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 ~~September~~June 30, ~~2022~~2023


¨			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 ~~November~~August 4, ~~2022: 34,000,642~~2023: 34,384,677

Tredegar Corporation

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Tredegar Corporation

Condensed Consolidated Balance Sheets

(In Thousands, Except Share Data)

(Unaudited)


		September 30,		December 31,			June 30,		December 31,
		2022		2021			2023		2022
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	19,250	$	30,521	Cash and cash equivalents	$	21,193	$	19,232
Accounts and other receivables, net	Accounts and other receivables, net	110,077		103,312		Accounts and other receivables, net	79,139		84,544
Income taxes recoverable	Income taxes recoverable	1,834		2,558		Income taxes recoverable	1,216		733
Inventories	Inventories	114,103		88,569		Inventories	86,692		127,771
Prepaid expenses and other	Prepaid expenses and other	9,601		11,275		Prepaid expenses and other	10,214		10,304
Current assets of discontinued operations		151		178
Total current assets	Total current assets	255,016		236,413		Total current assets	198,454		242,584
Property, plant and equipment, at cost	Property, plant and equipment, at cost	520,371		498,311		Property, plant and equipment, at cost	545,048		531,921
Less: accumulated depreciation	Less: accumulated depreciation	(340,868)		(327,930)		Less: accumulated depreciation	(355,156)		(345,510)
Net property, plant and equipment	Net property, plant and equipment	179,503		170,381		Net property, plant and equipment	189,892		186,411
Right-of-use leased assets	Right-of-use leased assets	14,356		13,847		Right-of-use leased assets	12,794		14,021
Identifiable intangible assets, net	Identifiable intangible assets, net	12,200		14,152		Identifiable intangible assets, net	10,785		11,690
Goodwill	Goodwill	70,608		70,608		Goodwill	55,195		70,608
Deferred income taxes	Deferred income taxes	11,820		15,723		Deferred income taxes	14,610		13,900
Other assets	Other assets	3,155		2,460		Other assets	3,139		2,879
Total assets	Total assets	$	546,658	$	523,584	Total assets	$	484,869	$	542,093
Liabilities and Shareholders’ Equity	Liabilities and Shareholders’ Equity					Liabilities and Shareholders’ Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	126,848	$	123,760	Accounts payable	$	82,290	$	114,938
Accrued expenses	Accrued expenses	36,894		33,104		Accrued expenses	23,501		31,603
Lease liability, short-term	Lease liability, short-term	2,003		2,158		Lease liability, short-term	2,163		2,035
Income taxes payable	Income taxes payable	1,391		9,333		Income taxes payable	579		1,137
Current liabilities of discontinued operations		71		193
Total current liabilities	Total current liabilities	167,207		168,548		Total current liabilities	108,533		149,713
Lease liability, long-term	Lease liability, long-term	13,160		12,831		Lease liability, long-term	11,991		12,738
Long-term debt	Long-term debt	124,000		73,000		Long-term debt	141,000		137,000
Pension and other postretirement benefit obligations, net	Pension and other postretirement benefit obligations, net	28,464		78,265		Pension and other postretirement benefit obligations, net	35,747		35,046

Other non-current liabilities	Other non-current liabilities	6,769		6,218		Other non-current liabilities	4,449		5,834
Total liabilities	Total liabilities	339,600		338,862		Total liabilities	301,720		340,331
Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Common stock, no par value (issued and outstanding 33,982,479 shares at September 30, 2022 and 33,736,629 shares at December 31, 2021)		57,902		55,174
Common stock held in trust for savings restoration plan (111,861 shares at September 30, 2022 and 108,433 shares at December 31, 2021)		(2,174)		(2,135)
Common stock, no par value (authorized shares 150,000,000, issued and outstanding 34,363,845 shares at June 30, 2023 and 34,000,642 shares at December 31, 2022)						Common stock, no par value (authorized shares 150,000,000, issued and outstanding 34,363,845 shares at June 30, 2023 and 34,000,642 shares at December 31, 2022)	60,078		58,824
Common stock held in trust for savings restoration plan (116,336 shares at June 30, 2023 and 113,316 shares at December 31, 2022)						Common stock held in trust for savings restoration plan (116,336 shares at June 30, 2023 and 113,316 shares at December 31, 2022)	(2,218)		(2,188)
Accumulated other comprehensive income (loss):	Accumulated other comprehensive income (loss):					Accumulated other comprehensive income (loss):
Foreign currency translation adjustment	Foreign currency translation adjustment	(87,826)		(85,792)		Foreign currency translation adjustment	(83,338)		(86,079)
Gain (loss) on derivative financial instruments	Gain (loss) on derivative financial instruments	(4,877)		901		Gain (loss) on derivative financial instruments	(843)		(2,480)
Pension and other postretirement benefit adjustments	Pension and other postretirement benefit adjustments	(56,963)		(64,613)		Pension and other postretirement benefit adjustments	(54,463)		(59,036)
Retained earnings	Retained earnings	300,996		281,187		Retained earnings	263,933		292,721
Total shareholders’ equity	Total shareholders’ equity	207,058		184,722		Total shareholders’ equity	183,149		201,762
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	546,658	$	523,584	Total liabilities and shareholders’ equity	$	484,869	$	542,093

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 September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Revenues and other items:	Revenues and other items:									Revenues and other items:
Sales	Sales	$	238,486	$	209,517	$	749,415	$	605,468	Sales	$	178,167	$	274,363	$	369,289	$	510,929
Other income (expense), net	Other income (expense), net	119		391		1,113		9,272		Other income (expense), net	(20)		1,342		260		1,041
		238,605		209,908		750,528		614,740			178,147		275,705		369,549		511,970
Costs and expenses:	Costs and expenses:									Costs and expenses:
Cost of goods sold	Cost of goods sold	200,582		170,756		601,930		470,733		Cost of goods sold	153,267		218,088		312,792		401,348
Freight	Freight	9,500		7,264		28,619		20,531		Freight	7,199		11,036		13,243		19,118
Selling, general and administrative	Selling, general and administrative	19,018		16,767		59,160		55,422		Selling, general and administrative	16,889		18,862		35,894		40,143
Research and development	Research and development	1,576		1,613		4,855		4,770		Research and development	1,376		1,754		2,581		3,278
Amortization of identifiable intangibles	Amortization of identifiable intangibles	653		724		1,982		2,170		Amortization of identifiable intangibles	464		666		968		1,329
Pension and postretirement benefits	Pension and postretirement benefits	3,506		3,540		10,489		10,622		Pension and postretirement benefits	3,418		3,506		6,837		6,982
Interest expense	Interest expense	1,138		842		3,158		2,555		Interest expense	2,374		1,234		4,686		2,020
Asset impairments and costs associated with exit and disposal activities, net of adjustments	Asset impairments and costs associated with exit and disposal activities, net of adjustments	495		265		621		633		Asset impairments and costs associated with exit and disposal activities, net of adjustments	—		134		69		126
Goodwill impairment										Goodwill impairment	15,413		—		15,413		—
Total	Total	236,468		201,771		710,814		567,436		Total	200,400		255,280		392,483		474,344
Income (loss) from continuing operations before income taxes		2,137		8,137		39,714		47,304
Income (loss) before income taxes										Income (loss) before income taxes	(22,253)		20,425		(22,934)		37,626
Income tax expense (benefit)	Income tax expense (benefit)	1,125		1,908		7,460		10,728		Income tax expense (benefit)	(3,331)		5,556		(3,000)		6,334
Net income (loss) from continuing operations		1,012		6,229		32,254		36,576
Income (loss) from discontinued operations, net of tax		21		(26)		68		(104)
Net income (loss)	Net income (loss)	$	1,033	$	6,203	$	32,322	$	36,472	Net income (loss)	$	(18,922)	$	14,869	$	(19,934)	$	31,292

Earnings (loss) per share:	Earnings (loss) per share:									Earnings (loss) per share:
Basic:
Continuing operations		$	0.03	$	0.19	$	0.96	$	1.09
Discontinued operations		—		—		—		—
Basic earnings (loss) per share		$	0.03	$	0.19	$	0.96	$	1.09
Diluted:
Continuing operations		$	0.03	$	0.19	$	0.96	$	1.09
Discontinued operations		—		—		—		—
Diluted earnings (loss) per share		$	0.03	$	0.19	$	0.96	$	1.09
Basic										Basic	$	(0.56)	$	0.44	$	(0.59)	$	0.93
Diluted										Diluted	$	(0.56)	$	0.44	$	(0.59)	$	0.93

Shares used to compute earnings (loss) per share:	Shares used to compute earnings (loss) per share:									Shares used to compute earnings (loss) per share:
Basic	Basic	33,870		33,620		33,780		33,541		Basic	34,079		33,814		33,988		33,734
Diluted	Diluted	33,871		33,649		33,808		33,678		Diluted	34,079		33,854		33,988		33,776

See accompanying notes to the condensed consolidated financial statements.

Tredegar Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In Thousands)

(Unaudited)


		Three Months Ended September 30,					Three Months Ended June 30,
		2022		2021			2023		2022
Net income (loss)	Net income (loss)	$	1,033	$	6,203	Net income (loss)	$	(18,922)	$	14,869
Other comprehensive income (loss):	Other comprehensive income (loss):					Other comprehensive income (loss):
Unrealized foreign currency translation adjustment (net of tax benefit of $148 in 2022 and net of tax benefit of $294 in 2021)		(2,340)		(2,788)
Derivative financial instruments adjustment (net of tax benefit of $818 in 2022 and net of tax benefit of $174 in 2021)		(2,547)		(717)
Amortization of prior service costs and net gains or losses (net of tax expense of $712 in 2022 and net of tax expense of $927 in 2021)		2,556		3,317
Unrealized foreign currency translation adjustment (net of tax expense of $179 in 2023 and net of tax benefit of $482 in 2022)						Unrealized foreign currency translation adjustment (net of tax expense of $179 in 2023 and net of tax benefit of $482 in 2022)	1,621		(5,230)
Derivative financial instruments adjustment (net of tax expense of $500 in 2023 and net of tax benefit of $3,359 in 2022)						Derivative financial instruments adjustment (net of tax expense of $500 in 2023 and net of tax benefit of $3,359 in 2022)	368		(9,161)
Amortization of prior service costs and net gains or losses (net of tax expense of $637 in 2023 and net of tax expense of $712 in 2022)						Amortization of prior service costs and net gains or losses (net of tax expense of $637 in 2023 and net of tax expense of $712 in 2022)	2,286		2,556
Other comprehensive income (loss)	Other comprehensive income (loss)	(2,331)		(188)		Other comprehensive income (loss)	4,275		(11,835)
Comprehensive income (loss)	Comprehensive income (loss)	$	(1,298)	$	6,015	Comprehensive income (loss)	$	(14,647)	$	3,034


		Nine Months Ended September 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Net income (loss)	Net income (loss)	$	32,322	$	36,472	Net income (loss)	$	(19,934)	$	31,292
Other comprehensive income (loss):	Other comprehensive income (loss):					Other comprehensive income (loss):
Unrealized foreign currency translation adjustment (net of tax expense of $98 in 2022 and net of tax benefit of $103 in 2021)		(2,034)		(1,443)
Derivative financial instruments adjustment (net of tax benefit of $1,261 in 2022 and net of tax expense of $185 in 2021)		(5,778)		515
Amortization of prior service costs and net gains or losses (net of tax expense of $2,136 in 2022 and net of tax expense of $2,773 in 2021)		7,650		9,954
Unrealized foreign currency translation adjustment (net of tax expense of $615 in 2023 and net of tax expense of $246 in 2022)						Unrealized foreign currency translation adjustment (net of tax expense of $615 in 2023 and net of tax expense of $246 in 2022)	2,741		306
Derivative financial instruments adjustment (net of tax expense of $1,336 in 2023 and net of tax benefit of $443 in 2022)						Derivative financial instruments adjustment (net of tax expense of $1,336 in 2023 and net of tax benefit of $443 in 2022)	1,637		(3,231)
Amortization of prior service costs and net gains or losses (net of tax expense of $1,274 in 2023 and net of tax expense of $1,424 in 2022)						Amortization of prior service costs and net gains or losses (net of tax expense of $1,274 in 2023 and net of tax expense of $1,424 in 2022)	4,573		5,094
Other comprehensive income (loss)	Other comprehensive income (loss)	(162)		9,026		Other comprehensive income (loss)	8,951		2,169
Comprehensive income (loss)	Comprehensive income (loss)	$	32,160	$	45,498	Comprehensive income (loss)	$	(10,983)	$	33,461

See accompanying notes to the condensed consolidated financial statements.

Tredegar Corporation

Condensed Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)


		Nine Months Ended September 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income (loss)	Net income (loss)	$	32,322	$	36,472	Net income (loss)	$	(19,934)	$	31,292
Adjustments for noncash items:	Adjustments for noncash items:					Adjustments for noncash items:
Depreciation	Depreciation	17,538		16,169		Depreciation	12,387		11,536
Amortization of identifiable intangibles	Amortization of identifiable intangibles	1,982		2,170		Amortization of identifiable intangibles	968		1,329
Reduction of right-of-use lease asset	Reduction of right-of-use lease asset	1,590		1,582		Reduction of right-of-use lease asset	1,075		1,072
Goodwill impairment						Goodwill impairment	15,413		—
Deferred income taxes	Deferred income taxes	3,078		4,120		Deferred income taxes	(3,731)		2,516
Accrued pension and post-retirement benefits	Accrued pension and post-retirement benefits	10,519		10,622		Accrued pension and post-retirement benefits	6,837		7,013
Stock-based compensation expense	Stock-based compensation expense	2,575		3,227		Stock-based compensation expense	521		1,842
Gain on investment in kaléo	Gain on investment in kaléo	(1,406)		(879)		Gain on investment in kaléo	(262)		(1,406)
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Accounts and other receivables	Accounts and other receivables	(7,222)		(11,379)		Accounts and other receivables	6,190		(24,172)
Inventories	Inventories	(24,855)		(19,902)		Inventories	43,013		(31,495)
Income taxes recoverable/payable	Income taxes recoverable/payable	(7,227)		111		Income taxes recoverable/payable	(1,060)		(6,129)
Prepaid expenses and other	Prepaid expenses and other	(5,365)		3,422		Prepaid expenses and other	2,976		(516)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	3,624		12,078		Accounts payable and accrued expenses	(39,629)		47,388
Lease liability	Lease liability	(1,737)		(1,566)		Lease liability	(1,095)		(1,166)
Pension and postretirement benefit plan contributions	Pension and postretirement benefit plan contributions	(50,503)		(5,510)		Pension and postretirement benefit plan contributions	(279)		(50,314)
Other, net	Other, net	1,935		750		Other, net	(692)		1,781
Net cash (used in) provided by operating activities		(23,152)		51,487
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	22,698		(9,429)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Capital expenditures	Capital expenditures	(25,527)		(19,576)		Capital expenditures	(15,907)		(13,514)
Proceeds from the sale of kaléo	Proceeds from the sale of kaléo	1,406		—		Proceeds from the sale of kaléo	262		1,406
Proceeds from the sale of assets		—		4,749
Net cash used in investing activities		(24,121)		(14,827)

Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	(15,645)		(12,108)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Borrowings	Borrowings	279,250		69,250		Borrowings	41,250		221,250
Debt principal payments	Debt principal payments	(228,250)		(76,250)		Debt principal payments	(37,250)		(192,750)
Dividends paid	Dividends paid	(12,552)		(12,114)		Dividends paid	(8,884)		(8,135)
Debt financing costs	Debt financing costs	(1,245)		—		Debt financing costs	—		(1,245)
Other	Other	(396)		915		Other	—		(396)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	36,807		(18,199)		Net cash provided by (used in) financing activities	(4,884)		18,724
Effect of exchange rate changes on cash	Effect of exchange rate changes on cash	(805)		(54)		Effect of exchange rate changes on cash	(208)		(246)
Increase (decrease) in cash & cash equivalents	Increase (decrease) in cash & cash equivalents	(11,271)		18,407		Increase (decrease) in cash & cash equivalents	1,961		(3,059)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	30,521		11,846		Cash and cash equivalents at beginning of period	19,232		30,521
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	19,250	$	30,253	Cash and cash equivalents at end of period	$	21,193	$	27,462

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 ~~September~~June 30, ~~2022:~~2023:


		Common Stock		Retained Earnings		Trust for Savings Restoration Plan		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity			Common Stock		Retained Earnings		Trust for Savings Restoration Plan		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity
Balance July 1, 2022		$	56,911	$	304,370	$	(2,161)	$	(147,335)	$	211,785
Balance April 1, 2023												Balance April 1, 2023	$	59,423	$	287,308	$	(2,203)	$	(142,919)	$	201,609
Net income (loss)	Net income (loss)	—		1,033		—		—		1,033		Net income (loss)	—		(18,922)		—		—		(18,922)
Foreign currency translation adjustment	Foreign currency translation adjustment	—		—		—		(2,340)		(2,340)		Foreign currency translation adjustment	—		—		—		1,621		1,621
Derivative financial instruments adjustment	Derivative financial instruments adjustment	—		—		—		(2,547)		(2,547)		Derivative financial instruments adjustment	—		—		—		368		368
Amortization of prior service costs and net gains or losses	Amortization of prior service costs and net gains or losses	—		—		—		2,556		2,556		Amortization of prior service costs and net gains or losses	—		—		—		2,286		2,286
Cash dividends declared ($0.13 per share)	Cash dividends declared ($0.13 per share)	—		(4,420)		—		—		(4,420)		Cash dividends declared ($0.13 per share)	—		(4,468)		—		—		(4,468)
Stock-based compensation expense	Stock-based compensation expense	991		—		—		—		991		Stock-based compensation expense	655		—		—		—		655

Tredegar common stock purchased by trust for savings restoration plan	Tredegar common stock purchased by trust for savings restoration plan	—		13		(13)		—		—		Tredegar common stock purchased by trust for savings restoration plan	—		15		(15)		—		—
Balance September 30, 2022		$	57,902	$	300,996	$	(2,174)	$	(149,666)	$	207,058
Balance June 30, 2023												Balance June 30, 2023	$	60,078	$	263,933	$	(2,218)	$	(138,644)	$	183,149

The following summarizes the changes in shareholders’ equity for the ~~nine~~six month period ended ~~September~~June 30, ~~2022:~~2023:


		Common Stock		Retained Earnings		Trust for Savings Restoration Plan		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity			Common Stock		Retained Earnings		Trust for Savings Restoration Plan		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity
Balance January 1, 2022		$	55,174	$	281,187	$	(2,135)	$	(149,504)	$	184,722
Balance January 1, 2023												Balance January 1, 2023	$	58,824	$	292,721	$	(2,188)	$	(147,595)	$	201,762
Net income (loss)	Net income (loss)	—		32,322		—		—		32,322		Net income (loss)	—		(19,934)		—		—		(19,934)
Foreign currency translation adjustment	Foreign currency translation adjustment	—		—		—		(2,034)		(2,034)		Foreign currency translation adjustment	—		—		—		2,741		2,741
Derivative financial instruments adjustment	Derivative financial instruments adjustment	—		—		—		(5,778)		(5,778)		Derivative financial instruments adjustment	—		—		—		1,637		1,637
Amortization of prior service costs and net gains or losses	Amortization of prior service costs and net gains or losses	—		—		—		7,650		7,650		Amortization of prior service costs and net gains or losses	—		—		—		4,573		4,573
Cash dividends declared ($0.37 per share)		—		(12,552)		—		—		(12,552)
Cash dividends declared ($0.26 per share)												Cash dividends declared ($0.26 per share)	—		(8,884)		—		—		(8,884)
Stock-based compensation expense	Stock-based compensation expense	3,124		—		—		—		3,124		Stock-based compensation expense	1,508		—		—		—		1,508
Repurchase of employee common stock for tax withholdings	Repurchase of employee common stock for tax withholdings	(396)		—		—		—		(396)		Repurchase of employee common stock for tax withholdings	(254)		—		—		—		(254)
Tredegar common stock purchased by trust for savings restoration plan	Tredegar common stock purchased by trust for savings restoration plan	—		39		(39)		—		—		Tredegar common stock purchased by trust for savings restoration plan	—		30		(30)		—		—
Balance September 30, 2022		$	57,902	$	300,996	$	(2,174)	$	(149,666)	$	207,058
Balance June 30, 2023												Balance June 30, 2023	$	60,078	$	263,933	$	(2,218)	$	(138,644)	$	183,149

The following summarizes the changes in shareholders’ equity for the three month period ended ~~September~~June 30, ~~2021:~~
Common
Stock Retained
Earnings Trust for
Savings
Restoration
Plan Accumulated Other
Comprehensive Income (Loss) Total
Shareholders’
Equity
Balance at July 1, 2021 $ 52,940 $ 261,699 $ (2,109) $ (169,190) $ 143,340
Net income (loss) — 6,203 — — 6,203
Foreign currency translation adjustment — — — (2,788) (2,788)
Derivative financial instruments adjustment — — — (717) (717)
Amortization of prior service costs and net gains or losses — — — 3,317 3,317
Cash dividends declared ($0.12 per share) — (4,042) — — (4,042)
Stock-based compensation expense 966 — — — 966
Tredegar common stock purchased by trust for savings restoration plan — 13 (13) — —
Balance at September 30, 2021 $ 53,906 $ 263,873 $ (2,122) $ (169,378) $ 146,279
2022:


	Common Stock		Retained Earnings		Trust for Savings Restoration Plan		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity
Balance at April 1, 2022	$	55,953	$	293,563	$	(2,148)	$	(135,500)	$	211,868
Net income (loss)	—		14,869		—		—		14,869
Foreign currency translation adjustment	—		—		—		(5,230)		(5,230)
Derivative financial instruments adjustment	—		—		—		(9,161)		(9,161)
Amortization of prior service costs and net gains or losses	—		—		—		2,556		2,556
Cash dividends declared ($0.12 per share)	—		(4,075)		—		—		(4,075)
Stock-based compensation expense	958		—		—		—		958
Tredegar common stock purchased by trust for savings restoration plan	—		13		(13)		—		—
Balance at June 30, 2022	$	56,911	$	304,370	$	(2,161)	$	(147,335)	$	211,785

The following summarizes the changes in shareholders’ equity for the ~~nine~~six month period ended ~~September~~June 30, ~~2021:~~2022:


		Common Stock		Retained Earnings		Trust for Savings Restoration Plan		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity			Common Stock		Retained Earnings		Trust for Savings Restoration Plan		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity
Balance at January 1, 2021		$	50,066	$	239,480	$	(2,087)	$	(178,404)	$	109,055
Balance at January 1, 2022												Balance at January 1, 2022	$	55,174	$	281,187	$	(2,135)	$	(149,504)	$	184,722
Net income (loss)	Net income (loss)	—		36,472		—		—		36,472		Net income (loss)	—		31,292		—		—		31,292
Foreign currency translation adjustment	Foreign currency translation adjustment	—		—		—		(1,443)		(1,443)		Foreign currency translation adjustment	—		—		—		306		306
Derivative financial instruments adjustment	Derivative financial instruments adjustment	—		—		—		515		515		Derivative financial instruments adjustment	—		—		—		(3,231)		(3,231)
Amortization of prior service costs and net gains or losses	Amortization of prior service costs and net gains or losses	—		—		—		9,954		9,954		Amortization of prior service costs and net gains or losses	—		—		—		5,094		5,094
Cash dividends declared ($0.36 per share)		—		(12,114)		—		—		(12,114)
Cash dividends declared ($0.24 per share)												Cash dividends declared ($0.24 per share)	—		(8,135)		—		—		(8,135)
Stock-based compensation expense	Stock-based compensation expense	2,925		—		—		—		2,925		Stock-based compensation expense	2,133		—		—		—		2,133
Shares issued upon exercise of stock options		915		—		—		—		915
Repurchase of employee common stock for tax withholdings												Repurchase of employee common stock for tax withholdings	(396)		—		—		—		(396)
Tredegar common stock purchased by trust for savings restoration plan	Tredegar common stock purchased by trust for savings restoration plan	—		35		(35)		—		—		Tredegar common stock purchased by trust for savings restoration plan	—		26		(26)		—		—
Balance at September 30, 2021		$	53,906	$	263,873	$	(2,122)	$	(169,378)	$	146,279
Balance at June 30, 2022												Balance at June 30, 2022	$	56,911	$	304,370	$	(2,161)	$	(147,335)	$	211,785

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 ~~September~~June 30, ~~2022,~~2023, the condensed consolidated results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, the condensed consolidated cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, and the condensed consolidated changes in shareholders’ equity for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, 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 ~~third~~second quarter for ~~2022~~2023 and ~~2021~~2022 for this segment references 13-week periods ended ~~September~~June 25, 2023 and June 26, 2022, ~~and September 26, 2021.~~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. There was no intercompany funding with Aluminum Extrusions between ~~September~~June 25, ~~2022~~2023 and ~~September~~June 30, ~~2022.~~2023.

The condensed consolidated financial ~~position data~~statements as of December 31, ~~2021~~2022 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, ~~2021~~2022 (“~~2021~~2022 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 ~~2021~~2022 Form 10-K.

The results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, are not necessarily indicative of the results to be expected for the full year.

~~Risks~~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). As of June 30, 2023, the Company’s reporting units with goodwill were Surface Protection in PE Films ("Surface Protection") and ~~Uncertainties~~Futura in Aluminum Extrusions (“Futura”). No events or circumstances were identified during the second quarter of 2023 that indicate that Futura’s fair value is more likely than not less than its carrying amount.

~~During~~However, manufacturers in the ~~three months ended September 30, 2022, events~~supply chain for consumer electronics continue to experience reduced capacity utilization and ~~circumstances indicated that~~inventory corrections. In light of the continued uncertainty about the timing of a recovery for this market and the expected adverse future impact to the Surface Protection ~~reporting unit ("Surface Protection"), which is also~~business, the ~~asset group, might be impaired. The~~ Company performed a Step 1 goodwill ~~and long-lived~~ impairment analysis ~~for~~of the Surface Protection component of PE Films using projections that contemplate the expected market recovery and ~~determined~~business conditions, as these events indicated Surface Protection’s fair value is more likely than not less than its carrying amount.

The Company estimated the fair value of Surface Protection at June 30, 2023 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 since Surface Protection’s projections reflect the expected recovery from the weak market demand, competitive pricing and cash flows associated with new surface protection products, applications, customers, production efficiencies, and cost savings.

The analysis concluded that the fair value of Surface Protection ~~exceeded~~was less than its carrying ~~value.~~ value, thus a non-cash partial goodwill impairment of $15.4 million ($11.9 million after deferred income tax benefits) was recognized during the second quarter of 2023.

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 September 30, 2022, the~~ The Surface Protection reporting unit had goodwill of $41.9 million and $57.3 million as of June 30, 2023 and ~~long-lived identifiable assets of $29.5 million.~~December 31, 2022, respectively.

Accounting Standards Adopted

~~In March 2020,~~No Accounting Standard Updates issued by the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by the discontinuation of the London Interbank Offered Rate or by another reference rate expected to be discontinued because of reference rate reform. The guidance was effective beginning March 12, 2020 and can be applied prospectively through December 31, 2022. In January 2021, the FASB issued ASU 2021-01, which clarified the scope and application of the original guidance. Inwere adopted during the second quarter of ~~2022, the Company adopted ASU 2020-04, which did not have a material impact on the Company’s consolidated financial statements.~~2023.

~~Accounting Standards Not Yet Adopted~~

In September 2022, the FASB issued ASU 2022-04, which requires that a buyer in a supplier finance program disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. The guidance is effective for annual periods beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the potential impact of adopting this guidance, but does not expect it to have a material impact on the consolidated financial statements.

2. ACCOUNTS AND OTHER RECEIVABLES

As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, accounts receivable and other receivables, net include the following:
September 30, December 31,
(In thousands) 2022 2021
Customer receivables $ 108,438 $ 102,090
Other receivables 3,959 2,958
Total accounts and other receivables 112,397 105,048
Less: Allowance for bad debts (2,320) (1,736)
Total accounts and other receivables, net $ 110,077 $ 103,312


(In thousands)	June 30, 2023		December 31, 2022
Customer receivables	$	79,112	$	83,667
Other receivables	2,233		3,874
Total accounts and other receivables	81,345		87,541
Less: Allowance for bad debts	(2,206)		(2,997)
Total accounts and other receivables, net	$	79,139	$	84,544

3. INVENTORIES

The components of inventories are as follows:


(In thousands)	(In thousands)	September 30, 2022		December 31, 2021		(In thousands)	June 30, 2023		December 31, 2022
Finished goods	Finished goods	$	30,025	$	25,199	Finished goods	$	29,677	$	34,686
Work-in-process	Work-in-process	17,201		11,955		Work-in-process	12,678		15,604
Raw materials	Raw materials	49,212		32,958		Raw materials	23,897		58,262
Stores, supplies and other	Stores, supplies and other	17,665		18,457		Stores, supplies and other	20,440		19,219
Total	Total	$	114,103	$	88,569	Total	$	86,692	$	127,771

4. PENSION AND OTHER POSTRETIREMENT BENEFITS

Tredegar sponsors 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, which could take up to 24 months to complete.~~plan. In connection therewith, on February 9, 2022, the Company contributed $50 million to the pension plan (the “Special Contribution”). The Company estimates that, with the Special Contribution, there will be no required minimum contributions to the pension plan until final settlement.

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 ~~third quarter of 2022~~three and ~~2021, respectively.~~six months ended June 30, 2023 and 2022. 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 and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, are shown below:


		Pension Benefits				Other Post-Retirement Benefits					Pension Benefits				Other Post-Retirement Benefits
		Three Months Ended September 30,				Three Months Ended September 30,					Three Months Ended June 30,				Three Months Ended June 30,
(In thousands)	(In thousands)	2022		2021		2022		2021		(In thousands)	2023		2022		2023		2022
Service cost	Service cost	$	—	$	—	$	5	$	9	Service cost	$	—	$	—	$	3	$	5
Interest cost	Interest cost	2,226		2,101		51		50		Interest cost	3,028		2,225		71		51
Expected return on plan assets	Expected return on plan assets	(2,044)		(2,862)		—		—		Expected return on plan assets	(2,607)		(2,043)		—		—
Amortization of prior service costs, (gains) losses and net transition asset	Amortization of prior service costs, (gains) losses and net transition asset	3,301		4,268		(33)		(24)		Amortization of prior service costs, (gains) losses and net transition asset	2,982		3,302		(59)		(34)
Net periodic benefit cost	Net periodic benefit cost	$	3,483	$	3,507	$	23	$	35	Net periodic benefit cost	$	3,403	$	3,484	$	15	$	22

		Pension Benefits				Other Post-Retirement Benefits					Pension Benefits				Other Post-Retirement Benefits
		Nine Months Ended September 30,				Nine Months Ended September 30,					Six Months Ended June 30,				Six Months Ended June 30,
(In thousands)	(In thousands)	2022		2021		2022		2021		(In thousands)	2023		2022		2023		2022
Service cost	Service cost	$	—	$	—	$	15	$	26	Service cost	$	—	$	—	$	6	$	10
Interest cost	Interest cost	6,676		6,305		153		151		Interest cost	6,056		4,450		142		102
Expected return on plan assets	Expected return on plan assets	(6,141)		(8,587)		—		—		Expected return on plan assets	(5,214)		(4,098)		—		—
Amortization of prior service costs, (gains) losses and net transition asset	Amortization of prior service costs, (gains) losses and net transition asset	9,887		12,799		(101)		(72)		Amortization of prior service costs, (gains) losses and net transition asset	5,965		6,586		(118)		(68)
Net periodic benefit cost	Net periodic benefit cost	$	10,422	$	10,517	$	67	$	105	Net periodic benefit cost	$	6,807	$	6,938	$	30	$	44

Pension and other postretirement liabilities were ~~$29.1~~$36.4 million and ~~$78.9~~$35.7 million at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively ($0.7 million included in “Accrued expenses” at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, 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 ~~2022,~~2023, the Company anticipates the amount will be consistent with amounts paid for the year ended December 31, ~~2021,~~2022, or approximately $0.5 million.

5. OTHER INCOME (EXPENSE), NET

Other income (expense), net consists of the following:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	(In thousands)	2022		2021		2022		2021		(In thousands)	2023		2022		2023		2022
Gain on investment in kaléo(a)	Gain on investment in kaléo(a)	$	—	$	279	$	1,406	$	1,197	Gain on investment in kaléo(a)	$	—	$	1,406	$	262	$	1,406
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		—		—		—		8,486
COVID-19-related expenses, net of relief (b)										COVID-19-related expenses, net of relief (b)	—		(96)		—		(308)

Other	Other	119		112		(293)		(411)		Other	(20)		32		(2)		(57)
Total	Total	$	119	$	391	$	1,113	$	9,272	Total	$	(20)	$	1,342	$	260	$	1,041
(a) In May 2022, additional cash consideration of $1.4 million was received related to customary post-closing adjustments. See Note 12 for additional information on the sale of the investment in kaléo.
(a) In January 2023, additional cash consideration of $0.3 million was received related to the customary post-closing adjustments on the sale of the investment in kaleo, Inc ("kaléo"), which was sold in December 2021. (b) Costs associated with operating under COVID-19 conditions include employee overtime expenses associated with absenteeism, personal protective equipment supplies and facility maintenance.										(a) In January 2023, additional cash consideration of $0.3 million was received related to the customary post-closing adjustments on the sale of the investment in kaleo, Inc ("kaléo"), which was sold in December 2021. (b) Costs associated with operating under COVID-19 conditions include employee overtime expenses associated with absenteeism, personal protective equipment supplies and facility maintenance.

In May 2021, the Brazil Supreme Court ruled in a leading case related to the amount of Brazilian value-added tax to exclude from the calculation of unemployment/social security insurance non-income taxes ("PIS/COFINS"). As a result, in the second quarter of 2021, the Company recorded a pre-tax gain of $8.5 million for certain excess PIS/COFINS paid from 2003 to 2021, plus applicable interest, which the Company applied to required Brazilian federal tax payments during 2021.

6. EARNINGS PER SHARE

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


		Three Months Ended		Nine Months Ended			Three Months Ended		Six Months Ended
		September 30,		September 30,			June 30,		June 30,
(In thousands)	(In thousands)	2022	2021	2022	2021	(In thousands)	2023	2022	2023	2022
Weighted average shares outstanding used to compute basic earnings per share	Weighted average shares outstanding used to compute basic earnings per share	33,870	33,620	33,780	33,541	Weighted average shares outstanding used to compute basic earnings per share	34,079	33,814	33,988	33,734
Incremental dilutive shares attributable to stock options and restricted stock	Incremental dilutive shares attributable to stock options and restricted stock	1	29	28	137	Incremental dilutive shares attributable to stock options and restricted stock	—	40	—	42
Shares used to compute diluted earnings per share	Shares used to compute diluted earnings per share	33,871	33,649	33,808	33,678	Shares used to compute diluted earnings per share	34,079	33,854	33,988	33,776

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. The Company had a net loss for the three and six months ended June 30, 2023, so there is no dilutive impact for such shares. If the Company had reported net income for the three and six months ended June 30, 2023, 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 3,019,333 and 2,830,849, respectively. 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 were ~~2,932,378~~2,525,104 and ~~2,645,063~~2,501,406 for the three and ~~nine~~six months ended ~~September~~June 30, 2022, ~~respectively, and 2,433,213 and 1,280,376 for the three and nine months ended September 30, 2021,~~ respectively.

7. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The changes in accumulated other comprehensive income (loss) by component for the three months ended ~~September~~June 30, ~~2022.~~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 April 1, 2023	$	(84,959)	$	(1,211)	$	(56,749)	$	(142,919)
Other comprehensive income (loss)	1,800		2,488		—		4,288
Income tax (expense) benefit	(179)		(945)		—		(1,124)
Other comprehensive income (loss), net of tax	1,621		1,543		—		3,164
Reclassification adjustment to net income (loss)	—		(1,621)		2,923		1,302
Income tax (expense) benefit	—		446		(637)		(191)
Reclassification adjustment to net income (loss), net of tax	—		(1,175)		2,286		1,111
Other comprehensive income (loss), net of tax	1,621		368		2,286		4,275
Balance at June 30, 2023	$	(83,338)	$	(843)	$	(54,463)	$	(138,644)

(In thousands) Foreign Currency Translation Gain (Loss) on Derivative Financial Instruments Pension & Other Postretirement Benefit Adjust Total Accumulated Other Comprehensive Income (Loss)
Balance at July 1, 2022 $ (85,486) $ (2,330) $ (59,519) $ (147,335)
Other comprehensive income (loss) (2,488) (2,205) — (4,693)
Income tax (expense) benefit 148 522 — 670
Other comprehensive income (loss), net of tax (2,340) (1,683) — (4,023)
Reclassification adjustment to net income (loss) — (1,159) 3,268 2,109
Income tax (expense) benefit — 295 (712) (417)
Reclassification adjustment to net income (loss), net of tax — (864) 2,556 1,692
Other comprehensive income (loss), net of tax (2,340) (2,547) 2,556 (2,331)
Balance at September 30, 2022 $ (87,826) $ (4,877) $ (56,963) $ (149,666)

The changes in accumulated other comprehensive income (loss) by component for the ~~nine~~six months ended ~~September~~June 30, 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)	3,356		5,565		—		8,921
Income tax (expense) benefit	(615)		(2,031)		—		(2,646)
Other comprehensive income (loss), net of tax	2,741		3,534		—		6,275
Reclassification adjustment to net income (loss)	—		(2,594)		5,847		3,253
Income tax (expense) benefit	—		697		(1,274)		(577)
Reclassification adjustment to net income (loss), net of tax	—		(1,897)		4,573		2,676
Other comprehensive income (loss), net of tax	2,741		1,637		4,573		8,951
Balance at June 30, 2023	$	(83,338)	$	(843)	$	(54,463)	$	(138,644)

The changes in accumulated other comprehensive income (loss) by component for the three months ended June 30, 2022.


(In thousands)	(In thousands)	Foreign Currency Translation		Gain (Loss) on Derivative Financial Instruments		Pension & Other Postretirement Benefit Adjust		Total Accumulated Other Comprehensive Income (Loss)		(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, 2022		$	(85,792)	$	901	$	(64,613)	$	(149,504)
Balance at April 1, 2022										Balance at April 1, 2022	$	(80,256)	$	6,831	$	(62,075)	$	(135,500)
Other comprehensive income (loss)	Other comprehensive income (loss)	(1,936)		(3,883)		—		(5,819)		Other comprehensive income (loss)	(5,712)		(11,681)		—		(17,393)
Income tax (expense) benefit	Income tax (expense) benefit	(98)		442		—		344		Income tax (expense) benefit	482		3,110		—		3,592
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	(2,034)		(3,441)		—		(5,475)		Other comprehensive income (loss), net of tax	(5,230)		(8,571)		—		(13,801)
Reclassification adjustment to net income (loss)	Reclassification adjustment to net income (loss)	—		(3,156)		9,786		6,630		Reclassification adjustment to net income (loss)	—		(840)		3,268		2,428
Income tax (expense) benefit	Income tax (expense) benefit	—		819		(2,136)		(1,317)		Income tax (expense) benefit	—		250		(712)		(462)
Reclassification adjustment to net income (loss), net of tax	Reclassification adjustment to net income (loss), net of tax	—		(2,337)		7,650		5,313		Reclassification adjustment to net income (loss), net of tax	—		(590)		2,556		1,966
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	(2,034)		(5,778)		7,650		(162)		Other comprehensive income (loss), net of tax	(5,230)		(9,161)		2,556		(11,835)
Balance at September 30, 2022		$	(87,826)	$	(4,877)	$	(56,963)	$	(149,666)
Balance at June 30, 2022										Balance at June 30, 2022	$	(85,486)	$	(2,330)	$	(59,519)	$	(147,335)

The changes in accumulated other comprehensive income (loss) by component for the ~~three~~six months ended ~~September~~June 30, ~~2021.~~2022.

(In thousands) Foreign Currency Translation Gain (Loss) on Derivative Financial Instruments Pension & Other Postretirement Benefit Adjust Total Accumulated Other Comprehensive Income (Loss)
Balance at July 1, 2021 $ (82,804) $ 3,496 $ (89,882) $ (169,190)
Other comprehensive income (loss) (3,082) 1,245 — (1,837)
Income tax (expense) benefit 294 (297) — (3)
Other comprehensive income (loss), net of tax (2,788) 948 — (1,840)
Reclassification adjustment to net income (loss) — (2,141) 4,244 2,103
Income tax (expense) benefit — 476 (927) (451)
Reclassification adjustment to net income (loss), net of tax — (1,665) 3,317 1,652
Other comprehensive income (loss), net of tax (2,788) (717) 3,317 (188)
Balance at September 30, 2021 $ (85,592) $ 2,779 $ (86,565) $ (169,378)

~~The changes in accumulated other comprehensive income (loss) by component for the nine months ended September 30, 2021.~~


(In thousands)	(In thousands)	Foreign Currency Translation		Gain (Loss) on Derivative Financial Instruments		Pension & Other Postretirement Benefit Adjust		Total Accumulated Other Comprehensive Income (Loss)		(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, 2021		$	(84,149)	$	2,264	$	(96,519)	$	(178,404)
Balance at January 1, 2022										Balance at January 1, 2022	$	(85,792)	$	901	$	(64,613)	$	(149,504)
Other comprehensive income (loss)	Other comprehensive income (loss)	(1,546)		4,736		—		3,190		Other comprehensive income (loss)	552		(1,678)		—		(1,126)
Income tax (expense) benefit	Income tax (expense) benefit	103		(1,064)		—		(961)		Income tax (expense) benefit	(246)		(80)		—		(326)
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	(1,443)		3,672		—		2,229		Other comprehensive income (loss), net of tax	306		(1,758)		—		(1,452)
Reclassification adjustment to net income (loss)	Reclassification adjustment to net income (loss)	—		(4,037)		12,727		8,690		Reclassification adjustment to net income (loss)	—		(1,997)		6,518		4,521
Income tax (expense) benefit	Income tax (expense) benefit	—		880		(2,773)		(1,893)		Income tax (expense) benefit	—		524		(1,424)		(900)
Reclassification adjustment to net income (loss), net of tax	Reclassification adjustment to net income (loss), net of tax	—		(3,157)		9,954		6,797		Reclassification adjustment to net income (loss), net of tax	—		(1,473)		5,094		3,621
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	(1,443)		515		9,954		9,026		Other comprehensive income (loss), net of tax	306		(3,231)		5,094		2,169
Balance at September 30, 2021		$	(85,592)	$	2,779	$	(86,565)	$	(169,378)
Balance at June 30, 2022										Balance at June 30, 2022	$	(85,486)	$	(2,330)	$	(59,519)	$	(147,335)

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~~costs. See Note 4 for additional details.

8. 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 certain 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 2412 months. The notional amount of aluminum futures contracts that hedged future purchases of aluminum to meet fixed-price forward sales contract obligations was ~~$33.7~~$17.0 million ~~(18.4~~(11.1 million pounds of aluminum) at ~~September~~June 30, ~~2022~~2023 and ~~$22.1~~$30.7 million ~~(14.9~~(20.3 million pounds of aluminum) at December 31, ~~2021.~~2022.

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 ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:

September 30, 2022

December 31, 2021

June 30, 2023

December 31, 2022

(In thousands)

Balance Sheet
Account

Fair
Value

Balance Sheet
Account

Fair
Value

(In thousands)

Balance Sheet
Account

Fair
Value

Balance Sheet
Account

Fair
Value

Derivatives Designated as Hedging Instruments

Asset derivatives:

Aluminum futures contracts

Asset derivatives:

Aluminum futures contracts

Prepaid expenses and other

2,085

Asset derivatives:

Aluminum futures contracts

Prepaid expenses and other

—

Prepaid expenses and other

Liability derivatives:

Aluminum futures contracts

Liability derivatives:

Aluminum futures contracts

Accrued expenses

(5,016)

Accrued expenses

(119)

Liability derivatives:

Aluminum futures contracts

Accrued expenses

(3,050)

Accrued expenses

(3,260)

Aluminum futures contracts

Other non-current liabilities

(1,222)

Other non-current liabilities

—

Aluminum futures contracts

Other non-current liabilities

(255)

Other non-current liabilities

(369)

Net asset (liability)

(6,230)

1,966

Net asset (liability)

(3,305)

(3,581)

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$") iswill result in an annual net ~~costs~~cost of R$~~150~~177 million for the full year of ~~2022.~~

2023.

Terphane Ltda. ~~has~~had the following outstanding foreign exchange average forward rate contracts to purchase Brazilian Real and sell U.S. ~~Dollars:~~Dollars as of June 30, 2023:


USD Notional Amount (000s)	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	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
$1,793		5.6264	R$10,088	Oct-22	78%
$1,784		5.6597	R$10,097	Nov-22	78%
$1,659		5.6962	R$9,450	Dec-22	73%
$1,728		5.4310	R$9,385	Jan-23	64%
$1,822		5.4657	R$9,959	Feb-23	68%
$1,921		5.4995	R$10,565	Mar-23	72%
$1,903		5.5379	R$10,539	Apr-23	72%
$1,873		5.5753	R$10,443	May-23	71%
$1,928		5.6118	R$10,820	Jun-23	74%

$2,154	$2,154	5.6378	R$12,144	Jul-23	83%	$2,154	5.6378	R$12,144	Jul-23	83%
$2,020	$2,020	5.6831	R$11,480	Aug-23	78%	$2,020	5.6831	R$11,480	Aug-23	78%
$2,071	$2,071	5.7174	R$11,841	Sep-23	80%	$2,071	5.7174	R$11,841	Sep-23	80%
$2,013	$2,013	5.7556	R$11,586	Oct-23	79%	$2,013	5.7556	R$11,586	Oct-23	79%
$2,018	$2,018	5.7836	R$11,671	Nov-23	79%	$2,018	5.7836	R$11,671	Nov-23	79%
$1,786	$1,786	5.8312	R$10,414	Dec-23	71%	$1,786	5.8312	R$10,414	Dec-23	71%
$659	$659	5.7360	R$3,780	Jan-24	23%	$659	5.7360	R$3,780	Jan-24	23%
$659	$659	5.7562	R$3,793	Feb-24	23%	$659	5.7562	R$3,793	Feb-24	23%
$659	$659	5.7774	R$3,807	Mar-24	23%	$659	5.7774	R$3,807	Mar-24	23%
$659	$659	5.8000	R$3,822	Apr-24	23%	$659	5.8000	R$3,822	Apr-24	23%
$659	$659	5.8207	R$3,836	May-24	24%	$659	5.8207	R$3,836	May-24	24%
$659	$659	5.8419	R$3,850	Jun-24	24%	$659	5.8419	R$3,850	Jun-24	24%
$659	$659	5.8636	R$3,864	Jul-24	24%	$659	5.8636	R$3,864	Jul-24	24%
$659	$659	5.8872	R$3,880	Aug-24	24%	$659	5.8872	R$3,880	Aug-24	24%
$659	$659	5.9118	R$3,896	Sep-24	24%	$659	5.9118	R$3,896	Sep-24	24%
$659	$659	5.9350	R$3,911	Oct-24	24%	$659	5.9350	R$3,911	Oct-24	24%
$659	$659	5.9581	R$3,926	Nov-24	24%	$659	5.9581	R$3,926	Nov-24	24%
$659	$659	5.9813	R$3,942	Dec-24	24%	$659	5.9813	R$3,942	Dec-24	24%
$36,381		5.6840	R$206,789		50%
$19,970						$19,970	5.7808	R$115,443		40%

These foreign currency exchange contracts have been designated and qualify as cash flow hedges of Terphane Ltda.’s forecasted sales to customers quoted or priced in U.S. Dollars over that period. By changing the currency risk associated with these U.S. Dollar sales, the derivatives have the effect of offsetting operating costs quoted or priced in Brazilian Real and decreasing the net exposure to Brazilian Real in the condensed consolidated statements of income.

The table below summarizes the location and gross amounts of foreign currency forward contract fair values (Level 2) in the condensed consolidated balance sheets as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:

September 30, 2022

December 31, 2021

June 30, 2023

December 31, 2022

(In thousands)

Balance Sheet
Account

Fair
Value

Balance Sheet
Account

Fair
Value

(In thousands)

Balance Sheet
Account

Fair
Value

Balance Sheet
Account

Fair
Value

Derivatives Designated as Hedging Instruments

Asset derivatives: