation that no Material Adverse Effect (as defined in the ABL Facility) has occurred since December 31, 2022). 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 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 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 (“Terphane Ltda.”), the Company’s wholly owned subsidiary in Brazil, borrowed $ 20 million secured by certain of its assets (“Terphane Brazil Loan”). This U.S. 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 September 30, 2024. Quarterly principal payments of $ 1.7 million begin starting in year 3 of the loan. There are no prepayment penalties. 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. 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 $ 1.4 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 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. 11. 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. 22