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Item 1A. Risk Factors

2026-03-11 compared with 2025-03-12 · 81 added, 70 removed, 54 unchanged (74% of the section changed)

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Risks Related to All of Tredegar’s Businesses

• Trade policies and prolonged geopolitical conflicts could cause an increase in the cost of our products or otherwise negatively impact the Company.

The primary raw materials used by Aluminum Extrusions consist of aluminum ingot, aluminum scrap and various alloys, which are purchased from domestic and foreign producers in open-market purchases and under short-term contracts.

High Performance Film’s Surface Protection business involves imports to and from the U.S.

and other countries where the Company produces and sells its products, including China.

Trade tensions have been rising between the U.S.

and other countries.

An increase in tariffs and other trade barriers between the U.S.

and other countries could cause disruption to supply chains and an increase in the cost of Aluminum Extrusions’ and High Performance Films’ products or otherwise negatively impact the production and sale of the Company’s products in global markets.

Furthermore, prolonged geopolitical conflicts, including recent increased tensions in the Middle East, could result in increased pricing of raw materials and supply chain constraints, which could negatively affect our business, financial position, results of operations and cash flows.

Refer to Risks Related to Aluminum Extrusions for additional information about unfairly traded imports of aluminum extrusions.

• Ongoing macroeconomic factors, including inflation, high interest rates and recession risks could cause downturns in key markets and create other commercial disruptions, which could adversely impact our businesses.

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and (iv) other interruptions of international and regional commerce.

Price erosion may occur as competitors become more aggressive in

pricing practices.

Price erosion may occur as competitors become more aggressive in pricing practices.

To the extent that these factors reduce demand for our products, our business, financial position, results of operations and cash flows could be adversely impacted.

• Tredegar’s performance is influenced by costs incurred by its operating companies, including the cost of raw materials and energy.

These costs include the cost of aluminum (the raw material on which Aluminum Extrusions primarily depends), resin (the raw material on which PE Films primarily depends), natural gas (the principal fuel necessary for Aluminum Extrusions’ plants to operate), electricity, diesel fuel, chemicals and paint.

These costs include the cost of aluminum (the raw material on which Aluminum Extrusions primarily depends), resin (the raw material on which High Performance Films primarily depends), natural gas (the principal fuel necessary for Aluminum Extrusions’ plants to operate), electricity, diesel fuel, chemicals and paint.

Aluminum, resin and natural gas prices are volatile as shown in the charts in Item 7A.

The Company attempts to mitigate the effects of increased costs through price increases and contractual pass-through provisions, but there are no assurances that higher prices can effectively be passed through to customers or that Tredegar will be able to offset fully or on a timely basis the effects of higher costs.

Further, the Company’s cost control efforts may not be sufficient to offset any increases in raw materials, energy or other costs.

• Noncompliance with any of the covenants in the Company’s $125 million asset-based revolving credit facility (“ABL Facility”), which matures on June 30, 2026, could result in all debt outstanding thereunder becoming due and limiting the Company’s borrowing capacity, which could have a material adverse effect on its consolidated financial condition and liquidity.

The Company attempts to mitigate the effects of higher costs, which includes tariff driven cost increases, through price increases and contractual pass-through provisions, but there are no assurances that higher prices can effectively be passed through to customers or that Tredegar will be able to offset fully or on a timely basis the effects of higher costs.

Further, the Company’s cost control efforts may not be sufficient to offset any increases in raw materials, energy or other input costs.

• Noncompliance with any of the covenants in the Company’s $125 million asset-based revolving credit facility (“ABL Facility”), which matures on May 6, 2030, could result in all debt outstanding thereunder becoming due and limiting the Company’s borrowing capacity, which could have a material adverse effect on its consolidated financial condition and liquidity.

The credit agreement governing Tredegar’s ABL Facility contains restrictions and financial covenants that, if violated, could restrict the Company’s operational and financial flexibility.

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an equipment failure with repairs requiring long lead times, labor stoppages or shortages, cybersecurity attacks, utility disruptions, constraints on the supply or delivery of critical raw materials, and severe weather conditions, including potential flooding at the Aluminum Extrusions facility located in Carthage, TN, which is located in a 50-year flood plain.

A material disruption in one of the Company’s operating locations could negatively impact production and the Company’s consolidated financial condition, results of operations and cash flows.

Refer to Risks Related to Aluminum Extrusions for additional information related to aging equipment and systems.

A material disruption in one of the Company’s operating locations

could negatively impact production and the Company’s consolidated financial condition, results of operations and cash flows.

• A failure in the Company’s information technology systems as a result of cybersecurity attacks or other causes could negatively affect Tredegar’s business.

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A significant prolonged failure of or security breach of the IT systems, networks or service providers the Company relies upon, or a loss or disclosure of business or other sensitive information, or personally identifiable information, as a result of a cybersecurity incident or other cause, could result in substantial costs to the Company, damage to the Company’s reputation, regulatory enforcement actions and lawsuits and could adversely affect the Company’s business, results of operations, financial condition or cash flows.

• Trade policies could cause an increase in the cost of our products or otherwise negatively impact the Company.

PE Film’s Surface Protection business involves imports to and from the U.S.

and other countries where the Company produces and sells its products, including China.

Trade tensions have been rising between the U.S.

and other countries.

An increase in tariffs and other trade barriers between the U.S.

and other countries could cause disruption to supply chains

and an increase in the cost of Aluminum Extrusions’ and PE Films’ products or otherwise negatively impact the production and sale of the Company’s products in world markets.

• The Company’s results of operations, financial condition and cash flows have been and could be impacted by the macroeconomic effects of a pandemic.

The COVID-19 pandemic had multiple adverse effects on the global economy, including short-term impacts affecting labor supply and causing supply chain disruptions which led to inflationary pressures.

In addition, the pandemic resulted in certain after-shocks and structural shifts, which have adversely impacted Tredegar’s markets.

In the event of a future pandemic, Tredegar’s businesses, our suppliers, contractors and third-party logistic providers could experience conditions similar to those associated with the COVID-19 pandemic, including facility closures, labor constraints, supply chain disruptions and other challenges.

• The Company’s results of operations, financial condition and cash flows could be impacted by the macroeconomic effects of a pandemic.

The outbreak of a public health emergency, such as a pandemic or epidemic, could have multiple adverse effects on the global economy, including short-term impacts affecting labor supply and causing supply chain disruptions which can lead to inflationary pressures.

In addition, a pandemic may result in certain after-shocks and structural shifts, which could adversely impact Tredegar’s markets.

Preventive or protective actions taken by governmental authorities could have a material adverse effect on our businesses, our suppliers, contractors and third-party logistic providers, including facility closures, labor constraints, supply chain disruptions and other challenges.

These challenges could impact our ability to maintain sufficient inventory and to accurately predict demand or lead times, which could inhibit our ability to service customer demand.

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The Company is subject to regulation by local, state, federal and foreign governmental authorities.

New laws and regulations, or changes to existing laws, including those relating to environmental matters (including global climate change and plastic products), and privacy matters, could subject Tredegar to significant additional capital expenditures, operating expenses or other compliance costs.

Moreover, future developments in federal, state, local and international laws and regulations, including environmental laws, are difficult to predict.

Environmental laws and privacy restrictions have become and are expected to continue to become increasingly strict.

As a result, Tredegar expects to be subject to new environmental and privacy laws and regulations.

Additionally, some customers are requesting that the Company demonstrate alignment with the customer’s own sustainability commitments.

New laws and regulations, or changes to existing laws, including those relating to environmental matters (including global climate change and plastic products), customer sustainability commitments and privacy matters, could subject Tredegar to significant additional capital expenditures, operating expenses or other compliance costs.

Moreover, future developments in federal, state, local and international laws and regulations, including environmental laws, and future customer sustainability initiatives are difficult to predict.

Environmental laws, customer sustainability initiatives and privacy restrictions have become and are expected to continue to become increasingly strict.

As a result, Tredegar expects to be subject to new environmental and privacy laws and regulations and new customer sustainability commitments.

However, any such changes are uncertain and, therefore, it is not possible for the Company to predict with certainty the amount of additional capital expenditures or operating expenses that could be necessary for compliance with respect to any such changes.

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Risks Related to Aluminum Extrusions

• Sales volume and profitability of Aluminum Extrusions is cyclical and seasonal and highly dependent on economic conditions of end-use markets in the U.S., particularly in the construction sector.

Aluminum Extrusions’ end-use markets can be cyclical and subject to seasonal swings in volume.

In addition, changes in architectural design, demographic, and remote work trends could negatively impact the overall commercial construction industry.

Because of the capital-intensive nature and level of fixed costs inherent in the aluminum extrusions business, the percentage drop in earnings before interest, taxes, depreciation and amortization (“EBITDA”) from ongoing operations in a cyclical downturn will likely exceed the percentage drop in volume.

In addition, during an economic slowdown, excess industry capacity often drives increased pricing pressure in many end-use markets as competitors seek to maintain or increase their position with key customers.

Benefits associated with cost reductions and productivity improvements may not be sufficient to offset the adverse effects on profitability from pricing and margin pressure and higher bad debts (including a greater chance of loss associated with customers defaulting on fixed-price forward sales contracts) that usually accompany a downturn.

• Unfairly traded imports of aluminum extrusions could injure or threaten with injury America’s domestic aluminum extrusions industry, which could have an adverse effect on the financial condition, results of operations and cash flows of Aluminum Extrusions.

Chinese and other foreign manufacturers continue to try to evade the antidumping and countervailing orders to avoid duties.

Chinese and other foreign manufacturers continue to attempt to evade the antidumping and countervailing orders to avoid duties.

In October 2022, the U.S.

International Trade Commission (“ITC”) extended the antidumping and countervailing duty orders against aluminum extrusions from China for a period of five years.

International Trade Commission extended the antidumping and countervailing duty orders against aluminum extrusions from China for a period of five years.

In March 2018, the U.S.

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from certain countries (“Section 232 tariffs”).

In December 2020, the Department of Commerce (“USDOC”) introduced a tariff exclusion process, allowing importers to bypass individual exclusion requests and import items without Section 232 tariffs.

The Company participated as a member of the U.S.

Aluminum Extruders Coalition which filed a trade case with the USDOC and the U.S.

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

In November 2023, the USITC found that there is a reasonable indication that the American aluminum extrusions industry is materially injured or threatened

with injury due to imports from 14 countries, including China.

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

In October 2024, the USITC found that U.S.

producers had not been materially injured by reason of the subject imports, despite the USDOC findings of less-than-fair value pricing by those imports.

The coalition has appealed the decision.

The USITC negative determination in October did not impact the existing duties on aluminum extrusions from China.

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 expands the scope of the tariffs to include downstream products, including certain finished aluminum goods.

These measures, which apply in addition to existing antidumping and countervailing duties, are intended to prevent the circumvention of duties through the importation of downstream products.

The actual level and timing of the tariffs remains a fluid situation.

A failure by, or the inability of, U.S.

trade officials to restore the import tariff in its full format could have an adverse effect on the businesses, financial condition, results of operations and cash flows of Aluminum Extrusions.

In December 2020, the Department of Commerce introduced general approved exclusions, allowing importers to bypass individual exclusion requests and import items without Section 232 tariffs.

All general approved exclusions were terminated effective March 12, 2025.

Unfairly traded imports of aluminum extrusions continue to pose a significant threat to the U.S.

aluminum extrusion industry and to our Aluminum Extrusions segment.

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.

Despite these actions, weekly net new orders declined approximately 23.6% after the tariff increase to 50%, from an average of 3.4 million pounds per week in the first half of 2025 to 2.6 million pounds per week in the period from June 2025 through early March 2026.

We believe this decline in net new orders after the step-up in the 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 domestic producers due to the undervaluation of imported fabricated aluminum products and customers pausing orders to evaluate the permanency of the new higher tariff.

Due to the persistent undervaluation problem, the Section 232 framework has created a tariff inversion and price distortions that has created a disadvantage for U.S.

extruders and fabricators, allowing foreign finished goods to enter the market at prices domestic manufacturers cannot match.

These domestic industry structural issues have reduced the effectiveness of recent tariff increases and have contributed to renewed import surges, despite the intended Section 232 measures.

Although the initial strengthening of the Section 232 program resulted in market share gains for U.S.

producers, those gains have diminished, and imports from certain countries have again begun to increase share at the expense of the domestic industry.

If these conditions persist, particularly the tariff inversion and continued undervaluation of imported fabricated aluminum productions, they could have a material adverse effect on the financial condition, results of operations, and cash flows of our Aluminum Extrusions segment.

• Our business is capital intensive, and the inability to replace aging equipment could have an adverse effect on our growth and profitability.

Our operations rely heavily on manufacturing equipment and information technology (“IT”) systems that, in certain cases, are aging or approaching obsolescence.

Many of our production assets have been in service for decades and, while maintained, are more susceptible to mechanical failure, inefficiency, or downtime compared to modern equipment.

Unexpected breakdowns or extended outages could disrupt production schedules, increase maintenance costs, and impair our ability to meet customer demand.

Similarly, portions of our IT infrastructure, including enterprise resource planning and manufacturing execution systems (ERP/MES), are based on legacy platforms that may lack the flexibility and scalability features of newer technologies.

These limitations increase the risk of system failures, security and operational inefficiencies.

In addition, reliance on outdated systems hinders our ability to integrate emerging technologies, automate processes, or respond quickly to evolving regulatory and market requirements.

A new ERP/MES project for all locations of the Aluminum Extrusions business commenced in 2022, with capitalized spending to-date of approximately $21 million related to assets not yet placed in service.

As the project progressed, certain implementation phases proved more complex and time‑consuming than originally anticipated, requiring a redesign of key elements of the system.

During the second quarter of 2023, this project was reorganized to increase the utilization of existing dedicated internal resources for system design in lieu of more costly external consultants.

The Company expects that in late 2026 the Board will evaluate the new project design and capital needed for implementation based on the Company’s earnings, financial position, expected cash needs, and other relevant considerations.

Furthermore, significant capital expenditures are required to modernize our infrastructure, and delays or difficulties in implementing such upgrades could exacerbate these risks.

Although we currently finance most of our capital expenditures through cash provided by operations, we also may depend on increased borrowing or other financing arrangements to fund future capital expenditures.

If we are unable to obtain suitable financing on favorable terms or at all, we may not be able to complete future capital projects and our ability to maintain or expand our operations may be limited.

If we are unable to timely upgrade or replace aging equipment and obsolete IT systems, our business could face higher operating costs, reduced competitiveness, or experience non-cash asset impairments.

• Sales volume and profitability of Aluminum Extrusions is cyclical and seasonal and highly dependent on economic conditions of end-use markets in the U.S., particularly in the construction sector.

Aluminum Extrusions’ end-use markets can be cyclical and subject to seasonal swings in volume.

In addition, changes in architectural design, demographic, and remote work trends could negatively impact the overall commercial construction industry.

Because of the capital-intensive nature and level of fixed costs inherent in the aluminum extrusions business, the percentage drop in

earnings before interest, taxes, depreciation and amortization (“EBITDA”) from ongoing operations in a cyclical downturn will likely exceed the percentage drop in volume.

• The markets for Aluminum Extrusions’ products are highly competitive with product quality, service, delivery performance and price being the principal competitive factors.

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Failure in any of these areas could lead to a loss of customers, which could have an adverse effect on the business, financial condition, results of operations and cash flows of Aluminum Extrusions.

• The failure to successfully implement the new enterprise resource planning and manufacturing execution systems could adversely impact the Aluminum Extrusions business and results of operations.

In January 2022, Aluminum Extrusions commenced the implementation of new enterprise resource planning and manufacturing execution systems (“ERP/MES”) across all locations of the Aluminum Extrusions business.

The implementation of these systems is a major undertaking from a financial, management, and personnel perspective.

The implementations have been more difficult, time-consuming and costly (approximately $21 million of spending to date) than expected.

This project has been reorganized with the timing for the go-live date being uncertain.

There can be no assurance that these systems will be beneficial to the extent anticipated.

Conversely, our existing systems could become obsolete, fail to function properly or otherwise fail to address our needs.

Any additional disruptions, delays or deficiencies in the design and implementation of the new systems could adversely affect our financial position, results of operations and cash flows.

Risks Related to PE Films

• PE Films is highly dependent on sales associated with relatively few large customers.

PE Films’ top four customers comprised in total approximately 16%, 12% and 12% of Tredegar’s consolidated net sales in 2024, 2023 and 2022, respectively.

Risks Related to High Performance Films

• High Performance Films is highly dependent on sales associated with relatively few large customers.

High Performance Films’ top four customers comprised in total approximately 13%, 16% and 12% of Tredegar’s consolidated net sales in 2025, 2024 and 2023, respectively.

The loss or significant reduction of sales associated with one or more of these customers without replacement by new business could have an adverse effect on the Company.

While PE Films is undertaking efforts to expand its customer base, there can be no assurance that such efforts will be successful, or that they will offset any loss of sales and profits associated with large customer declines.

• The failure of PE Films’ customers to achieve success or maintain market share could adversely impact PE Films’ sales and operating margins.

PE Films’ specialized protection and polyethylene overwrap films are used in the production of various consumer products sold worldwide.

Our customers’ ability to successfully develop, manufacture and market those products is integral to PE Films’ success.

Cyclical downturns and changing consumer preferences, particularly those driven by changes in technology, may negatively affect businesses that use PE Films’ film products, which could adversely affect sales and operating margins.

Other factors that could adversely affect the business include (i) failure by a key customer to achieve success or maintain share in markets in which they sell products containing PE Films’ materials, including as a result of customer preferences for products other than films, (ii) key customers using products developed by others that replace PE Films’ business with such customers, (iii) delays in a key customer rolling out products utilizing new technologies developed by PE Films, and (iv) operational decisions by a key customer that result in component substitution, inventory reductions and similar changes.

• The Company’s inability to protect its intellectual property rights or its infringement of the intellectual property rights of others could have an adverse impact on PE Films.

The continued success of PE Films’ business depends on its ability not only to protect its own technologies and trade secrets, but also to develop and sell new products that do not infringe upon existing patents.

Intellectual property litigation is very costly and could result in substantial expense and diversions

of Company resources, both of which could adversely affect its consolidated financial condition, results of operations and cash flows.

While High Performance Films is undertaking efforts to expand its customer base, there can be no assurance that such efforts will be successful, or that they will offset any loss of sales and profits associated with large customer declines.

• The failure of our customers to achieve success or maintain market share, shifts in customer strategies, and changes in consumer preferences could adversely impact High Performance Films’ sale and operating margins.

Our specialized protection and thin-gauge advanced packaging films are used in the production of various consumer products sold worldwide.

Our business relies heavily on a few large customers and the markets they operate in.

Failure by a key customer to maintain market share or changes in customer strategies or preferences could reduce orders and significantly affect our operating results.

Cyclical downturns, disruptive technologies, shifting consumer preferences, and operational decisions by a key customer that result in component substitution all pose risks to our business.

• The Company’s inability to protect its intellectual property rights or its infringement of the intellectual property rights of others could have an adverse impact on High Performance Films.

The continued success of High Performance Films’ business depends on its ability not only to protect its own technologies and trade secrets, but also to develop and sell new products that do not infringe upon existing patents.

Intellectual property litigation is very costly and could result in substantial expense and diversions of Company resources, both of which could adversely affect its consolidated financial condition, results of operations and cash flows.

In addition, there may be no effective legal recourse against infringement of the Company’s intellectual property by third parties, whether due to limitations on enforcement of rights in foreign jurisdictions or as a result of other factors.

• Our international operations expose us to risks associated with fluctuations in foreign currency exchange rates.

Because we compete against protective films companies who produce and supply films within Japan and price their products in yen, changes in exchange rates, which result in a strong U.S.

dollar versus the Japanese yen, can adversely affect the competitiveness of our products in foreign markets and our reported results of operations.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors