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 trade policies and prolonged geopolitical conflicts on raw materials and supply chain constraints; • 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; • political, economic and regulatory factors concerning the Company’s products; • the impact of the imposition of tariffs and sanctions on imported aluminum ingot used by Bonnell Aluminum; • inability to replace aging equipment and information technology systems with necessary capital expenditures; • inability to develop, efficiently manufacture and deliver new products at competitive prices; • 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; 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, 2025 (the “2025 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. 17 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 Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the" 2025 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, 2025, 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 High Performance Films segment. With approximately 1,700 employees, the Company operates manufacturing facilities in the U.S. and China. In the fourth quarter of 2025, the Company renamed the segment formerly known as “PE Films.” This segment is now referred to as “High Performance Films.” The product previously known as polyethylene overwrap films was renamed to advanced packaging films. There were no changes to the operations reported within the High Performance Films segment. The Company continues to have two reportable segments: Aluminum Extrusions and High Performance Films. 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 2026 net income (loss) from continuing operations was $5.1 million ($0.15 per diluted share) compared to $0.7 million ($0.02 per diluted share) in the first quarter of 2025. First Quarter Financial Results Highlights • EBITDA from ongoing operations for Aluminum Extrusions was $11.7 million in the first quarter of 2026 versus $9.2 million in the first quarter of 2025 and versus $15.7 million in the fourth quarter of 2025. • EBITDA from ongoing operations for High Performance Films was $5.1 million in the first quarter of 2026 versus $7.5 million in the first quarter of 2025 and versus $5.7 million in the fourth quarter of 2025. 18 Results of Operations First Quarter of 2026 Compared with the First Quarter of 2025 Results The following table presents a bridge of consolidated net income (loss) from continuing operations from the first quarter of 2025 to the first quarter of 2026 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, 2025 $ 671 Income tax expense (benefit) 577 Income (loss) from continuing operations before income taxes for the three months ended March 31, 2025 1,248 Change in income (loss) from increases (decreases) in the following items: Sales 21,751 Other income (expense), net 54 Total 21,805 Change in income (loss) from (increases) decreases in the following items: Cost of goods sold (21,853) Freight 67 Selling, general and administrative 4,245 Interest expense 654 Other (64) Total (16,951) Income (loss) from continuing operations before income taxes for the three months ended March 31, 2026 6,102 Income tax expense (benefit) 1,032 Net income (loss) from continuing operations for the three months ended March 31, 2026 $ 5,070 Sales in the first quarter of 2026 increased by $21.8 million compared with the first quarter of 2025. Net sales (sales less freight) in Aluminum Extrusions increased $25.8 million, primarily due to the pass-through of higher metal costs, partially offset by lower volume. Net sales in High Performance Films decreased $4.0 million, primarily due to a decrease in sales volume and unfavorable mix 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 12.6% in the first quarter of 2026 compared to 14.3% in the first quarter of 2025. The gross profit margin in Aluminum Extrusions remains consistent with the prior period. The gross profit margin in High Performance Films decreased due to a lower Surface Protection contribution margin associated with lower volume and unfavorable mix, partially offset by higher advanced packaging volume and favorable mix. As a percentage of sales, selling, general and administrative (“SG&A”) and research and development ("R&D") expenses were 8.9% in the first quarter of 2026 compared with 12.6% in the first quarter of 2025. First quarter sales increased 13.2% while SG&A decreased 20.5% compared to the prior period. Lower SG&A spending was primarily due to lower professional fees associated with business development activities ($2.9 million), lower employee compensation ($0.7 million), and lower stock-based compensation ($0.4 million). Interest expense was $0.4 million in the first quarter of 2026 in comparison to $1.0 million in the first quarter of 2025. 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 first quarter of 2026 was 16.9% compared to 46.2% in the first quarter of 2025. The effective tax rate for the first three months of 2026 varies from the statutory rate of 21% due to research and development tax credits while the effective tax rate for the first three months of 2025 varies from the statutory rate due to a mix of lower pre-tax income and higher nondeductible discrete items as a percentage of pre-tax income. 19 Pre-tax gains and losses associated with plant shutdowns, asset impairments, restructurings and other items for the first quarters of 2026 and 2025 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) 2026 2025 Aluminum Extrusions: (Gains) losses from sale of assets, investment writedowns and other items: Consulting expenses for ERP/MES project 1 $ 0.3 $ 0.4 Legal fees associated with the Aluminum Extruders Trade Case and other matters 1 (0.1) 0.3 Aluminum premium charge as a result of unplanned maintenance interruptions 2 — 0.3 Total for Aluminum Extrusions $ 0.2 $ 1.0 Corporate: (Gains) losses from sale of assets, investment writedowns and other items: Professional fees associated with business development activities 1 $ (0.4) $ 2.5 Professional fees associated with remediation activities related to internal control over financial reporting 1 — 0.2 Group annuity contract premium adjustment 3 — 0.1 Professional fees associated with the transition to the ABL Facility 1 0.1 0.1 Initial installment proceeds on the sale of corporate-owned land 3 — (0.1) Total for Corporate $ (0.3) $ 2.8 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. 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) 2026 2025 Floating-rate debt with interest charged on a rollover basis plus a credit spread: Average total outstanding debt balance $ 35.6 $ 59.7 Average interest rate 5.6 % 7.2 % 20 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) 2026 2025 % Change Sales volume (lbs) 35,163 37,918 (7.3)% Net sales $ 159,457 $ 133,635 19.3% Variable costs 127,333 103,523 (23.0)% Manufacturing fixed costs 1 11,800 11,214 (5.2)% Selling, general and administrative costs 1 8,905 9,412 5.4% Other 2 (263) 326 NM* EBITDA from ongoing operations $ 11,682 $ 9,160 27.5% Depreciation & amortization (4,045) (4,225) 4.3% EBIT from ongoing operations 3 $ 7,637 $ 4,935 54.8% Capital expenditures $ 4,689 $ 2,370 1. Excludes related depreciation and amortization 2. Includes segment allocated employee-related benefit expense (income). 3. See the reconciliation below of this non-GAAP measure to the most comparable measure calculated in accordance with GAAP. *Not meaningful (“NM”) The following table presents the sales volume by end use market for the three months ended March 31, 2026 and 2025, and the three months ended December 31, 2025. Three Months Ended Favorable/ Three Months Ended Favorable/ (In millions of lbs) March 31, (Unfavorable) December 31, (Unfavorable) 2026 2025 % Change 2025 % Change Sales volume by end-use market: Non-residential B&C 18.1 19.2 (5.7) % 19.7 (8.1) % Residential B&C 2.2 2.0 10.0 % 2.2 — % Automotive 2.5 3.1 (19.4) % 2.8 (10.7) % Specialty products 12.4 13.6 (8.8) % 12.5 (0.8) % Total 35.2 37.9 (7.3) % 37.2 (5.4) % First Quarter 2026 Results vs. First Quarter 2025 Results Net sales in the first quarter of 2026 increased 19.3% versus the first quarter of 2025 primarily due to the pass-through of higher metal costs, partially offset by lower volume. Sales volume in the first quarter of 2026 decreased 7.3% versus the first quarter of 2025 and 5.4% versus the fourth quarter of 2025. The Company reported a 6% decline in nonresidential building and construction volume, driven by higher costs and ongoing economic uncertainty. Within the specialty market, electrical shipments decreased 45% following the expiration of federal tax credits for solar panels. Also in the specialty market, TSLOTS TM shipments, representing approximately 13% of total volume, increased 70%, supported by increased demand for data‑containment and data‑center infrastructure. Automotive and transportation volume declined 19% as manufacturers continued to face rising cost pressures. Net new orders in the first quarter of 2026 decreased 20% versus the first quarter of 2025 from an average of 3.4 million pounds per week in the first quarter of 2025 to 2.8 million pounds per week in the first quarter of 2026. The Company believes this year-over-year decline reflects both softer U.S. demand and the continued undervaluation of imported extrusions, attributed to the tariff structure associated with the increase of Section 232 tariffs on aluminum products to 50%, discussed below. Open orders at the end of the first quarter of 2026 were 19 million pounds versus 25 million pounds at the end of the first quarter of 2025 and 17 million pounds at the end of the fourth quarter of 2025. This level of open orders falls below the normalized level that is typically associated with stable demand patterns and healthy market dynamics. 21 Effective June 4, 2025, Section 232 tariffs on aluminum products increased to 50%, following a prior increase from 10% to 25% in March 2025, with the United Kingdom as the only exception. In April 2026, federal policymakers updated several elements of Section 232, including measures intended to close the loophole that allowed undervalued aluminum extrusions to enter the U.S. market. While these changes are expected to help restore fair competition for domestic producers, U.S. extruders have emphasized the need for clear, uniform, and predictable enforcement to avoid near‑term market disruption. The Company continues to participate in a coalition of downstream aluminum manufacturers that engages with policymakers on issues affecting the competitiveness of the U.S. aluminum extrusion industry. Tariffs and duties continue to be passed through to customers under the Company’s metal‑cost adjustment mechanism. The Company implemented additional price increases in the first quarter of 2026 and the third quarter of 2025 to offset tariff‑related costs not covered by that mechanism. EBITDA from ongoing operations in the first quarter of 2026 increased $2.5 million versus the first quarter of 2025, primarily due to: • A $2.0 million increase in contribution margin (net sales less variable costs) associated with: ◦ Pricing increases ($4.6 million) and lower manufacturing costs associated with material yield ($2.0 million favorable in the first quarter of 2026 versus $0.1 million unfavorable in the first quarter of 2025), partially offset by lower volume ($2.1 million), higher labor rates ($0.7 million), unfavorable labor productivity ($0.6 million), higher maintenance and supply expense ($0.8 million), higher freight expense ($0.4 million), higher utilities ($0.5 million), and higher die expense ($0.8 million). ◦ 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 $2.9 million in the first quarter of 2026 versus a benefit of $1.7 million in the first quarter of 2025. • Higher fixed costs primarily associated with wage increases ($0.5 million). • Lower SG&A expenses primarily associated with lower employee-related compensation and lower routine environmental compliance expense ($0.5 million). • Lower other expense for employee-related medical costs associated with medical claims ($0.6 million). Conflict-driven disruptions in the Strait of Hormuz beginning in March 2026 have constrained shipments and raised costs, contributing to historically low U.S. inventory levels. In response to recent geopolitical tensions in the Middle East and resulting contraction of the global aluminum market, we have proactively diversified our supply chain portfolio to support long-term stability. Through the third quarter of 2026, we have successfully transitioned nearly all of our aluminum supply previously sourced from the Middle East to North American partners. Simultaneously, we are optimizing billet casting operations at our Carthage, TN, and Newnan, GA facilities to overcome localized production constraints. These strategic shifts in our supply chain and internal capabilities continue to strengthen our operational resilience, positioning the Company to meet customer demand through 2026. Refer to Item 3. Quantitative and Qualitative Disclosures About Market Risk in this Form 10-Q for additional information on aluminum price trends. Projected Capital Expenditures and Depreciation & Amortization Capital expenditures for Bonnell Aluminum are projected to be $20 million in 2026, including $4 million for productivity projects and $16 million for capital expenditures required to support continuity of operations. Depreciation expense is projected to be $14 million in 2026. Amortization expense is projected to be $2 million in 2026. The Company anticipates capital spending to increase from the levels of the past two years and return to a pattern more closely aligned with depreciation and amortization, consistent with long-term historical patterns. This approach supports ongoing maintenance and efficiency initiatives while maintaining disciplined capital allocation. 22 High Performance Films A summary of results for High Performance Films is provided below: Three Months Ended Favorable/ (In thousands, except percentages) March 31, (Unfavorable) 2026 2025 % Change Sales volume (lbs) 8,971 9,639 (6.9)% Net sales $ 21,533 $ 25,537 (15.7)% Variable costs 10,422 11,977 13.0% Manufacturing fixed costs 1 3,471 3,459 (0.3)% Selling, general and administrative costs 1 2,593 2,592 —% Other 2 (27) (11) NM* EBITDA from ongoing operations $ 5,074 $ 7,520 (32.5)% Depreciation & amortization (1,203) (1,250) 3.8% EBIT from ongoing operations 3 $ 3,871 $ 6,270 (38.3)% Capital expenditures $ 452 $ 587 1. Excludes related depreciation and amortization 2. Includes segment allocated employee-related benefit expense (income). 3. See the reconciliation below of this non-GAAP measure to the most comparable measure calculated in accordance with GAAP. *Not meaningful (“NM”) First Quarter 2026 Results vs. First Quarter 2025 Results Net sales in the first quarter of 2026 decreased 15.7% versus the first quarter of 2025 due to a decrease in sales volume and unfavorable mix in surface protection films. Surface Protection sales volume decreased 17.5% in the first quarter of 2026 versus the first quarter of 2025. Sales volume for surface protection films declined in the first quarter of 2026 as expected due to a significant customer’s inventory correction and scheduled maintenance activity for another customer. Volume for advanced packaging films, which are predominantly manufactured and sold in the U.S. and used in consumer staple items, increased 5.6% in the first quarter of 2026 versus the first quarter of 2025. The top four customers comprised 87% and 91% of the net sales for High Performance Films for the first three months of 2026 and first three months of 2025, respectively. 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 first quarter of 2026 decreased $2.4 million versus the first quarter of 2025, primarily due to: • A decrease in contribution margin of $2.4 million resulting from: ◦ A $2.8 million decrease from Surface Protection associated with lower volume and unfavorable mix ($3.4 million), partially offset by cost improvements and favorable productivity ($0.6 million). ◦ A $0.4 million increase from advanced packaging films primarily due to higher volume, favorable mix and unfavorable pricing ($0.5 million), partially offset by unfavorable productivity ($0.1 million). • Lower SG&A expense associated with lower employee-related compensation ($0.3 million). • A foreign currency transaction loss of $0.3 million in the first quarter of 2026 versus no gain or loss in the first quarter of 2025. Although the conflict-driven disruptions in the Strait of Hormuz beginning in March 2026 have caused an increase to resin costs, High Performance Films maintains pass-through mechanisms with customers and has not experienced supply issues to date. 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 High Performance Films are projected to be $2 million in 2026, 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 $4 million in 2026. There is no amortization expense for High Performance Films. 23 Corporate Expenses Corporate expenses, net in the first three months of 2026 decreased $2.9 million compared to the first three months of 2025 due to lower professional fees associated with business development activities ($2.9 million). The Company does not expect significant expenses from business development activities in 2026. Net capitalization and other credit measures are provided in Liquidity and Capital Resources below. 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, 2026 and 2025. Three Months Ended March 31, 2026 2025 Net Sales Aluminum Extrusions $ 159,457 $ 133,635 High Performance Films 21,533 25,537 Total net sales 180,990 159,172 Add back freight 5,499 5,566 Sales as shown in the condensed consolidated statements of income $ 186,489 $ 164,738 EBITDA from Ongoing Operations Aluminum Extrusions: Ongoing operations: EBITDA $ 11,682 $ 9,160 Depreciation & amortization (4,045) (4,225) EBIT 7,637 4,935 Plant shutdowns, asset impairments, restructurings and other (222) (1,167) High Performance Films: Ongoing operations: EBITDA $ 5,074 $ 7,520 Depreciation & amortization (1,203) (1,250) EBIT 3,871 6,270 Total 11,286 10,038 Interest income 10 5 Interest expense 359 1,013 Corporate expenses, net 4,835 7,782 Income (loss) from continuing operations before income taxes 6,102 1,248 Income tax expense (benefit) 1,032 577 Net income (loss) from continuing operations 5,070 671 Income (loss) from discontinued operations, net of tax 591 9,430 Net income (loss) $ 5,661 $ 10,101 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, 2025 to March 31, 2026 are summarized below. 24 • Accounts and other receivables increased $11.9 million (14.5%). ◦ Accounts and other receivables in Aluminum Extrusions increased $10.8 million primarily due to 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 45.0 days for the 12 months ended March 31, 2026 and 44.8 days for the 12 months ended December 31, 2025. ◦ Accounts and other receivables in High Performance Films increased $1.1 million primarily due to higher sales volume in advanced packaging films. DSO was approximately 25.9 days for the 12 months ended March 31, 2026 and 25.4 days for the 12 months ended December 31, 2025. • Inventories increased $19.1 million (29.4%). ◦ Inventories in Aluminum Extrusions increased $18.9 million primarily due to increased raw material levels from seasonally low levels at the end of last year, higher metal costs and raw material stocking as a result of the geopolitical uncertainty impacting aluminum‑related supply chains. 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 50.7 days for the 12 months ended March 31, 2026 and 48.8 days for the 12 months ended December 31, 2025. ◦ Inventories in High Performance Films remain consistent with prior year. DIO was approximately 55.7 days for the 12 months ended March 31, 2026 and 54.6 days for the 12 months ended December 31, 2025. • Net property, plant and equipment increased $0.1 million primarily due to capital expenditures of $4.9 million and favorable foreign exchange of $0.1 million, partially offset by depreciation expense of $4.9 million. • Identifiable intangible assets, net decreased $0.4 million (7.9%) due to amortization expense. • Accounts payable increased $20.7 million (27.3%). ◦ Accounts payable in Aluminum Extrusions increased $20.1 million primarily due to increased raw material levels from seasonally low levels at the end of last year, higher metal costs and raw material stocking as a result of the geopolitical uncertainty impacting aluminum‑related supply chains. 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 47.7 days for the 12 months ended March 31, 2026 and 46.6 days for the 12 months ended December 31, 2025. ◦ Accounts payable in High Performance Films increased $1.1 million primarily due to effective working capital management and the timing of vendor payments. DPO was approximately 39.3 days for the 12 months ended March 31, 2026 and 40.6 days for the 12 months ended December 31, 2025. Net cash provided by operating activities was $2.0 million in the first three months of 2026 compared to net cash used in operating activities of $5.0 million in the first three months of 2025. The change primarily reflects more favorable working capital movements in the first quarter of 2026 compared to the first quarter of 2025. Net cash used in investing activities was $4.6 million in the first three months of 2026 compared to net cash provided by investing activities of $6.9 million the first three months of 2025. 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 ($2.2 million). Net cash provided by financing activities of $11.3 million in the first three months of 2026 compared to net cash used in financing activities of $5.3 million in the first three months of 2025. The change is primarily due to higher debt borrowings, net of principal payments ($16.5 million) under the ABL Facility (as defined below) in the first three months of 2026. At March 31, 2026, the Company had cash and cash equivalents of $15.6 million, including cash and cash equivalents held in locations outside the U.S. of $2.6 million. 25 Debt and Credit Agreements ABL Facility The Second Amended and Restated Credit Agreement (or amended, the "ABL Facility") 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. The maturity date of the ABL Facility is May 6, 2030. As of March 31, 2026, funds available to borrow under the ABL Facility was $76 million, or 61.0% of the aggregate commitment of $125 million. During 2025, the Company's letters of credit were reduced from approximately $12 million to $3 million, which directly increased the Company's borrowing availability. Outstanding borrowings accrue interest at the rates elected by the Company depending on the type of loan and denomination of such borrowing. With respect to revolving loans denominated in U.S. Dollars, the Company may elect interest rates at: • Alternate Base Rate (“ABR”) plus the applicable ABR Spread (as defined in the ABL Facility) determined in accordance with an excess availability-based pricing grid. ABR is defined, in part, as the greater of (a) the Prime Rate in effect on such day, (b) the Federal Reserve Bank of New York Rate in effect on such day plus one-half of 1% and (c) the Adjusted Term SOFR Rate (defined below) for a one-month period plus 1%; or • The Adjusted Term Secured Overnight Financing Rate ("SOFR") Rate plus the applicable Term Benchmark Spread (as defined in the ABL Facility) determined in accordance with an excess availability-based pricing grid. Adjusted Term SOFR Rate is defined as the Term SOFR Rate plus 0.10%, subject to an initial Floor (as defined in the ABL Facility) of 0%. Based upon the quarterly average of daily availability under the ABL Facility, the interest rate pricing grid, is as follows: Pricing under the ABL Facility (Basis Points) Quarter Average of Daily Availability Term Benchmark Spread ABR Spread > 66% of $125 million aggregate commitment 175.0 75.0 ≤ 66% but > 33% of $125 million aggregate commitment 200.0 100.0 ≤ 33% of $125 million aggregate commitment 225.0 125.0 The commitment fee is (i) 0.25% if the Average Usage (as defined in the ABL Facility) is greater than or equal to 50% and (ii) 0.375% if Average Usage is less than 50%. 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. If at any time the availability under the ABL facility is less than the greater of (x) 20% of the Line Cap and (y) $20 million and until such subsequent date, if any, on which availability is greater than the greater of (x) 20% of the Line Cap and (y) $20 million for a period of thirty (30) consecutive calendar days, the Company’s current monthly reporting requirements to lenders changes to a weekly cadence. A Cash Dominion Period (as defined in the ABL Facility) is triggered when (x) availability falls below the greater of (i) 12.5% of the Line Cap 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. During a Cash Dominion Period, receipts that have not yet been applied to the ABL Facility are classified as restricted cash in the Company’s consolidated balance sheets. The ABL Facility has customary representations and warranties including, as a condition to each borrowing, that all such representations and warranties are true and correct in all material respects (including a representation that no Material Adverse Effect (as defined in the ABL Facility) has occurred since December 31, 2024). In the event that the Company cannot certify that all conditions to the borrowing have been met, the lenders can restrict the Company’s future borrowings under the ABL Facility. 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 26 believes the likelihood that lenders would exercise the subjective acceleration clause whereby prohibiting future borrowings is remote. The computation of Credit EBITDA and fixed charge coverage ratio, 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, 2026 * Computations of Credit EBITDA for the twelve months ended March 31, 2026 (in thousands): Net income (loss) $ 29,036 Plus: After-tax losses related to discontinued operations — Total income tax expense for continuing operations 7,039 Interest expense 3,349 Depreciation and amortization expense for continuing operations 21,499 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 $4,790) 5,635 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”) 266 Fees, costs and expenses incurred in connection with the amendment process (Amendment No. 5) — Minus: After-tax income related to discontinued operations (552) Total income tax benefits for continuing operations — Interest income (41) 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 (6,265) 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 $ 59,966 Fixed charge coverage ratio**: Credit EBITDA $ 59,966 Unfinanced capital expenditures $ 19,425 Fixed charges $ 3,935 Fixed charge coverage ratio 10.30 * 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. High Performance Films Guangzhou Loan In October 2025, High Performance Films' business location in Guangzhou, China, Guangzhou Tredegar Film Products Co., Ltd. (“Guangzhou Tredegar”), entered into a 3.5 million Chinese Yuan, which is equivalent to $0.5 million as of March 31, 2026, unsecured revolving loan with the Industrial and Commercial Bank of China. The loan matures on October 20, 2026. 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 0.55%. As of October 20, 2025, the National Interbank Funding Center rate was 3.00%. The financial covenants require that the total amount of Guangzhou Tredegar’s current liabilities cannot exceed 50% of the total amount of current assets and the short-term financing amount cannot exceed 50% of Guangzhou Tredegar’s 27 total sales over the last 12 months. As of March 31, 2026, this loan was presented as current debt on the consolidated balance sheets. For more information on the ABL Facility and the High Performance Films Guangzhou Loan, see Note 7 in the Company's 2025 Form 10-K. As of March 31, 2026, the Company was in compliance with all debt covenants. 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.