TREDEGAR CORP 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Forward-looking and Cautionary Statements Some of the information contained in this Quarterly Report on Form 10-Q ("Form 10-Q") may constitute “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. When the Company uses the words “believe,” “estimate,” “anticipate,” “appear to,” “expect,” “project,” “plan,” “likely,” “may” and similar expressions, it does so to identify forward-looking statements. Such statements are based on the Company's then current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. It is possible that the Company's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these forward-looking statements. Factors that could cause actual results to differ materially from expectations include, without limitation, the following: • the impact of macroeconomic factors, such as inflation, interest rates and recession risks; • an increase in the operating costs incurred by the Company’s business units, including, for example, the cost of raw materials and energy; • noncompliance with any of the financial and other restrictive covenants in the ABL Facility; • failure to continue to attract, develop and retain certain key officers or employees; • disruptions to the Company’s manufacturing facilities, including those resulting from labor shortages; • an information technology system failure or breach; • risks of doing business in countries outside the U.S. that affect our international operations; • the impact of public health epidemics on employees, production and the global economy, such as the COVID-19 pandemic; • political, economic and regulatory factors concerning the Company’s products; • inability to develop, efficiently manufacture and deliver new products at competitive prices; • 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 antidumping 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 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; • failure of the Company’s customers to achieve success or maintain market share; • failure to protect our intellectual property rights; • inability to successfully complete strategic acquisitions or dispositions, failure to realize the expected benefits of such acquisitions or dispositions, and assumption of unanticipated risks in such acquisitions or dispositions; and the other factors discussed in the reports Tredegar files with or furnishes to the Securities and Exchange Commission (the “SEC”) from time to time, including the risks and important factors set forth in additional detail in Part I, Item 1A of Tredegar’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Form 10-K”). Readers are urged to review and consider carefully the disclosures Tredegar makes in its filings with the SEC. Tredegar does not undertake, and expressly disclaims any duty, to update any forward-looking statement to reflect any change in management’s expectations or any change in conditions, assumptions or circumstances on which such statements are based, except as required by applicable law. References herein to “Tredegar,” “the Company,” “we,” “us” and “our” are to Tredegar Corporation and its subsidiaries, collectively, unless the context otherwise indicates or requires. Unless otherwise stated or indicated, all comparisons are to the prior year period. References to "Notes" are to notes to our condensed consolidated financial statements found in Part I, Item 1 of this Form 10-Q. 19 Critical Accounting Policies and Estimates In the ordinary course of business, the Company makes a number of estimates and assumptions relating to the reporting of results of operations and financial position in the preparation of financial statements in conformity with generally accepted accounting standards in the United States ("GAAP"). The Company believes the estimates, assumptions and judgments described in the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in the 2024 Form 10-K have the greatest potential impact on our financial statements, so Tredegar considers these to be its critical accounting policies. Since December 31, 2024, there have been no changes in these policies or estimates that have had a material impact on our results of operations or financial position. Business Overview Tredegar Corporation is an industrial manufacturer with two primary businesses: custom aluminum extrusions for the building & construction (“B&C”). automotive and specialty end-use markets in the United States through its Aluminum Extrusions segment (with exports comprising less than 5% of total sales volume) and surface protection films for high-technology applications in the global electronics industry through its PE Films segment. With approximately 1,500 employees, the Company operates manufacturing facilities in the U.S. and China. 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 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. Earnings before interest and taxes ("EBIT") from ongoing operations is a non-GAAP financial measure included in the reconciliation of segment financial information to consolidated results for the Company in the Segment Operations Review section below. It is not intended to represent the stand-alone results for Tredegar's ongoing operations under GAAP and should not be considered as an alternative to net income as defined by GAAP. 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. First quarter 2025 net income (loss) from continuing operations was $0.7 million ($0.02 per diluted share) compared to $2.6 million ($0.08 per diluted share) in the first quarter of 2024. First Quarter Financial Results Highlights • Earnings before interest, taxes, depreciation and amortization (“EBITDA”) from ongoing operations for Aluminum Extrusions was $9.2 million in the first quarter of 2025 versus $12.5 million in the first quarter of 2024 ◦ Sales volume was 37.9 million pounds in the first quarter of 2025 versus 33.8 million pounds in the first quarter of 2024. ◦ Net new orders increased 36% in the first quarter of 2025 versus the first quarter of 2024 and 24% versus the fourth quarter of 2024. Open orders at the end of the first quarter of 2025 were 25 million pounds, which is up from 15 million pounds at the end of the first quarter of 2024 and 17 million pounds at the end of the fourth quarter of 2024. • EBITDA from ongoing operations for PE Films was $7.5 million in the first quarter of 2025 versus $6.9 million in the first quarter of 2024 and versus $7.6 million in the fourth quarter of 2024. ◦ Sales volume was 9.6 million pounds in the first quarter of 2025 versus 10.0 million pounds in the first quarter of 2024. 20 Results of Operations First Quarter of 2025 Compared with the First Quarter of 2024 The following table presents a bridge of consolidated net income (loss) from continuing operations from the first quarter of 2024 to the first quarter of 2025 with management's related discussion and analysis below the table. (In thousands) Net income (loss) from continuing operations for the three months ended March 31, 2024 $ 2,604 Income tax expense (benefit) 2,384 Income (loss) from continuing operations before income taxes for the three months ended March 31, 2024 4,988 Change in income (loss) from increases (decreases) in the following items: Sales 20,766 Other income (expense), net (16) Total 20,750 Change in income (loss) from (increases) decreases in the following items: Cost of goods sold (20,537) Freight (551) Selling, general and administrative (4,127) Asset impairments and costs associated with exit and disposal activities, net of adjustments 489 Other 236 Total (24,490) Income (loss) from continuing operations before income taxes for the three months ended March 31, 2025 1,248 Income tax expense (benefit) 577 Net income (loss) from continuing operations for the three months ended March 31, 2025 $ 671 Sales in the first quarter of 2025 increased by $20.8 million compared with the first quarter of 2024. Net sales (sales less freight) in Aluminum Extrusions increased $19.4 million, primarily due to higher sales volume and the pass-through of higher metal costs, partially offset by a lower average conversion price add-on to metal costs associated with a shift in sales mix. Net sales in PE Films increased $0.8 million, primarily due to volume increases in Surface Protection. 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 14.3% in the first quarter of 2025 compared to 16.6% in the first quarter of 2024. The gross profit margin in Aluminum Extrusions decreased compared to the prior year period primarily due to lower spread (the difference between selling prices and metal costs) associated with a shift in sales mix, higher variable manufacturing costs associated with material yield, which was unfavorable to projected rates, increased labor, net of increased labor productivity, to accommodate the rise in orders, unfavorable maintenance expense associated with extreme winter weather events and downed equipment, higher die expense associated with the timing of purchases and increasing volume and higher utilities, partially offset by higher volume. Additionally, the timing of the flow-through under the first-in first-out (“FIFO”) method of aluminum raw materials costs, which were previously acquired in a quickly changing commodity pricing environment, causing a temporary mismatch in the change in the cost of raw materials included in variable costs and the pass through to customers included in sales, resulted in a benefit of $1.7 million in the first quarter of 2025 versus a charge of $1.3 million in the first quarter of 2024. The gross profit margin in PE Films increased due to a higher Surface Protection contribution margin associated with increased volume, favorable sales mix and pricing and cost improvements, partially offset by decreased overwrap films contribution margin associated with lower volume and unfavorable sales mix and unfavorable pricing. As a percentage of sales, selling, general and administrative (“SG&A”) and research and development ("R&D") expenses were 12.6% in the first quarter of 2025 compared with 11.6% in the first quarter of 2024. Higher SG&A spending was primarily due to higher professional fees associated with business development activities and higher employee-related incentive compensation. The decrease in asset impairments and costs associated with exit and disposal activities, net of adjustments is due to the closure of the PE Films technical center in Richmond, VA in 2024. The effective tax rate used to compute income taxes (benefit) from continuing operations in the first three months of 2025 was 46.2% compared to 47.8% in the first three months of 2024. The effective tax rate in the first three months of 2025 was 21 impacted by lower taxable discrete items and a lower projected annual effective tax rate offset by the impact of lower book income. Pre-tax gains and losses associated with plant shutdowns, asset impairments, restructurings and other items for the first quarters of 2025 and 2024 detailed below are shown in the reconciliation of net sales and EBITDA from ongoing operations by segment in the table in the Segment Operations Review section below 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 March 31, (In millions) 2025 2024 Aluminum Extrusions: (Gains) losses from sale of assets, investment writedowns and other items: Consulting expenses for ERP/MES project 1 $ 0.4 $ 0.6 Storm damage to the Newnan, Georgia plant 1 — 0.1 Legal fees associated with the Aluminum Extruders Trade Case and other matters 1 0.3 0.2 Aluminum premium charge as a result of unplanned maintenance interruptions 2 0.3 — Total for Aluminum Extrusions $ 1.0 $ 0.9 PE Films: (Gains) losses associated with plant shutdowns, asset impairments and restructurings: Richmond, Virginia Technical Center closure expenses, including severance 3 $ — $ 0.2 Richmond, Virginia Technical Center lease modification 3 — 0.3 Total for PE Films $ — $ 0.5 Corporate: (Gains) losses from sale of assets, investment writedowns and other items: Professional fees associated with business development activities 1 $ 2.5 $ 0.2 Professional fees associated with remediation activities related to internal control over financial reporting 1 0.2 0.9 Group annuity contract premium adjustment 4 0.1 — Professional fees associated with the transition to the ABL Facility 1 0.1 0.2 Initial installment proceeds on the sale of corporate-owned land 4 (0.1) — Total for Corporate $ 2.8 $ 1.3 1. Included in “Selling, general and administrative expenses” in the condensed consolidated statements of income. 2. Included in “Cost of Goods Sold” in the condensed consolidated statements of income. 3. See Note 1 for additional information. 4. Included in “Other income (expense), net” in the condensed consolidated statements of income. Average total debt outstanding and interest rates were as follows: Three Months Ended March 31, (In millions, except percentages) 2025 2024 Floating-rate debt with interest charged on a rollover basis plus a credit spread: Average total outstanding debt balance $ 59.7 $ 133.1 Average interest rate 7.2 % 9.1 % 22 Segment Operations Review Aluminum Extrusions A summary of results for Aluminum Extrusions is provided below: Three Months Ended Favorable/ (In thousands, except percentages) March 31, (Unfavorable) 2025 2024 % Change Sales volume (lbs) 37,918 33,841 12.0% Net sales $ 133,635 $ 114,222 17.0% Variable costs 103,523 84,786 (22.1)% Manufacturing fixed costs 1 11,214 9,625 (16.5)% Selling, general and administrative costs 1 9,412 6,798 (38.5)% Other 2 326 473 31.1% EBITDA from ongoing operations $ 9,160 $ 12,540 (27.0)% Depreciation & amortization (4,225) (4,542) 7.0% EBIT from ongoing operations 3 $ 4,935 $ 7,998 (38.3)% Capital expenditures $ 2,370 $ 1,550 1. Excludes related depreciation and amortization 2. Includes segment allocated employee compensation benefit expenses 3. See the reconciliation below of this non-GAAP measure to the most comparable measure calculated in accordance with GAAP. First Quarter 2025 Results vs. First Quarter 2024 Results Net sales (sales less freight) in the first quarter of 2025 increased 17.0% versus the first quarter of 2024 primarily due to higher sales volume and the pass-through of higher metal costs, partially offset by a lower average conversion price add-on to metal costs associated with a shift in sales mix. Sales volume in the first quarter of 2025 increased 12.0% versus the first quarter of 2024 and 5.9% versus the fourth quarter of 2024. The Company saw increased shipments for specialty markets, primarily for solar panels within the electrical product group for both year-over-year and sequential periods and TSLOTS TM aluminum framing systems versus the first quarter of last year. The Company estimates that the growth in the solar market was partly due to regaining share previously lost to imported aluminum extrusions. Net new orders increased 36% in the first quarter of 2025 versus the first quarter of 2024 and 24% versus the fourth quarter of 2024, largely due to improving sales opportunities. The Company is experiencing strong demand and share gains for solar products within the electrical product group (as noted above) and curtainwall and institutional walkway covers within the non-residential B&C product group. The first quarter of 2025 marked the tenth consecutive quarterly increase for this metric, supporting the Company’s belief that a steady recovery is underway. Open orders at the end of the first quarter of 2025 were 25 million pounds, which is up from 15 million pounds at the end of the first quarter of 2024 and 17 million pounds at the end of the fourth quarter of 2024 and is the highest level in the last two years. This level falls within the quarterly range of 21 to 27 million pounds in 2019 before pandemic-related disruptions that resulted in long lead times. On February 10, 2025, the Section 232 tariffs on all aluminum imports were increased from 10% to 25%, effective March 12, 2025, and certain country-specific and product-specific exclusions from the tariffs were revoked. This action also expanded the scope of the tariffs to include downstream products, including certain finished aluminum goods. These measures, which are in addition to existing antidumping and countervailing duties, are intended to prevent the circumvention of duties through the importation of downstream products. The tariffs on aluminum imports have been implemented with no country-specific or product-specific exclusions occurring to date. The Company believes that it has begun to regain some market share for business that was previously associated with imports, particularly in the specialty market, as noted above. EBITDA from ongoing operations in the first quarter of 2025 decreased $3.4 million versus the first quarter of 2024, primarily due to: • Flat contribution margin (net sales less variable costs) associated with: ◦ Lower spread (the difference between selling prices and metal costs) associated with a shift in sales mix ($2.4 million), higher variable manufacturing costs associated with material yield, which was unfavorable to projected rates ($0.7 million unfavorable in the first quarter of 2025 versus $0.6 million favorable in the first quarter of 2024), increased labor, net of increased labor productivity ($0.6 million), to accommodate the rise in orders, unfavorable maintenance expense associated with extreme winter weather events and downed 23 equipment ($0.7 million), higher die expense associated with the timing of purchases and increasing volume ($1.0 million) and higher utilities ($0.2 million), partially offset by higher volume ($3.4 million); and ◦ The timing of the flow-through under the first-in first-out (“FIFO”) method of aluminum raw materials costs, which were previously acquired in a quickly changing commodity pricing environment, causing a temporary mismatch in the change in the cost of raw materials included in variable costs and the pass through to customers included in sales, resulted in a benefit of $1.7 million in the first quarter of 2025 versus a charge of $1.3 million in the first quarter of 2024. • Higher fixed costs associated with wage increases and added resources to support increasing volume ($1.0 million). • Higher selling, general and administrative ("SG&A") expenses of $2.6 million primarily associated with employee-related compensation ($1.7 million), travel and consulting fees ($0.3 million) and routine environmental compliance costs ($0.4 million). R efer to Item 3. Q uantitative and Qualitative Disclosures About Market Risk in this Form 10-Q f or additional information on aluminum prices. Projected Capital Expenditures and Depreciation & Amortization Capital expenditures for Bonnell Aluminum are projected to be $17 million in 2025, including $5 million for productivity projects and $12 million for capital expenditures required to support continuity of operations. Depreciation expense is projected to be $16 million in 2025. Amortization expense is projected to be $2 million in 2025. PE Films A summary of results for PE Films is provided below: Three Months Ended Favorable/ (In thousands, except percentages) March 31, (Unfavorable) 2025 2024 % Change Sales volume (lbs) 9,639 10,036 (4.0)% Net sales $ 25,537 $ 24,735 3.2% Variable costs 11,977 12,024 0.4% Manufacturing fixed costs 1 3,459 3,243 (6.7)% Selling, general and administrative costs 1 2,592 2,516 (3.0)% Other 2 (11) 48 122.9% EBITDA from ongoing operations $ 7,520 $ 6,904 8.9% Depreciation & amortization (1,250) (1,329) 5.9% EBIT from ongoing operations 3 $ 6,270 $ 5,575 12.5% Capital expenditures $ 587 $ 394 1. Excludes related depreciation and amortization 2. Includes segment allocated employee compensation benefit expenses 3. See the reconciliation below of this non-GAAP measure to the most comparable measure calculated in accordance with GAAP. First Quarter 2025 Results vs. First Quarter 2024 Results Net sales in the first quarter of 2025 increased 3.2% versus the first quarter of 2024, due to higher net sales in surface protection films. Surface Protection sales volume increased 4% in the first quarter of 2025 versus the first quarter of 2024 and decreased 5.6% versus the fourth quarter of 2024. Recent volume performance for Surface Protection has exceeded expectations, given high sales volume in the first half of 2024 associated with restocking of Surface Protection customer inventories. The Company believes there is the possibility that some display volume may have been pulled forward in anticipation of U.S. tariffs on imported televisions and mobile devices. To date, Surface Protection has not experienced an adverse impact on customer demand related to potential tariff actions; however, the situation remains fluid and the impact on consumer electronics is uncertain. Overwrap sales volume, which is predominantly manufactured and sold in the U.S. and used in consumer staple items, decreased 11.9% in the first quarter of 2025 versus a strong volume performance in the first quarter of 2024. EBITDA from ongoing operations in the first quarter of 2025 increased $0.6 million versus the first quarter of 2024, primarily due to: • Higher contribution margin of $0.9 million resulting from: 24 ◦ A $1.5 million increase from Surface Protection associated with increased volume, favorable sales mix and pricing ($0.7 million) and cost improvements ($0.8 million); and ◦ A $0.7 million decrease from overwrap films primarily due to lower volume, unfavorable sales mix ($0.5 million) and unfavorable pricing ($0.1 million). There have been significant cyclical swings in the sales volume and EBITDA from ongoing operations for PE Films in the last three 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 past 3.25 years (first quarter of 2025, full year 2024, 2023 and 2022) has averaged approximately $4.7 million per quarter. R efer to Item 3. Q uantitative and Qualitative Disclosures About Market Risk in this Form 10-Q f or additional information on resin prices. Projected Capital Expenditures and Depreciation & Amortization Capital expenditures for PE Films are projected to be $3 million in 2025, including $2 million for productivity projects and $1 million for capital expenditures required to support continuity of current operations. Depreciation expense is projected to be $5 million in 2025. There is no amortization expense for PE Films. Corporate Expenses, Interest & Other Corporate expenses, net in the first three months of 2025 increased $2.0 million compared to the first three months of 2024 primarily due to higher professional fees associated with business development activities ($2.2 million) and higher employee-related incentive compensation ($1.0 million), partially offset by lower external and internal audit fees ($0.4 million), lower professional fees associated with remediation activities related to internal control over financial reporting ($0.4 million), and lower software maintenance fees ($0.1 million). Interest expense was $1.0 million in the first three months of 2025 in comparison to $1.2 million in the first three months of 2024, primarily due to lower weighted average total debt outstanding and lower interest rates. Net capitalization and other credit measures are provided in Liquidity and Capital Resources below. 25 Reconciliation of Net Sales and EBITDA from Ongoing Operations by Segment A reconciliation of segment financial information to consolidated results for the Company for the three months ended March 31, 2025 and 2024. Three Months Ended March 31, 2025 2024 Net Sales Aluminum Extrusions $ 133,635 $ 114,222 PE Films 25,537 24,735 Total net sales 159,172 138,957 Add back freight 5,566 5,015 Sales as shown in the condensed consolidated statements of income $ 164,738 $ 143,972 EBITDA from Ongoing Operations Aluminum Extrusions: Ongoing operations: EBITDA $ 9,160 $ 12,540 Depreciation & amortization (4,225) (4,542) EBIT 4,935 7,998 Plant shutdowns, asset impairments, restructurings and other (1,167) (1,167) PE Films: Ongoing operations: EBITDA $ 7,520 $ 6,904 Depreciation & amortization (1,250) (1,329) EBIT 6,270 5,575 Plant shutdowns, asset impairments, restructurings and other — (504) Total 10,038 11,902 Interest income 5 20 Interest expense 1,013 1,184 Corporate expenses, net 7,782 5,750 Income (loss) from continuing operations before income taxes 1,248 4,988 Income tax expense (benefit) 577 2,384 Net income (loss) from continuing operations 671 2,604 Income (loss) from discontinued operations, net of tax 9,430 684 Net income (loss) $ 10,101 $ 3,288 Liquidity and Capital Resources The Company continues to focus on improving working capital management. 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, 2024 to March 31, 2025 are summarized below. 26 • Accounts and other receivables increased $14.9 million (23.0%). ◦ Accounts and other receivables in Aluminum Extrusions increased $13.2 million primarily due to higher sales volume and the pass-through of higher metal costs, partially offset by a lower average conversion price add-on to metal costs associated with a shift in sales mix. DSO (represents trailing 12 months net sales divided by a rolling 12-month average of accounts and other receivables balances) was approximately 44.9 days for the 12 months ended March 31, 2025 and 44.7 days for the 12 months ended December 31, 2024. ◦ Accounts and other receivables in PE Films increased $1.2 million primarily due to the timing of cash collections and orders related to overwrap films during the first quarter of 2025 compared to the fourth quarter of 2024. DSO was approximately 25.2 days for the 12 months ended March 31, 2025 and 24.9 days for the 12 months ended December 31, 2024. • Inventories increased $17.5 million (34.1%). ◦ Inventories in Aluminum Extrusions increased $16.8 million primarily due to higher average aluminum prices and increased raw material levels from seasonally low levels at the end of last year. 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 48.0 days for the 12 months ended March 31, 2025 and 47.4 days for the 12 months ended December 31, 2024. ◦ Inventories in PE Films increased $0.8 million primarily due to higher raw materials levels. DIO was approximately 50.7 days for the 12 months ended March 31, 2025 and 50.3 days for the 12 months ended December 31, 2024. • Net property, plant and equipment decreased $2.5 million primarily due to depreciation expense of $5.1 million, partially offset by capital expenditures of $2.7 million. • Identifiable intangible assets, net decreased $0.4 million (6.0%) due to amortization expense. • Accounts payable increased $18.5 million (28.6%). ◦ Accounts payable in Aluminum Extrusions increased $16.0 million primarily due to higher average aluminum prices and increased raw material purchases. 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 45.4 days for the 12 months ended March 31, 2025 and 44.5 days for the 12 months ended December 31, 2024. ◦ Accounts payable in PE Films increased $0.9 million primarily due to higher raw material purchases. DPO was approximately 39.9 days for the 12 months ended March 31, 2025 and 41.3 days for the 12 months ended December 31, 2024. Net cash used in operating activities was $5.0 million in the first three months of 2025 compared to net cash used in operating activities of $7.7 million in the first three months of 2024. The change in operating activities from the Company's continuing business segments is primarily due to lower working capital, partially offset by lower EBITDA from ongoing operations. Net cash provided by investing activities was $6.9 million in the first three months of 2025 compared to net cash used in investing activities of $2.4 million the first three months of 2024. The change is primarily due to $9.8 million post-closing settlement proceeds associated with the sale of Terphane received in the first three months of 2025, partially offset by higher capital expenditures ($0.5 million). Net cash used in financing activities of $5.3 million in the first three months of 2025 compared to net cash provided by financing activities of $2.0 million in the first three months of 2024. The change is primarily due to higher debt principal payments, net of borrowings ($7.3 million) under the ABL Facility (as defined below). At March 31, 2025, the Company had cash and cash equivalents of $3.7 million, including cash and cash equivalents held in locations outside the U.S. of $1.3 million. Debt and Credit Agreements ABL Facility In December 2023, the Company entered into Amendment No. 3 to the Second Amended and Restated Credit Agreement (the "Credit Agreement”), which, prior to the ABL Adjustment Date (as defined below), provided the Company with a $180 million senior secured asset-based revolving credit facility. In April 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) moved the ABL Adjustment Date (defined below) from March 31, 2025 to September 30, 2025 and (ii) required 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 27 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 received the proceeds from the sale of Terphane (the “ABL Adjustment Date”), the $180 million ABL Facility was to be reduced to $125 million. On November 1, 2024, with the closing of the sale of Terphane, the ABL Adjustment Date occurred. The ABL Facility was to expire on June 30, 2026. The financial covenant is a minimum fixed charge coverage ratio (as defined in the ABL Facility) of 1.00:1.00 that will be triggered in the event that availability is less than 10% of the $125 million commitment amount and continuing thereafter until availability is greater than 10% of the $125 million commitment amount for 30 consecutive days. As of March 31, 2025, funds available to borrow under the ABL Facility was $50.9 million, or 40.7% of the aggregate commitment of $125 million. On May 6, 2025, the Company entered into Amendment No. 5 (the "Amended ABL Facility") to the Credit Agreement. The material terms of the Amended ABL Facility include the following: • Provides for a $125 million asset-based facility. • The maturity date was extended to May 6, 2030. • The interest rate margins were reduced to a range between 1.75%-2.25% for any Term Benchmark Loan and any RFR Loan (each as defined in the Amended ABL Facility) and 0.75%-1.25% for any ABR Loan (as defined in the Amended ABL Facility), in each case, based on average quarterly availability. • The commitment fee was decreased from 0.40% to (i) 0.25% if the Average Usage (as defined in the Amended ABL Facility) is greater than or equal to 50% and (ii) 0.375% if Average Usage is less than 50%. • The borrowing base calculation was amended as follows: (i) real property is no longer eligible to be included in the borrowing base, (ii) the PP&E Component (as defined in the Amended ABL Facility), as included in the borrowing base, was changed to the lesser of (a) 60% of the Net Orderly Liquidation Value (as defined in the Amended ABL Facility) in place of eligible equipment and (b) 30% of the borrowing base and (iii) the amount of eligible cash included in the borrowing base is now capped at 15% of the borrowing base. • A Cash Dominion Period is now triggered when (x) availability falls below the greater of (i) 12.5% of the Line Cap (as defined in the Amended ABL Facility) and (ii) $12.6 million or (y) during the continuation of an event of default and continuing until (x) availability is above the greater of (i) 12.5% of the Line Cap and (ii) $12.6 million for 30 consecutive days and (y) no events of default are continuing. • Compliance with the fixed charge coverage ratio of 1.00 to 1.00 is now triggered upon the occurrence of availability being less than the greater of (x) 10% of the Line Cap and (y) $10 million and will continue until availability is equal to or greater than the greater of (x) 10% of the Line Cap and (y) $10 million for 30 consecutive days, as long as no events of default are continuing. 28 The computation of Credit EBITDA, as defined in the ABL Facility, is presented below. Computations of Credit EBITDA (as defined in the ABL Facility) as of and for the Twelve Months Ended March 31, 2025 * Computations of Credit EBITDA for the twelve months ended March 31, 2025 (in thousands): Net income (loss) $ (57,752) Plus: After-tax losses related to discontinued operations 56,864 Total income tax expense for continuing operations — Interest expense 4,493 Depreciation and amortization expense for continuing operations 22,784 All non-cash losses and expenses, plus cash losses and expenses not to exceed $10,000, for continuing operations that are classified as unusual, extraordinary or which are related to plant shutdowns, asset impairments and/or restructurings (cash-related of $10,000) 23,389 Charges related to stock option grants and awards accounted for under the fair value-based method — Losses related to the application of the equity method of accounting — Losses related to adjustments in the estimated fair value of assets accounted for under the fair value method of accounting — Fees, costs and expenses incurred in connection with the amendment process 355 Terphane sale transaction costs in an amount not to exceed $10,000 — Minus: After-tax income related to discontinued operations — Total income tax benefits for continuing operations (1,972) Interest income (21) All non-cash gains and income, plus cash gains and income in excess of $10,000, for continuing operations that are classified as unusual, extraordinary or which are related to plant shutdowns, asset impairments and/or restructurings — Income related to changes in estimates for stock option grants and awards accounted for under the fair value-based method — Income related to the application of the equity method of accounting — Income related to adjustments in the estimated fair value of assets accounted for under the fair value method of accounting (144) Plus cash dividends declared on investments in an amount not to exceed $10,000 for such period — Plus or minus, as applicable, pro forma EBITDA adjustments associated with acquisitions and asset dispositions — Plus or minus, as applicable, pro forma EBITDA adjustments to pension expense associated with the early payment of pension obligations (181) Credit EBITDA $ 47,815 Fixed charge coverage ratio**: Credit EBITDA $ 47,815 Unfinanced capital expenditures $ 12,871 Fixed charges $ 5,424 Fixed charge coverage ratio 6.44 * Credit EBITDA is not intended to represent net income (loss) or cash flow from operations as defined by GAAP and should not be considered as an alternative to either net income (loss) or to cash flow. ** Fixed Charge Coverage Ratio is computed as the ratio of (a) Credit EBITDA minus Unfinanced Capital Expenditures to (b) Fixed Charges. 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 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 March 31, 2025, the interest rate on the outstanding loan balance was 2.90%. 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 29 and is effective from June 25, 2024 through May 31, 2027. As of March 31, 2025 and December 31, 2024, this loan is presented as current debt on the consolidated balance sheets. For more information on the ABL Facility and the PE Films Guangzhou Loan, see Note 10. The Company believes that existing borrowing availability, current cash balances and cash flow from operations will be sufficient to satisfy short term material cash requirements related to working capital, capital expenditure, and debt repayments for at least the next 12 months. 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.