TG US Equity☆

Item 1A. RISK FACTORS

There are a number of risks and uncertainties that could have a material adverse effect on the Company’s consolidated financial condition, results of operations or cash flows. The following risk factors should be considered, in addition to the other information included in this Form 10-K, when evaluating Tredegar and its businesses.

Risks Related to Aluminum Extrusions

•Sales volume and profitability of Aluminum Extrusions is cyclical and seasonal and highly dependent on economic conditions of end-use markets in the U.S., particularly in the construction sector. Aluminum Extrusions’ end-use markets can be cyclical and subject to seasonal swings in volume, and have been adversely impacted during the coronavirus pandemic (“COVID-19”). Because of the capital intensive nature and level of fixed costs inherent in the aluminum extrusions business, the percentage drop in earnings before interest, taxes, depreciation and amortization (“EBITDA”) from ongiong operations in a cyclical downturn will likely exceed the percentage drop in volume. In addition, during an economic slowdown, excess industry capacity often drives increased pricing pressure in many end-use markets as competitors seek to protect their position with key customers. Any benefits associated with cost reductions and productivity improvements may not be sufficient to offset the adverse effects on profitability from pricing and margin pressure and higher bad debts (including a greater chance of loss associated with customers defaulting on fixed-price forward sales contracts) that usually accompany a downturn. In addition, higher energy costs can reduce profits unless offset by price increases or cost reductions and productivity improvements.

•Failure to prevent competitors from evading anti-dumping and countervailing duties, or a reduction in such duties, could adversely impact Aluminum Extrusions. Effective April 25, 2017, the anti-dumping duty and countervailing duty orders on aluminum extrusions were extended for a period of five years. The orders will be reviewed again beginning in

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March 2022. Chinese and other overseas manufacturers continue to try to evade the anti-dumping and countervailing orders to avoid duties. A failure by, or the inability of, U.S. trade officials to curtail the evasion of these duties, or the potential reduction of applicable duties pursuant to annual administrative reviews of the orders by the Department of Commerce, could have a material adverse effect on the financial condition, results of operations and cash flows of Aluminum Extrusions.

•The duty-free importation of goods allowed under the United States-Mexico-Canada Agreement (“USMCA”) could result in lower demand for aluminum extrusions made in the U.S., which could materially and negatively affect Bonnell Aluminum’s business and results of operations. In March 2018, the U.S. imposed tariffs of 10% on aluminum ingot and semi-finished aluminum imported in the U.S. from certain countries, including countries from which Bonnell Aluminum has historically sourced aluminum products. In September 2019, the U.S., Canada and Mexico entered into the USMCA. As a result of the 10% tariffs on aluminum ingot imported to the U.S. and the duty-free importation of goods allowed under USMCA, aluminum extrusions made in Canada and Mexico are free of the 10% tariff and can now be imported into and sold in the U.S. at very competitive prices. This could result in lower demand for aluminum extrusions made in the U.S., which could materially and negatively affect Bonnell Aluminum’s business and results of operations.

•Competition from China could increase significantly if China is granted market economy status by the World Trade Organization. China launched a formal complaint to the World Trade Organization (“WTO”) challenging its non-market economy status, claiming that as of December 11, 2016, China’s transition period as a non-market economy under its Accession Protocol to the WTO ended. China believes with respect to all Chinese-made products that it should receive market economy status and the rights attendant to that status under WTO rules. The U.S. and the European Union have each rejected that interpretation. If China is granted market economy status by the WTO, the extent to which the U.S. anti-dumping laws will be able to limit unfair trade practices from China will likely be limited because the U.S. government will be forced to utilize Chinese prices and costs that do not reflect market principles in anti-dumping duty investigations involving China, which could ultimately limit the level of anti-dumping duties applied to unfairly traded Chinese imports. The volume of unfairly traded imports of Chinese aluminum extrusions could increase as a result and this, in turn, would likely create substantial pricing pressure on Aluminum Extrusions’ products and could have a material adverse effect on the financial condition, results of operations and cash flows of Aluminum Extrusions. In June 2019, at China’s request, after certain preliminary rulings in the case went against the Chinese position, the WTO indefinitely suspended the proceedings on the Chinese WTO complaint.

•The markets for Aluminum Extrusions’ products are highly competitive with product quality, service, delivery performance and price being the principal competitive factors. Aluminum Extrusions has approximately 1,450 customers that are in a variety of end-use markets within the broad categories of building and construction, distribution, automotive and other transportation, machinery and equipment, electrical and consumer durables. No single Aluminum Extrusions’ customer exceeds 4% of consolidated net sales. Future success and prospects depend on Aluminum Extrusions’ ability to provide superior service, high quality products, timely delivery and competitive pricing to retain existing customers and participate in overall industry cross-cycle growth. Failure in any of these areas could lead to a loss of customers, which could have an adverse material effect on the financial condition, results of operations and cash flows of Aluminum Extrusions.

Risks Related to PE Films

•PE Films is highly dependent on sales associated with relatively few large customers. PE Films’ top four customers comprised approximately 16%, 14% and 13% of Tredegar’s consolidated net sales in 2020, 2019 and 2018, respectively. The loss or significant reduction of sales associated with one or more of these customers without replacement by new business could have a material adverse effect on the Company.

Additionally, PE Films anticipates that a portion of its film products used in surface protection applications could be made obsolete by possible future customer product transitions to less costly alternative processes or materials. These transitions principally relate to one customer. The Company believes that previously reported delays in this customer's transitions were recently resolved by the customer and much of the remaining transitions could occur by the end of 2021. Under this scenario, the Company estimates that the contribution to EBITDA from ongoing operations for PE Films could decline due to the remaining customer product transitions by $18 million in 2021 versus 2020 and $4 million in 2022 versus 2021. To offset the expected adverse impact, the Company is aggressively pursuing and making progress in generating contribution from sales from new surface protection products, applications and customers and implementing cost savings measures. Annual contribution to EBITDA from ongoing operations for PE Films on surface protection products unrelated to the customer product transitions has increased since 2018 by approximately $12 million.

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

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•Failure of PE Films’ customers, who are subject to cyclical downturns, to achieve success or maintain market share could adversely impact PE Films’ sales and operating margins. PE Films’ plastic films are used in the production of various consumer products sold worldwide. A customer’s ability to successfully develop, manufacture and market those products is integral to PE Films’ success. Cyclical downturns and changing consumer preferences may negatively affect businesses that use PE Films’ plastic film products, which could adversely affect sales and operating margins. Other factors that could adversely affect the business include (i) failure by a key customer to achieve success or maintain share in markets in which they sell products containing PE Films’ materials, including as a result of customer preferences for products other than plastics, (ii) key customers using products developed by others that replace PE Films’ business with such customers, (iii) delays in a key customer rolling out products utilizing new technologies developed by PE Films, and (iv) operational decisions by a key customer that result in component substitution, inventory reductions and similar changes.

•The Company’s inability to protect its intellectual property rights or its infringement of the intellectual property rights of others could have a material adverse impact on PE Films. The continued success of the PE Films’ business depends on its ability not only to protect its own technologies and trade secrets, but also to develop and sell new products that do not infringe upon existing patents. Intellectual property litigation is very costly and could result in substantial expense and diversions of Company resources, both of which could adversely affect its consolidated financial condition, results of operations and cash flows. In addition, there may be no effective legal recourse against infringement of the Company’s intellectual property by third parties, whether due to limitations on enforcement of rights in foreign jurisdictions or as a result of other factors.

•Disruptions to PE Films’ supply chain could have a material adverse impact on PE Films. Certain raw materials used in manufacturing PE Films’ products are sourced from single suppliers, and PE Films may not be able to quickly or inexpensively re-source from other suppliers. The risk of damage or disruption to its supply chain may increase if and when different suppliers consolidate their product portfolios, experience financial distress or disruption of manufacturing operations (such as, for example, the impact of hurricanes on petrochemical production). Failure to take adequate steps to effectively manage such events, which are intensified when a product is procured from a single supplier or location, could adversely affect PE Films’ consolidated financial condition, results of operations and cash flows, and also require additional resources to restore its supply chain.

•Rising trade tensions could cause an increase in the cost of PE Films’ products or otherwise negatively impact the Company. A portion of PE Film’s business involves imports to and from the U.S. and other countries where the Company produces and sells its products. Trade tensions have been rising between the U.S. and other countries, particularly China. An increase in tariffs and other trade barriers between the U.S. and China, or between the U.S. and other countries, could cause an increase in the cost of PE Films’ products or otherwise negatively impact the production and sale of the Company’s products in world markets.

Risks Related to Flexible Packaging Films

•Overcapacity in Latin American polyester film production and a history of uncertain economic conditions in Brazil could adversely impact the financial condition, results of operations and cash flows of Flexible Packaging Films. For flexible packaging films produced in Brazil, selling prices and key raw material costs are principally determined in U.S. Dollars and are impacted by local economic conditions and local and global competitive dynamics. Flexible Packaging Films is exposed to foreign exchange translation risk (its functional currency is the Brazilian Real) because almost 90% of the sales of Flexible Packaging Films business unit in Brazil (“Terphane Ltda.”) and substantially all of its related raw material costs are quoted or priced in U.S. Dollars while its variable conversion, fixed conversion and sales, general and administrative costs before depreciation & amortization (collectively “Terphane Ltda. Operating Costs”) are quoted or priced in Brazilian Real. This mismatch, together with a variety of economic variables impacting currency exchange rates, causes volatility that could negatively or positively impact EBITDA from ongoing operations for Flexible Packaging Films. While Flexible Packaging Films hedges this exposure on a short-term basis with foreign exchange forward rate contracts, the exposure continues to exist beyond the hedging periods.

•Governmental failure to extend anti-dumping duties in Brazil on imported products or prevent competitors from circumventing such duties could adversely impact Flexible Packaging Films. In recent years, excess global capacity in the industry has led to increased competitive pressures from imports into Brazil. The Company believes that these conditions have shifted the competitive environment from a regional to a global landscape and have driven price convergence and lower product margins for Flexible Packaging Films. Favorable anti-dumping rulings or countervailing duties are in effect for products imported from China, Egypt, India, Mexico, United Arab Emirates, Turkey, Peru and Bahrain. Competitors not currently subject to anti-dumping duties may choose to utilize their excess capacity by selling product in Brazil, which may result in pricing pressures that Flexible Packaging Films may not be able to offset with cost savings measures and/or manufacturing efficiency initiatives. Brazilian authorities initiated an investigation for sunset review on anti-dumping rulings against China, India and Egypt and extended duties that would have expired in 2020 for

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one year. There can be no assurance that efforts to extend anti-dumping duties beyond 2021 on products imported from China, India, Egypt and other countries will be successful.

Risks Related to all Tredegar Businesses

•The Company has identified material weaknesses in its internal control over financial reporting. The Company’s failure to establish and maintain effective internal control over financial reporting and to maintain effective disclosure controls and procedures increases the risk of a material misstatement in its consolidated financial statements, and its failure to meet its reporting and financial obligations, could, in turn, have a negative impact on its financial condition. Maintaining effective internal control over financial reporting is an integral part of producing reliable financial statements. As discussed in Item 9A. “Controls and Procedures” of this Form 10-K (“Item 9A”), the Company’s management concluded that the Company’s internal control over financial reporting was not effective for the periods referred to therein as a result of certain deficiencies that were determined to constitute material weaknesses in the Company’s internal control over financial reporting.

Under standards established by the Public Company Accounting Oversight Board, a material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. Under the criteria set forth in Internal Control - Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission, a material weakness in the design of monitoring controls indicates that the Company has not sufficiently developed and/or documented internal controls by which management can review and oversee the Company’s financial information to detect and correct material errors or that the personnel responsible for performing the review did not have the sufficient skill set or knowledge of the subject matter to perform a proper assessment.

As discussed in Item 9A to remediate the material weaknesses, the Company, with the assistance of its outside consultant, is in the process of implementing certain changes to its internal controls and reviewing the entire control environment to help ensure that there are no other material weaknesses. The Company believes that its remediation plan will be sufficient to remediate the identified material weaknesses and strengthen its internal control over financial reporting. The Company’s remediation efforts are ongoing, and it will continue its initiatives to implement and document policies and procedures. Remediation of the identified material weaknesses and strengthening the Company’s internal control environment have extended into 2021. In addition, the Company is monitoring the impact of COVID-19 on its remediation plan. Depending on the severity and length of the pandemic, the remediation timeline could be negatively impacted because of inefficiencies caused by COVID-related limitations on travel, meetings, on-site work and close collaboration and the related increase in time necessary to complete remediation projects.

As the Company continues to evaluate and work to improve its internal control over financial reporting and disclosure controls and procedures, management may determine to take additional measures to address control deficiencies or modify the remediation plan. The Company cannot provide assurance, however, as to when it will remediate all such weaknesses, nor can it be certain of whether additional actions will be required or the costs of any such actions. Moreover, the Company cannot provide assurance that additional material weaknesses will not arise in the future.

While the material weaknesses discussed in Item 9A did not result in material misstatements of the Company’s financial statements as of and for the years ended December 31, 2020, 2019, 2018 and 2017 or in the intervening interim periods during those respective years, any failure to remediate the material weaknesses, or the development of new material weaknesses in its internal control over financial reporting, could result in material misstatements in the Company’s consolidated financial statements and cause it to fail to meet its reporting and financial obligations, which in turn could have a negative impact on its financial condition.

•Tredegar has an underfunded defined benefit (pension) plan. Tredegar sponsors a pension plan that covers certain hourly and salaried employees in the U.S. The plan was closed to new participants in 2007, and substantially frozen to benefit accruals for active participants in 2014. 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. As of December 31, 2020, the plan was underfunded under U.S. generally accepted accounting principles (“GAAP”) measures by $103.1 million. Tredegar expects that it will be required to make a cash contribution of approximately $11.7 million to its underfunded pension plan in 2021, and may be required to make higher cash contributions in future periods depending on the level of interest rates and investment returns on plan assets.

•Noncompliance with any of the covenants in the Company’s $375 million revolving credit facility, as amended on December 1, 2020, which matures in June 2024, could result in all debt under the agreement outstanding at such time becoming due and limiting the Company’s borrowing capacity, which could have a material adverse effect on its consolidated financial condition and liquidity. The credit agreement governing Tredegar’s revolving credit facility contains restrictions and financial covenants that, if violated, could restrict the Company’s operational and financial

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flexibility. Failure to comply with these covenants could result in an event of default, which if not cured or waived, would result in all outstanding debt under the credit facility at such time becoming due, which could have a material adverse effect on the Company’s consolidated financial condition and liquidity.

•Tredegar’s performance is influenced by costs incurred by its operating companies, including, for example, the cost of raw materials and energy. These costs include the cost of aluminum (the raw material on which Aluminum Extrusions primarily depends), resin (the raw material on which PE Films primarily depends), PTA and MEG (the raw materials on which Flexible Packaging Films primarily depends), natural gas (the principal fuel necessary for Aluminum Extrusions’ plants to operate), electricity and diesel fuel. Aluminum, resin and natural gas prices are volatile as shown in the charts in Quantitative and Qualitative Disclosures in Item 7. The Company attempts to mitigate the effects of increased costs through price increases and contractual pass-through provisions, but there are no assurances that higher prices can effectively be passed through to customers or that Tredegar will be able to offset fully or on a timely basis the effects of higher raw material and energy costs through price increases or pass-through arrangements. Further, the Company’s cost control efforts may not be sufficient to offset any increases in raw material, energy or other costs.

•Tredegar is subject to current and future governmental regulation, including environmental laws and regulations, and could become exposed to material liabilities and costs associated with such regulation. The Company is subject to regulation by local, state, federal and foreign governmental authorities. New laws and regulations, or changes to existing laws, including those relating to environmental matters (including global climate change and plastic products), and privacy matters, could subject Tredegar to significant additional capital expenditures, operating expenses or other compliance costs. Moreover, future developments in federal, state, local and international laws and regulations, including environmental laws, are difficult to predict. Environmental laws and privacy restrictions have become and are expected to continue to become increasingly strict. As a result, Tredegar expects to be subject to new environmental and privacy laws and regulations. However, any such changes are uncertain and, therefore, it is not possible for the Company to predict with certainty the amount of additional capital expenditures or operating expenses that could be necessary for compliance with respect to any such changes. See Government Regulation in Item 1. “Business” of this Form 10-K for a further discussion of this risk factor.

We are subject to the U.S. Foreign Corrupt Practices Act, Brazilian anti-corruption laws and similar anti-bribery laws in other jurisdictions, which generally prohibit companies and their intermediaries from making improper payments to foreign officials for the purpose of obtaining or retaining business. Although we have policies and procedures designed to facilitate compliance with these laws and regulations, our employees, contractors and agents may take actions in violation of our policies. Any such violation, even if prohibited by our policies, could adversely affect our business and/or our reputation.

•Material disruptions at one of the Company’s major manufacturing facilities could negatively impact financial results. Tredegar believes it has implemented measures to minimize the risks of disruption at its facilities. However, a disruption could occur as a result of any number of events: an equipment failure with repairs requiring long lead times, labor stoppages or shortages, cybersecurity attacks, utility disruptions, constraints on the supply or delivery of critical raw materials, and severe weather conditions. A material disruption in one of the Company’s operating locations could negatively impact production and the Company’s consolidated financial condition, results of operations and cash flows.

•An inability to renegotiate the Company’s collective bargaining agreements could adversely impact its consolidated financial condition, results of operations and cash flows. Approximately 34% of the Company’s employees are represented by labor unions located in the U.S. and Brazil under various collective bargaining agreements with varying durations and expiration dates. Tredegar may not be able to satisfactorily renegotiate collective bargaining agreements when they expire, which could result in strikes or work stoppages or higher labor costs. In addition, existing collective bargaining agreements may not prevent a strike or work stoppage at the Company’s facilities in the future. Any such work stoppages (or potential work stoppages) could negatively impact Tredegar’s ability to manufacture its products and adversely affect its consolidated financial condition, results of operations and cash flows. None of Tredegar’s collective bargaining agreements expire before the fourth quarter of 2021.

•Our business and operations, and the operations of our customers, suppliers and others we do business with, may be adversely affected by epidemics such as the recent COVID-19 pandemic, which could adversely affect our financial condition, results of operations and cash flows. We may face risks related to health epidemics or outbreaks of communicable diseases. The outbreak of such a communicable disease could result in a widespread health crisis that could adversely affect general commercial activity and the economies and financial markets of many countries. For example, COVID-19 has spread across the globe to every country in which the Company does business and is impacting worldwide economic activity. A public health epidemic, including COVID-19, poses the risk that we or our contractors, suppliers, customers and other business partners may be prevented or otherwise adversely affected in the conduct of business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities and by other government mandates or policy changes. We may also face staffing issues if our employees

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become ill from an epidemic, are subject to epidemic-related “stay-at-home” orders, or absenteeism increases because of fear of epidemic-related health risks. An epidemic may also cause a significant reduction in demand for one or more of our products as a result of a drop in product-specific demand, because of an epidemic’s impact on the world economy generally, or for other reasons. Bonnell Aluminum is experiencing higher than normal absenteeism and hiring difficulties due to COVID-19 factors. As a result, it is having difficulty maintaining sufficient labor to meet desired shipping levels. As a result of an epidemic, we may be unable to meet our supply commitments or otherwise fulfill our customers’ needs due to disruptions in our manufacturing and supply arrangements, including as a result of constrained workforce capacity, interruption of raw material supplies, transportation disruptions or a loss or disruption of other key elements of our manufacturing and distribution capability. An epidemic may cause the failure of, or default in performance by, third parties we rely on to supply our manufacturing operations, to process, transport or purchase our products, to finance our operations, and to otherwise provide products and services to the Company in support of our business and operations. While it is not possible at this time to estimate the impact that any particular epidemic, including COVID-19, could have on the Company’s business, the extent of that impact would likely be affected by factors outside of our control such as the severity, duration and spread of such an epidemic, the measures taken by the governments of countries affected and the ability of our customers and consumers to access government programs providing liquidity and support during the crisis. The impact of an epidemic on our employees, our customers, our supply chains, demand for our products, our ability to supply customers, our operating costs and our other business activities, could adversely affect our financial condition, results of operations and cash flows. For more information on the effect of COVID-19 on our business and financial condition, refer to “The Impact of COVID-19” in Item 7.

•Tredegar’s valuation of its $7.5 million cost-basis investment in kaléo is volatile and uncertain. Tredegar uses the fair value method to account for its fully-diluted ownership interest of approximately 20% in kaleo, Inc. (“kaléo”), a privately held specialty pharmaceutical company. There is no active secondary market for buying or selling stock in kaléo. The Company’s fair value estimates can fluctuate materially between reporting periods primarily due to changes in kaléo’s projections, which rely on numerous assumptions, and changes in the valuation of guideline public companies as measured by their enterprise value-to-EBITDA multiples. The estimated fair value of the Company’s investment in kaléo may significantly decline due to pricing pressures and expected changes in market access as well as continued lower market demand for epinephrine delivery devices resulting from COVID-19-driven delays in in-person back-to-school schedules and social distancing guidelines. Additionally, the U.S. Department of Justice began an investigation of kaléo’s Evzio business in 2018, the impact of which on kaléo and on the value of the Company’s interest in kaléo cannot be estimated with certainty. During 2020, kaléo discontinued the marketing of its Evzio product.

•A failure in the Company’s information technology systems as a result of cybersecurity attacks or other causes could negatively affect Tredegar’s business. The Company depends on information technology (“IT”) to record and process customers’ orders, manufacture and ship products in a timely manner, secure its production processes and know-how, maintain the financial accuracy of its business records and maintain personally identified information of its employees. An IT system failure due to computer viruses, internal or external security breaches, cybersecurity attacks or other malicious causes could disrupt our operations and prevent us from being able to process transactions with our customers, operate our manufacturing facilities and properly report transactions in a timely manner. Increased global IT security threats and cyber-crime pose a potential risk to the security and availability of the Company’s IT systems, networks and services, including those that are managed, hosted, provided or used by third parties, as well as to the confidentiality, availability and integrity of the Company’s data. To date, interruptions of the Company’s IT systems have been infrequent and have not had a material impact on the Company’s operations. A significant protracted failure of or security breach of the IT systems, networks or service providers the Company relies upon, or a loss or disclosure of business or other sensitive information, or personally identified information, as a result of a cybersecurity incident or other cause, could result in substantial costs to the Company, damage to the Company’s reputation, regulatory enforcement actions and lawsuits and could adversely affect the Company’s results of operations, financial condition or cash flows.

Item 1B. UNRESOLVED STAFF COMMENTS

None.

Item 2. PROPERTIES

General

Most of the improved real property and the other assets used in the Company’s operations are owned. Certain of the owned property is subject to an encumbrance under the Company’s credit agreement (see Note 11 “Debt and Credit Agreements” to the Consolidated Financial Statements in Item 15 for more information).

Tredegar considers the manufacturing facilities, warehouses and other properties and assets that it owns or leases to be in generally good condition. Capacity utilization at its various manufacturing facilities can vary with product mix and normal

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fluctuations in sales levels. The Company believes that its Bonnell Aluminum, PE Films and Flexible Packaging Films manufacturing facilities have sufficient capacity to meet current production requirements. Tredegar’s corporate headquarters, which is leased, is located at 1100 Boulders Parkway, Richmond, Virginia 23225.

The Company’s principal manufacturing plants and facilities as of December 31, 2020 are listed below:

Aluminum Extrusions

Locations in the U.S. Locations Outside the U.S. Principal Operations

PE Films

Locations in the U.S. Locations Outside the U.S. Principal Operations

Flexible Packaging Films

Locations in the U.S. Locations Outside the U.S. Principal Operations

Item 3. LEGAL PROCEEDINGS

The information required by this Item 3 is set forth in Note 18 "Contingencies" to the Consolidated Financial Statements in Item 15 and is hereby incorporated herein by reference.

Item 4. MINE SAFETY DISCLOSURES

None.

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PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Tredegar’s common stock is traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “TG”. There were 33,537,892 shares of common stock held by 1,747 shareholders of record on March 12, 2021.

Dividend Information

Tredegar has paid a regular cash dividend every quarter since becoming a public company in July 1989 and expects that comparable regular cash dividends will continue to be paid in the future. In addition, Tredegar has paid special cash dividends from time to time. On December 1, 2020, the Board declared a special dividend of $200 million, or $5.97 per share, on the Company’s common stock (the “Special Dividend”). The Special Dividend was paid in December 2020.

All decisions with respect to the declaration and payment of future dividends will be made by the Board in its sole discretion based upon earnings, financial condition, anticipated cash needs, restrictions in the Company’s revolving credit facility and other such considerations as the Board deems relevant. See Note 11 "Debt and Credit Agreements" to the Consolidated Financial Statements in Item 15 for the restrictions on the payment of dividends contained in the Company’s credit agreement related to aggregate dividends permitted.

Issuer Purchases of Equity Securities

On January 7, 2008, Tredegar announced that the Board approved a share repurchase program whereby management is authorized at its discretion to purchase, in the open market or in privately negotiated transactions, up to 5 million shares of the Company’s outstanding common stock. The authorization has no time limit. Tredegar did not repurchase any shares in the open market or otherwise in 2020, 2019 or 2018 under this standing authorization. The maximum number of shares remaining under this standing authorization was 1,732,003 at December 31, 2020.

Stock Performance Graph

The following graph compares cumulative total shareholder returns for Tredegar, the S&P SmallCap 600 Stock Index (an index comprised of companies with market capitalizations similar to Tredegar) and the Russell 2000 Index for the five years ended December 31, 2020. Tredegar is part of both the S&P SmallCap 600 Index and Russell 2000 Index.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among Tredegar Corporation, the S&P SmallCap 600 Index, and the Russell 2000 Index

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Item 6. SELECTED FINANCIAL DATA

The tables that follow present certain selected financial and segment information for the five years ended December 31, 2020. All historical results for Personal Care Films have been presented as discontinued operations. The surface protection component of the PE Films segment now includes Pottsville Packaging.

FIVE-YEAR SUMMARY

Tredegar Corporation and Subsidiaries

(In thousands, except per-share data)

Results of Operations:

Goodwill impairment 13,696 (c) — — — —

Diluted earnings (loss) per share:

Refer to Notes to Financial Tables that follow these tables.

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FIVE-YEAR SUMMARY

Tredegar Corporation and Subsidiaries

(In thousands, except per-share data)

Share Data:

Closing market price per share:

Total return to shareholders (d)(n) 3.6 % 43.8 % (15.1) % (18.2) % 79.4 %

Financial Position:

Refer to Notes to Financial Tables that follow these tables.

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SEGMENT TABLES

Tredegar Corporation and Subsidiaries

Net Sales (f)

(In thousands)

Identifiable Assets

(In thousands)

Refer to Notes to Financial Tables that follow these tables.

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SEGMENT TABLES

Tredegar Corporation and Subsidiaries

EBITDA from Ongoing Operations (l)

(In thousands)

Aluminum Extrusions:

Ongoing operations:

Goodwill impairment charge (13,696) (c) — — — —

Trade name accelerated amortization — (10,040) (j) — — —

PE Films:

Ongoing operations:

Flexible Packaging Films:

Ongoing operations:

Loss on sale of Bright View (o) (2,299) — — — —

Loss on sale of investment property — — (38) — —

Unrealized loss on investment property — — (186) — (1,032)

Refer to Notes to Financial Tables that follow these tables.

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SEGMENT TABLES

Tredegar Corporation and Subsidiaries

Depreciation and Amortization

(In thousands)

Capital Expenditures

(In thousands)

Refer to Notes to Financial Tables that follow these tables.

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NOTES TO FINANCIAL TABLES

(a)For a description of plant shutdowns, asset impairments, restructurings and other charges for 2020, 2019, and 2018, see the plant shutdowns, asset impairments, restructurings and other tables for the respective periods in Results of Operations in Item 7.

(b)For a description of plant shutdowns, asset impairments, restructurings and other charges for 2017 and 2016, see Item 6. “Selected Financial Data” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

(c)Results for 2020 included a goodwill impairment charge of $13.7 million ($10.5 million after taxes) recognized in Bonnell Aluminum in the first quarter of 2020 upon completion of an impairment analysis performed as of March 31, 2020.

(d)Total return to shareholders is defined as the change in stock price during the year plus dividends per share, divided by the stock price at the beginning of the year.

(e)Equity market capitalization is the closing market price per share for the period multiplied by the shares outstanding at the end of the period.

(f)Net sales represents gross sales less freight. The Company uses net sales as its measure of revenues from external customers at the segment level.

(g)The gains and losses on the Company’s investment in kaléo are included in “Other income (expense), net” in the consolidated statements of income. See Note 4 to the Consolidated Financial Statements in Item 15 for more details for the years 2020, 2019 and 2018.

(h)Equity per share is computed by dividing shareholders’ equity at year end by the shares outstanding at year end.

(i)For the year ended December 31, 2017, the pension and postretirement benefit expenses recorded in Cost of goods sold and Selling, general and administrative expenses were reclassified to a new line item, Pension and postretirement benefits, on the consolidated statements of income, due to the retrospective adoption of Accounting Standards Update (“ASU”) 2017-07.

(j)Depreciation and amortization (“D&A”) in 2019 for Aluminum Extrusions excludes $10.0 million for accelerated amortization of trade names as a result of a rebranding initiative.

(k)Corporate depreciation and amortization is included in Corporate expenses, net, on the EBITDA from ongoing operations table above.

(l)In the fourth quarter of 2019, the Company changed its segment measure of profit and loss from operating profit from ongoing operations to EBITDA (earnings before interest, taxes, depreciation and amortization) from ongoing operations. EBITDA from ongoing operations is the key profitability metric used by the Company’s chief operating decision maker to assess segment financial performance. See Note 5 to the Consolidated Financial Statements in Item 15 for additional business segment information.

(m)EBIT (earnings before interest and taxes) from ongoing operations is a non-GAAP financial measure included in the reconciliation of segment financial information to consolidated results for the Company. It is not intended to represent the stand-alone results for Tredegar’s ongoing operations under GAAP and should not be considered as an alternative to net income as defined by GAAP. EBIT is a widely understood and utilized metric that is meaningful to certain investors. We believe 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.

(n)On December 1, 2020, the Board declared a special cash dividend of $200 million or $5.97 per share on the Company’s common stock. The special cash dividend was payable on December 18, 2020 to shareholders of record at the close of business on December 11, 2020.

(o)In December 2020, the Company entered into a definitive agreement and completed the sale of Bright View. See Note 2 to the Consolidated Financial Statements in Item 15 for more details.

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

Forward-looking and Cautionary Statements

Some of the information contained in this Form 10-K may constitute “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. When using the words “believe,” “estimate,” “anticipate,” “expect,” “project,” “plan,” “likely,” “may” and similar expressions, Tredegar does so to identify forward-looking statements. Such statements are based on Tredegar’s then current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. It is possible that Tredegar’s actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in or implied by these forward-looking statements. In addition, the Company's current projections for its businesses could be materially affected by the highly uncertain impact of COVID-19. As a consequence, the Company's results could differ significantly from its projections, depending on, among other things, the duration of "shelter in place" orders and the ultimate impact of the pandemic on employees, supply chains, customers and the U.S. and world economies. Accordingly, you should not place undue reliance on these forward-looking statements. For risks and important factors that could cause actual results to differ from expectations, refer to the reports that Tredegar files with or furnishes the SEC from time-to-time, including the risks and important factors set forth in Item 1A. Readers are urged to review and consider carefully the disclosures Tredegar makes in the reports Tredegar files with or furnishes to the SEC. Tredegar does not undertake, and expressly disclaims any duty, to update any forward-looking statement to reflect any change in management’s expectations or any change in conditions, assumptions or circumstances on which such statements are based, except as required by applicable law.

Executive Summary

General

Tredegar Corporation is an industrial manufacturer with three primary businesses: custom aluminum extrusions for the North American building & construction, 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 2,400 employees, the Company operates manufacturing facilities in North America, South America, and Asia.

On October 30, 2020, the Company completed the sale of its personal care films business (“Personal Care Films”). The transaction excluded the packaging film lines and related operations located at the Pottsville, Pennsylvania manufacturing site (“Pottsville Packaging”), which are now being reported within the Surface Protection component of PE Films. Commencing in the third quarter of 2020, all historical results for Personal Care Films have been presented as discontinued operations. For more information on these transactions, see Note 2 to the Consolidated Financial Statements in Item 15.

Sales were $755.3 million in 2020 compared to $826.3 million in 2019. Net loss from continuing operations was $16.8 million ($0.51 per diluted share) in 2020, compared with net income from continuing operations of $58.5 million ($1.76 per diluted share) in 2019.

The 2020 results include:

•An after-tax loss on the Company’s investment in kaléo of $47.6 million ($1.42 per diluted share), which is accounted for under the fair value method (see Note 4 to the Consolidated Financial Statements in Item 15 for more details); and

•An impairment of the total goodwill balance of Aluminum Extrusions' reporting unit acquired in the AACOA acquisition in 2012 was recorded in the after-tax amount of $10.5 million ($0.32 per diluted share).

The 2019 results include:

•An after-tax dividend received from kaléo of $14.8 million ($0.45 per diluted share); and

•An unrealized after-tax gain on the Company’s investment in kaléo of $8.5 million ($0.26 per diluted share).

The 2018 results include:

•An unrealized after-tax gain on the Company’s investment in kaléo of $23.9 million ($0.72 per diluted share).

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, 2020, 2019 and 2018, respectively. Losses associated with plant shutdowns, asset impairments, restructurings and other items are described in Results of Operations. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) from ongoing operations is the measure of profit and loss used by Tredegar’s chief operating decision maker (“CODM”) for purposes of assessing financial performance. The Company uses sales less

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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.

EBIT (earnings before interest and taxes) from ongoing operations is a non-GAAP financial measure included in the reconciliation of segment financial information to consolidated results for the Company. It is not intended to represent the stand-alone results for Tredegar’s ongoing operations under GAAP and should not be considered as an alternative to net income as defined by GAAP. EBIT is a widely understood and utilized metric that is meaningful to certain investors. We believe 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.

THE IMPACT OF COVID-19

Essential Business and Employee Considerations

The Company’s priorities during the COVID-19 pandemic continue to be to protect the health and safety of employees while keeping its manufacturing sites open due to the essential nature of many of its products. Within the limitations imposed by the health and safety procedures described below, the Company has continued to manufacture the full range of products at its facilities.

The Company’s protocols to protect the health and well-being of its employees from COVID-19 continue to develop as COVID-19 informed work practices evolve and the Company responds to recommended and mandated actions of government and health authorities. In addition, to facilitate a return to fully functional operations, the Company has undertaken an education campaign to provide employees with the most accurate and up-to-date information available, particularly from the Centers for Disease Control (“CDC”), the Office of the Surgeon General and state and local health departments. The Company believes that these efforts will encourage employees to receive a vaccine when they are eligible.

The Company has educated employees about COVID-19, including how the virus is spread, COVID-19 symptoms and mitigation efforts to keep employees safe. Even in those facilities not bound by the Families First Coronavirus Response Act, the Company has adopted COVID-19 related pay and sick leave policies and remote work policies that require employees to stay home if they feel ill or have been exposed to others with the illness, until they are cleared to return to work by our Human Resources team, who applies CDC and other state health department guidance to each case. The Company’s policies include: mandating employees self-monitor for symptoms; taking an employee’s temperature before entering production facilities; answering self-screening questions related to potential exposure and COVID-19 symptoms; mandating frequent handwashing; requiring social distancing; requiring face coverings on production floors at all times and in common areas and office settings where social distancing is difficult; streamlining onsite personnel to only those required for production and distribution; strongly encouraging and, where mandated, requiring remote work for all those who can work from home; limiting travel to essential business purposes; and regularly cleaning and disinfecting facilities. In the U.S., the Company has educated employees on COVID-19-related government benefits and has provided such benefits even in those facilities where the government benefits are not mandated.

Bonnell Aluminum is experiencing higher than normal absenteeism and hiring difficulties, which it attributes to COVID-19-related factors. Bonnell Aluminum attempts to match its direct labor with demand and is facing difficulty maintaining sufficient labor to meet desired shipment levels.

Financial Considerations

The 2020 annual plan for Bonnell Aluminum (pre-COVID-19) included sales volume of 201 million pounds and EBITDA from ongoing operations of $65 million, versus 2019 sales volume of 208 million pounds and EBITDA from ongoing operations of $65.7 million. Actual 2020 sales volume was 186 million pounds and EBITDA from ongoing operations was $55.1 million. Approximately 62% of Bonnell Aluminum’s sales volume in 2020 was related to building and construction (“B&C”) markets (non-residential B&C of 55% and residential B&C of 7%). Much of the 2020 sales volume associated with the B&C market was related to contracts that existed at the start of the COVID-19 pandemic. With the completion of many of these contracts, Bonnell began experiencing weakness in the B&C market during the fourth quarter of 2020. Overall, the Company believes that volume results for Bonnell Aluminum in 2020 have outperformed the industry, and performance to date during the COVID-19 environment has exceeded the Company's expectations, with current bookings and backlog at high levels. No significant issues have arisen to date on the collection of accounts receivable at Bonnell Aluminum.

Demand has remained strong under COVID-19 conditions for the Company’s flexible food packaging films produced by Terphane. The Surface Protection component of PE Films had record performance for EBITDA from ongoing operations in the second quarter and first half of 2020, but it experienced a slowdown in the third quarter, with a portion of the decline in volume related to a previously disclosed customer product transition and customer inventory corrections. The Company believes that while Surface Protection’s customer inventory corrections were largely resolved during the third quarter of 2020, it will experience a significant decline in volume and profitability in the first quarter of 2021 as a result of the customer product

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transition. See the PE Films section below for further discussion. No significant issues have arisen to date on the collection of accounts receivable at Terphane or Surface Protection.

Tredegar owns approximately 20% of kaleo, Inc. (“kaléo”), which makes and sells an epinephrine delivery device under the name AUVI-Q®. The Company accounts for its investment in kaléo on a fair value basis. The Company’s estimate of the fair value of its interest in kaléo at December 31, 2020 was $34.6 million ($29.7 million after taxes), which represents an increase of $0.1 million ($0.1 million after taxes) and a decrease of $60.9 million ($47.6 million after taxes) since September 30, 2020 and December 31, 2019, respectively. The decline in estimated fair value in 2020 was primarily due to: (i) current projections that assume ongoing pricing pressures, (ii) expected changes in market access as well as continued lower market demand for epinephrine delivery devices resulting from COVID-19-driven delays in in-person back-to-school schedules and social distancing guidelines, and (iii) a higher private company liquidity discount.kaléo’s stock is not publicly traded. The ultimate value of Tredegar’s ownership interest in kaléo could be materially different from the $34.6 million estimated fair value reflected in the Company’s financial statements at December 31, 2020.

Total debt was $134 million at December 31, 2020, compared to $42 million at December 31, 2019. Net debt (debt in excess of cash and cash equivalents), a non-GAAP financial measure, was $122.2 million at December 31, 2020, compared to $10.6 million at December 31, 2019. In December 2020, the Company paid a special dividend of $5.97 per share or $200 million, as a result of strong cash generation and overall net cash proceeds of approximately $46 million relating to the sale of Personal Care Films. The overall net cash proceeds resulted from net proceeds of $53 million received in the fourth quarter of 2020 less $7 million of expected expenditures during 2021, primarily related to information technology transition services and severance. The Company’s revolving credit agreement allows borrowings of up to $375 million and matures in June 2024. The Company believes that its most restrictive covenant (computed quarterly) is the leverage ratio, which permits maximum borrowings of up to 4x EBITDA, as defined under the revolving credit agreement for the trailing four quarters (“Credit EBITDA”). The Company had Credit EBITDA and a leverage ratio (calculated in the “Liquidity and Capital Resources” below) of $93.4 million and 1.43x, respectively, at December 31, 2020. The Company’s current stress testing under a COVID-19-driven recession indicates a low probability that a future leverage ratio will exceed 4.0x. See the “Liquidity and Capital Resources” below for a reconciliation of net debt, a non-GAAP financial measure, to the most directly comparable GAAP financial measure.

OPERATIONS REVIEW

Segment Analysis. A summary of results for 2020 versus 2019 for each of the Company’s reporting segments is shown below.

Aluminum Extrusions

A summary of results for Aluminum Extrusions is provided below:

Year Ended Favorable/

(In thousands, except percentages) December 31, (Unfavorable)

Ongoing operations:

Net sales in 2020 decreased by 14.0% versus 2019 primarily due to lower sales volume and the pass-through of lower metal costs, partially offset by an increase in average selling prices to cover higher operating costs. Sales volume in 2020 decreased by 10.5% versus 2019 with declines in all key markets, which the Company believes was mainly a result of COVID-19-related lower demand.

EBITDA from ongoing operations in 2020 decreased by $10.5 million in comparison to 2019 due to lower volume ($16.1 million) and higher labor and employee-related costs ($4.3 million), partially offset by higher pricing ($8.1 million), lower freight ($0.8 million) and lower travel and entertainment expenses as a result of COVID-19 ($0.9 million).

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Projected Capital Expenditures and Depreciation & Amortization

Capital expenditures are projected to be $21 million in 2021, including $3 million for infrastructure upgrades at the Carthage, Tennessee and Newnan, Georgia facilities, $3 million for a roof replacement at the Elkhart, Indiana site and $4 million for strategic projects. In addition, approximately $11 million will be required to support continuity of current operations. Depreciation expense is projected to be $14 million in 2021. Amortization expense is projected to be $3 million in 2021.

PE Films

A summary of results for PE Films is provided below:

Year Ended Favorable/

(In thousands, except percentages) December 31, (Unfavorable)

Ongoing operations:

* See the table in Item 6 for a reconciliation of this non-GAAP measure to GAAP.

Net sales increased by 4.1% in 2020 versus 2019 primarily due to higher sales of products in Surface Protection unrelated to customer product transitions ($12.0 million), partially offset by lower sales associated with the customer product transitions this year ($6.8 million).

EBITDA from ongoing operations in 2020 increased by $4.0 million versus 2019 primarily due to:

•A $3.2 million increase from Surface Protection, primarily due to sales of products unrelated to the customer product transitions ($8.3 million), partially offset by lower sales associated with the customer product transitions ($4.5 million); and

•A $0.8 million increase from Pottsville Packaging primarily related to higher sales volume and favorable raw materials pricing.

Customer Product Transitions in Surface Protection

The Surface Protection component of PE Films supports manufacturers of optical and other specialty substrates used in flat panel display products. These films are primarily used by customers to protect components of displays in the manufacturing and transportation processes and then discarded.

The Company previously reported the risk that a portion of its film products used in surface protection applications will be made obsolete by possible future customer product transitions to less costly alternative processes or materials. These transitions principally relate to one customer. The Company believes that previously reported delays in this customer's transitions were recently resolved by the customer and much of the remaining transitions could occur by the end of 2021. Under this scenario, the Company estimates that the contribution to EBITDA from ongoing operations for PE Films could decline due to the remaining customer product transitions by $18 million in 2021 versus 2020 and $4 million in 2022 versus 2021. To offset the expected adverse impact, the Company is aggressively pursuing and making progress in generating contribution from sales from new surface protection products, applications and customers and implementing cost savings measures. Annual contribution to EBITDA from ongoing operations for PE Films on surface protection products unrelated to the customer product transitions has increased since 2018 by approximately $12 million.

Projected Capital Expenditures and Depreciation & Amortization

Capital expenditures are projected to be $5 million in 2021, including: $2 million for productivity projects and $3 million for capital expenditures required to support continuity of current operations. Depreciation expense is projected to be $6 million in 2021. 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:

Year Ended Favorable/(Unfavorable)% Change

(In thousands, except percentages) December 31,

Ongoing operations:

* See the table in Item 6 for a reconciliation of this non-GAAP measure to GAAP.

Net sales in 2020 increased 0.5% versus 2019 while volume increased 7.4% versus 2019 primarily due to lower selling prices from lower raw material costs and changes in product mix.

Terphane’s EBITDA from ongoing operations in 2020 increased by $15.9 million versus 2019 due to:

•Lower raw material costs, net of lower selling prices ($8.9 million), higher sales volume ($3.3 million), favorable product mix ($2.2 million) and lower fixed costs ($1.0 million), partially offset by higher variable costs ($1.1 million) and higher selling and general administration expenses ($0.4 million);

•Net favorable foreign currency translation of Real-denominated costs ($1.5 million);

•Foreign currency transaction losses of $0.5 million in 2020 versus gains of $0.2 million in 2019; and

•A benefit of $1.2 million in 2020 resulting from the favorable settlement of a dispute related to value-added taxes.

Projected Capital Expenditures and Depreciation & Amortization

Capital expenditures are projected to be $9 million in 2021, including $5 million for new capacity for value-added products and productivity projects and $4 million for capital expenditures required to support continuity of current operations. Depreciation expense is projected to be $2 million in 2021. Amortization expense is projected to be $0.4 million in 2021.

Corporate Expenses, Interest and Income Taxes

Pension expense was $14.6 million in 2020, an unfavorable change of $5.1 million from 2019. The impact on earnings from pension expense is reflected in “Corporate expenses, net” in the net sales and operating profit by segment table in Note 5 to the Consolidated Financial Statements in Item 15. Pension expense is projected to be $14.0 million in 2021, which is determined at the beginning of the year based on the funded status of the Company’s defined benefit pension plan and actuarial assumptions at that time. In addition to the higher pension expense in 2020 compared to 2019, corporate expenses, net, increased primarily due to higher professional fees ($3.4 million) related to business development activities and higher stock compensation expense ($1.0 million), partially offset by lower environmental expenses ($0.6 million) and lower other employee-related compensation ($1.3 million).

Interest expense decreased to $2.6 million in 2020 from $4.1 million in 2019, primarily due to lower average debt levels.

The effective tax rate used to compute income taxes for continuing operations in 2020 was 32.8% compared to 18.8% in 2019. The differences between the U.S. federal statutory rate and the effective tax rate for 2020 and 2019 are shown in Note 16 in the Notes to the Financial Statements.

Net capitalization and other credit measures are provided in Liquidity and Capital Resources, below.

Critical Accounting Policies

In the ordinary course of business, the Company makes a number of estimates and assumptions relating to the reporting of results of operations and financial position in the preparation of financial statements in conformity with GAAP. Actual results could differ significantly from those estimates under different assumptions and conditions. The Company believes the following discussion addresses its critical accounting policies. These policies require management to exercise judgments that are often difficult, subjective and complex due to the necessity of estimating the effect of matters that are inherently uncertain.

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Impairment of Long-lived Identifiable Assets and Goodwill

The Company assesses its long-lived identifiable assets for impairment when events or circumstances indicate that their carrying value may not be recoverable from future cash flows. Any necessary impairment charges are recorded when the Company does not believe the carrying value of the long-lived asset(s) will be recoverable. Tredegar also reassesses the useful lives of its long-lived assets based on changes in the business and technologies.

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 about the likelihood of the carrying value of a reporting unit exceeding its fair value, referred to as the Step 0 assessment. The Step 0 assessment requires the evaluation of 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 the carrying amount, then the Company would perform a quantitative impairment test.

As of December 1, 2020, the Company applied the Step 0 assessment to its PE Films’ Surface Protection reporting unit and its Aluminum Extrusions’ Futura reporting unit, which was created as a result of an acquisition in 2017. Each reporting unit had a fair value significantly in excess of its carrying amount when last tested using the quantitative impairment test. The Company's Step 0 analysis in 2020 of these reporting units concluded that it is not more likely than not that the fair value of each reporting unit was less than its carrying amount.

Goodwill for Surface Protection and Futura totaled $57.3 million and $10.4 million, respectively, at December 31, 2020.

In assessing the recoverability of goodwill and long-lived identifiable assets, the Company primarily estimates fair value using discounted cash flow analyses and comparative enterprise value-to-EBITDA multiples. These calculations require management to make assumptions regarding estimated future cash flows, discount rates and other factors to determine if an impairment exists. If these estimates or their related assumptions change in the future, the Company may be required to record additional impairment charges.

During the first three months of 2020, the Company performed goodwill impairment tests for the Aluminum Extrusions’ AACOA reporting unit, which was created as a result of an acquisition in 2011, and the Futura reporting unit using a combination of income and market approaches and determined that the fair value of the Futura reporting unit exceeded its carrying value. However, the fair value of the AAOCA reporting unit did not exceed its carrying value. As a result, the Company recognized a goodwill impairment charge of $13.7 million ($10.5 million after taxes), which represented the entire amount of goodwill associated with the AACOA reporting unit. The operations of the AACOA reporting unit, which includes the Niles, Michigan and Elkhart, Indiana facilities, was expected to be severely impacted by COVID-19 at that time, with over 80% of the aluminum extrusions manufactured at these facilities sold to customers that make consumer durable products, such as recreational boating and power sports vehicles, and to customers serving the building and construction and automotive markets.

Investment Accounted for Under the Fair Value Method

In August 2007 and December 2008, Tredegar made an aggregate investment of $7.5 million in kaléo (formerly Intelliject, Inc.), a privately held specialty pharmaceutical company. This investment is accounted for under the fair value method. At the time of the initial investment, the Company elected the fair value option of accounting since its investment objectives were similar to those of venture capitalists, which typically do not have controlling financial interests (venture capital funds generally use the fair value option to account for their investment portfolios). At December 31, 2020, Tredegar’s ownership interest was approximately 20% on a fully diluted basis.

The Company considers its investment in kaléo to be a Level 3 investment under the fair value hierarchy described in GAAP. The Company discloses the level of its investments within the fair value hierarchy in which fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3). The Company believes that its fair value estimates will continue to be based upon Level 3 inputs since there is no secondary market for Tredegar’s ownership. See Note 4 to the Consolidated Financial Statements in Item 15 for more information on valuation methods used. Adjustments to the estimated fair value of this investment will be made in the period in which such changes can be quantified.

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At December 31, 2020 and 2019, the fair value of the Company’s investment in kaléo (also the carrying value, which is separately stated in the consolidated balance sheets) was estimated at $34.6 million and $95.5 million, respectively. The weighted average cost of capital used in the fair market valuation of the Company’s interest in kaléo was 35% and 29% as of December 31, 2020 and 2019. The ultimate value of the Company’s ownership interest in kaléo will be determined and realized only if and when a liquidity event occurs, and the ultimate value could be materially different from the $34.6 million estimated fair value reflected in the Company’s financial statements at December 31, 2020. The fair market valuation of Tredegar’s interest in kaléo is sensitive to changes in the weighted average cost of capital used to discount cash flow projections for the high degree of risk and wide range of possible outcomes. At December 31, 2020, the effect of a 500 basis point decrease in the weighted average cost of capital assumption would have further increased the fair value of the Company’s interest in kaléo by approximately $5 million, and a 500 basis point increase in the weighted average cost of capital assumption would have decreased the fair value of the Company’s interest by approximately $6 million.

Pension Benefits

Tredegar sponsors noncontributory defined benefit (pension) plans that have resulted in varying amounts of net pension income or expense, as developed from actuarial valuations. Inherent in these valuations are key assumptions including discount rates, expected return on plan assets and rate of future compensation increases. The Company is required to consider current market conditions, including changes in interest rates and plan asset investment returns, in determining these assumptions. Actuarial assumptions may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of participants. These differences may result in a significant impact to the amount of net pension income or expense recorded in future periods.

The discount rate is used to determine the present value of future payments. The discount rate is the single rate that, when applied to expected benefit payments, provides a present value equal to the present value of expected benefit payments determined by using the AA-rated bond yield curve. In general, the pension liability increases as the discount rate decreases and vice versa. The weighted average discount rate utilized was 2.57%, 3.27% and 4.40% at the end of 2020, 2019 and 2018, respectively, with changes between periods due to changes in market interest rates. Pay for active participants of the plan was frozen as of December 31, 2007. 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.

A lower expected return on plan assets increases the amount of expense and vice versa. Decreases in the level of actual plan assets will also serve to increase the amount of pension expense. The total return on plan assets (net of fees and plan expenses), which is primarily affected by the change in fair value of plan assets, current year contributions and current year payments to participants, was approximately 10.9% in 2020, 11.8% in 2019 and negative 5.4% in 2018. The expected long-term return on plan assets, which is estimated by asset class and generally based on inflation-adjusted historical returns, volatilities, risk premiums and managed asset premiums, was 5.00%, 6.00% and 6.50% in 2020, 2019 and 2018, respectively. The Company anticipates that its expected long-term return on plan assets will be 5.00% for 2021. See Note 13 to the Consolidated Financial Statements in Item 15 for more information on expected long-term return on plan assets and asset mix.

See the Executive Summary section above for further discussion regarding the financial impact of the Company’s pension plans.

Income Taxes

On a quarterly basis, Tredegar reviews its judgments regarding uncertain tax positions and the likelihood that the benefits of a deferred income tax asset will be realized. As circumstances change, the Company reflects in earnings any adjustments to unrecognized benefits for uncertain tax positions and valuation allowances for deferred income tax assets.

For financial reporting purposes, unrecognized tax benefits on uncertain tax positions were $0.6 million and $0.9 million as of December 31, 2020 and 2019, respectively. 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. Accordingly, the Company also accrues for possible interest and penalties on uncertain tax positions. The balance of accrued interest and penalties on deductions taken relating to uncertain tax positions was $0.1 million, $0.1 million and $0.2 million at December 31, 2020, 2019 and 2018, respectively ($0.1 million, $0.1 million and $0.2 million, respectively, net of corresponding U.S. federal and state income tax benefits). Accruals for possible interest and penalties on uncertain tax positions are reflected in income tax expense for financial reporting purposes.

Tredegar, or one of its subsidiaries, files income tax returns in the U.S. federal jurisdiction, various states and jurisdictions outside the U.S. With few exceptions, Tredegar is no longer subject to U.S. federal, state or non-U.S. income tax examinations by tax authorities for years before 2017.

As of December 31, 2020 and 2019, valuation allowances relating to deferred income tax assets were $17.5 million and $3.8 million, respectively. For more information on deferred income tax assets and liabilities, see Note 16 to the Consolidated Financial Statements in Item 15.

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Results of Operations

2020 versus 2019

Revenues. Sales in 2020 decreased by 8.6% compared with 2019 primarily due to lower sales in Aluminum Extrusions partially offset by higher sales in PE Films. Net sales decreased 14.0% in Aluminum Extrusions primarily due to lower sales volume and the pass-through of lower metal costs, partially offset by an increase in average selling prices to cover higher operating costs. Net sales increased 4.1% in PE Films primarily due to higher sales of products in Surface Protection unrelated to customer product transitions, partially offset by lower sales associated with the customer product transitions. Net sales increased in Flexible Packaging Films by 0.5% primarily due to increased volume and changes in product mix. For more information on changes in net sales and volume, see the Executive Summary section above.

Operating Costs and Expenses. Consolidated gross profit margin (sales minus cost of goods sold and freight as a percentage of sales) was 22.6% in 2020 versus 18.9% in 2019. The gross profit margin in Flexible Packaging Films increased due to higher sales volume, lower raw material costs and favorable product mix. The gross profit margin in PE Films and Aluminum Extrusions was flat compared to 2019.

For more information on changes in operating costs and expenses, see the Executive Summary section above.

Selling, General and Administrative. As a percentage of sales, selling, general and administrative (“SG&A”) and R&D expenses were 12.3% in 2020, which increased from 10.2% in 2019. SG&A and R&D expenses were up year-over-year, while net sales decreased. Increased SG&A expense was primarily due to higher professional fees related to business development activities, higher stock-based compensation expense, and corporate costs incurred during 2020 associated with the sale of Personal Care Films.

Plant shutdowns, asset impairments, restructurings and other. Pre-tax losses associated with plant shutdowns, asset impairments, restructurings and other items for continuing operations in 2020 detailed below are shown in the statements of net sales and EBITDA from ongoing operations by segment table in Note 5 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. A discussion of unrealized gains and losses on investments can also be found in Note 4 to the Financial Statements in Item 15 and additional information on restructuring costs can be found in Note 17 to the Consolidated Financial Statements in Item 15.

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Aluminum Extrusions:

Losses from sale of assets, investment writedowns and other items:

Consulting expenses for ERP feasibility study2 $ 0.7 $ 0.2 $ 0.3 $ 0.1 $ 1.3

Environmental charges at Newnan, Georgia plant1 — — — 0.3 0.3

Total for Aluminum Extrusions $ 0.7 $ 1.1 $ 0.8 $ 0.9 $ 3.5

PE Films:

Losses associated with plant shutdowns, asset impairments and restructurings:

Surface Protection restructuring costs - severance $ — $ — $ — $ 1.6 $ 1.6

(Gains) losses from sale of assets, investment writedowns and other items:

Total for PE Films $ — $ 0.1 $ — $ 1.8 $ 1.9

Corporate:

Accelerated recognition of stock option-based compensation2 — 0.1 — — 0.1

Loss on sale of Bright View3 — — — 2.3 2.3

Interest Expense. Interest expense, which is net of amounts capitalized and included in property, plant and equipment ($0.1 million and $0.3 million capitalized in 2020 and 2019, respectively), was $2.6 million in 2020, compared to $4.1 million for 2019. Average debt outstanding and interest rates were as follows:

(In millions, except percentages) 2020 2019

Average outstanding debt balance $ 33.5 $ 85.0

Average interest rate 2.3 % 4.0 %

2019 versus 2018

Revenues. Sales in 2019 decreased by 3.0% compared with 2018 due to lower sales in Aluminum Extrusions partially offset by higher sales in PE Films and Flexible Packaging Films. Net sales decreased 7.6% in Aluminum Extrusions primarily due to lower sales volume and the pass-through of lower metal costs, partially offset by an increase in average selling prices to cover higher operating costs. Net sales increased 4.8% in PE Films primarily due to higher sales volume and increased selling prices. Net sales increased in Flexible Packaging Films by 8.2% primarily due to higher sales volume and increased selling prices. For more information on changes in net sales and volume, see the Segment Analysis below.

Operating Costs and Expenses. Consolidated gross profit (sales minus cost of goods sold and freight) as a percentage of sales (gross profit margin) was 18.9% in 2019 versus 17.0% in 2018. The gross profit margin in Aluminum Extrusions increased primarily as a result of higher selling prices. The gross profit margin in PE Films increased primarily due to higher profits in Surface Protection as a result of higher sales volume and increased selling prices. The gross profit margin in Flexible Packaging Films was essentially unchanged from 2018 to 2019. For more information on changes in operating costs and expenses, see the Segment Analysis below.

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Selling, General and Administrative. As a percentage of sales, SG&A and R&D expenses were 10.2% in 2019, which increased from 8.8% in 2018. The increase in SG&A and R&D expenses as a percentage of sales can be primarily attributed to lower sales for Aluminum Extrusions. Increased spending was due to higher stock-based compensation and consulting fees for remediation activities and other costs relating to the Company’s material weaknesses in internal control over financial reporting, business development activities and implementation of new accounting guidance.

Plant shutdowns, asset impairments, restructurings and other. Pre-tax losses associated with plant shutdowns, asset impairments, restructurings and other items for continuing operations in 2019 and 2018 detailed below are shown in the statements of net sales and EBITDA from ongoing operations by segment table in Note 5 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. A discussion of unrealized gains and losses on investments can also be found in Note 4 to the Consolidated Financial Statements in Item 15 and additional information on restructuring costs can be found in Note 17 to the Consolidated Financial Statements in Item 15.

Aluminum Extrusions:

(Gains) losses from sale of assets, investment writedowns and other items:

Wind damage to roof of Elkhart, Indiana plant2 $ — $ — $ 0.3 $ (0.4) $ (0.1)

Environmental charges at Carthage Tennessee plant1 — — 0.4 0.2 0.6

Total for Aluminum Extrusions $ — $ — $ 0.7 $ (0.2) $ 0.5

PE Films:

Losses associated with plant shutdowns, asset impairments and restructurings:

Surface Protection restructuring costs - severance — — 0.1 0.2 0.3

Total for PE Films $ 0.4 $ — $ 0.1 $ 0.2 $ 0.7

Corporate:

Accelerated recognition of stock option-based compensation2 — — — 1.3 1.3

Environmental costs not associated with a business unit2 — — — 0.6 0.6

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Aluminum Extrusions:

Losses associated with plant shutdowns, asset impairments and restructurings:

Other restructuring costs - severance $ 0.1 $ — $ — $ — $ 0.1

(Gains) losses from sale of assets, investment writedowns and other items:

Wind damage to roof of Elkhart, Indiana plant2 — — 0.1 — 0.1

Environmental charges at Carthage Tennessee plant1 — — 0.2 0.1 0.3

Total for Aluminum Extrusions $ 0.1 $ — $ 0.3 $ 0.1 $ 0.5

PE Films:

Losses associated with plant shutdowns, asset impairments and restructurings:

Surface Protection restructuring costs - severance $ — $ — $ — $ 0.2 $ 0.2

(Gains) losses from sale of assets, investment writedowns and other items:

Costs to prepare a market study2 — — 0.2 — 0.2

Gain on reversal of contingent liability3 — — — (0.3) (0.3)

Total for PE Films $ — $ — $ 0.2 $ (0.1) $ 0.1

Corporate:

Business development projects2 — — — 0.5 0.5

Interest Expense. Interest expense, which is net of amounts capitalized and included in property, plant and equipment ($0.3 million and $0.1 million capitalized in 2019 and 2018, respectively), was $4.1 million in 2019, compared to $5.7 million for 2018. Average debt outstanding and interest rates were as follows:

(In millions, except percentages) 2019 2018

Average outstanding debt balance $ 85.0 $ 121.3

Average interest rate 4.0 % 3.8 %

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Segment Analysis. A summary of operating results for 2019 versus 2018 for each of the Company’s reporting segments is shown below.

Aluminum Extrusions

A summary of results for Aluminum Extrusions is provided below:

Year Ended Favorable/

(In thousands, except percentages) December 31, (Unfavorable)

Ongoing operations:

Net sales in 2019 decreased versus 2018 primarily due to lower sales volume and the pass-through of lower metal costs, partially offset by an increase in average selling prices to cover higher operating costs.

EBITDA from ongoing operations in 2019 increased slightly in comparison to 2018. Excluding the adverse impact of the accounting for inventories under the last in, first out method in the fourth quarter of 2019 versus 2018 ($1.5 million), EBITDA from ongoing operations increased $1.7 million despite a 7% decline in sales volume. The increase was primarily due to higher pricing ($22.8 million) and fabrication profits ($1.0 million), partially offset by lower sales volume ($8.7 million), increased labor and employee-related expenses ($7.4 million), higher supplies, maintenance, utilities and other operating costs ($2.0 million), increased freight costs ($2.0 million) and increased general and administrative expenses ($1.9 million).

PE Films

A summary of results for PE Films is provided below:

Year Ended Favorable/

(In thousands, except percentages) December 31, (Unfavorable)

Ongoing operations:

* See the table in Item 6 for a reconciliation of this non-GAAP measure to GAAP.

Net sales in 2019 increased by $6.1 million versus 2018 primarily due to higher sales in Surface Protection. Surface Protection’s sales increased $5.8 million due to higher sales volume and increased selling prices, partially offset by unfavorable product mix.

EBITDA from ongoing operations in 2019 increased by $8.7 million versus 2018 primarily due to:

•A $6.8 million increase from Surface Protection, primarily due to higher selling prices ($6.0 million), quality claims in 2018 that did not recur in 2019 ($1.2 million), production efficiencies ($1.4 million) and favorable raw material costs ($1.9 million), partially offset by unfavorable mix (net impact of $2.0 million) and higher fixed manufacturing and general and administrative costs ($1.5 million); and

•A $1.6 million increase from Pottsville Packaging primarily related to higher sales volume ($1.5 million), increased productivity ($0.5 million) and increased selling prices ($0.2 million), partially offset by unfavorable product mix ($1.0 million).

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Flexible Packaging Films

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

Year Ended Favorable/(Unfavorable)% Change

(In thousands, except percentages) December 31,

Ongoing operations:

* See the table in Item 6 for a reconciliation of this non-GAAP measure to GAAP.

Net sales in 2019 increased versus 2018 primarily due to higher sales volume and increased selling prices.

Terphane’s EBITDA from ongoing operations in 2019 increased by $3.6 million versus 2018 due to:

•Higher volume ($2.6 million) and higher selling prices ($1.6 million), partially offset by higher fixed and variable costs, including costs related to a restarted line ($2.0 million);

•Net favorable foreign currency translation of Real-denominated operating costs of $0.4 million; and

•Foreign currency transaction gains of $1.0 million in 2019 versus losses of $0.8 million in 2018.

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 continuing operations from December 31, 2019 to December 31, 2020 are summarized below. Cash flows for discontinued operations have not been separately disclosed in the consolidated statements of cash flows.

•Accounts and other receivables decreased $2.8 million (3.1%).

◦Accounts and other receivables in Aluminum Extrusions decreased by $3.3 million primarily due to lower sales volume and lower sales prices from the pass-through of lower metal costs, partially offset by an increase in average selling prices. DSO (computed using trailing 12 months net sales and a rolling 12-month average of accounts and other receivables balances) was approximately 47.5 days in 2020 and 48.5 days in 2019.

◦Accounts and other receivables in PE Films decreased by $0.3 million as the removal of assets related to Bright View was partially offset by increased accounts receivables in Surface Protection due to higher sales. DSO was approximately 30.2 days in 2020 and 34.7 days in 2019.

◦Accounts and other receivables in Flexible Packaging Films remained consistent compared to the prior year. DSO was approximately 41.0 days in 2020 and 37.7 days in 2019.

•Inventories increased $2.2 million (3.5%).

◦Inventories in Aluminum Extrusions increased by $3.2 million primarily due to higher average aluminum prices and COVID-19-related operational and production inefficiencies. DIO (computed using trailing 12 months costs of goods sold calculated on a first in, first out basis and a rolling 12-month average of inventory balances calculated on the first-in, first-out basis) was approximately 39.3 days in 2020 and 38.6 days in 2019.

◦Inventories in PE Films increased by $0.7 million primarily due to higher raw material levels in Surface Protection partially offset by the removal of assets related to Bright View. DIO was approximately 59.2 days in 2020 and 51.3 days in 2019.

◦Inventories in Flexible Packaging Films decreased by $1.6 million primarily due to increased sales volume and lower resin costs partially offset by higher raw material levels. DIO was approximately 89.4 days in 2020 and 94.3 days in 2019.

•Net property, plant and equipment decreased by $7.0 million (4.0%) primarily due to depreciation expenses of $23.4 million, a reduction from the effect of changes in foreign exchange rates of $3.3 million and the removal of assets related to Bright View of $2.3 million, partially offset by capital expenditures of $21.4 million.

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•Identifiable intangible assets, net decreased by $3.8 million (16.9%) primarily due to amortization expense of $3.0 million and the removal of assets related to Bright View of $0.6 million.

•Accounts payable increased by $2.4 million (2.8%).

◦Accounts payable in Aluminum Extrusions increased by $3.3 million, primarily due to increased inventory levels as a result of COVID-19-related lower demand. DPO (computed using trailing 12 months costs of goods sold calculated on a first in, first out basis and a rolling 12-month average of accounts payable balances) was approximately 53.1 days in 2020 and 49.9 days in 2019.

◦Accounts payable in PE Films decreased by $3.2 million primarily due to effective working capital management and the normal volatility associated with the timing of payments. DPO was approximately 36.8 days in 2020 and 37.1 days in 2019.

◦Accounts payable in Flexible Packaging Films increased by $0.5 million, primarily due the negotiation of longer payment terms partially offset by reduced resin costs. DPO was approximately 61.7 days in 2020 and 55.2 days in 2019.

Net cash provided by operating activities was $74.4 million in 2020 compared to $115.9 million in 2019. The decrease is primarily due to significant net working capital efficiencies in 2019 versus 2020 ($28.5 million), a dividend received from kaléo in 2019 ($17.6 million), and higher pension and postretirement benefit plan contributions ($4.1 million), partially offset by higher EBITDA from ongoing operations for business segments of $9.3 million in 2020 versus the prior period.

Cash provided by investing activities was $32.9 million in 2020 compared to cash used in investing activities of $39.9 million in 2019. Cash provided by investing activities in 2020 includes the net cash proceeds received for the sale of Personal Care Films ($55.1 million) and Bright View ($1.1 million), partially offset by capital expenditures of $23.4 million. Cash used in investing activities in 2019 includes capital expenditures of $50.9 million, which was partially offset by $10.9 million of cash proceeds received for the sale of the PE Films’ Shanghai manufacturing facility.

Net cash used in financing activities of $125.6 million in 2020 compared to $77.3 million in 2019. The increase is primarily due to higher net borrowings of $151.5 million under the Credit Agreement (as defined below) and higher dividend payments to shareholders of $200.7 million primarily due to the $200 million Special Dividend (partially funded from borrowings under the Credit Agreement, as defined below), partially offset by lower debt financing costs of $1.1 million.

On December 1, 2020, Tredegar entered into an amendment (“Amendment No. 1”) to its five-year secured revolving credit agreement (the “Credit Agreement”), which matures in June 2024. The material changes from Amendment No. 1 are as follows:

•Aggregate borrowings available under the facility were reduced from $500 million to $375 million.

•The definition of Credit EBITDA was amended to permit certain adjustments for prepayment of pension obligations on a pro forma basis.

•Amendments were made to certain of the negative covenants, including, among other amendments, the following: (i) the restricted payments covenant was amended to permit a one-time special dividend payment of up to $200 million and allow for an aggregate amount of dividend payments up to $75 million subsequent to Amendment No. 1 through the maturity date of the Credit Agreement; (ii) the asset disposition covenant was amended to reduce the general basket to 20% of consolidated total assets over the life of the facility and was reset as of December 1, 2020; and (iii) the indebtedness covenant was amended to reduce several baskets to $25 million each.

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Net capitalization and indebtedness as defined under the Credit Agreement as of December 31, 2020 were as follows:

Net Capitalization and Indebtedness as of December 31, 2020

(In thousands)

Net capitalization:

Cash and cash equivalents $ 11,846

Debt:

Debt, net of cash and cash equivalents 122,154

Indebtedness as defined in Credit Agreement:

The credit spread and commitment fees charged on the unused amount under the Credit Agreement at various indebtedness-to-Credit EBITDA levels are as follows:

Pricing Under Credit Agreement (Basis Points)

Indebtedness-to-Credit EBITDA Ratio Credit SpreadOver LIBOR CommitmentFee

At December 31, 2020, the interest rate on debt under the Credit Agreement existing at that date was priced at one-month LIBOR plus the applicable credit spread of 162.5 basis points. Under the Credit Agreement, borrowings are permitted up to $375 million, and approximately $241 million was available to borrow at December 31, 2020, based upon the most restrictive covenant within the Credit Agreement.

The computations of Credit EBITDA, the leverage ratio and interest coverage ratio as defined in the Credit Agreement are presented below along with the related most restrictive covenants. Credit EBITDA as defined in the Credit Agreement is not intended to represent net income or cash flow from operations as defined by GAAP and should not be considered as either an alternative to net income or to cash flow.

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As of and for the Twelve Months Ended December 31, 2020 (In thousands)

Net income (loss) $ (75,444)

Plus:

After-tax losses related to discontinued operations 58,611

Total income tax expense for continuing operations —

Interest expense 2,587

Depreciation and amortization expense for continuing operations 26,446

Losses related to the application of the equity method of accounting —

Minus:

After-tax income related to discontinued operations —

Total income tax benefits for continuing operations (8,213)

Interest income (44)

Income related to the application of the equity method of accounting —

Credit EBITDA as defined in Credit Agreement $ 93,388

Leverage ratio (indebtedness-to-Credit EBITDA) 1.43x

Interest coverage ratio (Credit EBITDA-to-interest expense) 36.1x

Most restrictive covenants as defined in Credit Agreement:

Maximum leverage ratio permitted 4.00x

Minimum interest coverage ratio permitted 3.00x

Tredegar was in compliance with all of its debt covenants as of December 31, 2020. Noncompliance with any of the debt covenants may have a material adverse effect on its financial condition or liquidity, in the event such noncompliance cannot be cured or should the Company be unable to obtain a waiver from the lenders. Renegotiation of the covenant through an amendment to the Credit Agreement may effectively cure the noncompliance, but may have an effect on its financial condition or liquidity depending upon how the covenant is renegotiated.

The Company believes that existing borrowing availability, current cash balances and cash flow from operations will be sufficient to satisfy working capital, capital expenditure and dividend requirements for at least the next twelve months.

At December 31, 2020, Tredegar had cash and cash equivalents of $11.8 million, including funds held in locations outside the U.S. of $9.4 million.

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Contractual Obligations, Contingent Liabilities and Commitments

Following is a table which summarizes the continuing operations contractual obligations of Tredegar as of December 31, 2020:

Payments Due by Period

Debt:

Principal payments $ — $ — $ — $ 134.0 $ — $ — $ 134.0

Estimated contributions required: (1)

Capital expenditure commitments 1.3 3.1 — — — — 4.4

(1) Estimated minimum required contributions for defined benefit plans and benefit payments for other postretirement plans are based on actuarial estimates using current assumptions for discount rates, long-term rate of return on plan assets, rate of compensation increases and health care cost trends. The expected defined benefit plan contribution estimates for 2021 through 2030 were determined under provisions of the Pension Protection Act of 2006 using the preliminary assumptions chosen by Tredegar for the 2021 plan year. Tredegar has determined that it is not practicable to present defined benefit contributions and other postretirement benefit payments beyond 2030.

(2) Contractual lease payments for 2021 include $0.5 million of short term lease payments and $0.3 million of variable lease costs.

(3) Amounts for which reasonable estimates about the timing of payments cannot be made are included in the remainder column.

(4) Includes contractual severance and other miscellaneous contractual arrangements.

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.

Quantitative and Qualitative Disclosures about Market Risk

Tredegar has exposure to the volatility of interest rates, polyethylene and polypropylene resin prices, Terephthalic Acid (“PTA”) and Monoethylene Glycol (“MEG”) prices, aluminum ingot and scrap prices, energy prices, foreign currencies and emerging markets. See Liquidity and Capital Resources regarding interest rate exposures related to borrowings under the Credit Agreement.

Profit margins in Aluminum Extrusions are sensitive to fluctuations in aluminum ingot and scrap prices as well as natural gas prices (natural gas is the principal energy source used to operate its casting furnaces). Changes in polyethylene resin prices and the timing of those changes could have a significant impact on profit margins in PE Films. Changes in polyester resin, PTA and MEG prices, and the timing of those changes, could have a significant impact on profit margins in Flexible Packaging Films. There is no assurance of the Company’s ability to pass through higher raw material and energy costs to its customers.

In the normal course of business, Aluminum Extrusions enters into fixed-price forward sales contracts with certain customers for the sale of fixed quantities of aluminum extrusions at scheduled intervals. In order to hedge its exposure to aluminum price volatility (see the chart below) under these fixed-price arrangements, which generally have a duration of not more than 12 months, the Company enters into a combination of forward purchase commitments and futures contracts to acquire or hedge aluminum, based on the scheduled deliveries. See Note 9 to the Consolidated Financial Statements in Item 15 for additional information.

The volatility of quarterly average aluminum prices is shown in the chart below.

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The volatility of quarterly average natural gas prices is shown in the chart below.

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The volatility of average quarterly prices of polyethylene resin in the U.S. (a primary raw material for PE Films products) is shown in the chart below:

The price of resin is driven by several factors, including supply and demand and the price of oil, ethylene and natural gas. Selling prices to customers are set considering numerous factors, including the expected volatility of resin prices. In certain situations, PE Films has index-based pass-through raw material cost arrangements with customers. However, under certain agreements, changes in resin prices are not passed through for a period of 90 days or more. Pricing on the remainder of the business is based upon raw material costs and supply/demand dynamics within the markets that the Company competes.

Polyester resins, MEG and PTA used in flexible packaging films produced in Brazil are primarily purchased domestically, with other sources available mostly from Asia and the U.S. Given the nature of these products as commodities, pricing is derived from Asian pricing indexes. The volatility of the average quarterly prices for polyester fibers in Asia, which is representative of polyester resin (a primary raw material for Flexible Packaging Films) pricing trends, is shown in the chart below:

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The volatility of average quarterly prices of PTA and MEG in Asia (raw materials used in the production of polyester resins produced by Flexible Packaging Films) is shown in the chart below:

The Company sells to customers in foreign markets through its foreign operations and through exports from U.S. plants. The percentage of sales and total assets for manufacturing operations related to foreign markets for 2020, 2019 and 2018 are as follows:

Net Sales Net Sales Net Sales

Canada 2 — — 2 — — 2 — —

Europe 1 — — 1 — — — — —

Tredegar attempts to match the pricing and cost of its products in the same currency and generally views the volatility of foreign currencies and the corresponding impact on earnings and cash flow as part of the overall risk of operating in a global environment (for additional information, see trends for the Brazilian Real and Chinese Yuan in the charts on the following page). Exports from the U.S. are generally denominated in U.S. Dollars. The Company’s foreign currency exposure on income from continuing foreign operations relates to the Chinese Yuan and the Brazilian Real.

PE Films is generally able to match the currency of its sales and costs for its product lines. For flexible packaging films produced in Brazil, selling prices and key raw material costs are principally determined in U.S. Dollars and are impacted by local economic conditions and local and global competitive dynamics. Flexible Packaging Films is exposed to foreign exchange translation risk (its functional currency is the Brazilian Real) because almost 90% of the sales of Flexible Packaging Films business unit in Brazil (“Terphane Ltda.”) and substantially all of its related raw material costs are quoted or priced in U.S. Dollars while its variable conversion, fixed conversion and sales, general and administrative costs before depreciation & amortization (collectively “Terphane Ltda. Operating Costs”) are quoted or priced in Brazilian Real. This mismatch, together

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with a variety of economic variables impacting currency exchange rates, causes volatility that could negatively or positively impact EBITDA from ongoing operations for Flexible Packaging Films.

The Company estimates annual net costs of R$119 million for the net mismatch translation exposure between Terphane Ltda.’s U.S. Dollar quoted or priced sales and raw material costs and underlying Brazilian Real quoted or priced Terphane Ltda. Operating Costs. Terphane Ltda. has outstanding foreign exchange average forward rate contracts to purchase Brazilian Real and sell U.S. Dollars to hedge its exposure. See Note 9 to the Consolidated Financial Statements in Item 15 for more information on outstanding hedging contracts and this hedging program.

Tredegar estimates that the change in the value of foreign currencies relative to the U.S. Dollar on PE Films had an unfavorable impact on EBITDA from ongoing operations in PE Films of $0.7 million in 2020 compared to 2019 and an unfavorable impact on EBITDA from ongoing operations of $0.5 million in 2019 compared with 2018.

Trends for the Brazilian Real and Chinese Yuan are shown in the chart below:

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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See discussion of Quantitative and Qualitative Disclosures about Market Risk in Item 7.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this Item 8 is set forth in Item 15 and is hereby incorporated herein by reference.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A.CONTROLS AND PROCEDURES

On November 1, 2018, the Company filed a Current Report on Form 8-K (the “November 2018 Form 8-K”) to disclose deficiencies in internal control over financial reporting. For further information, see the November 2018 Form 8-K and Item 4. “Controls and Procedures” of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018 (the “2018 Third Quarter 10-Q”).

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this Form 10-K, pursuant to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation, with the participation of its management, including its Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), of the effectiveness of disclosure controls and procedures (as defined under Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2020.

Based on this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, because of the material weaknesses in internal control over financial reporting discussed below, the Company’s disclosure controls and procedures were not effective as of December 31, 2020, to ensure: (i) that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and (ii) that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is a process designed by or under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer, and overseen by the Board of Directors, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of published financial statements for external purposes in accordance with GAAP and includes policies and procedures that:

•Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets;

•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that the Company’s receipts and expenditures are being made only in accordance with the authorization of its management and directors; and

•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of the Company’s consolidated financial statements would be prevented or detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting using the criteria in Internal Control - Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “2013 COSO Framework”). As a result of this evaluation, management concluded that the

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Company’s internal control over financial reporting was not effective as of December 31, 2020, because of the material weaknesses in internal control over financial reporting discussed below.

•Control Environment: The Company did not have a sufficient number of trained resources with assigned responsibility and accountability for the design, operation and documentation of internal control over financial reporting in accordance with the 2013 COSO Framework.

•Risk Assessment: The Company did not have an effective risk assessment process that defined clear financial reporting objectives and evaluated risks, including fraud risks, and risks resulting from changes in the external environment and business operations, at a sufficient level of detail to identify all relevant risks of material misstatement across the entity.

•Information and Communication: The Company did not have an effective information and communication process that identified and assessed the source of and controls necessary to ensure the reliability of information used in financial reporting and that communicates relevant information about roles and responsibilities for internal control over financial reporting.

•Monitoring Activities: The Company did not have effective monitoring activities to assess the operation of internal control over financial reporting, including the continued appropriateness of control design and level of documentation maintained to support control effectiveness.

•Control Activities: As a consequence of the material weaknesses described above, internal control deficiencies related to the design and operation of process-level controls and general information technology controls were determined to be pervasive throughout the Company’s financial reporting processes.

While these material weaknesses did not result in material misstatements of the Company’s financial statements as of and for the year ended December 31, 2020, these material weaknesses create a reasonable possibility that a material misstatement of account balances or disclosures in annual or interim consolidated financial statements may not be prevented or detected in a timely manner. Accordingly, the Company concluded that the deficiencies represent material weaknesses in its internal control over financial reporting and its internal control over financial reporting was not effective as of December 31, 2020.

The Company’s independent registered public accounting firm, KPMG LLP, which audited the 2020 consolidated financial statements included in this Form 10-K, has expressed an adverse opinion on the operating effectiveness of the Company's internal control over financial reporting. KPMG LLP's report appears on page 47 of this Form 10-K.

Remediation Plan

The Company’s remediation efforts are ongoing, and it will continue its initiatives to implement and document policies and procedures, and strengthen the Company’s internal control environment. Remediation of the identified material weaknesses and strengthening the Company’s internal control environment has extended into 2021. In addition, the Company is monitoring the impact of COVID-19 on its remediation plan. Depending on the severity and length of the pandemic, the remediation timeline could be negatively impacted because of inefficiencies caused by COVID-related limitations on travel, meetings, on-site work and close collaboration and the related increase in time necessary to complete remediation projects.

The material weaknesses cannot be considered completely remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

To remediate the material weaknesses described above, the Company is pursuing the six remediation steps identified in the 2018 Third Quarter 10-Q. To date, the Company has accomplished the following as part of those remediation steps:

a.Identified material processes and significant locations for the purpose of identifying risks of material misstatement to the Company’s financial statements,

b.Conducted interviews with relevant parties to ensure our understanding of the activities involved in the recording of transactions within material processes,

c.Substantially completed a comprehensive review and update, as necessary, of the documentation of relevant processes with respect to the Company’s internal control over financial reporting,

d.Documented significant elements of a comprehensive risk assessment and internal control gap analysis and commenced the validation thereof with key stakeholders,

e.Commenced the design of certain new or redesigned internal controls, and

f.Commenced the design and implementation of internal controls for certain processes within its Aluminum Extrusions business, PE Films business, its Flexible Packaging business, and its corporate functions.

The Company continues to work with its outside consultant, an internationally recognized accounting firm, to assist in completing the remediation plan. The Company believes that its remediation plan will be sufficient to remediate the identified

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material weaknesses and strengthen its internal control over financial reporting. As the Company continues to evaluate, and works to improve, its internal control over financial reporting, management may determine that additional measures to address control deficiencies or modifications to the remediation plan are necessary. The Company cannot assure you, however, when it will remediate such weaknesses, nor can it be certain whether additional actions will be required or the costs of any such actions. Moreover, the Company cannot assure you that additional material weaknesses will not arise in the future.

Changes in Internal Control Over Financial Reporting

The Company is in the process of implementing certain changes in its internal controls to remediate the material weaknesses described above. The implementation of the material aspects of this plan began in the second quarter of 2019. During the quarter ended December 31, 2020, the Company, with the assistance of its outside consultant, continued the design and implementation of internal controls for certain processes within its Aluminum business, PE Films business, Flexible Packaging business and its corporate function. Except as noted above with respect to the implementation of the remediation plan, there has been no change in the Company’s internal control over financial reporting during the quarter ended December 31, 2020, that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

Item 9B. OTHER INFORMATION

None.

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PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information concerning directors and persons nominated to become directors of Tredegar to be included in the Proxy Statement under the headings “Proposal 1: Election of Directors” and “Tredegar’s Board of Directors” is incorporated herein by reference.

The information concerning corporate governance to be included in the Proxy Statement under the headings “Board Meetings, Meetings of Non-Management Directors and the Board Committees” and “Corporate Governance” is incorporated herein by reference.

Set forth below are the names, ages and titles of the Company’s executive officers:

Name Age Title

John M. Steitz 62 President and Chief Executive Officer

D. Andrew Edwards 62 Executive Vice President and Chief Financial Officer

Kevin C. Donnelly 46 Vice President, General Counsel and Corporate Secretary

John M. Steitz. Mr. Steitz was elected President and Chief Executive Officer effective March 19, 2019. He previously served as President and Chief Executive Officer of Addivant Corporation, a leading global supplier of antioxidants, intermediates, inhibitors, modifiers, UV stabilizers and other additives to the plastic and rubber industries, from March 2015 until January 2019, as President and Chief Operating Officer of PQ Corporation, a leading worldwide producer of specialty inorganic performance chemicals and catalysts, from October 2013 until March 2015, as President and Chief Executive Officer of Avantor Performance Materials, a global supplier of ultra-high-purity life sciences materials with strict regulatory and performance specifications, from September 2012 until September 2013, as President and Chief Operating Officer of Albemarle Corporation from March 2012 until August 2012, and as Chief Operating Officer and Executive Vice President of Albemarle from April 2007 until March 2012.

D. Andrew Edwards. Mr. Edwards was named Executive Vice President and Chief Financial Officer effective August 6, 2020. Mr. Edwards had been Vice President and Chief Financial Officer since July 20, 2015. He previously served as the Chief Financial Officer of United Sporting Companies, Inc., a wholesale distributor of outdoor sporting goods, from February 2013 until July 2015 and as Vice President, Controller and Chief Accounting Officer of Owens & Minor, Inc., a distributor of acute medical products, from April 2010 to February 2013 and as Acting Chief Financial Officer of Owens & Minor, Inc. from March 2012 to February 2013. Mr. Edwards also served as Vice President, Finance, of Owens & Minor, Inc. from December 2009 until April 2010. Mr. Edwards previously served as the Company’s Vice President, Chief Financial Officer and Treasurer from August 2003 to December 2009 and as the Company’s Vice President, Finance from November 1998 to August 2003. Mr. Edwards also served as the Company’s Treasurer from May 1997 to December 2009 and as the Company’s Controller from October 1992 until July 2000.

Kevin C. Donnelly. Mr. Donnelly was elected Vice President, General Counsel and Corporate Secretary effective January 1, 2021. He joined Tredegar in 2010 and served as its Associate General Counsel from 2013 to 2020. Prior to joining Tredegar, Mr. Donnelly was an associate at Hunton & Williams LLP (now Hunton Andrews Kurth LLP). He received a B.A. degree from the University of Richmond and a J.D. from the University of Virginia.

Tredegar has adopted a Code of Conduct that applies to all of its directors, officers and employees (including its chief executive officer, chief financial officer and principal accounting officer) and has posted the Code of Conduct on its website. All amendments to or waivers from any provision of the Company’s Code of Conduct applicable to the chief executive officer, chief financial officer and principal accounting officer will be disclosed on the Company’s website. The Company’s internet address is www.tredegar.com.

Item 11. EXECUTIVE COMPENSATION

The information to be included in the Proxy Statement under the headings “Compensation of Directors,” “Board Meetings, Meetings of Non-Management Directors and Board Committees - Executive Compensation Committee Interlocks and Insider Participation,” “Compensation Discussion and Analysis,” “Executive Compensation Committee Report” and “Compensation of Executive Officers” is incorporated herein by reference.

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Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERS

The information to be included in the Proxy Statement under the heading “Equity Compensation Plan Information” is incorporated herein by reference.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information to be included in the Proxy Statement under the headings “Certain Relationships and Related Transactions,” “Tredegar’s Board of Directors” and “Board Meetings, Meetings of Non-Management Directors and Board Committees” is incorporated herein by reference.

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The following is incorporated herein by reference:

•Information on accounting fees and services to be included in the Proxy Statement under the heading “Audit and Non-Audit Fees;” and

•Information on the Audit Committee’s procedures for pre-approving certain audit and non-audit services to be included in the Proxy Statement under the heading “Board Meetings, Meetings of Non-Management Directors and Board Committees—Audit Committee Matters.”

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PART IV

Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) List of documents filed as a part of the report:

(1) Financial statements:

Tredegar Corporation

Index to Financial Statements and Supplementary Data

Page

Auditors’ Opinions:

Report of Independent Registered Public Accounting Firm 45

Opinion on Internal Control Over Financial Reporting 47

Financial Statements:

Consolidated Balance Sheets 48

Consolidated Statements of Income 49

Consolidated Statements of Comprehensive Income (Loss) 50

Consolidated Statements of Cash Flows 51

Consolidated Statements of Shareholders' Equity 52

Notes to Financial Statements 53

(2) Financial statement schedules:

None

(3) Exhibit Index 88

44

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Tredegar Corporation:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Tredegar Corporation and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income (loss), cash flows, and shareholders’ equity for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 16, 2021 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of investment in kaleo, Inc.

As discussed in Notes 1 and 4 to the consolidated financial statements, the Company accounts for its ownership interest in kaleo, Inc. (“kaléo”) under the fair value option of accounting. The Company estimates the fair value of its investment in kaléo by computing the weighted average estimated enterprise value utilizing both the discounted cash flow method (the “DCF method”) and the application of a market multiple to earnings before interest, taxes, depreciation and amortization (the “EBITDA multiple method”), and applying certain other adjustments. The Company applied an 80% weighting to the DCF method and a 20% weighting to the EBITDA multiple method. As of December 31, 2020, the estimated fair value of the Company’s ownership interest in kaléo was $34.6M.

We identified the assessment of the fair value of the Company’s ownership interest in kaléo as a critical audit matter. Subjective auditor judgment was required to evaluate certain assumptions used in the DCF method. Specifically, the weighted average cost of capital (“WACC”), which was used as the basis for the discount rate, is sensitive to variation such that minor changes to this assumption could have a significant impact on the estimated fair value of the Company’s ownership interest in kaléo.

The following are the primary procedures we performed to address the critical audit matter. We involved valuation professionals with specialized skills and knowledge who assisted in:

45

— evaluating the Company’s discount rate by comparing it to a discount rate that was independently developed using publicly available third-party market data for comparable entities

— developing an estimate of fair value using kaléo’s forecasted cash flows and the independently developed discount rate, and comparing the results of our estimate of fair value to the Company’s fair value estimate.

/s/ KPMG LLP

We have served as the Company’s auditor since 2018.

Richmond, Virginia

March 16, 2021

46

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Tredegar Corporation:

Opinion on Internal Control Over Financial Reporting

We have audited Tredegar Corporation and subsidiaries’(the Company) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, because of the effect of the material weaknesses, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income (loss), cash flows, and shareholders’ equity for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements), and our report dated March 16, 2021 expressed an unqualified opinion on those consolidated financial statements.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Material weaknesses related to an ineffective control environment resulting from an insufficient number of trained resources, ineffective risk assessment, ineffective information and communication, and ineffective monitoring activities resulting in ineffective control activities related to the design and operation of process-level controls and general information technology controls across all financial reporting processes have been identified and included in management’s assessment. The material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2020 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

Richmond, Virginia

March 16, 2021

47

CONSOLIDATED BALANCE SHEETS

Tredegar Corporation and Subsidiaries

December 31

(In thousands, except share data)

Assets

Current assets:

Current assets of discontinued operations 1,339 37,418

Property, plant and equipment, at cost:

Non-current assets of discontinued operations 151 70,861

Liabilities and Shareholders’ Equity

Current liabilities:

Income taxes payable 706 —

Current liabilities of discontinued operations 7,521 23,280

Pension and other postretirement benefit obligations, net 110,585 107,446

Deferred income tax liabilities — 11,019

Other non-current liabilities 5,529 5,297

Non-current liabilities of discontinued operations — 351

Shareholders’ equity:

Common stock (no par value):

Accumulated other comprehensive income (loss):