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. 24 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 1,700 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. Third quarter 2025 net income (loss) from continuing operations was $7.1 million ($0.20 per diluted share) compared to $(3.4) million ($(0.10) per diluted share) in the third quarter of 2024. Third Quarter Financial Results Highlights • EBITDA from ongoing operations for Aluminum Extrusions was $16.8 million in the third quarter of 2025 versus $6.2 million in the third quarter of 2024 and versus $9.3 million in the second quarter of 2025. ◦ Sales volume was 41.3 million pounds in the third quarter of 2025 versus 34.6 million pounds in the third quarter of 2024 and 40.7 million pounds in the second quarter of 2025. ◦ Net new orders decreased 5% in the third quarter of 2025 versus the third quarter of 2024 and 16% versus the second quarter of 2025. Open orders at the end of the third quarter of 2025 were 19 million pounds versus 16 million pounds at the end of the third quarter of 2024 and 25 million pounds at the end of the second quarter of 2025. • EBITDA from ongoing operations for PE Films was $7.2 million in the third quarter of 2025 versus $5.9 million in the third quarter of 2024 and versus $6.7 million in the second quarter of 2025. ◦ Sales volume was 9.7 million pounds in the third quarter of 2025 versus 9.6 million pounds in the third quarter of 2024 and 9.8 million pounds in the second quarter of 2025. 25 Results of Operations Third Quarter of 2025 Compared with the Third Quarter of 2024 Results The following table presents a bridge of consolidated net income (loss) from continuing operations from the third quarter of 2024 to the third 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 September 30, 2024 $ (3,389) Income tax expense (benefit) 828 Income (loss) from continuing operations before income taxes for the three months ended September 30, 2024 (2,561) Change in income (loss) from increases (decreases) in the following items: Sales 48,878 Other income (expense), net 30 Total 48,908 Change in income (loss) from (increases) decreases in the following items: Cost of goods sold (34,738) Freight (1,121) Selling, general and administrative (1,552) Interest expense 424 Other (237) Total (37,224) Income (loss) from continuing operations before income taxes for the three months ended September 30, 2025 9,123 Income tax expense (benefit) 2,014 Net income (loss) from continuing operations for the three months ended September 30, 2025 $ 7,109 Sales in the third quarter of 2025 increased by $48.9 million compared with the third quarter of 2024. Net sales (sales less freight) in Aluminum Extrusions increased $46.8 million, primarily due to higher sales volume and the pass-through of higher metal costs. Net sales in PE Films increased $1.0 million, primarily due to an increase in sales volume in surface protection films. For more information on net sales and volume, see the Segment Operations Review below. Consolidated gross profit (sales minus cost of goods sold and freight) as a percentage of sales (gross profit margin) was 16.0% in the third quarter of 2025 compared to 12.4% in the third quarter of 2024. The gross profit margin in Aluminum Extrusions increased compared to the prior year period primarily due to higher volume, favorable pricing and lower manufacturing costs associated with material yield, partially offset by higher labor rates, unfavorable labor productivity associated with onboarding new employees, higher maintenance and supply expense, and higher fixed costs primarily associated with wage increases and compensation-related costs. 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 $4.3 million in the third quarter of 2025 versus a charge of $1.0 million in the third quarter of 2024. The gross profit margin in PE Films increased due to a higher Surface Protection contribution margin associated with higher volume, cost improvements and favorable productivity and the pass-through lag associated with resin costs, partially offset by lower overwrap films volume and unfavorable productivity. As a percentage of sales, selling, general and administrative (“SG&A”) and research and development ("R&D") expenses were 10.5% in the third quarter of 2025 compared with 13.0% in the third quarter of 2024. Third quarter sales increased 33.5% while SG&A increased 8.3% compared to the prior period. Higher SG&A spending was primarily due to employee-related incentive compensation, stock-based compensation and business development activities. Interest expense was $0.8 million in the third quarter of 2025 in comparison to $1.2 million in the third quarter of 2024. The decrease in interest expense was primarily due to lower weighted average total debt outstanding and lower interest rates. The effective tax rate used to compute income taxes (benefit) from continuing operations in the third quarter of 2025 was 22.1% compared to (32.3)% in the third quarter of 2024. The effective tax rate in the third quarter of 2025 was impacted by taxable discrete items, including stock-based compensation. The effective tax rate in the third quarter of 2024 was impacted by a loss from continuing operations before income taxes. 26 Pre-tax gains and losses associated with plant shutdowns, asset impairments, restructurings and other items for the third 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 September 30, (In millions) 2025 2024 Aluminum Extrusions: (Gains) losses associated with plant shutdowns, asset impairments and restructurings: Production equipment asset impairment $ 0.4 $ — (Gains) losses from sale of assets, investment writedowns and other items: Consulting expenses for ERP/MES project 1 0.4 0.7 Aluminum extrusion press fire at the Newnan, Georgia plant 1 0.1 — Legal fees associated with the Aluminum Extruders Trade Case and other matters 1 — 0.4 Resolution of customer quality complaint 2 — 0.8 Total for Aluminum Extrusions $ 0.9 $ 1.9 Corporate: (Gains) losses from sale of assets, investment writedowns and other items: Professional fees associated with business development activities 1 $ 1.8 $ 0.1 Professional fees associated with remediation activities related to internal control over financial reporting 1 — 0.3 Professional fees associated with the transition to the ABL Facility 1 — 0.1 Total for Corporate $ 1.8 $ 0.5 1. Included in “Selling, general and administrative expenses” in the condensed consolidated statements of income. 2. Included in "Sales" in the condensed consolidated statements of income. Average total debt outstanding and interest rates were as follows: Three Months Ended September 30, (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 $ 59.0 $ 125.5 Average interest rate 6.5 % 9.0 % 27 First Nine Months of 2025 Compared with the First Nine Months of 2024 Results The following table presents a bridge of consolidated net income (loss) from continuing operations from the first nine months of 2024 to the first nine months of 2025 with management's related discussion and analysis below the table. (In thousands) Net income (loss) from continuing operations for the nine months ended September 30, 2024 $ 8,385 Income tax expense (benefit) 3,175 Income (loss) from continuing operations before income taxes for the nine months ended September 30, 2024 11,560 Change in income (loss) from increases (decreases) in the following items: Sales 94,820 Other income (expense), net 1,077 Total 95,897 Change in income (loss) from (increases) decreases in the following items: Cost of goods sold (84,796) Freight (2,497) Selling, general and administrative (7,154) Interest expense (51) Other 225 Total (94,273) Income (loss) from continuing operations before income taxes for the nine months ended September 30, 2025 13,184 Income tax expense (benefit) 3,575 Net income (loss) from continuing operations for the nine months ended September 30, 2025 $ 9,609 Sales in the first nine months of 2025 increased by $94.8 million compared with the first nine months of 2024. Net sales (sales less freight) in Aluminum Extrusions increased $95.1 million, primarily due to higher sales volume and the pass-through of higher metal costs. Net sales in PE Films decreased $2.8 million, primarily due to a decrease in sales volume in Surface Protection and overwrap films. 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 14.7% in the first nine months of 2025 compared to 16.1% in the first nine months of 2024. The gross profit margin in Aluminum Extrusions decreased compared to the prior year period primarily due to higher variable manufacturing costs associated with material yield in the first five months of 2025, higher labor rates, decreased labor productivity associated with onboarding new employees, higher maintenance expense, primarily associated with downed equipment and extreme winter weather events in the first quarter of 2025 and tariff impacts, higher die expense associated with the timing of purchases in the first quarter of 2025, higher expense for externally purchased (versus internally produced) billet related to increasing volume, higher utilities and higher fixed costs associated with wage increases and compensation-related costs, partially offset by higher volume and favorable mix. Additionally, the timing of the flow-through under the FIFO method of aluminum raw material costs, which were previously acquired at lower prices in a quickly changing commodity pricing environment and passed through to customers, resulted in a benefit of $5.4 million in the first nine months of 2025 versus a charge of $1.0 million in the first nine months of 2024. The gross profit margin in PE Films remained consistent with the prior period. As a percentage of sales, SG&A and R&D expenses were 11.5% in the first nine months of 2025 compared with 12.3% in the first nine months of 2024. Sales increased 21.4% while SG&A increased 13.2% compared to the prior period. Higher SG&A spending was primarily due to employee-related incentive compensation, stock-based compensation and business development activities. Interest expense was $3.6 million in the first nine months of 2025 in comparison to $3.5 million in the first nine months of 2024. The increase was primarily due to the write-off of deferred financing fees related to the entry into Amendment No. 5 to the Second Amended and Restated Credit Agreement of $0.8 million, partially offset by lower weighted average total debt outstanding and lower interest rates. The effective tax rate used to compute income taxes (benefit) from continuing operations in the first nine months of 2025 was 27.1% compared to 27.5% in the first nine months of 2024. The effective tax rate in the first nine months of 2025 and the first nine months of 2024 was impacted by taxable discrete items, including stock-based compensation. 28 Pre-tax gains and losses associated with plant shutdowns, asset impairments, restructurings and other items for the first nine months 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. Nine Months Ended September 30, (In millions) 2025 2024 Aluminum Extrusions: (Gains) losses associated with plant shutdowns, asset impairments and restructurings: Production equipment asset impairment $ 0.4 $ — (Gains) losses from sale of assets, investment writedowns and other items: Consulting expenses for ERP/MES project 1 1.2 2.1 Storm damage to the Newnan, Georgia plant 1 (0.2) 0.3 Aluminum extrusion press fire at the Newnan, Georgia plant 1 0.1 Legal fees associated with the Aluminum Extruders Trade Case and other matters 1 0.1 0.9 Resolution of customer quality complaint 5 — 0.8 Aluminum premium charge as a result of unplanned maintenance interruptions 2 0.3 — Total for Aluminum Extrusions $ 1.9 $ 4.1 PE Films: (Gains) losses associated with plant shutdowns, asset impairments and restructurings: Richmond, Virginia Technical Center closure expenses, including severance 3 $ — $ 0.3 Richmond, Virginia Technical Center lease modification 3 — 0.3 Total for PE Films $ — $ 0.6 Corporate: (Gains) losses from sale of assets, investment writedowns and other items: Professional fees associated with business development activities 1 $ 5.6 $ 0.3 Professional fees associated with remediation activities related to internal control over financial reporting 1 0.2 1.6 Group annuity contract premium adjustment 4 0.1 (0.2) Professional fees associated with the transition to the ABL Facility 1 0.2 0.3 Proceeds on the sale of corporate-owned land 4 (1.5) — Total for Corporate $ 4.6 $ 2.0 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. 5. Included in "Sales" in the condensed consolidated statements of income. Average total debt outstanding and interest rates were as follows: Nine Months Ended September 30, (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 $ 60.0 $ 128.6 Average interest rate 6.8 % 9.1 % 29 Segment Operations Review Aluminum Extrusions A summary of results for Aluminum Extrusions is provided below: Three Months Ended Favorable/ Nine Months Ended Favorable/ (In thousands, except percentages) September 30, (Unfavorable) September 30, (Unfavorable) 2025 2024 % Change 2025 2024 % Change Sales volume (lbs) 41,303 34,556 19.5% 119,911 103,303 16.1% Net sales $ 162,470 $ 115,717 40.4% $ 444,470 $ 349,353 27.2% Variable costs 124,462 90,397 (37.7)% 344,043 263,007 (30.8)% Manufacturing fixed costs 1 11,906 10,218 (16.5)% 34,879 29,726 (17.3)% Selling, general and administrative costs 1 8,948 8,549 (4.7)% 28,489 24,319 (17.1)% Other 2 346 376 8.0% 1,808 677 (167.1)% EBITDA from ongoing operations $ 16,808 $ 6,177 172.1% $ 35,251 $ 31,624 11.5% Depreciation & amortization (4,190) (4,404) 4.9% (12,509) (13,392) 6.6% EBIT from ongoing operations 3 $ 12,618 $ 1,773 611.7% $ 22,742 $ 18,232 24.7% Capital expenditures $ 3,079 $ 1,449 $ 7,835 $ 4,461 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. Third Quarter 2025 Results vs. Third Quarter 2024 Results Net sales (sales less freight) in the third quarter of 2025 increased 40.4% versus the third quarter of 2024 primarily due to higher sales volume and the pass-through of higher metal costs. Sales volume in the third quarter of 2025 increased 19.5% versus the third quarter of 2024 and 1.5% versus the second quarter of 2025. The Company increased shipments for curtainwall, storefront and institutional walkway covers within the nonresidential B&C market versus the third quarter of 2024. Within the specialty market, shipments for solar panel products within the electrical product group, machinery and equipment, consumer durables and distribution products increased versus the third quarter of last year. The Company attributes the increase in nonresidential B&C and consumer durables to a pull-forward of demand earlier in the year as customers placed orders in anticipation of higher tariff-related pricing ( see discussion on net new orders below) . Year-over-year growth in shipments for TSLOTS TM aluminum framing systems was primarily associated with increased demand for infrastructure associated with data containment and data centers. The Company believes that the growth in the solar and distribution markets was partly due to regaining market share previously lost to imported aluminum extrusions. Net new orders in the third quarter of 2025 decreased 5% versus the third quarter of 2024 and 16% versus the second quarter of 2025. The decrease in net new orders in the third quarter of 2025, which is largely attributed to the tariff increase to 50%, marked the second quarterly decline for this metric, following 10 consecutive quarterly increases. Open orders at the end of the third quarter of 2025 were 19 million pounds versus 16 million pounds at the end of the third quarter of 2024 and 25 million pounds at the end of the second quarter of 2025. This level falls below the quarterly range of 21 to 27 million pounds in 2019 before pandemic-related disruptions that resulted in long lead times. Effective June 4, 2025, the Section 232 tariffs were increased to 50%, except for the United Kingdom, after previously being increased from 10% to 25%, effective March 12, 2025. These measures are in addition to existing antidumping and countervailing duties. There are no country-specific or product-specific exclusions occurring to date, except for an alternative arrangement with the United Kingdom. Tariffs and duties are part of the mechanical pass-through to customers in the U.S. market for aluminum extrusions for changes in metal costs. In addition, the Company implemented price increases during the third quarter of 2025 to offset other tariff-related cost increases that are not part of the metal cost pass-through mechanism. 30 The trend of net new orders declined after the most recent tariff increase to 50% from an average of 3.4 million pounds per week for the weekly periods ending from January 5 to June 1, 2025, to an average of 2.7 million pounds per week for the weekly periods ending June 8, 2025 through November 2, 2025. The Company believes that the 20% decline in net new orders after the step-up in tariff to 50% is due to a combination of: lower demand for extrusions in the U.S.; tariffs not resulting in the expected favorable shift of market share to U.S. aluminum extrusion producers due to the apparent undervaluing of goods by importers; and customers pausing orders to evaluate the permanency of the new higher tariff. When the Section 232 program was initially strengthened, while import volume remained high, U.S. producers began to see increased market share gains against imports. However, the U.S. industry has seen these early gains reversed and imports have again begun gaining share at the expense of the domestic industry, which has impacted the Company’s business. The Company is hopeful that the Administration will address the problem. EBITDA from ongoing operations in the third quarter of 2025 increased $10.6 million versus the third quarter of 2024, primarily due to: • A $12.7 million increase in contribution margin (net sales less variable costs) associated with: ◦ Higher volume ($4.9 million), favorable pricing ($4.2 million) and lower manufacturing costs associated with material yield ($0.5 million favorable in the third quarter of 2025 versus $0.8 million unfavorable in the third quarter of 2024), partially offset by higher labor rates ($0.9 million), unfavorable labor productivity associated with onboarding new employees ($0.7 million), higher maintenance and supply expense, partially due to the impact of tariffs ($0.5 million), and higher utilities ($0.3 million). ◦ The timing of the flow-through under the 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 $4.3 million in the third quarter of 2025 versus a charge of $1.0 million in the third quarter of 2024. ▪ The underlying average U.S. Midwest transaction prices for aluminum (which includes tariffs and duties) and the main factor causing the flow-through timing issue for the related periods compared, were $1.89 and $1.49 per pound in August and May of 2025, and $1.25 and $1.36 per pound in August and May of 2024. The average U.S. Midwest transaction prices for aluminum for the third and second quarters of 2025 and third and second quarters of 2024 were $1.90, $1.56, $1.27 and $1.34 per pound, respectively. • Higher fixed costs primarily associated with wage increases and compensation-related costs ($0.6 million), higher maintenance and utilities expenses ($0.5 million) and added resources to support increasing volume ($0.3 million). • Higher SG&A expenses primarily associated with employee-related compensation ($0.4 million). First Nine Months of 2025 Results vs. First Nine Months of 2024 Results Net sales in the first nine months of 2025 increased 27.2% versus the first nine months of 2024 primarily due to higher sales volume and the pass-through of higher metal costs. Sales volume in the first nine months of 2025 increased 16.1% versus the first nine months of 2024. EBITDA from ongoing operations in the first nine months of 2025 increased $3.6 million in comparison to the first nine months of 2024 primarily due to: • A $14.0 million increase in contribution margin associated with: ◦ Higher volume and favorable mix ($15.6 million), partially offset by higher variable manufacturing costs associated with material yield in the first five months of 2025, which was unfavorable to projected rates ($0.8 million unfavorable in the first nine months of 2025 versus $0.2 million unfavorable in the first nine months of 2024), higher labor rates ($2.3 million), decreased labor productivity associated with onboarding new employees ($1.2 million), higher maintenance expense, primarily associated with downed equipment, extreme winter weather events in the first quarter of 2025 and tariff impacts ($1.0 million), higher die expense associated with the timing of purchases in the first quarter of 2025 ($0.7 million), higher expense for externally purchased (versus internally produced) billet related to increasing volume ($1.0 million) and higher utilities ($0.7 million). ◦ The timing of the flow-through under the FIFO method of aluminum raw material costs, which were previously acquired at lower prices in a quickly changing commodity pricing environment and passed through to customers, resulted in a benefit of $5.4 million in the first nine months of 2025 versus a charge of $1.0 million in the first nine months of 2024. 31 • Higher fixed costs associated with wage increases and compensation-related costs ($2.4 million), higher maintenance and utilities ($1.2 million) and added resources to support increasing volume ($0.9 million). • Higher SG&A expenses primarily associated with employee-related compensation ($3.3 million), increased training and onboarding expense ($0.5 million) and routine environmental compliance costs ($0.3 million). • Higher other expense for employee-related medical costs caused by an increase in the number of high-cost medical claims versus favorable experience in recent years ($1.1 million). The Company is self-insured for medical claims with stop loss coverage for claims of over $0.3 million. Manufacturing costs versus expectations during the second quarter of 2025 were unfavorable by approximately $3 million, which occurred in April and May due to inefficiencies from the ramp-up of production and hiring to fulfill the higher order rate. These issues were resolved and did not recur in the third quarter of 2025. 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 $15 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/ Nine Months Ended Favorable/ (In thousands, except percentages) September 30, (Unfavorable) September 30, (Unfavorable) 2025 2024 % Change 2025 2024 % Change Sales volume (lbs) 9,656 9,640 0.2% 29,093 30,223 (3.7)% Net sales $ 25,883 $ 24,879 4.0% $ 76,017 $ 78,811 (3.5)% Variable costs 11,922 12,294 3.0% 35,586 37,522 5.2% Manufacturing fixed costs 1 3,785 3,496 (8.3)% 10,487 9,832 (6.7)% Selling, general and administrative costs 1 2,961 3,173 6.7% 8,420 8,480 0.7% Other 2 (6) 40 115.0% 70 64 (9.4)% EBITDA from ongoing operations $ 7,221 $ 5,876 22.9% $ 21,454 $ 22,913 (6.4)% Depreciation & amortization (1,224) (1,299) 5.8% (3,705) (3,944) 6.1% EBIT from ongoing operations 3 $ 5,997 $ 4,577 31.0% $ 17,749 $ 18,969 (6.4)% Capital expenditures $ 529 $ 517 $ 1,411 $ 1,127 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. Third Quarter 2025 Results vs. Third Quarter 2024 Results Net sales in the third quarter of 2025 increased 4.0% versus the third quarter of 2024 due to an increase in sales volume in surface protection films. Sales volume increased 10.9% in surface protection films versus the third quarter of 2024 and 16.1% versus the second quarter of 2025. Recent volume performance for Surface Protection is expected to moderate for the remainder of the year. Volume for overwrap films, which are predominantly manufactured and sold in the U.S. and used in consumer staple items, decreased 11.0% in the third quarter of 2025 versus the third quarter of 2024. To date, Surface Protection has not experienced an adverse impact on customer demand related to tariff actions; however, the situation remains fluid and the impact on consumer electronics is uncertain. EBITDA from ongoing operations in the third quarter of 2025 increased $1.4 million versus the third quarter of 2024, primarily due to: • An increase in contribution margin of $1.4 million resulting from: ◦ A $1.8 million increase from Surface Protection associated with higher volume ($0.7 million), cost improvements and favorable productivity ($1.0 million) and the pass-through lag associated with resin costs 32 (a charge of $0.1 million in the third quarter of 2025 versus a charge of $0.2 million in the third quarter of 2024). ◦ A $0.4 million decrease from overwrap films primarily due to lower volume ($0.1 million) and unfavorable productivity ($0.3 million) There have been significant cyclical swings in the sales volume and EBITDA from ongoing operations for PE Films since the beginning of 2022, 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 3.75 years (first nine months of 2025, full year 2024, 2023 and 2022) has averaged approximately $5.0 million per quarter. The top four customers comprised 88% of the net sales for PE Films for the first nine months of 2025 and all of 2024. First Nine Months of 2025 Results vs. First Nine Months of 2024 Results Net sales in the first nine months of 2025 decreased 3.5% compared to the first nine months of 2024 due to a decrease in sales volume in Surface Protection and overwrap films. Sales volume decreased 1.9% in Surface Protection in the first nine months of 2025 versus the first nine months of 2024. Sales volume for overwrap films decreased 5.7% in the first nine months of 2025 versus the first nine months of 2024. EBITDA from ongoing operations in the first nine months of 2025 decreased $1.5 million versus the first nine months of 2024, primarily due to: • A decrease in contribution margin of $0.8 million resulting from: ◦ Flat contribution margin in Surface Protection associated with lower volume ($3.2 million) offset by cost improvements and favorable pricing ($2.7 million) and the pass-through lag associated with resin costs (a charge of $0.2 million in the first nine months of 2025 versus a charge of $0.7 million in the first nine months of 2024). ◦ A $0.8 million decrease in overwrap films primarily due to lower volume, unfavorable mix and pricing ($0.9 million) and unfavorable productivity ($0.3 million), partially offset by cost improvements ($0.2 million) and the pass-through lag associated with resin costs (a charge of $0.1 million in the first nine months of 2025 versus a charge of $0.3 million in the first nine months of 2024). • Higher fixed costs primarily associated with wage increases and compensation-related 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 resin prices. Projected Capital Expenditures and Depreciation & Amortization Capital expenditures for PE Films are projected to be $2 million in 2025, including $1 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 Corporate expenses, net in the first nine months of 2025 increased $4.9 million compared to the first nine months of 2024 primarily due to higher professional fees associated with business development activities ($5.3 million) and higher employee-related incentive compensation ($2.0 million), partially offset by a gain on the sale of corporate-owned land ($1.5 million) and lower external and internal audit fees ($0.7 million). The Company does not expect significant expenses from business development activities in the fourth quarter of 2025. Net capitalization and other credit measures are provided in Liquidity and Capital Resources below. 33 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 and nine months ended September 30, 2025 and 2024. Three Months Ended Nine Months Ended September 30, September 30, 2025 2024 2025 2024 Net Sales Aluminum Extrusions $ 162,470 $ 115,717 $ 444,470 $ 349,353 PE Films 25,883 24,879 76,017 78,811 Total net sales 188,353 140,596 520,487 428,164 Add back freight 6,589 5,468 18,309 15,812 Sales as shown in the condensed consolidated statements of income $ 194,942 $ 146,064 $ 538,796 $ 443,976 EBITDA from Ongoing Operations Aluminum Extrusions: Ongoing operations: EBITDA $ 16,808 $ 6,177 $ 35,251 $ 31,624 Depreciation & amortization (4,190) (4,404) (12,509) (13,392) EBIT 12,618 1,773 22,742 18,232 Plant shutdowns, asset impairments, restructurings and other (927) (2,170) (2,151) (4,986) PE Films: Ongoing operations: EBITDA $ 7,221 $ 5,876 $ 21,454 $ 22,913 Depreciation & amortization (1,224) (1,299) (3,705) (3,944) EBIT 5,997 4,577 17,749 18,969 Plant shutdowns, asset impairments, restructurings and other 12 — 13 (584) Total 17,700 4,180 38,353 31,631 Interest income 6 5 16 30 Interest expense 768 1,192 3,566 3,515 Gain on investment in kaleo, Inc. — — — 144 Corporate expenses, net 7,815 5,554 21,619 16,730 Income (loss) from continuing operations before income taxes 9,123 (2,561) 13,184 11,560 Income tax expense (benefit) 2,014 828 3,575 3,175 Net income (loss) from continuing operations 7,109 (3,389) 9,609 8,385 Income (loss) from discontinued operations, net of tax (35) (557) 9,297 (251) Net income (loss) $ 7,074 $ (3,946) $ 18,906 $ 8,134 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 September 30, 2025 are summarized below. 34 • Accounts and other receivables increased $23.1 million (35.7%). ◦ Accounts and other receivables in Aluminum Extrusions increased $23.0 million primarily due to higher sales volume and the pass-through of higher metal costs. DSO (represents trailing 12 months net sales divided by a rolling 12-month average of accounts and other receivables balances) was approximately 44.2 days for the 12 months ended September 30, 2025 and 44.7 days for the 12 months ended December 31, 2024. ◦ Accounts and other receivables in PE Films remain consistent with prior period. DSO was approximately 25.5 days for the 12 months ended September 30, 2025 and 24.9 days for the 12 months ended December 31, 2024. • Inventories increased $10.6 million (20.7%). ◦ Inventories in Aluminum Extrusions increased $9.1 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 48.7 days for the 12 months ended September 30, 2025 and 47.4 days for the 12 months ended December 31, 2024. ◦ Inventories in PE Films increased $1.5 million primarily due to higher raw material levels. DIO was approximately 52.3 days for the 12 months ended September 30, 2025 and 50.3 days for the 12 months ended December 31, 2024. • Net property, plant and equipment decreased $6.6 million primarily due to depreciation expense of $15.0 million, partially offset by capital expenditures of $9.0 million. • Identifiable intangible assets, net decreased $1.3 million (18.0%) due to amortization expense. • Accounts payable increased $14.5 million (22.5%). ◦ Accounts payable in Aluminum Extrusions increased $13.9 million primarily due to higher average aluminum prices and increased raw material purchases to support higher sales volume. 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 45.8 days for the 12 months ended September 30, 2025 and 44.5 days for the 12 months ended December 31, 2024. ◦ Accounts payable in PE Films increased $0.8 million primarily due to higher raw material purchases. DPO was approximately 39.5 days for the 12 months ended September 30, 2025 and 41.3 days for the 12 months ended December 31, 2024. Net cash provided by operating activities was $17.3 million in the first nine months of 2025 compared to net cash provided by operating activities of $6.1 million in the first nine months of 2024. The change in operating activities from the Company's continuing business segments is primarily due to higher segment EBITDA from ongoing operations, partially offset by higher working capital. Net cash provided by investing activities was $2.5 million in the first nine months of 2025 compared to net cash used in investing activities of $7.5 million the first nine 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 and proceeds on the sale of corporate-owned land ($1.9 million), partially offset by higher capital expenditures ($1.6 million). Net cash used in financing activities of $13.7 million in the first nine months of 2025 compared to net cash used in financing activities of $3.6 million in the first nine months of 2024. The change is primarily due to lower debt borrowings, net of principal payments ($9.5 million) under the ABL Facility (as defined below) in the first nine months of 2025, partially offset by higher deferred financing fees paid associated with Amendment No. 5 (defined below) to the ABL Facility in the first nine months of 2025. At September 30, 2025, the Company had cash and cash equivalents of $13.3 million, including cash and cash equivalents held in locations outside the U.S. of $2.0 million. 35 Debt and Credit Agreements ABL Facility In May 2025, the Company entered into Amendment No. 5 (“Amendment No. 5”) to the Second Amended and Restated Credit Agreement (the "ABL Facility"), which provides the Company with a $125 million senior secured asset-based revolving credit facility. 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, and owned machinery and equipment. Amendment No. 5 extended the maturity date of the ABL Facility to May 6, 2030. As of September 30, 2025, funds available to borrow under the ABL Facility was $72.5 million, or 58.0% of the aggregate commitment of $125 million. During the third quarter of 2025, the Company's letters of credit have been reduced from approximately $12 million to $3 million, which directly increases the Company's borrowing availability. 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 the greater of (x) 10% of the Line Cap (as defined in the ABL Facility) 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. 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, 2025, the Company was in compliance with all debt covenants. 36 The computation of Credit EBITDA, as defined in the ABL Facility, and fixed charge coverage ratio is presented below. Computations of Credit EBITDA (as defined in the ABL Facility) as of and for the Twelve Months Ended September 30, 2025 * Computations of Credit EBITDA for the twelve months ended September 30, 2025 (in thousands): Net income (loss) $ (53,793) Plus: After-tax losses related to discontinued operations 56,062 Total income tax expense for continuing operations 235 Interest expense 4,715 Depreciation and amortization expense for continuing operations 21,996 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 $9,926) 23,735 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 (Amendment No. 3 “ABL Transition”) 289 Fees, costs and expenses incurred in connection with the amendment process (Amendment No. 5) — Minus: After-tax income related to discontinued operations — Total income tax benefits for continuing operations — Interest income (22) 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 — Plus or minus, as applicable, pro forma EBITDA adjustments associated with acquisitions and asset dispositions — Credit EBITDA $ 53,217 Fixed charge coverage ratio**: Credit EBITDA $ 53,217 Unfinanced capital expenditures $ 15,516 Fixed charges $ 5,494 Fixed charge coverage ratio 6.86 * 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 In June 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. This loan matured on July 3, 2025. The interest rate was 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, 2025, there was no outstanding loan balance. The revolving loan was 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. Guangzhou Tredegar has the option to enter into additional loan contracts with the Industrial and Commercial Bank of China for the duration of the mortgage contract. As of December 31, 2024, this loan was presented as current debt on the consolidated balance sheets. 37 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 expenditures, 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.