tg-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024


¨			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-10258

Tredegar Corporation

(Exact Name of Registrant as Specified in Its Charter)


Virginia						54-1497771
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)


1100 Boulders Parkway
Richmond,	Virginia	23225
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (804) 330-1000

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, no par value	TG	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Smaller reporting company

☐

Non-accelerated filer

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

The number of shares of Common Stock, no par value, outstanding as of May 3, 2024: 34,484,893

Tredegar Corporation

Table of Contents


		Page

Part I	Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets (unaudited)		2
	Condensed Consolidated Statements of Income (Loss) (unaudited)		3
	Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)		4
	Condensed Consolidated Statements of Cash Flows (unaudited)		5
	Condensed Consolidated Statements of Shareholders' Equity (unaudited)		6
	Notes to the Condensed Consolidated Financial Statements (unaudited)		7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		29
Item 4.	Controls and Procedures		33

Part II	Other Information
Item 1A.	Risk Factors		33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.		34
Item 5.	Other Information		34
Item 6.	Exhibits		34

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Tredegar Corporation

Condensed Consolidated Balance Sheets

(In Thousands, Except Share Data)

(Unaudited)


	March 31,		December 31,
	2024		2023
Assets
Current assets:
Cash and cash equivalents	$	3,493	$	9,660
Restricted cash	1,299		3,795
Accounts and other receivables, net	73,032		67,938
Income taxes recoverable	793		1,182
Inventories	86,822		82,037
Prepaid expenses and other	9,438		12,065
Total current assets	174,877		176,677
Property, plant and equipment, at cost	540,856		541,046
Less: accumulated depreciation	(362,884)		(357,591)
Net property, plant and equipment	177,972		183,455
Right-of-use leased assets	16,761		11,848
Identifiable intangible assets, net	9,364		9,851
Goodwill	35,717		35,717
Deferred income taxes	24,320		25,034
Other assets	3,520		3,879
Total assets	$	442,531	$	446,461
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	84,925	$	95,023
Accrued expenses	23,083		24,442
Lease liability, short-term	2,871		2,107
ABL revolving facility (matures June 30, 2026)	128,330		126,322
Income taxes payable	225		1,210
Total current liabilities	239,434		249,104
Lease liability, long-term	15,318		10,942
Long-term debt	20,000		20,000
Pension and other postretirement benefit obligations, net	6,582		6,643

Other non-current liabilities	4,382		4,119
Total liabilities	285,716		290,808
Shareholders’ equity:
Common stock, no par value (authorized shares 150,000,000, issued and outstanding 34,533,870 shares at March 31, 2024 and 34,408,638 shares at December 31, 2023)	61,959		61,606
Common stock held in trust for savings restoration plan (118,543 shares at March 31, 2024 and 118,543 shares at December 31, 2023)	(2,233)		(2,233)
Accumulated other comprehensive income (loss):
Foreign currency translation adjustment	(84,985)		(83,037)
Gain (loss) on derivative financial instruments	297		801
Pension and other postretirement benefit adjustments	512		539
Retained earnings	181,265		177,977
Total shareholders’ equity	156,815		155,653
Total liabilities and shareholders’ equity	$	442,531	$	446,461

See accompanying notes to the condensed consolidated financial statements.

Tredegar Corporation

Condensed Consolidated Statements of Income (Loss)

(In Thousands, Except Per Share Data)

(Unaudited)


	Three Months Ended March 31,
	2024		2023
Revenues and other items:
Sales	$	175,736	$	191,122
Other income (expense), net	8		280
	175,744		191,402
Costs and expenses:
Cost of goods sold	142,043		159,525
Freight	6,666		6,043
Selling, general and administrative	18,258		19,006
Research and development	352		1,205
Amortization of identifiable intangibles	464		503
Pension and postretirement benefits	54		3,418
Interest expense	3,455		2,311
Asset impairments and costs associated with exit and disposal activities, net of adjustments	507		69


Total	171,799		192,080
Income (loss) before income taxes	3,945		(678)
Income tax expense (benefit)	657		331
Net income (loss)	$	3,288	$	(1,009)

Earnings (loss) per share:
Basic	$	0.10	$	(0.03)
Diluted	$	0.10	$	(0.03)

Shares used to compute earnings (loss) per share:
Basic	34,323		33,895
Diluted	34,323		33,895

See accompanying notes to the condensed consolidated financial statements.

Tredegar Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In Thousands)

(Unaudited)


	Three Months Ended March 31,
	2024		2023
Net income (loss)	$	3,288	$	(1,009)
Other comprehensive income (loss):
Unrealized foreign currency translation adjustment (net of tax expense of $221 in 2024 and net of tax expense of $436 in 2023)	(1,948)		1,120
Derivative financial instruments adjustment (net of tax benefit of $140 in 2024 and net of tax expense of $836 in 2023)	(504)		1,269
Amortization of prior service costs and net gains or losses (net of tax benefit of $8 in 2024 and net of tax expense of $637 in 2023)	(27)		2,287
Other comprehensive income (loss)	(2,479)		4,676
Comprehensive income (loss)	$	809	$	3,667

See accompanying notes to the condensed consolidated financial statements.

Tredegar Corporation

Condensed Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)


	Three Months Ended March 31,
	2024		2023
Cash flows from operating activities:
Net income (loss)	$	3,288	$	(1,009)
Adjustments for noncash items:
Depreciation	6,252		6,340
Amortization of identifiable intangibles	464		503
Reduction of right-of-use lease asset	610		551

Deferred income taxes	623		411
Accrued pension and post-retirement benefits	54		3,418

Stock-based compensation expense	686		186
Gain on investment in kaléo	—		(262)

Changes in assets and liabilities:
Accounts and other receivables	(5,337)		(4,320)
Inventories	(5,481)		14,840
Income taxes recoverable/payable	(580)		(1,156)
Prepaid expenses and other	1,890		1,816
Accounts payable and accrued expenses	(10,306)		(28,977)
Lease liability	(689)		(558)
Pension and postretirement benefit plan contributions	(158)		(154)
Other, net	965		(737)
Net cash provided by (used in) operating activities	(7,719)		(9,108)
Cash flows from investing activities:
Capital expenditures	(2,461)		(9,025)
Proceeds from the sale of kaléo	—		262
Proceeds from the sale of assets	83		—
Net cash provided by (used in) investing activities	(2,378)		(8,763)
Cash flows from financing activities:
Borrowings	179,248		37,250
Debt principal payments	(177,240)		(19,250)
Dividends paid	—		(4,419)


Net cash provided by (used in) financing activities	2,008		13,581
Effect of exchange rate changes on cash	(574)		83
Increase (decrease) in cash, cash equivalents and restricted cash	(8,663)		(4,207)
Cash, cash equivalents and restricted cash at beginning of period	13,455		19,232
Cash, cash equivalents and restricted cash at end of period	$	4,792	$	15,025

See accompanying notes to the condensed consolidated financial statements.

Tredegar Corporation

Condensed Consolidated Statements of Shareholders’ Equity

(In Thousands, Except Share and Per Share Data)

(Unaudited)

The following summarizes the changes in shareholders’ equity for the three month period ended March 31, 2024:


	Common Stock		Retained Earnings		Trust for Savings Restoration Plan		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity
Balance January 1, 2024	$	61,606	$	177,977	$	(2,233)	$	(81,697)	$	155,653
Net income (loss)	—		3,288		—		—		3,288
Foreign currency translation adjustment	—		—		—		(1,948)		(1,948)
Derivative financial instruments adjustment	—		—		—		(504)		(504)
Amortization of prior service costs and net gains or losses	—		—		—		(27)		(27)



Stock-based compensation expense	579		—		—		—		579
Repurchase of employee common stock for tax withholdings	(226)		—		—		—		(226)

Balance March 31, 2024	$	61,959	$	181,265	$	(2,233)	$	(84,176)	$	156,815

The following summarizes the changes in shareholders’ equity for the three month period ended March 31, 2023:


	Common Stock		Retained Earnings		Trust for Savings Restoration Plan		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity
Balance at January 1, 2023	$	58,824	$	292,721	$	(2,188)	$	(147,595)	$	201,762
Net income (loss)	—		(1,009)		—		—		(1,009)
Foreign currency translation adjustment	—		—		—		1,120		1,120
Derivative financial instruments adjustment	—		—		—		1,269		1,269
Amortization of prior service costs and net gains or losses	—		—		—		2,287		2,287
Cash dividends declared ($0.13 per share)	—		(4,419)		—		—		(4,419)
Stock-based compensation expense	853		—		—		—		853
Repurchase of employee common stock for tax withholdings	(254)								(254)
Tredegar common stock purchased by trust for savings restoration plan	—		15		(15)		—		—
Balance at March 31, 2023	$	59,423	$	287,308	$	(2,203)	$	(142,919)	$	201,609

See accompanying notes to the condensed consolidated financial statements.

TREDEGAR CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

In the opinion of management, the accompanying condensed consolidated financial statements of Tredegar Corporation and its subsidiaries (“Tredegar,” “the Company,” “we,” “us” or “our”) contain all adjustments necessary to state fairly, in all material respects, Tredegar’s condensed consolidated financial position as of March 31, 2024, the condensed consolidated results of operations for the three months ended March 31, 2024 and 2023, the condensed consolidated cash flows for the three months ended March 31, 2024 and 2023, and the condensed consolidated changes in shareholders’ equity for the three months ended March 31, 2024 and 2023, in accordance with U.S. generally accepted accounting principles (“GAAP”). All such adjustments, unless otherwise detailed in the notes to the condensed consolidated financial statements, are deemed to be of a normal, recurring nature.

The Company operates on a calendar fiscal year except for the Aluminum Extrusions segment, which operates on a 52/53-week fiscal year basis. As such, the fiscal first quarter for 2024 and 2023 for this segment references 13-week periods ended March 31, 2024 and March 26, 2023, respectively. The Company does not believe the impact of reporting the results of this segment as stated above is material to the consolidated financial results. The Company may fund or receive cash from the Aluminum Extrusions segment based on Aluminum Extrusion’s cash flows from operations during the intervening period from Aluminum Extrusion’s fiscal quarter end and the Company’s fiscal quarter end.

The condensed consolidated financial statements as of December 31, 2023 that is included herein was derived from the audited consolidated financial statements provided in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”) but does not include all disclosures required by GAAP. These financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the 2023 Form 10-K.

The results of operations for the three months ended March 31, 2024, are not necessarily indicative of the results to be expected for the full year.

Sale of Flexible Packaging Films

On September 1, 2023, the Company announced that it had entered into a definitive agreement to sell its Flexible Packaging Films business (also referred to as "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.

Closure of PE Films Technical Center

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 & development activities for PE Films will be performed at the production 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. All activities ceased at the PE Films technical center in Richmond, VA as of the end of the first quarter of 2024. The Company recognized expense incurred through March 31, 2024 associated with the exit activities of $0.2 million for building closure costs. In addition, the Company recognized a non-cash loss on the lease abandonment ($0.3 million).

Supply Chain Financing

As of March 31, 2024 and December 31, 2023, $8.8 million and $15.8 million, respectively, of the Company’s accounts payable were financed by participating suppliers through third-party financial institutions.

Accounting standards not yet adopted

In October 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-06 to amend various paragraphs in the Accounting Standards Codification ("ASC") to primarily reflect the issuance of U.S. Securities and Exchange Commission ("SEC") Staff Bulletin No. 33-10532. ASU 2023-06 will impact various disclosure areas, including the statement of cash flows, accounting changes and error corrections, earnings per share, debt, equity, derivatives, and transfers of financial assets. The amendments in this ASU 2023-06 will be effective on the date the related disclosures are removed from Regulation S-X or Regulation S-K by the SEC and will no longer be effective if the SEC has not removed the applicable disclosure requirement by June 30, 2027. Early adoption is not permitted. The Company does not expect a material impact from the adoption of this standard on our consolidated financial statements and related disclosures.

In November 2023, the FASB issued ASU 2023-07 to improve reportable segment disclosure and requirements, primarily through the enhanced disclosures about significant segment expenses. ASU 2023-07 expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. This ASU is effective for fiscal years beginning after December 15, 2023 and interim period beginning after December 15, 2024, with early adoption permitted. The amendments in this ASU are to be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09 to improve the income tax disclosures related to the rate reconciliation and income taxes paid information and to improve the effectiveness of income tax disclosures. The amendments in this ASU will require the Company to disclose specified additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 will also require the Company to disaggregate its income taxes paid disclosure by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions. This ASU is effective for annual periods beginning after December 15, 2024; early adoption is permitted. The Company is currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.

2. ACCOUNTS AND OTHER RECEIVABLES

As of March 31, 2024 and December 31, 2023, accounts and other receivables, net include the following:


(In thousands)	March 31, 2024		December 31, 2023
Customer receivables	$	73,333	$	67,183
Other receivables	1,754		3,056
Total accounts and other receivables	75,087		70,239
Less: Allowance for bad debts	(2,055)		(2,301)
Total accounts and other receivables, net	$	73,032	$	67,938

3. INVENTORIES

The components of inventories are as follows:


(In thousands)	March 31, 2024		December 31, 2023
Finished goods	$	28,939	$	29,821
Work-in-process	9,835		7,830
Raw materials	25,182		21,939
Stores, supplies and other	22,866		22,447
Total	$	86,822	$	82,037

4. PENSION AND OTHER POSTRETIREMENT BENEFITS

Tredegar sponsored a noncontributory defined benefit (pension) plan covering certain current and former U.S. employees. As of January 31, 2018, the plan no longer accrued benefits associated with crediting employees for service, thereby freezing all future benefits under the plan. On February 10, 2022, Tredegar announced the initiation of a process to terminate and settle its frozen defined benefit pension plan through lump sum distributions and the purchase of annuity contracts. On November 3, 2023, the pension plan termination and settlement process for the Company was completed, and the remaining pension plan obligation was transferred to Massachusetts Mutual Life Insurance Company. During 2023, the Company recognized a pre-tax pension settlement loss of $92.3 million.

Tredegar also has a non-qualified supplemental pension plan covering certain employees. Effective December 31, 2005, further participation in this plan was terminated and benefit accruals for existing participants were frozen. Pension expense recognized for this plan was immaterial in the three months ended March 31, 2024 and 2023. This information has been included in the pension benefit table below.

The components of net periodic benefit cost for the pension and other postretirement benefit programs reflected in the condensed consolidated statements of income for the three months ended March 31, 2024 and 2023, are shown below:


	Pension Benefits				Other Post-Retirement Benefits
	Three Months Ended March 31,				Three Months Ended March 31,
(In thousands)	2024		2023		2024		2023
Service cost	$	—	$	—	$	3	$	3
Interest cost	19		3,027		67		71
Expected return on plan assets	—		(2,607)		—		—
Amortization of prior service costs, (gains) losses and net transition asset	5		2,983		(40)		(59)
Net periodic benefit cost	$	24	$	3,403	$	30	$	15

Pension and other postretirement liabilities were $7.2 million and $7.3 million at March 31, 2024 and December 31, 2023, respectively ($0.6 million and $0.7 million included in “Accrued expenses” at March 31, 2024 and December 31, 2023, respectively, with the remainder included in “Pension and other postretirement benefit obligations, net” in the condensed consolidated balance sheets).

Tredegar funds its other postretirement benefits on a claims-made basis; for 2024, the Company anticipates the amount will be consistent with amounts paid for the year ended December 31, 2023, or approximately $0.4 million.

5. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding. Diluted earnings per share is computed by dividing net income (loss) by the weighted average common and potentially dilutive common equivalent shares outstanding, determined as follows:


	Three Months Ended March 31,
(In thousands)	2024	2023
Weighted average shares outstanding used to compute basic earnings per share	34,323	33,895
Incremental dilutive shares attributable to stock options and restricted stock	—	—
Shares used to compute diluted earnings per share	34,323	33,895

Incremental shares attributable to stock options and restricted stock are computed under the treasury stock method using the average market price during the related period. Average out-of-the-money options to purchase shares that were excluded from the calculation of incremental shares attributable to stock options and restricted stock were 2,870,670 for the three months ended March 31, 2024. If the Company had reported net income for the three months ended March 31, 2023, the average out-of-the-money options to purchase shares that were excluded from the calculation of incremental shares attributable to stock options and restricted stock would have been 2,645,365.

6. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The changes in accumulated other comprehensive income (loss) by component for the three months ended March 31, 2024.


(In thousands)	Foreign Currency Translation		Gain (Loss) on Derivative Financial Instruments		Pension & Other Postretirement Benefit Adjust		Total Accumulated Other Comprehensive Income (Loss)
Balance at January 1, 2024	$	(83,037)	$	801	$	539	$	(81,697)
Other comprehensive income (loss)	(1,727)		282		—		(1,445)
Income tax (expense) benefit	(221)		(112)		—		(333)
Other comprehensive income (loss), net of tax	(1,948)		170		—		(1,778)
Reclassification adjustment to net income (loss)	—		(927)		(35)		(962)
Income tax (expense) benefit	—		253		8		261
Reclassification adjustment to net income (loss), net of tax	—		(674)		(27)		(701)
Other comprehensive income (loss), net of tax	(1,948)		(504)		(27)		(2,479)
Balance at March 31, 2024	$	(84,985)	$	297	$	512	$	(84,176)

The changes in accumulated other comprehensive income (loss) by component for the three months ended March 31, 2023.


(In thousands)	Foreign Currency Translation		Gain (Loss) on Derivative Financial Instruments		Pension & Other Postretirement Benefit Adjust		Total Accumulated Other Comprehensive Income (Loss)
Balance at January 1, 2023	$	(86,079)	$	(2,480)	$	(59,036)	$	(147,595)
Other comprehensive income (loss)	1,557		3,078		—		4,635
Income tax (expense) benefit	(437)		(1,087)		—		(1,524)
Other comprehensive income (loss), net of tax	1,120		1,991		—		3,111
Reclassification adjustment to net income (loss)	—		(973)		2,924		1,951
Income tax (expense) benefit	—		251		(637)		(386)
Reclassification adjustment to net income (loss), net of tax	—		(722)		2,287		1,565
Other comprehensive income (loss), net of tax	1,120		1,269		2,287		4,676
Balance at March 31, 2023	$	(84,959)	$	(1,211)	$	(56,749)	$	(142,919)

The amounts reclassified out of accumulated other comprehensive income (loss) related to pension and other postretirement benefits is included in the computation of net periodic pension costs. See Note 4 for additional details.

7. DERIVATIVES

Tredegar uses derivative financial instruments for the purpose of hedging margin exposure from fixed-price forward sales contracts in Aluminum Extrusions and exposure from currency volatility that exists as part of ongoing business operations in Flexible Packaging Films. These derivative financial instruments are designated as and qualify as cash flow hedges and are recognized in the condensed consolidated balance sheet at fair value. If individual derivative instruments with the same counterparty can be settled on a net basis, the Company records the corresponding derivative fair values as a net asset or net liability.

In the normal course of business, Aluminum Extrusions enters into fixed-price forward sales contracts with a small subset of its customers for the future sale of fixed quantities of aluminum extrusions at scheduled intervals. In order to hedge margin exposure created from the fixing of future sales prices relative to volatile raw material (aluminum) costs, Aluminum Extrusions enters into a combination of forward purchase commitments and futures contracts to acquire or hedge aluminum, based on the

scheduled purchases for the firm sales commitments. The fixed-price firm sales commitments and related hedging instruments have durations generally no longer than 12 months. The notional amount of aluminum futures contracts that hedged future purchases of aluminum to meet fixed-price forward sales contract obligations was $6.8 million (5.1 million pounds of aluminum) at March 31, 2024 and $7.7 million (5.6 million pounds of aluminum) at December 31, 2023.

The table below summarizes the location and gross amounts of aluminum futures contract fair values (Level 2) in the condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023:

March 31, 2024

December 31, 2023

(In thousands)

Balance Sheet
Account

Fair
Value

Balance Sheet
Account

Fair
Value

Derivatives Designated as Hedging Instruments

Asset derivatives:

Aluminum futures contracts

Other assets

—

Liability derivatives:

Aluminum futures contracts

Accrued expenses

(318)

Accrued expenses

(483)

Aluminum futures contracts

Other non-current liabilities

—

Other non-current liabilities

(9)

Net asset (liability)

(290)

(492)

In the event that a counterparty to an aluminum fixed-price forward sales contract chooses not to take delivery of its aluminum extrusions, the customer is contractually obligated to compensate Aluminum Extrusions for any losses on the related aluminum futures and/or forward contracts through the date of cancellation.

The Company's earnings are exposed to foreign currency exchange risk primarily through the translation of the financial statements of subsidiaries that have a functional currency other than the U.S. Dollar. The Company estimates that the net mismatch translation exposure for the Flexible Packaging Film's business unit in Brazil (“Terphane Ltda.”) of its sales and raw materials quoted or priced in U.S. Dollars and its variable conversion, fixed conversion and sales, general and administrative costs (before depreciation and amortization) quoted or priced in Brazilian Real ("R$") will result in an annual net cost of R$139 million for the full year of 2024.

Terphane Ltda. had the following outstanding foreign exchange average forward rate contracts to purchase Brazilian Real and sell U.S. Dollars as of March 31, 2024:

USD Notional Amount (000s)

Average Forward Rate Contracted on USD/BRL

R$ Equivalent Amount (000s)

Applicable Month

Estimated % of Terphane Ltda. R$ Operating Cost Exposure Hedged

SEC Form 10-Q filed by Tredegar Corporation