TREDEGAR CORP (TG)

Item 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations focuses on and is intended to clarify the results of our operations, certain changes in our financial position, liquidity, capital structure and business developments for the periods covered by the consolidated financial statements included in this Form 10-K. This discussion should be read in conjunction with, and is qualified by reference to, the other related information including, but not limited to, the audited consolidated financial statements (including the notes thereto) and the description of our business, all as set forth in this Form 10-K, as well as the risk factors discussed above in Item 1A.

This section provides discussion and a year-to-year comparison for the years ended December 31, 2024 and 2023 and for the years ended December 31, 2023 and 2022.

Business Overview

General

Tredegar Corporation is an industrial manufacturer with two primary businesses: custom aluminum extrusions for the B&C, automotive and specialty end-use markets in the United States through its Aluminum Extrusions segment (with exports comprising less than 5% of total sales volume) and surface protection films for high-technology applications in the global electronics industry through its PE Films segment. With approximately 1,500 employees, the Company operates manufacturing facilities in the U.S. and China.

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. EBIT 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 (loss) 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.

Sales were $598.0 million in 2024 compared to $573.3 million in 2023. Net income (loss) from continuing operations was $1.0 million ($0.03 per diluted share) in 2024, compared with net income (loss) from continuing operations of $(99.2) million ($(2.91) per diluted share) in 2023.

2024 Financial Results Highlights

•EBITDA from ongoing operations for Aluminum Extrusions of $41.4 million was $3.4 million higher than the year of 2023.

•EBITDA from ongoing operations for PE Films of $30.5 million was $19.3 million higher than the year of 2023.

Gains and losses associated with exit and disposal activities, plant shutdowns, asset impairments, restructurings and other items are described in Results of Operations below.

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Results of Operations

2024 versus 2023

The following table presents a bridge of consolidated net income (loss) from continuing operations from the year of 2023 to the year of 2024 with related management’s discussion and analysis below the table.

Sales in 2024 increased by 4.3% compared with 2023. Net sales were relatively flat in Aluminum Extrusions primarily due to flat sales volume and the pass-through of higher metal costs, partially offset by a lower average conversion price add-on to metal costs associated with a shift in sales mix. Net sales increased 37.0% in PE Films primarily due to higher net sales and volume in Surface Protection, with extremely high sales in the first half of 2024 associated with the restocking of Surface Protection customers’ inventories. Overwrap films volume increased 14% versus 2023, primarily due to volume increases associated with lower margin business. For more information on changes in net sales and volume, see the Segment Operations Review section below.

Other income (expense), net was $(1.0) million in 2024 compared to $(2.1) million in 2023. The amount in other income (expense), net for 2024 was primarily related to $1.3 million of deferred and discretionary incentive payments made in 2024 subsequent to the sale of Terphane. The amount in other income (expense), net for 2023 was primarily related to a $2.0 million charge to adjust the initial purchase price of the nonparticipating single premium group annuity contract as a result of the routine administrative process to transition the pension plan.

Consolidated gross profit (sales minus cost of goods sold and freight) as a percentage of sales (gross profit margin) was 16.1% in 2024 versus 12.4% in 2023.

•The gross profit margin in Aluminum Extrusions increased primarily due to favorable variable manufacturing costs, higher labor productivity and higher volume, partially offset by higher labor and employee-related costs and lower spread (the difference between selling prices and metal costs) associated with a shift in sales mix. Additionally, inventories accounted for under the last-in first-out (“LIFO”) inventory method resulted in a charge of $1.2 million in 2024 versus a benefit of $0.9 million in 2023. The timing of the flow-through under the first-in first-out (“FIFO”) method of aluminum raw material 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

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the pass through to customers included in sales, resulted in a benefit of $1.4 million in 2024 versus a charge of $1.0 million in 2023.

•The gross profit margin in PE Films increased primarily due to higher contribution margin (net sales less variable costs) from Surface Protection associated with substantially higher volume, favorable pricing, operating efficiencies and variable cost savings in 2024 versus 2023. Inventories accounted for under the LIFO method resulted in a benefit of $0.2 million in 2024 versus a benefit of $1.3 million in 2023, and the pass-through lag associated with resin costs resulted in a charge of $1.0 million in 2024 versus a charge of $0.5 million in 2023.

For more information on changes in operating costs and expenses, see the Segment Operations Review section below.

As a percentage of sales, selling, general and administrative (“SG&A”) and R&D expenses were 12.3% in 2024 compared with 11.9% in 2023. While SG&A expense increased 11.6% and R&D decreased 75.4% year-over-year, sales increased $24.7 million or 4.3% compared with the prior year period. Higher SG&A spending was primarily due to higher employee-related compensation and higher professional fees associated with business development activities. Lower R&D spending was primarily due to lower costs associated with the closure of the PE Films technical center in Richmond, VA in 2023.

Pension and postretirement benefits was $0.2 million in 2024 compared to $10.8 million in 2023. The change in pension and postretirement benefits was primarily due to lower pension expense as a result of the pension plan termination completed in 2023. During 2023, the Company settled the pension plan, which resulted in a pre-tax pension settlement loss in the consolidated results of operation of $92.3 million. On November 3, 2023, the pension plan termination and settlement process was completed, and the Company’s relevant pension plan obligation was transferred to Massachusetts Mutual Life Insurance Company. See Note 8 “Retirement Plans and Other Postretirement Benefits” to the Consolidated Financial Statements in Item 15 for more information.

During 2024, a non-cash goodwill impairment of $13.3 million was recognized associated with the Clearfield, Utah operation reporting unit in Aluminum Extrusions. During 2023, a non-cash partial goodwill impairment of $34.9 million was recognized associated with the Surface Protection reporting unit in PE Films. See Note 1 “Nature of Operations and Summary of Significant Accounting Policies” to the Consolidated Financial Statements in Item 15 for more information.

The effective tax rate used to compute income taxes from continuing operations for the year of 2024 was (18.8)%, compared to 34.1% in 2023. The decrease in the effective tax rate is primarily due to pre-tax income from continuing operations in 2024 versus a pre-tax loss from continuing operations in 2023. The tax rate in 2023 was significantly impacted by tax benefits previously recorded in other comprehensive income (loss) that were released in 2023 as a result of the pension plan termination. The stranded taxes released with the termination of the pension plan represent the effect of the change in federal and state tax rates on pension-related deferred tax items initially recorded in other comprehensive income. The related stranded taxes were released in full in 2023. See Note 11 “Income Taxes” to the Consolidated Financial Statements in Item 15 for additional information.

Pre-tax gains and losses associated with plant shutdowns, asset impairments, restructurings and other items in 2024 detailed below are shown in the reconciliation of net sales and EBITDA from ongoing operations by segment in the Segment Operations Review below and are included in “Asset impairments and costs associated with exit and disposal activities, net of adjustments” in the consolidated statements of income, unless otherwise noted.

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Average total debt outstanding and interest rates were as follows:

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2023 versus 2022

The following table presents a bridge of consolidated net income (loss) from the year of 2022 to the year of 2023 with related management’s discussion and analysis below the table.

Sales in 2023 decreased by 24.8% compared with 2022. Net sales decreased 25.6% in Aluminum Extrusions primarily due to lower sales volume and the pass-through of lower metal costs. Net sales decreased 21.3% in PE Films primarily due to lower volume in Surface Protection, resulting from weak demand in the consumer electronics market and customer inventory corrections during 2023. For more information on changes in net sales and volume, see the Segment Operations Review section below.

Other income (expense), net was $(2.1) million in 2023 compared to $1.1 million in 2022. The change in other income (expense), net was primarily due to a $2.0 million charge to adjust the initial purchase price of the nonparticipating single premium group annuity contract as a result of the routine administrative process to transition the pension plan. Also, there was cash consideration of $0.3 million received in January 2023 compared to $1.4 million received in May 2022 related to customary post-closing adjustments on the sale of the investment in kaleo, Inc., which was sold in December 2021.

Consolidated gross profit (sales minus cost of goods sold and freight) as a percentage of sales (gross profit margin) was 12.4% in 2023 versus 13.8% in 2022.

•The gross profit margin in Aluminum Extrusions decreased primarily due to lower volume, lower labor productivity in the first half of 2023, higher supply expense, including higher paint expense associated with a shift to more painted product throughout 2023 and inflationary costs for other supplies, partially offset by lower utility costs and unfavorable LIFO inventory adjustments. The timing of the flow through under the FIFO method of aluminum raw material 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 charge of $1.0 million in 2023 versus a benefit of $0.1 million in 2022. There were lower fixed manufacturing costs primarily due to lower non-production utility costs, and lower employee compensation. In addition, the Company recorded an unfavorable out-of-period adjustment of $0.4 million related to inventory and accrued labor costs in 2022.

•The gross profit margin in PE Films increased primarily due to higher overwrap films contribution margin associated with higher volume, favorable mix and favorable pricing, operating efficiencies and cost improvements and favorable LIFO inventory adjustments for both Surface Protection and overwrap films in 2023 versus 2022, partially offset by lower contribution margin for Surface Protection associated with a market slowdown, customer

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inventory corrections and for previously disclosed customer product transitions. In addition, fixed manufacturing costs were lower primarily due to employee compensation and fixed cost savings.

For more information on changes in operating costs and expenses, see the Segment Operations Review section below.

As a percentage of sales, SG&A and R&D expenses were 11.9% in 2023 compared with 9.8% in 2022. While SG&A and R&D expenses decreased 6.1% and 45.6% year-over-year, sales decreased $188.7 million or 24.8% compared with the prior year period. Lower SG&A spending was primarily due to lower employee-related compensation and lower stock-based compensation. Lower R&D spending was primarily due to the closure of the technical center in Richmond, VA.

For more information on changes in interest expense, see the “Corporate Expenses, Interest and Other” section of the Segment Operations Review section below.

During 2023, the Company settled the pension plan, which resulted in a pre-tax pension settlement loss in the consolidated results of operation of $92.3 million. On November 3, 2023, the pension plan termination and settlement process was completed, and the Company’s relevant pension plan obligation was transferred to Massachusetts Mutual Life Insurance Company. See Note 8 “Retirement Plans and Other Postretirement Benefits” to the Consolidated Financial Statements in Item 15 for more information.

During 2023, a non-cash partial goodwill impairment of $34.9 million was recognized associated with the Surface Protection reporting unit in PE Films, see Note 1 “Nature of Operations and Summary of Significant Accounting Policies” to the Consolidated Financial Statements in Item 15 for more information.

The effective tax rate used to compute income taxes from continuing operations for the year of 2023 was 34.1%, compared to (31.6)% in 2022. The increase in the effective tax rate is primarily due to tax benefits previously recorded in other comprehensive income (loss) that were released as a result of the pension plan termination, partially offset by a reduction in Brazilian tax incentives as a percentage of income. The stranded taxes released with the termination of the pension plan represent the effect of the change in federal and state tax rates on pension-related deferred tax items initially recorded in other comprehensive income. The related stranded taxes were released in full in 2023. See Note 11 “Income Taxes” to the Consolidated Financial Statements in Item 15 for additional information.

Pre-tax gains and losses associated with plant shutdowns, asset impairments, restructurings and other items in 2023 detailed below are shown in the reconciliation of net sales and EBITDA from ongoing operations by segment table in the Segment Operations Review below and are included in “Asset impairments and costs associated with exit and disposal activities, net of adjustments” in the consolidated statements of income, unless otherwise noted.

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Average total debt outstanding and interest rates were as follows:

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Segment Operations Review

2024 versus 2023

A summary of operating results for 2024 versus 2023 for both of the Company’s reporting segments is shown below.

Aluminum Extrusions

A summary of results for Aluminum Extrusions is provided below:

Net sales in 2024 were relatively flat versus 2023 primarily due to flat sales volume and the pass-through of higher metal costs, partially offset by a lower average conversion price add-on to metal costs associated with a shift in sales mix.

EBITDA from ongoing operations increased $3.4 million in 2024 versus 2023, primarily due to:

•A $7.9 million increase in contribution margin associated with:

◦Favorable variable manufacturing costs ($4.8 million), higher labor productivity ($2.5 million) and higher volume ($0.5 million), partially offset by higher labor and employee-related costs ($2.2 million) and lower spread associated with a shift in sales mix ($1.4 million); and

◦The timing of the flow-through under the FIFO method of aluminum raw material costs, which were previously acquired in a quickly changing commodity pricing environment, causing a temporary mismatch in the change in the cost of raw materials included in variable costs and the pass through to customers included in sales, resulted in a benefit of $1.4 million in 2024 versus a charge of $1.0 million in 2023.

•Inventories accounted for under the LIFO method resulted in a charge of $1.2 million in 2024 versus a benefit of $0.9 million in 2023;

•Lower manufacturing fixed costs of $0.9 million primarily due to lower employee-related compensation and reduced outside services ($1.2 million); and

•Higher SG&A expenses of $3.9 million primarily due to employee-related incentive compensation ($2.7 million) and headquarters rent expenses ($0.6 million).

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Aluminum Extrusions believes that it has adequate supply agreements for aluminum and other product cost components in 2025. See discussion of quantitative and qualitative disclosures about market risk in Item 7A in this Form 10-K for additional information on aluminum price trends.

Goodwill Impairment at Bonnell

During the fourth quarter of 2024, the Company recognized a non-cash write-off of goodwill of $13.3 million ($10.4 million after deferred income tax benefits) associated with the Clearfield, Utah operation ("Clearfield") acquired in February 2017 (formerly Futura). Clearfield exceeded expectations in performance, including exceptional customer service, from the date of acquisition until before pandemic-related disruptions that resulted in long lead times during periods of 2021 and 2022. Long lead times resulted in customers seeking supply from other sources to meet their demand, including imports. Some business lost at Clearfield during this time has been regained during the recovery underway, but not at the level that the Company previously anticipated would eventually replicate the EBITDA and net cash flow generation that existed prior to the pandemic-related disruptions. As a consequence, using projections that assume the continuation of lower sales and profitability, the estimated fair value of Clearfield during the fourth quarter of 2024 fell below its carrying value by more than the amount of goodwill causing the write-off.

Projected Capital Expenditures and Depreciation & Amortization

Capital expenditures for Bonnell Aluminum are projected to be $17 million in 2025, including $5 million for productivity projects and $12 million for capital expenditures required to support continuity of operations. Depreciation expense is projected to be $16 million in 2025. Amortization expense is projected to be $2 million in 2025.

PE Films

A summary of results for PE Films is provided below:

Net sales in 2024 increased 37.0% versus 2023 due to higher net sales in Surface Protection. Sales volume in 2024 for surface protection films increased 57% versus 2023, with extremely high sales volumes in the first half of 2024 associated with the restocking of Surface Protection customers’ inventories. Overwrap films volume increased 14% versus 2023, primarily due to volume increases associated with lower margin business.

EBITDA from ongoing operations in 2024 increased $19.3 million versus 2023 primarily due to:

•Higher contribution margin of $19.0 million resulting from:

◦A $19.4 million increase from Surface Protection associated with substantially higher volume and favorable pricing ($13.4 million), and operating efficiencies and variable cost savings ($6.0 million);

◦Relatively flat contribution margin from overwrap films, associated with a shift in sales mix and unfavorable pricing ($1.0 million), offset by operating efficiencies and variable cost savings ($1.0 million); and

◦The pass-through lag associated with resin costs ($1.0 million charge in 2024 versus a charge of $0.5 million in 2023).

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•Inventories accounted for under the LIFO method that resulted in a benefit of $0.2 million in 2024 versus a benefit of $1.3 million in 2023.

•Lower SG&A of $0.9 million primarily due to decreased research and development costs ($1.6 million), partially offset by increased employee-related incentive compensation ($1.2 million).

See discussion of quantitative and qualitative disclosures about market risk in Item 7A in this Form 10-K for additional information on resin price trends.

Projected Capital Expenditures and Depreciation & Amortization

Capital expenditures for PE Films are projected to be $3 million in 2025, including $2 million for productivity projects and $1 million for capital expenditures required to support continuity of current operations. Depreciation expense is projected to be $5 million in 2025. There is no amortization expense for PE Films.

Corporate Expenses and Interest

Corporate expenses, net in 2024 decreased by $9.2 million compared to 2023, primarily due to lower pension expense as a result of the pension plan termination completed in 2023 ($10.7 million), a non-recurring charge in 2023 associated with the pension plan transition ($2.3 million) and lower software maintenance fees ($0.6 million), partially offset by higher employee-related incentive compensation ($4.7 million).

Interest expense was $4.7 million in 2024 in comparison to $6.3 million in 2023, primarily due to lower weighted average total debt outstanding, partially offset by higher interest rates.

2023 versus 2022

A summary of operating results for 2023 versus 2022 for each of the Company’s reporting segments is shown below.

Aluminum Extrusions

A summary of results for Aluminum Extrusions is provided below:

Net sales in 2023 decreased 25.6% versus 2022 primarily due to lower sales volume and the pass-through of lower metal costs.

EBITDA from ongoing operations decreased $28.8 million in 2023 versus 2022, primarily due to:

•A 25.0 million decrease in contribution margin associated with:

◦Lower volume ($27.6 million), lower labor productivity in the first half of 2023 ($0.9 million), higher supply expense, including higher paint expense associated with a shift to more painted product throughout 2023 and inflationary costs for other supplies ($1.6 million), partially offset by lower utility costs ($2.3 million);

◦The timing of the flow-through under the FIFO method of aluminum raw material costs, which were previously acquired in a quickly changing commodity pricing environment, causing a temporary mismatch in

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the change in the cost of raw materials included in variable costs and the pass through to customers included in sales, resulted in a charge of $1.0 million in 2023 versus a benefit of $0.1 million in 2022; and

•Inventories accounted for under the LIFO method resulted in a benefit of $0.9 million in 2023 versus a benefit of $5.4 million in 2022.

•Lower manufacturing fixed costs of $2.0 million primarily due to lower non-production utility costs ($0.9 million) and lower employee-related compensation ($0.5 million). In addition, the Company recorded an unfavorable out-of-period adjustment of $0.4 million related to inventory and accrued labor costs in 2022.

•Lower SG&A expenses of $1.9 million primarily due to lower employee incentive-based compensation ($2.5 million) and lower expense for allowance for bad debt ($0.8 million), partially offset by other employee-related compensation ($0.9 million) and increased information technology expenses ($0.4 million).

PE Films

A summary of results for PE Films is provided below:

Net sales in 2023 decreased 21.3% versus 2022, primarily due to lower volume in Surface Protection, resulting from weak demand in the consumer electronics market and customer inventory corrections during 2023. Sales volume in 2023 for surface protection films declined 22% and increased 2% for overwrap films versus 2022.

EBITDA from ongoing operations in 2023 decreased $0.7 million versus 2022 primarily due to:

•Lower contribution margin of $5.5 million resulting from:

◦An $8.6 million decrease from Surface Protection associated with a market slowdown and customers’ inventory corrections ($11.1 million) and for previously disclosed customer product transitions ($0.7 million), partially offset by favorable pricing ($0.5 million) and operating efficiencies ($2.6 million);

◦A $4.5 million increase from overwrap films associated with higher volume, favorable mix and favorable pricing ($1.3 million) and operating efficiencies and cost improvements ($3.2 million); and

◦The pass-through lag associated with resin costs (a charge of $0.5 million in 2023 versus a benefit of $0.9 million in 2022).

•Inventories accounted for under the LIFO method, which resulted in a benefit of $1.3 million versus a charge of $0.5 million in 2022;

•Lower fixed manufacturing costs of $1.4 million primarily due to employee compensation expenses ($1.0 million) and other fixed cost savings ($0.2 million).

•Lower SG&A of $2.0 million primarily due to lower research and development ($2.0 million) from the closure of the technical center in Richmond, VA.

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Corporate Expenses and Interest

Corporate expenses, net in 2023 decreased by $6.7 million compared to 2022, primarily due to lower pension expense as a result of the pension plan termination completed in 2023 ($3.7 million), lower accruals for employee-related compensation ($2.1 million), lower stock-based compensation ($1.3 million), lower professional fees associated with business development activities ($0.8 million), and lower external and internal audit fees ($1.0 million), partially offset by a charge to adjust the initial purchase price of the nonparticipating single premium group annuity contract as a result of the routine administrative process to transition the pension plan ($2.0 million).

Interest expense was $6.3 million in 2023 in comparison to $4.1 million in 2022, primarily due to higher weighted average total debt outstanding and higher interest rates.

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 years ended December 31, 2024, 2023 and 2022 is shown below:

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Liquidity and Capital Resources

The Company continues to focus on 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, 2023 to December 31, 2024 are summarized below. Cash flows for discontinued operations have not been separately disclosed in the consolidated statements of cash flows.

•Accounts and other receivables increased $9.2 million or 16.5%.

◦Accounts and other receivables in Aluminum Extrusions increased $8.3 million primarily due to higher sales volume and the pass-through of higher metal costs, partially offset by a lower average conversion price add-on to metal costs associated with a shift in sales mix in the fourth quarter of 2024 versus the fourth quarter of 2023. DSO (computed using trailing 12 months net sales and a rolling 12-month average of accounts and other receivables balances) was approximately 44.7 days in 2024 and 45.1 days in 2023.

◦Accounts and other receivables in PE Films increased $0.9 million primarily due to higher sales volume in surface protection films. DSO was approximately 24.9 days in 2024 and 26.3 days in 2023.

•Inventories increased $1.7 million or 3.5%.

◦Inventories in Aluminum Extrusions remained consistent with prior year. DIO (computed using trailing 12 months costs of goods sold calculated on a FIFO basis and a rolling 12-month average of inventory balances calculated on the FIFO basis) was approximately 47.4 days in 2024 and 51.6 days in 2023.

◦Inventories in PE Films increased $1.4 million due to higher raw materials costs and higher finished goods. The DIO was approximately 50.3 days in 2024 and 57.2 days in 2023.

•Net property, plant and equipment decreased by $14.1 million or 9.3% primarily due to depreciation expense ($21.4 million), partially offset by capital expenditures ($8.3 million).

•Identifiable intangible assets, net decreased by $1.8 million or 19.5% primarily due to amortization expense.

•Deferred income tax assets, net increased $9.3 million or 40.1% primarily due to an increase in tax credit carryforwards offset by the utilization of net operating loss and interest limitation carryforwards. Deferred tax liabilities related to intangible amortization, depreciation and foregone tax credits on foreign branch income decreased $6.3 million while deferred taxes assets related to capitalized R&D and asset write-offs, divestitures and environmental accruals increased $4.3 million. See Note 11 “Income Taxes” to the Consolidated Financial Statements in Item 15 for additional information.

•Accounts payable decreased by $4.6 million or 6.7%.

◦Accounts payable in Aluminum Extrusions decreased $3.9 million, primarily due to the timing of payments. DPO (computed using trailing 12 months costs of goods sold calculated on a FIFO basis and a rolling 12-month average of accounts payable balances) was approximately 44.5 days in 2024 and 49.8 days in 2023.

◦Accounts payable in PE Films remained relatively flat. The DPO was approximately 41.3 days in 2024 and 43.4 days for 2023.

Net cash provided by operating activities was $25.5 million in 2024 compared to net cash provided by operating activities of $24.0 million in 2023. The change in operating activities is primarily due to an increase in EBITDA from ongoing operations of the Company’s continuing business segments of $22.7 million, partially offset by a net increase in accounts and other receivables, inventories, prepaid expenses and other, and accounts payable of $18.9 million.

Net cash provided by investing activities was $40.5 million in 2024 compared to net cash used in investing activities of $26.2 million in 2023. The change in investing activities is primarily due to net cash proceeds received for the sale of Terphane ($54.6 million) and lower capital expenditure spending ($12.1 million).

Net cash used in financing activities was $65.0 million in 2024 compared to net cash used in financing activities of $4.5 million in 2023. The change in financing activities is primarily due to higher debt principal payments, net of borrowings ($72.8 million) under the ABL Facility (as defined below), lower dividends paid ($8.9 million) and lower debt financing fees ($3.4 million).

At December 31, 2024, Tredegar had cash, cash equivalents and restricted cash of $7.1 million, including funds held in locations outside the U.S. of $1.6 million.

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Debt and Credit Agreements

ABL Facility

In December 2023, the Company entered into Amendment No. 3 to the Second Amended and Restated Credit Agreement (“the Credit Agreement”), which, prior to the ABL Adjustment Date (as defined below), provided the Company with a $180 million senior secured asset-based revolving credit facility. In April 2024, the Company entered into Amendment No. 4 to the Credit Agreement (as amended by Amendment No. 3 and Amendment No. 4, the “ABL Facility”) that, among other items: (i) moved the ABL Adjustment Date (defined below) from March 31, 2025 to September 30, 2025 and (ii) required weekly reporting of the borrowing base financial covenant until the ABL Adjustment Date. The ABL Facility is secured by substantially all assets of the Company and its domestic subsidiaries, including equity in certain material first-tier foreign subsidiaries. Availability for borrowings under the ABL Facility is governed by a borrowing base, determined by the application of specified advance rates against eligible assets, including a portion of trade accounts receivable, inventory, cash and cash equivalents, owned real properties, and owned machinery and equipment. Upon the earlier of September 30, 2025 or the date the Company received the proceeds from the sale of Terphane (the “ABL Adjustment Date”), the $180 million ABL Facility was to be reduced to $125 million. On November 1, 2024, with the closing of the sale of Terphane, the ABL Adjustment Date occurred. The ABL Facility will expire on June 30, 2026.

The financial covenant is a minimum fixed charge coverage ratio (as defined in the ABL Facility) of 1.00:1.00 that will be triggered in the event that availability is less than 10% of the $125 million commitment amount and continuing thereafter until availability is greater than 10% of the $125 million commitment amount for 30 consecutive days. As of December 31, 2024, funds available to borrow under the ABL Facility was $43.8 million, or 35.0% of the aggregate commitment of $125 million.

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The computation of Credit EBITDA, as defined in the ABL Facility, is presented below.

As of December 31, 2024, the Company was in compliance with all debt covenants.

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, which is equivalent to $1.3 million as of December 31, 2024, revolving loan with the Industrial and Commercial Bank of China. The loan matures on July 3, 2025. The interest rate is the one-year loan prime rate published by the National Interbank Funding Center for the working day immediately preceding the drawdown date, minus 0.45%. As of December 31, 2024, the National Interbank Funding Center rate was 3.45%. The

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revolving loan is secured by a mortgage contract listing the Guangzhou Tredegar factory building as collateral. The mortgage contract has a maximum value of 30 million Chinese Yuan and is effective from June 25, 2024 through May 31, 2027. This loan was presented as current debt on the consolidated balance sheet for the year ended December 31, 2024.

For more information on the ABL Facility and the PE Films Guangzhou Loan, see Note 7 “Debt and Credit Agreements” to the consolidated Financial Statements in Item 15.

The Company believes that existing borrowing availability, current cash balances and cash flow from operations will be sufficient to satisfy short term material cash requirements related to working capital, capital expenditure, and debt repayments for at least the next 12 months. In the longer term, liquidity will depend on many factors, including the results of operations, the timing and extent of capital expenditures, changes in operating plans, or other events that would cause the Company to seek additional financing in future periods.

Material Cash Requirements for Known Contractual and Other Obligations

The Company’s material cash requirements from known contractual and other obligations as of December 31, 2024 were as follows:

Debt and interest payments

As of December 31, 2024, the Company had outstanding debt under the ABL Facility of $60.6 million with contractual payments due in June 2026. Estimated future interest payments associated with the ABL Facility total $6.6 million, with $4.4 million payable within the next 12 months.

As of December 31, 2024, PE Films had outstanding debt of $1.3 million under the PE Films Guangzhou Loan. Estimated future interest payments associated with the PE Films Guangzhou Loan payable within the next 12 months were immaterial.

Capital expenditure commitments

See “Projected Capital Expenditures and Depreciation & Amortization” within “Segment Operations Overview” above in this Item 7 for discussion of the Company’s planned investment in capital expenditures in 2024, of which $0.4 million are contractual commitments that existed as of December 31, 2024.

Operating Leases

The Company enters into various operating leases primarily for real estate, office equipment and vehicles. See Note 4 “Leases” to the Consolidated Financial Statements in Item 15 for additional information.

Uncertain Tax Positions

As of December 31, 2024, unrecognized tax benefits on uncertain tax positions were $0.8 million. Tax payments resulting from the successful challenge by the taxing authority on uncertain tax positions taken by Tredegar would possibly result in the payment of interest and penalties of $0.2 million, which were accrued at December 31, 2024, if tax payments were made as a result of a successful challenge by the taxing authority on uncertain tax positions. Due to uncertainties in the timing of potential tax audits, the timing of the resolution of these positions is uncertain. Therefore, the Company is unable to make a reasonably reliable estimate of the timing of payments beyond 12 months. See Note 11 “Income Taxes” to the Consolidated Financial Statements in Item 15 for additional information.

Off-Balance Sheet Arrangements

The Company has no material off-balance sheet arrangements that have had or are reasonably likely to have a material current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

From time to time, the Company enters into transactions with third parties in connection with the sale of assets or businesses in which it agrees to indemnify the buyers or third parties involved in the transaction, or the sellers or third parties involved in the transaction agree to indemnify Tredegar, for certain liabilities or risks related to the assets or business. Also, in the ordinary course of business, the Company may enter into agreements with third parties for the sale of goods or services that may contain indemnification provisions. In the event that an indemnification claim is asserted, liability for indemnification would be subject to an assessment of the underlying facts and circumstances under the terms of the applicable agreement. Further, any indemnification payments may be limited or barred by a monetary cap, a time limitation, or a deductible or basket. For these reasons, the Company is unable to estimate the maximum potential amount of the potential future liability under the indemnity provisions of these agreements. Tredegar does, however, accrue for losses for any known contingent liability, including those that may arise from indemnification provisions, when future payment is probable and the amount is reasonably estimable. The Company discloses contingent liabilities if the probability of loss is reasonably possible and material.

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Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. Certain accounting policies, as described below, are considered "critical accounting policies" because they are particularly dependent on estimates made by management about matters that are inherently uncertain and could have a material impact on the Company’s consolidated financial statements. Estimates and judgments are based on historical experience, forecasted events and various other assumptions that management believes are reasonable under the circumstances. Actual results could differ significantly from those estimates under different assumptions and conditions. A summary of all of our significant accounting policies is included in Note 1 “Nature of Operations and Summary of Significant Accounting Policies” to the Consolidated Financial Statements in Item 15.

Impairment of Goodwill

The Company assesses goodwill for impairment when events or circumstances indicate that the carrying value may not be recoverable, or, at a minimum, on an annual basis (December 1st of each year). When assessing goodwill for impairment, accounting guidance allows the Company to first perform a qualitative assessment (“Step 0 analysis”), which evaluates certain qualitative factors, including macroeconomic conditions, industry and market considerations, cost factors and overall financial performance, as well as company and reporting unit factors. If the Company's Step 0 analysis indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company would perform a quantitative impairment test (“Step 1 analysis”).

Domestic producers of aluminum extrusions in the U.S. continue to experience adverse conditions associated with economic uncertainty, including persistently high interest rates, tight lending standards and inflationary pressures, which negatively impact the non-residential B&C end-use market. These pandemic-related disruptions, which resulted in long lead times and a decline in industry capacity utilization, caused pricing pressure in the aluminum extrusions end-use markets. An influx of foreign imports at less-than-fair value pricing has also adversely impacted domestic producers.

During 2024, customers of the Aluminum Extrusions’ Clearfield, Utah operation ("Clearfield") acquired as “Futura” in February 2017 continued to seek supply from other sources to meet their demand, including imports. However, in 2024, Clearfield continued to experience a resurgence in customer volumes that had declined due to the pandemic, albeit not at the speed and profit level that was previously projected. The recovery has been slower than previously anticipated, and is not trending back to previous Company expectations to replicate the EBITDA and net cash flow generation that existed prior to the pandemic-related disruptions and influx of imports.

As a consequence, the Company performed a goodwill impairment analysis during the fourth quarter of 2024 using Clearfield projections that assume the continuation of lower margin business. Since the estimated fair value of Clearfield fell below its carrying value by more than the amount of goodwill, the Company recognized a non-cash write-off of goodwill of $13.3 million ($10.4 million after deferred income tax benefits) associated with Clearfield.

The Company estimated the fair value of Clearfield by: (i) computing an estimated enterprise value (“EV”) utilizing the discounted cash flow method (the “DCF Method”), and (ii) adding cash and cash equivalents. Key financial assumptions utilized to determine the fair value of the reporting unit include sales volume and sales price growth projections. At December 31, 2024, the effect of a two percent increase per year in these growth projections would increase the reporting unit’s fair value, however such sensitized fair value is still below Clearfield’s carrying value by more than the amount of goodwill.

As of December 31, 2024, the Company’s remaining goodwill of $22.4 million was included in the Surface Protection reporting unit. See Note 1 “Nature of Operations and Summary of Significant Accounting Policies” to the Consolidated Financial Statements in Item 15 for additional information on the analysis of goodwill impairment.

Income Taxes

Current tax liabilities and assets are recognized for the estimated taxes payable or refundable, respectively, on the tax returns for the current year. Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Accordingly, accounting for income taxes represents the Company’s best estimate of various events and transactions. Tax laws are often complex and may be subject to differing interpretations by the taxpayer and the relevant governmental taxing authorities. In establishing a provision for income tax expense, Tredegar must make judgments and interpretations about the application of tax laws. The Company must also make estimates about when in the future certain items will affect taxable income in the various taxing jurisdictions.

A valuation allowance is recorded in the period when the Company determines that it is more likely than not that all or a portion of deferred income tax assets may not be realized. The establishment and removal of a valuation allowance requires the Company to consider all positive and negative evidence and make a judgmental decision regarding the amount of valuation allowance required as of a reporting date.

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Tredegar may be required to change its provision for income taxes when estimates used in determining valuation allowances on deferred tax assets significantly change, or when new information indicates the need for adjustment in valuation allowances. Additionally, future events, such as changes in tax laws, tax regulations, or interpretations of such laws or regulations, could have an impact on the provision for income tax and the effective tax rate. Any such changes could significantly affect the amounts reported in the financial statements in the year these changes occur.

See Note 11 “Income Taxes” to the Consolidated Financial Statements in Item 15 for additional information on income taxes.

Item 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations focuses on and is intended to clarify the results of our operations, certain changes in our financial position, liquidity, capital structure and business developments for the periods covered by the consolidated financial statements included in this Form 10-K. This discussion should be read in conjunction with, and is qualified by reference to, the other related information including, but not limited to, the audited consolidated financial statements (including the notes thereto) and the description of our business, all as set forth in this Form 10-K, as well as the risk factors discussed above in Item 1A.

This section provides discussion and a year-to-year comparison for the years ended December 31, 2023 and 2022.

Business Overview

General

Tredegar Corporation is an industrial manufacturer with three primary businesses: custom aluminum extrusions for the North American B&C, automotive and specialty end-use markets through its Aluminum Extrusions segment; surface protection films for high-technology applications in the global electronics industry through its PE Films segment; and specialized polyester films primarily for the Latin American flexible packaging market through its Flexible Packaging Films segment. With approximately 1,900 employees, the Company operates manufacturing facilities in North America, South America, and Asia.

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 Note 13 “Business Segments” to the Consolidated Financial Statements in Item 15. EBIT 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 (loss) 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.

Sales were $704.8 million in 2023 compared to $938.6 million in 2022. Net income (loss) was $(105.9) million ($(3.10) per diluted share) in 2023, compared with net income (loss) of $28.5 million ($0.84 per diluted share) in 2022.

2023 Financial Results Highlights

•EBITDA from ongoing operations for Aluminum Extrusions of $38.0 million was $28.8 million lower than the year of 2022.

•EBITDA from ongoing operations for PE Films of $11.2 million was $0.7 million lower than the year of 2022.

•EBITDA from ongoing operations for Flexible Packaging Films of $4.4 million was $23.1 million lower than the year of 2022.

Gains and losses associated with exit and disposal activities, plant shutdowns, asset impairments, restructurings and other items are described in Results of Operations below.

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Results of Operations

2023 versus 2022

The following table presents a bridge of consolidated net income (loss) from the year of 2022 to the year of 2023 with related management’s discussion and analysis below the table.

Sales in 2023 decreased by 24.9% compared with 2022. Net sales decreased 25.6% in Aluminum Extrusions primarily due to lower sales volume and the pass-through of lower metal costs. Net sales decreased 21.3% in PE Films primarily due to lower volume in Surface Protection, resulting from weak demand in the consumer electronics market and customer inventory corrections during 2023. Net sales decreased in Flexible Packaging Films by 24.9% primarily due to lower sales volume and lower margin that the Company believes are driven by excess global capacity and competition in Brazil from imports, partially offset by favorable product mix. For more information on changes in net sales and volume, see the Segment Operations Review section below.

Other income (expense), net was $(2.1) million in 2023 compared to $1.0 million in 2022. The change in other income (expense), net was primarily due a $2.0 million charge to adjust the initial purchase price of the nonparticipating single premium group annuity contract as a result of the routine administrative process to transition the pension plan. Also, there was cash consideration of $0.3 million received in January 2023 compared to $1.4 million received in May 2022 related to customary post-closing adjustments on the sale of the investment in kaleo, Inc., which was sold in December 2021. See Note 9 “Other Income (Expense), net” to the Consolidated Financial Statements in Item 15 for additional information.

Consolidated gross profit (sales minus cost of goods sold and freight) as a percentage of sales (gross profit margin) was 11.2% in 2023 versus 14.9% in 2022.

•The gross profit margin in Aluminum Extrusions decreased primarily due to: lower volume; higher labor and employee-related costs; lower labor productivity in the first half of 2023; higher supply expense (including higher paint expense associated with a shift to more painted product throughout 2023 and inflationary costs for other supplies); and higher freight rates; partially offset by higher pricing (primarily in the first quarter of 2023); lower utility costs; and favorable LIFO inventory adjustments in 2023 versus 2022. Additionally, the timing of the flow through under the first-in first-out method of aluminum raw material costs passed through to customers, previously acquired at higher prices in a quickly changing commodity pricing environment, resulted in a charge of $1.1 million in 2023 versus a benefit of $0.1 million in 2022.

•The gross profit margin in PE Films increased primarily due to higher overwrap films contribution margin associated with higher volume and favorable mix, cost improvements and favorable LIFO inventory adjustments for both Surface

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Protection and overwrap films in 2023 versus 2022, partially offset by lower contribution margin for Surface Protection associated with a market slowdown, customer inventory corrections for non-transitioning products and for previously disclosed customer product transitions.

•The gross profit margin in Flexible Packaging Films decreased primarily due to lower sales volume, lower selling prices from the pass-through of lower resin costs and margin pressures and higher fixed and variable costs, partially offset by lower raw material costs.

For more information on changes in operating costs and expenses, see the Segment Operations Review section below.

As a percentage of sales, selling, general and administrative (“SG&A”) and R&D expenses were 11.3% in 2023 compared with 9.1% in 2022. While SG&A and R&D expenses decreased 3.3% and 39.5% year-over-year, sales decreased $233.7 million or 24.9% compared with the prior year period. Lower SG&A spending was primarily due to lower employee-related compensation and lower stock-based compensation, partially offset by higher professional fees associated with business development activities.

For more information on changes in interest expense, see the “Corporate Expenses, Interest and Other” section of the Segment Operations Review section below.

During 2023, the Company settled the pension plan, which resulted in a pre-tax pension settlement loss in the consolidated results of operation of $92.3 million. On November 3, 2023, the pension plan termination and settlement process was completed, and the Company’s relevant pension plan obligation was transferred to Massachusetts Mutual Life Insurance Company. See Note 8 “Retirement Plans and Other Postretirement Benefits” to the Consolidated Financial Statements in Item 15 for more information.

During 2023, a non-cash partial goodwill impairment of $34.9 million was recognized, see Note 1 “Nature of Operations and Summary of Significant Accounting Policies” to the Consolidated Financial Statements in Item 15 for more information.

The effective tax rate used to compute income taxes for the year of 2023 was 33.8%, compared to 13.4% in 2022. The increase in the effective tax rate is primarily due to tax benefits previously recorded in other comprehensive income (loss) that were released as a result of the pension plan termination, partially offset by a reduction in Brazilian tax incentives as a percentage of income. The stranded taxes released with the termination of the pension plan represent the effect of the change in federal and state tax rates on pension-related deferred tax items initially recorded in other comprehensive income. The related stranded taxes were released in full in 2023. See Note 12 “Income Taxes” to the Consolidated Financial Statements in Item 15 for additional information.

Pre-tax gains and losses associated with plant shutdowns, asset impairments, restructurings and other items in 2023 detailed below are shown in the statements of net sales and EBITDA from ongoing operations by segment table in Note 13 “Business Segments” to the Consolidated Financial Statements in Item 15 and are included in “Asset impairments and costs associated with exit and disposal activities, net of adjustments” in the consolidated statements of income, unless otherwise noted.

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Average total debt outstanding and interest rates were as follows:

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Segment Operations Review

Aluminum Extrusions

A summary of results for Aluminum Extrusions is provided below:

Net sales in 2023 decreased 25.6% versus 2022 primarily due to lower sales volume and the pass-through of lower metal costs.

EBITDA from ongoing operations decreased $28.8 million in 2023 versus 2022, primarily due to:

•Lower volume ($29.6 million), higher labor and employee-related costs ($4.5 million), lower labor productivity in the first half of 2023 ($0.9 million), higher supply expense, including higher paint expense associated with a shift to more painted product throughout 2023 and inflationary costs for other supplies ($1.2 million), higher freight rates ($0.8 million) and higher SG&A expenses ($1.5 million); partially offset by higher pricing, primarily in the first quarter of 2023 ($4.0 million), and lower utility costs ($2.3 million);

•The timing of the flow-through under the FIFO method of aluminum raw material costs passed through to customers, previously acquired at higher prices in a quickly changing commodity pricing environment, resulted in a charge of $1.1 million in 2023 versus a benefit of $0.1 million in 2022; and

•Inventories accounted for under the last in, first out (“LIFO”) method resulted in a benefit of $1.2 million in 2023 versus a charge of $2.9 million in 2022. In addition, the Company recorded an unfavorable out-of-period adjustment of $0.6 million related to inventory and accrued labor costs in the third quarter and fourth quarters of 2022.

Aluminum Extrusions believes that it has adequate supply agreements for aluminum raw materials in 2024. See discussion of quantitative and qualitative disclosures about market risk in Item 7A in this Form 10-K for additional information on aluminum price trends.

Projected Capital Expenditures and Depreciation & Amortization

Capital expenditures for Bonnell Aluminum are projected to be $9 million in 2024, including $4 million for productivity projects and $5 million for capital expenditures required to support continuity of operations. The projected spending reflects stringent spending measures that the Company has implemented to control its financial leverage (see the Liquidity and Capital Resources section for more information). The multi-year implementation of the new ERP/MES has been reorganized with an extended implementation period. As a result, the earliest “go-live” date for the new ERP/MES is 2025. The ERP/MES project commenced in 2022, with spending to-date of approximately $21 million. Depreciation expense is projected to be $16 million in 2024. Amortization expense is projected to be $2 million in 2024.

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PE Films

A summary of results for PE Films is provided below:

Net sales in 2023 decreased 21.3% versus 2022, primarily due to lower volume in Surface Protection, resulting from weak demand in the consumer electronics market and customer inventory corrections during 2023. Sales volume in 2023 for surface protection films declined 22% and increased 2% for overwrap films versus 2022.

EBITDA from ongoing operations in 2023 decreased $0.7 million versus 2022 primarily due to:

•A $5.7 million decrease from Surface Protection:

◦Lower contribution margin for non-transitioning products associated with a market slowdown and customer inventory corrections ($11.1 million) and for previously disclosed customer product transitions ($0.7 million), partially offset by favorable pricing ($0.5 million), operating efficiencies ($2.6 million) and cost improvements ($3.2 million);

◦The pass-through lag associated with resin costs ($0.3 million charge in 2023 versus a benefit of $0.5 million in 2022);

◦A foreign currency transaction gain of $0.2 million in 2023 versus a gain of $0.8 million in 2022; and

◦Inventories accounted for under the LIFO method resulted in a benefit of $1.0 million in 2023 versus a charge of $0.1 million in 2022.

•A $5.0 million increase from overwrap films primarily due:

◦Higher contribution margin associated with higher volume and favorable mix ($1.3 million), cost improvements ($3.1 million) and lower SG&A ($0.4 million);

◦The pass-through lag associated with resin costs (a charge of $0.2 million in 2023 versus a benefit of $0.4 million in 2022); and

◦Inventories accounted for under the LIFO method resulted in a benefit of $0.3 million in 2023 versus a charge of $0.4 million in 2022.

In August 2023, the Company adopted a plan to close the PE Films technical center in Richmond, VA and reduce its efforts to develop and sell films supporting the semiconductor market. Future research and development activities for PE Films will be performed at the facility in Pottsville, PA. PE Films continues to have new business opportunities primarily relating to surface protection films that protect components of flat panel and flexible displays. The Company anticipates all activities to cease at the PE Films technical center in Richmond, VA, by the end of the first quarter of 2024. The Company recognized total expense incurred through December 31, 2023 associated with exit activities of $1.3 million for: (i) severance and related costs ($0.9 million) and (ii) building closure costs ($0.4 million). In addition, the Company recognized a non-cash asset impairment ($3.5 million), accelerated depreciation ($0.3 million) and a gain on the lease modification ($0.1 million). Net annual cash savings of $3.4 million are anticipated, which began in the fourth quarter of 2023.

Projected Capital Expenditures and Depreciation & Amortization

Capital expenditures for PE Films are projected to be $2 million in 2024, 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 $6 million in 2024. There is no amortization expense for PE Films.

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Flexible Packaging Films

A summary of results for Flexible Packaging Films is provided below:

Net sales in 2023 decreased 24.9% compared to 2022, primarily due to lower sales volume and lower margin that the Company believes were driven by excess global capacity and competition in Brazil from imports, partially offset by favorable product mix.

EBITDA from ongoing operations in 2023 decreased by $23.1 million versus 2022, primarily due to:

•Lower selling prices from the pass-through of lower resin costs and margin pressures ($17.6 million), lower sales volume ($9.7 million), higher fixed costs ($1.0 million, primarily due to under absorption from lower production volumes) and higher variable costs ($1.3 million, including higher costs resulting from quality issues), partially offset by lower raw material costs ($5.9 million) and lower SG&A expenses ($2.3 million);

•Foreign currency transaction losses ($0.3 million) in 2023 compared to foreign currency transaction losses ($0.2 million) in 2022; and

•Net unfavorable foreign currency translation of Real-denominated operating costs ($1.4 million) in 2023 versus 2022.

Projected Capital Expenditures and Depreciation & Amortization

Capital expenditures are projected to be $4 million in 2024, for capital expenditures required to support continuity of current operations. Depreciation expense is projected to be $3 million in 2024. Amortization expense is projected to be $0.1 million in 2024.

Corporate Expenses, Interest and Other

Corporate expenses, net in 2023 decreased by $1.8 million compared to 2022, primarily due to lower pension expense as a result of the pension plan termination completed in 2023 ($3.7 million), lower accruals for employee-related compensation ($2.1 million) and lower stock-based compensation ($1.4 million), partially offset by higher professional fees associated with business development activities ($3.2 million) and a charge to adjust the initial purchase price of the nonparticipating single premium group annuity contract as a result of the routine administrative process to transition the pension plan ($2.0 million).

Interest expense was $11.6 million in 2023 in comparison to $5.0 million in 2022, primarily due to higher weighted average total debt outstanding, higher interest rates and the write-off of $1.1 million of deferred financing fees.

Status of Current Corporate Strategic Initiatives

The status of current corporate strategic initiatives is as follows:

Agreement to Sell Terphane

On September 1, 2023, the Company announced that it had entered into a definitive agreement to sell Terphane to Oben Group (the “Contingent Terphane Sale”). Completion of the sale is contingent upon the satisfaction of customary closing conditions, including the receipt of certain competition filing approvals by authorities in Brazil and Colombia. On October 27, 2023, the Company filed the requisite competition forms with the Administrative Council for Economic Defense (“CADE”) in Brazil. The regulatory review process is ongoing and in line with the Company’s expectations. CADE’s maximum deadline for completing its review is no later than November 18, 2024. The merger review regarding the transaction was cleared by the Colombian authority in early February 2024.

As of December 31, 2023, the Company has reported results for Terphane as a continuing operation, given the early stage of the approval process by authorities. If the Contingent Terphane Sale transaction is completed, the Company expects to realize after-tax cash proceeds of $85 million after deducting projected Brazil withholding taxes, escrow funds, U.S. capital

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gains taxes and transaction costs. Actual after-tax net proceeds may differ from this estimate due to possible changes in deductions and the Company's tax situation during the potentially lengthy interim period to the closing date.

Pension Plan Termination

On September 27, 2023, the Company borrowed $30 million under the Prior Credit Agreement (as defined below) in anticipation of the final funding expected for terminating its defined benefit pension plan obligation. On October 31, 2023, the Company used this cash to contribute $27.7 million to fully fund the pension plan with the amount necessary to purchase from Massachusetts Mutual Life Insurance Company a nonparticipating single premium group annuity contract for $157.5 million, subject to final premium adjustments. On November 3, 2023, the pension plan termination and settlement process was completed, and the Company’s relevant pension plan obligation was transferred to Massachusetts Mutual Life Insurance Company. This completed the pension plan termination process that began in February 2022. During 2023, the Company recognized a pre-tax pension settlement loss of $92.3 million.

Liquidity and Capital Resources

The Company continuously focuses on 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, 2022 to December 31, 2023 are summarized below.

•Accounts and other receivables decreased $16.6 million or 19.6%.

◦Accounts and other receivables in Aluminum Extrusions decreased $15.4 million primarily due to lower sales volume and the pass-through of lower metal costs. DSO (computed using trailing 12 months net sales and a rolling 12-month average of accounts and other receivables balances) was approximately 45.1 days in 2023 and 48.7 days in 2022.

◦Accounts and other receivables in PE Films increased $0.6 million primarily due to higher sales volume in overwrap films, partially offset by lower sales volume in Surface Protection. DSO was approximately 26.3 days in 2023 and 30.3 days in 2022.

◦Accounts and other receivables in Flexible Packaging Films decreased $1.9 million primarily due to lower sales. DSO was approximately 38.1 days in 2023 and 41.1 days in 2022.

•Inventories decreased $45.7 million or 35.8%.

◦Inventories in Aluminum Extrusions decreased $24.1 million primarily due to decreased raw material levels which align to lower demand and strict working capital targets, partially offset by a LIFO inventory benefit of $1.2 million in 2023 versus a charge of $2.9 million in 2022. DIO (computed using trailing 12 months costs of goods sold calculated on a FIFO basis and a rolling 12-month average of inventory balances calculated on the FIFO basis) was approximately 51.6 days in 2023 and 53.6 days in 2022.

◦Inventories in PE Films decreased $1.9 million due to lower raw materials costs, partially offset by a LIFO inventory benefit of $1.3 million in 2023 versus a charge of $0.5 million in 2022. The DIO was approximately 57.2 days in 2023 and 66.8 days in 2022.

◦Inventories in Flexible Packaging Films decreased $19.7 million primarily due to lower raw material purchases, lower work-in-process and finished goods levels as a result of lower sales volume. DIO of approximately 117.7 days in 2023 was higher compared to 108.0 days for 2022 due to the lower 12-month average of costs of goods sold as a result of lower sales volume and lower margin that the Company believes are driven by excess global capacity and competition in Brazil from imports.

•Net property, plant and equipment decreased by $3.0 million or 1.6% primarily due to depreciation expense ($25.8 million) and the impairment of assets from the closure of the Richmond, VA technical center ($3.5 million), partially offset by capital expenditures ($25.6 million).

•Identifiable intangible assets, net decreased by $1.8 million or 15.7% primarily due to amortization expense.

•Deferred income tax assets increased $11.1 million or 80.1% primarily due to an increase in net operating loss, tax credit and interest limitation carryforwards. Deferred tax liabilities related to intangible amortization and depreciation decreased $11.8 million while deferred taxes assets related to pension, employee benefits and inventory decreased $10.6 million. See Note 12 “Income Taxes” to the Consolidated Financial Statements in Item 15 for additional information.

•Accounts payable decreased by $19.9 million or 17.3%.

◦Accounts payable in Aluminum Extrusions decreased $15.7 million, primarily due to lower raw material purchases to align with demand and strict working capital targets. DPO (computed using trailing 12 months costs of goods sold calculated on a FIFO basis and a rolling 12-month average of accounts payable balances) was approximately 49.8 days in 2023 and 64.2 days in 2022.

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◦Accounts payable in PE Films remained relatively flat. DPO of approximately 43.4 days in 2023 was lower compared to 51.0 days for 2022 due to lower raw materials associated with overwrap films.

◦Accounts payable in Flexible Packaging Films decreased $3.9 million, primarily due to lower raw material purchases, lower work-in-process, and finished goods levels as a result of lower sales volume. DPO was approximately 61.7 days in 2023 and 72.4 days in 2022.

Net cash provided by operating activities was $24.0 million in 2023 compared to net cash used in operating activities of $20.8 million in 2022. The change in operating activities is primarily due to pension plan contributions of $27.7 million in 2023 compared to $50 million in 2022 and improved working capital due to factors discussed earlier in this section relating to accounts and other receivables, inventories and accounts payable.

Net cash used in investing activities was $26.2 million in 2023 compared to $35.5 million in 2022. The change in investing activities is primarily due to lower capital expenditure spending ($10.4 million).

Net cash used in financing activities was $4.5 million in 2023 compared to net cash provided by financing activities of $45.4 million in 2022. The change in financing activities is primarily due to lower net borrowings ($55.6 million) under the ABL Facility and the Prior Credit Agreement and Terphane Brazil Loan (defined below), higher deferred financing costs ($2.8 million), partially offset by lower dividends paid in 2023 ($8.1 million).

At December 31, 2023, Tredegar had cash, cash equivalents and restricted cash of $13.5 million, including funds held in locations outside the U.S. of $9.8 million.

Debt and Credit Agreements

ABL Facility

On August 3, 2023, the Company entered into Amendment No. 2 to the Second Amended and Restated Credit Agreement (collectively the “Prior Credit Agreement”), which amended the financial covenants and decreased aggregate borrowings from $375 million to $200 million.

On December 27, 2023, the Company entered into Amendment No. 3 (the “ABL Facility”) to the Prior Credit Agreement, which provides the Company with $180 million senior secured asset-based revolving credit facility that will expire on June 30, 2026. The ABL Facility is secured by substantially all assets of the Company and its domestic subsidiaries, including equity in certain material first-tier foreign subsidiaries. Availability for borrowings under the ABL Facility is governed by a borrowing base, determined by the application of specified advance rates against eligible assets, including a portion of trade accounts receivable, inventory, cash and cash equivalents, owned real properties, and owned machinery and equipment. Upon the earlier of March 31, 2025 or the date the Company receives the proceeds from the sale of Terphane (the “ABL Adjustment Date”), the $180 million ABL Facility will be reduced to $125 million. As of December 31, 2023, availability under the ABL Facility was $22.9 million, after reducing the availability by the aggregate outstanding borrowings of $126.3 million, standby letters of credit of $13.1 million and the Minimum Liquidity (as defined in the ABL Facility) financial covenant.

Under the terms of the ABL Facility, certain domestic bank accounts are subject to blocked account agreements, each of which contains a springing feature whereby the lenders may exercise control over those accounts during a cash dominion period (any such period, a “Cash Dominion Period”). A Cash Dominion Period was implemented on the date of the closing of the ABL Facility and will remain in effect at all times prior to the ABL Adjustment Date. After the ABL Adjustment Date, a Cash Dominion Period goes into effect if availability under the ABL Facility falls below 12.5% or an Event of Default (as defined in the ABL Facility) occurs. The Company would then be subject to the Cash Dominion Period until the Event of Default is waived or ABL Facility availability is above 12.5% of the $125 million aggregate commitment for 30 consecutive days. Receipts that have not yet been applied to the ABL Facility are classified as restricted cash in the Company’s consolidated balance sheets.

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The financial covenants in the ABL Facility, which are reported to lenders on a monthly basis, include:

•Until the ABL Adjustment Date, the Company is required to maintain (i) minimum Credit EBITDA (as defined in the ABL Facility), as of the end of each fiscal month for the 12-month period then ended (presented below) and (ii) a Minimum Liquidity (as defined in the ABL Facility) of $10.0 million.

•Following the ABL Adjustment Date, the foregoing financial covenants will cease to exist and will be replaced with a minimum fixed charge coverage ratio of 1.00:1.00 that will be triggered in the event that availability is less than 10% of $125 million commitment amount and continuing thereafter until availability is greater than 10% of the $125 million commitment amount for 30 consecutive days.

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The computation of Credit EBITDA, as defined in the ABL Facility, is presented below.

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The computation of the ABL Facility availability and Minimum Liquidity covenant, as defined in the ABL Facility, is presented below.

In addition to the financial covenants, the ABL Facility contains restrictive covenants, including covenants that restrict the Company’s ability to pay dividends and repurchase shares of its common stock.

As of December 31, 2023, the Company was in compliance with all debt covenants.

Terphane Brazil Loan

On October 26, 2023, Terphane Ltda., the Company’s wholly owned subsidiary in Brazil, borrowed $20 million secured by certain of its assets (“Terphane Brazil Loan”). This U.S. Dollar borrowing matures on October 30, 2028. The Company expects that the Terphane Brazil Loan will be repaid (and collateral released) upon the closing of the Contingent Terphane Sale. On October 26, 2023, the Company borrowed $20 million from Terphane Brazil (the “Intercompany Loan”) at the same interest rate as the Terphane Brazil Loan, thereby transferring the funds to the U.S. The Company will repay the Intercompany Loan in conjunction with the closing of the Contingent Terphane Sale.

For more information on the ABL Facility and the Terphane Brazil Loan, see Note 7 “Debt and Credit Agreements” to the Consolidated Financial Statements in Item 15.

The Company believes that existing borrowing availability, current cash balances and cash flow from operations will be sufficient to satisfy short term material cash requirements related to working capital, capital expenditure, and debt repayments for at least the next 12 months. In the longer term, liquidity will depend on many factors, including the results of operations, the timing and extent of capital expenditures, changes in operating plans, or other events that would cause the Company to seek additional financing in future periods. In addition, the completion of the Contingent Terphane Sale would provide additional liquidity.

Material Cash Requirements for Known Contractual and Other Obligations

The Company’s material cash requirements from known contractual and other obligations as of December 31, 2023 were as follows:

Debt and interest payments

As of December 31, 2023, the Company had outstanding debt from the ABL Facility of $126.3 million with contractual payments due in June 2026. Estimated future interest payments associated with the ABL Facility total $28.6 million, with $11.5 million payable within the next 12 months.

As of December 31, 2023, Terphane Ltda., the Company’s wholly owned subsidiary in Brazil, had outstanding debt of $20.0 million under the Terphane Brazil Loan. Estimated future interest payments associated with the Terphane Brazil Loan total $7.9 million, with $2.3 million payable within the next 12 months.

Capital expenditure commitments

See “Projected Capital Expenditures and Depreciation & Amortization” within “Segment Operations Overview” above in this Item 7 for discussion of the Company’s planned investment in capital expenditures in 2024, of which $1.2 million are contractual commitments that existed as of December 31, 2023.

Operating Leases

The Company enters into various operating leases primarily for real estate, office equipment and vehicles. See Note 4 “Leases” to the Consolidated Financial Statements in Item 15 for additional information.

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Uncertain Tax Positions

As of December 31, 2023, unrecognized tax benefits on uncertain tax positions were $0.7 million. Tax payments resulting from the successful challenge by the taxing authority on uncertain tax positions taken by Tredegar would possibly result in the payment of estimated interest and penalties of $0.2 million if tax payments were made as a result of a successful challenge by the taxing authority on uncertain tax positions. Due to uncertainties in the timing of potential tax audits, the timing of the resolution of these positions is uncertain. Therefore, the Company is unable to make a reasonably reliable estimate of the timing of payments beyond 12 months. See Note 12 “Income Taxes” to the Consolidated Financial Statements in Item 15 for additional information.

Off-Balance Sheet Arrangements

The Company has no material off-balance sheet arrangements that have had or are reasonably likely to have a material current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

From time to time, the Company enters into transactions with third parties in connection with the sale of assets or businesses in which it agrees to indemnify the buyers or third parties involved in the transaction, or the sellers or third parties involved in the transaction agree to indemnify Tredegar, for certain liabilities or risks related to the assets or business. Also, in the ordinary course of business, the Company may enter into agreements with third parties for the sale of goods or services that may contain indemnification provisions. In the event that an indemnification claim is asserted, liability for indemnification would be subject to an assessment of the underlying facts and circumstances under the terms of the applicable agreement. Further, any indemnification payments may be limited or barred by a monetary cap, a time limitation, or a deductible or basket. For these reasons, the Company is unable to estimate the maximum potential amount of the potential future liability under the indemnity provisions of these agreements. Tredegar does, however, accrue for losses for any known contingent liability, including those that may arise from indemnification provisions, when future payment is probable and the amount is reasonably estimable. The Company discloses contingent liabilities if the probability of loss is reasonably possible and material.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. Certain accounting policies, as described below, are considered "critical accounting policies" because they are particularly dependent on estimates made by management about matters that are inherently uncertain and could have a material impact on the Company’s consolidated financial statements. Estimates and judgments are based on historical experience, forecasted events and various other assumptions that management believes are reasonable under the circumstances. Actual results could differ significantly from those estimates under different assumptions and conditions. A summary of all of our significant accounting policies is included in Note 1 “Nature of Operations and Summary of Significant Accounting Policies” to the Consolidated Financial Statements in Item 15.

Impairment of Goodwill

The Company assesses goodwill for impairment when events or circumstances indicate that the carrying value may not be recoverable, or, at a minimum, on an annual basis (December 1st of each year). When assessing goodwill for impairment, accounting guidance allows the Company to first perform a qualitative assessment (“Step 0 analysis”), which evaluates certain qualitative factors, including macroeconomic conditions, industry and market considerations, cost factors and overall financial performance, as well as company and reporting unit factors. If the Company's Step 0 analysis indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then the Company would perform a quantitative impairment test (“Step 1 analysis”).

During 2023, uncertainty about the timing of a recovery in the consumer electronics market persisted, and manufacturers in the supply chain for consumer electronics continued to experience reduced capacity utilization and inventory corrections. In light of the limited visibility on the timing of a recovery and the expected adverse future impact to the Surface Protection business, coupled with a cautious outlook on new product development opportunities, the Company performed a Step 1 goodwill impairment analysis, as of June 30, 2023 and September 30, 2023, of the Surface Protection component of PE Films. The analyses concluded that the fair value of Surface Protection was less than its carrying value, thus a non-cash partial goodwill impairment of $34.9 million ($27.0 million after deferred income tax benefits) was recognized during 2023.

The Company estimated the fair value of Surface Protection by: (i) computing an estimated enterprise value (“EV”) utilizing the discounted cash flow method (the “DCF Method”), (ii) applying adjustments for any surplus or deficient working capital, (iii) adding cash and cash equivalents, and (iv) subtracting interest-bearing debt. The DCF Method was used, incorporating Surface Protection’s latest projections, which reflect updated expected market recovery levels, feasibility of launching new product applications, competitive pricing and cash flows associated with production efficiencies, as well as consideration of cost savings and inventory corrections.

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Key financial assumptions utilized to determine the fair value of the reporting unit include revenue growth projections and a weighted average cost of capital assumption. At September 30, 2023, the effect of a ten percent decrease in the revenue growth projections and a one percent increase to the weighted average cost of capital assumption would further decrease the fair value of the reporting unit’s fair value by approximately $1 million. Further impairment to the Surface Protection reporting unit’s goodwill may be caused by factors outside the Company’s control, such as increasing competitive pricing pressures, weak consumer electronic market demand, lower than expected sales and profit growth rates, and various other factors. Given the uncertain demand for Surface Protections products, it is reasonably possible that the cash flow estimates used in deriving such fair value measurements may change in the future.

As of December 1, 2023, the Company’s reporting units with goodwill were Surface Protection in PE Films and Futura in Aluminum Extrusions. Both of these reporting units have separately identifiable operating net assets (operating assets including goodwill and identifiable intangible assets net of operating liabilities). The Company's Step 0 analysis of these reporting units concluded that it is more likely than not that the fair value of each reporting unit was greater than its carrying value. Therefore, the Step 1 quantitative goodwill impairment tests for these reporting units were not necessary. The Surface Protection and Futura reporting units had goodwill in the amounts of $22.4 million and $13.3 million, respectively, at December 31, 2023. See Note 1 “Nature of Operations and Summary of Significant Accounting Policies” to the Consolidated Financial Statements in Item 15 for additional information on the analysis of goodwill impairment.

Income Taxes

Current tax liabilities and assets are recognized for the estimated taxes payable or refundable, respectively, on the tax returns for the current year. Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Accordingly, accounting for income taxes represents the Company’s best estimate of various events and transactions. Tax laws are often complex and may be subject to differing interpretations by the taxpayer and the relevant governmental taxing authorities. In establishing a provision for income tax expense, Tredegar must make judgments and interpretations about the application of tax laws. The Company must also make estimates about when in the future certain items will affect taxable income in the various taxing jurisdictions.

A valuation allowance is recorded in the period when the Company determines that it is more likely than not that all or a portion of deferred income tax assets may not be realized. The establishment and removal of a valuation allowance requires the Company to consider all positive and negative evidence and make a judgmental decision regarding the amount of valuation allowance required as of a reporting date.

Tredegar may be required to change its provision for income taxes when estimates used in determining valuation allowances on deferred tax assets significantly change, or when new information indicates the need for adjustment in valuation allowances. Additionally, future events, such as changes in tax laws, tax regulations, or interpretations of such laws or regulations, could have an impact on the provision for income tax and the effective tax rate. Any such changes could significantly affect the amounts reported in the financial statements in the year these changes occur.

See Note 12 “Income Taxes” to the Consolidated Financial Statements in Item 15 for additional information on income taxes.

Item 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations focuses on and is intended to clarify the results of our operations, certain changes in our financial position, liquidity, capital structure and business developments for the periods covered by the consolidated financial statements included in this Form 10-K. This discussion should be read in conjunction with, and is qualified by reference to, the other related information including, but not limited to, the audited consolidated financial statements (including the notes thereto) and the description of our business, all as set forth in this Form 10-K, as well as the risk factors discussed above in Item 1A.

This section provides discussion and a year-to-year comparison for the years ended December 31, 2022, 2021 and 2020.

Business Overview

General

Tredegar Corporation is an industrial manufacturer with three primary businesses: custom aluminum extrusions for the North American building and construction ("B&C"), automotive and specialty end-use markets through its Aluminum Extrusions segment; surface protection films for high-technology applications in the global electronics industry through its PE Films segment; and specialized polyester films primarily for the Latin American flexible packaging market through its Flexible Packaging Films segment. With approximately 2,300 employees, the Company operates manufacturing facilities in North America, South America, and Asia.

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”) from continuing operations 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 Note 13 “Business Segments” to the Consolidated Financial Statements in Item 15. EBIT 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 (loss) 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.

Sales were $938.6 million in 2022 compared to $826.5 million in 2021. Net income from continuing operations was $28.4 million ($0.84 per diluted share) in 2022, compared with net income from continuing operations of $57.9 million ($1.72 per diluted share) in 2021.

2022 Financial Results Highlights

•EBITDA from ongoing operations for Aluminum Extrusions of $66.8 million was $10.9 million higher than the year of 2021

•EBITDA from ongoing operations for PE Films of $11.9 million was $15.7 million lower than the year of 2021

•EBITDA from ongoing operations for Flexible Packaging Films of $27.5 million was $4.2 million lower than the year of 2021

Other losses related to asset impairments and costs associated with exit and disposal activities for continuing operations were not material for the years ended December 31, 2022 and 2021, respectively. Gains and losses associated with plant shutdowns, asset impairments, restructurings and other items are described in Results of Operations below.

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Results of Operations

2022 versus 2021

The following table presents a bridge of consolidated net income (loss) from continuing operations from the year of 2021 to the year of 2022 with related management’s discussion and analysis below the table.

Sales in 2022 increased by 13.6% compared with 2021. Net sales increased 18.3% in Aluminum Extrusions primarily due to an increase in average selling prices to cover higher aluminum raw material costs and higher operating costs, partially offset by lower sales volume. Net sales decreased 18.0% in PE Films primarily due to lower volume, partially offset by higher pricing associated with the pass-through of increased resin costs. Net sales increased in Flexible Packaging Films by 20.1% primarily due to higher selling prices from the pass-through of higher resin costs, favorable product mix and higher sales volume. For more information on changes in net sales and volume, see the Segment Operations Review section below.

Other income (expense), net decreased $19.4 million compared to 2021, primarily due to 2021 gains of $12.8 million on the investment in kaléo and $8.5 million associated with a one-time tax credit in Brazil for unemployment/social security insurance non-income taxes resulting from a favorable decision by Brazil's Supreme Court regarding the calculation of such tax. See Note 9 “Other Income (Expense), net” to the Consolidated Financial Statements in Item 15 for additional information.

Consolidated gross profit (sales minus cost of goods sold and freight) as a percentage of sales (gross profit margin) was 14.9% in 2022 versus 18.0% in 2021. The gross profit margin in Aluminum Extrusions remained flat compared to 2021. The gross profit margin in PE Films decreased primarily due to Surface Protection lower sales for non-transitioning products associated with a market slowdown and customer inventory corrections and competitive pricing, and previously disclosed customer product transitions, partially offset by pass-through lag associated with resin pricing. The gross profit margin in Flexible Packaging Films decreased due to higher raw material costs and higher fixed costs, partially offset by favorable product mix, higher sales volume and higher selling prices from the pass-through of higher resin costs. For more information on changes in operating costs and expenses, see the Segment Operations Review section below.

As a percentage of sales, selling, general and administrative (“SG&A”) and R&D expenses were 9.1% in 2022 compared with 9.8% in 2021. SG&A expenses and sales increased year-over-year, while R&D expenses remained consistent with the prior year. Increased SG&A spending is primarily due to higher professional fees associated with the internal and external audits of the Company and higher employee-related compensation.

The effective tax rate used to compute income taxes for continuing operations for the year of 2022 was 13.4%, compared to 13.8% in 2021. The decrease in the effective tax rate for continuing operations is primarily due to a discrete tax benefit recorded in the first quarter of 2022 resulting from the implementation of new U.S. tax regulations associated with foreign tax credits published by the U.S. Treasury and Internal Revenue Service (“IRS”) on January 4, 2022. These regulations overhaul various components of the foreign tax credit regime including the determination of creditable foreign taxes and limit the amount of foreign taxes that are creditable against U.S. income taxes. This discrete benefit was partially offset by an increase to the effective tax rate as the result of the Brazilian income tax no longer being creditable in the U.S. for the foreseeable future. Lastly, the effective tax rate changed due to foreign rate differences pertaining to the Company’s foreign operations and the

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benefit from tax incentives in Brazil. See Note 12 “Income Taxes” to the Consolidated Financial Statements in Item 15 for additional information.

Pre-tax gains and losses associated with plant shutdowns, asset impairments, restructurings and other items for continuing operations in 2022 detailed below are shown in the statements of net sales and EBITDA from ongoing operations by segment table in Note 13 “Business Segments” to the Consolidated Financial Statements in Item 15 and are included in “Asset impairments and costs associated with exit and disposal activities, net of adjustments” in the consolidated statements of income, unless otherwise noted.

Average debt outstanding and interest rates were as follows:

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2021 versus 2020

The following table presents a bridge of consolidated net income (loss) from continuing operations from the year of 2020 to the year of 2021 with related management’s discussion and analysis below the table.

Sales in 2021 increased by 9.4% compared with 2020. Net sales increased 18.3% in Aluminum Extrusions primarily due to an increase in average selling prices to cover significantly higher aluminum raw material costs and higher operating costs, partially offset by lower sales volume. Net sales decreased 14.6% in PE Films primarily due to lower volume and unfavorable mix associated with the previously disclosed customer product transitions in Surface Protection, partially offset by higher pricing associated with the pass-through of increased resin costs. Net sales increased in Flexible Packaging Films by 4.0% primarily due to higher selling prices from the pass-through of higher resin costs and favorable product mix, partially offset by lower sales volume.

Other income (expense), net increased $87.7 million compared to 2020, primarily due to a 2021 gain of $8.5 million associated with a one-time tax credit in Brazil for unemployment/social security insurance non-income taxes resulting from a favorable decision by Brazil's Supreme Court regarding the calculation of such tax and a gain of $12.8 million on the Company’s investment in kaléo recognized in the full year ended December 31, 2021 compared to a loss of $60.9 million in the full year ended December 31, 2020.

Consolidated gross profit (sales minus cost of goods sold and freight) as a percentage of sales (gross profit margin) was 18.0% in 2021 versus 22.6% in 2020. The gross profit margin in Aluminum Extrusions decreased primarily due to higher labor and employee-related costs and other inflationary operating costs such as higher supply expenses, partially offset by higher pricing. The gross profit margin in PE Films decreased primarily due to Surface Protection lower sales and unfavorable mix associated with the customer product transitions, lower sales and unfavorable mix for products unrelated to customer product transitions, and margin erosion associated with higher resin costs that occurred before the resin index pricing plan was fully implemented. The gross profit margin in Flexible Packaging Films decreased due to lower sales volume and higher raw material costs, partially offset by favorable product mix and higher selling prices from the pass-through of higher resin costs.

As a percentage of sales, SG&A and R&D expenses were 9.8% in 2021 compared with 12.3% in 2020. SG&A and R&D expenses were down year-over-year, while net sales increased. Decreased spending is primarily due to non-recurring corporate costs associated with the divested Personal Care Films business, lower R&D spending in PE Films, lower stock-based compensation, and nonrecurring SG&A expenses related to the Bright View Technologies divestiture at the end of 2020.

Amortization of intangible assets decreased $1.3 million compared to 2020 primarily due to an out-of-period adjustment of $0.9 million in connection with the original valuation of intangible assets and goodwill related to the acquisition of Futura in February 2017.

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During the first three months of 2020, the Company performed goodwill impairment tests and recognized a goodwill impairment charge of $13.7 million ($10.5 million after taxes), which represented the entire amount of goodwill associated with Aluminum Extrusions’ AACOA reporting unit. See Note 1 “Nature of Operations and Summary of Significant Accounting Policies” to the Consolidated Financial Statements in Item 15 for additional details.

The effective tax rate used to compute income taxes for continuing operations for the year of 2021 was 13.8%, compared to 32.8% in 2020. The decrease in the effective tax rate for continuing operations is primarily due to the strong earnings of Terphane Ltda, which are included in Tredegar’s U.S. consolidated tax return and, the tax impact of the local statutory tax rates of Tredegar’s foreign subsidiaries being higher than the current U.S. tax rate of 21%, the benefit of tax incentives in Brazil and the release of the valuation allowance for capital loss carryforwards.

Pre-tax gains and losses associated with plant shutdowns, asset impairments, restructurings and other items for continuing operations in 2021 detailed below are shown in the statements of net sales and EBITDA from ongoing operations by segment table in Note 13 “Business Segments” to the Consolidated Financial Statements in Item 15 and are included in “Asset impairments and costs associated with exit and disposal activities, net of adjustments” in the consolidated statements of income, unless otherwise noted.

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