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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number 1-10258 
Tredegar Corporation
(Exact Name of Registrant as Specified in Its Charter)
 
Virginia 54-1497771
(State or Other Jurisdiction of
Incorporation or Organization)
 (I.R.S. Employer
Identification No.)
1100 Boulders Parkway
Richmond,Virginia 23225
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, Including Area Code: (804) 330-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, no par valueTGNew York Stock Exchange
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer¨Accelerated filerxSmaller reporting company
Non-accelerated filer
¨ 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  x
The number of shares of Common Stock, no par value, outstanding as of October 29, 2021: 33,742,316



PART I - FINANCIAL INFORMATION 

Item 1.    Financial Statements.
Tredegar Corporation
Condensed Consolidated Balance Sheets
(In Thousands, Except Share Data)
(Unaudited)
September 30,December 31,
20212020
Assets
Current assets:
Cash and cash equivalents$30,253 $11,846 
Accounts and other receivables, net97,185 86,327 
Income taxes recoverable2,013 2,807 
Inventories85,686 66,437 
Prepaid expenses and other13,502 19,679 
Current assets of discontinued operations151 1,339 
Total current assets228,790 188,435 
Property, plant and equipment, at cost493,094 475,619 
Less accumulated depreciation(325,141)(309,074)
Net property, plant and equipment167,953 166,545 
Right-of-use leased assets14,453 16,037 
Investment in kaléo (cost basis of $7,500)
35,479 34,600 
Identifiable intangible assets, net16,608 18,820 
Goodwill67,708 67,708 
Deferred income taxes12,101 19,068 
Other assets2,591 3,506 
Non-current assets of discontinued operations151 151 
Total assets$545,834 $514,870 
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable$115,879 $89,702 
Accrued expenses31,672 40,741 
Lease liability, short-term2,086 2,082 
Income taxes payable56 706 
Current liabilities of discontinued operations370 7,521 
Total current liabilities150,063 140,752 
Lease liability, long-term13,376 14,949 
Long-term debt127,000 134,000 
Pension and other postretirement benefit obligations, net102,970 110,585 
Other non-current liabilities6,146 5,529 
Total liabilities399,555 405,815 
Shareholders’ equity:
Common stock, no par value (issued and outstanding 33,727,317 shares at September 30, 2021 and 33,457,176 shares at December 31, 2020)
53,906 50,066 
Common stock held in trust for savings restoration plan (107,397 shares at September 30, 2021 and 105,067 shares at December 31, 2020)
(2,122)(2,087)
Accumulated other comprehensive income (loss):
Foreign currency translation adjustment(85,592)(84,149)
Gain (loss) on derivative financial instruments2,779 2,264 
Pension and other postretirement benefit adjustments(86,565)(96,519)
Retained earnings263,873 239,480 
Total shareholders’ equity146,279 109,055 
Total liabilities and shareholders’ equity$545,834 $514,870 
See accompanying notes to financial statements.
2


Tredegar Corporation
Condensed Consolidated Statements of Income (Loss)
(In Thousands, Except Per Share Data)
(Unaudited)
 
Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
Revenues and other items:
Sales$209,517 $184,370 $605,468 $562,766 
Other income (expense), net391 (37,934)9,272 (63,898)
209,908 146,436 614,740 498,868 
Costs and expenses:
Cost of goods sold170,756 136,008 470,733 415,212 
Freight7,264 6,453 20,531 19,222 
Selling, general and administrative16,767 20,420 55,422 61,654 
Research and development1,613 1,656 4,770 6,063 
Amortization of identifiable intangibles724 753 2,170 2,264 
Pension and postretirement benefits3,540 3,567 10,622 10,701 
Interest expense842 494 2,555 1,598 
Asset impairments and costs associated with exit and disposal activities, net of adjustments265 3 633 74 
Goodwill impairment
   13,696 
Total201,771 169,354 567,436 530,484 
Income (loss) from continuing operations before income taxes8,137 (22,918)47,304 (31,616)
Income tax expense (benefit)1,908 (5,942)10,728 (8,308)
Net income (loss) from continuing operations6,229 (16,976)36,576 (23,308)
Income (loss) from discontinued operations, net of tax(26)(48,237)(104)(53,031)
Net income (loss)$6,203 $(65,213)$36,472 $(76,339)
Earnings (loss) per share:
Basic:
Continuing operations$0.19 $(0.51)$1.09 $(0.70)
Discontinued operations (1.44) (1.59)
Basic earnings (loss) per share$0.19 $(1.95)$1.09 $(2.29)
Diluted:
Continuing operations$0.19 $(0.51)$1.09 $(0.70)
Discontinued operations (1.44) (1.59)
Diluted earnings (loss) per share$0.19 $(1.95)$1.09 $(2.29)
Shares used to compute earnings (loss) per share:
Basic33,620 33,439 33,541 33,396 
Diluted33,649 33,439 33,678 33,396 
See accompanying notes to financial statements.

3


Tredegar Corporation
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In Thousands)
(Unaudited)
Three Months Ended September 30,
 20212020
Net income (loss)$6,203 $(65,213)
Other comprehensive income (loss):
Unrealized foreign currency translation adjustment (net of tax benefit of $294 in 2021 and net of tax benefit of $19 in 2020)
(2,788)927 
Derivative financial instruments adjustment (net of tax benefit of $174 in 2021 and net of tax of $618 in 2020)
(717)2,213 
Amortization of prior service costs and net gains or losses (net of tax of $927 in 2021 and net of tax of $836 in 2020)
3,317 2,931 
Other comprehensive income (loss)(188)6,071 
Comprehensive income (loss)$6,015 $(59,142)

Nine Months Ended September 30,
 20212020
Net income (loss)$36,472 $(76,339)
Other comprehensive income (loss):
Unrealized foreign currency translation adjustment (net of tax benefit of $103 in 2021 and net of tax benefit of $1,125 in 2020)
(1,443)(11,076)
Derivative financial instruments adjustment (net of tax of $185 in 2021 and net of tax benefit of $269 in 2020)
515 (304)
Amortization of prior service costs and net gains or losses (net of tax of $2,773 in 2021 and net of tax of $2,507 in 2020)
9,954 8,793 
Other comprehensive income (loss)9,026 (2,587)
Comprehensive income (loss)$45,498 $(78,926)
See accompanying notes to financial statements.

4


Tredegar Corporation
Condensed Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
Nine Months Ended September 30,
20212020
Cash flows from operating activities:
Net income (loss)$36,472 $(76,339)
Adjustments for noncash items:
Depreciation16,169 23,218 
Amortization of identifiable intangibles2,170 2,264 
Reduction of right-of-use lease asset1,582 2,102 
Goodwill impairment 13,696 
Deferred income taxes4,120 (19,492)
Accrued pension and post-retirement benefits10,622 10,701 
Stock-based compensation expense3,227 4,120 
(Gain) loss on investment in kaléo accounted for under the fair value method(879)61,000 
Held for sale impairment loss on divested assets 45,054 
Changes in assets and liabilities:
Accounts and other receivables(11,379)4,961 
Inventories(19,902)(2,761)
Income taxes recoverable/payable111 5,332 
Prepaid expenses and other3,422 (5,305)
Accounts payable and accrued expenses12,078 (2,112)
Lease liability(1,566)(2,245)
Pension and postretirement benefit plan contributions(5,510)(2,254)
Other, net750 4,386 
Net cash provided by operating activities51,487 66,326 
Cash flows from investing activities:
Capital expenditures(19,576)(13,416)
Proceeds from the sale of assets4,749  
Net cash used in investing activities(14,827)(13,416)
Cash flows from financing activities:
Borrowings69,250 25,000 
Debt principal payments(76,250)(60,000)
Dividends paid(12,114)(12,048)
Other915 (586)
Net cash used in financing activities(18,199)(47,634)
Effect of exchange rate changes on cash(54)(1,676)
Increase in cash & cash equivalents18,407 3,600 
Cash and cash equivalents at beginning of period11,846 31,422 
Cash and cash equivalents at end of period$30,253 $35,022 
See accompanying notes to financial statements.

5


Tredegar Corporation
Condensed Consolidated Statements of Shareholders’ Equity
(In Thousands, Except Share and Per Share Data)
(Unaudited)

The following summarizes the changes in shareholders’ equity for the three month period ended September 30, 2021:
Accumulated Other Comprehensive Income (Loss)
Common StockRetained EarningsTrust for Savings Restoration PlanForeign Currency TranslationGain (Loss) on Derivative Financial InstrumentsPension & Other Post-retirement Benefit AdjustmentTotal Shareholders’ Equity
Balance July 1, 2021$52,940 $261,699 $(2,109)$(82,804)$3,496 $(89,882)$143,340 
Net income (loss)— 6,203 — — — — 6,203 
Foreign currency translation adjustment (net of tax benefit of $294)
— — — (2,788)— — (2,788)
Derivative financial instruments adjustment (net of tax benefit of $174)
— — — — (717)— (717)
Amortization of prior service costs and net gains or losses (net of tax of $927)
— — — — — 3,317 3,317 
Cash dividends declared ($0.12 per share)
— (4,042)— — — — (4,042)
Stock-based compensation expense966 — — — — — 966 
Tredegar common stock purchased by trust for savings restoration plan— 13 (13)— — — — 
Balance September 30, 2021
$53,906 $263,873 $(2,122)$(85,592)$2,779 $(86,565)$146,279 

6


The following summarizes the changes in shareholders’ equity for the nine month period ended September 30, 2021:
Accumulated Other Comprehensive Income (Loss)
Common StockRetained EarningsTrust for Savings Restoration PlanForeign Currency TranslationGain (Loss) on Derivative Financial InstrumentsPension & Other Post-retirement Benefit AdjustmentTotal Shareholders’ Equity
Balance January 1, 2021$50,066 $239,480 $(2,087)$(84,149)$2,264 $(96,519)$109,055 
Net income (loss)— 36,472 — — — — 36,472 
Foreign currency translation adjustment (net of tax benefit of $103)
— — — (1,443)— — (1,443)
Derivative financial instruments adjustment (net of tax of $185)
— — — — 515 — 515 
Amortization of prior service costs and net gains or losses (net of tax of $2,773)
— — — — — 9,954 9,954 
Cash dividends declared ($0.36 per share)
— (12,114)— — — — (12,114)
Stock-based compensation expense2,925 — — — — — 2,925 
Issued upon exercise of stock options915 — — — — — 915 
Tredegar common stock purchased by trust for savings restoration plan— 35 (35)— — — — 
Balance September 30, 2021
$53,906 $263,873 $(2,122)$(85,592)$2,779 $(86,565)$146,279 

7


The following summarizes the changes in shareholders’ equity for the three month period ended September 30, 2020:
Accumulated Other Comprehensive Income (Loss)
Common StockRetained EarningsTrust for Savings Restoration PlanForeign Currency TranslationGain (Loss) on Derivative Financial InstrumentsPension & Other Post-retirement Benefit AdjustmentTotal Shareholders’ Equity
Balance July 1, 2020$47,448 $511,345 $(1,610)$(112,666)$(3,824)$(89,819)$350,874 
Net income (loss)— (65,213)— — — — (65,213)
Foreign currency translation adjustment (net of tax benefit of $19)
— — — 927 — — 927 
Derivative financial instruments adjustment (net of tax of $618)
— — — — 2,213 — 2,213 
Amortization of prior service costs and net gains or losses (net of tax of $836)
— — — — — 2,931 2,931 
Cash dividends declared ($0.12 per share)
— (4,023)— — — — (4,023)
Stock-based compensation expense1,600 — — — — — 1,600 
Tredegar common stock purchased by trust for savings restoration plan— 9 (9)— — — — 
Balance September 30, 2020
$49,048 $442,118 $(1,619)$(111,739)$(1,611)$(86,888)$289,309 



8


The following summarizes the changes in shareholders’ equity for the nine month period ended September 30, 2020:
  Accumulated Other
Comprehensive Income (Loss)
 
 Common
Stock
Retained
Earnings
Trust for
Savings
Restoration
Plan
Foreign
Currency
Translation
Gain
(Loss) on
Derivative
Financial
Instruments
Pension & Other Post-retirement Benefit AdjustmentTotal
Shareholders’
Equity
Balance at January 1, 2020$45,514 $530,478 $(1,592)$(100,663)$(1,307)$(95,681)$376,749 
Net income (loss)— (76,339)— — — — (76,339)
Foreign currency translation adjustment (net of tax benefit of $1,125)
— — — (11,076)— — (11,076)
Derivative financial instruments adjustment (net of tax benefit of $269)
— — — — (304)— (304)
Amortization of prior service costs and net gains or losses (net of tax of $2,507)
— — — — — 8,793 8,793 
Cash dividends declared ($0.36 per share)
— (12,048)— — — — (12,048)
Stock-based compensation expense4,120 — — — — — 4,120 
Repurchase of employee common stock for tax withholdings(586)— — — — — (586)
Tredegar common stock purchased by trust for savings restoration plan— 27 (27)— — — — 
Balance at September 30, 2020$49,048 $442,118 $(1,619)$(111,739)$(1,611)$(86,888)$289,309 
See accompanying notes to financial statements.

9


TREDEGAR CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
1    BASIS OF PRESENTATION
In the opinion of management, the accompanying condensed consolidated financial statements of Tredegar Corporation and its subsidiaries (“Tredegar,” “the Company,” “we,” “us” or “our”) contain all adjustments necessary to state fairly, in all material respects, Tredegar’s consolidated financial position as of September 30, 2021, the consolidated results of operations for the three and nine months ended September 30, 2021 and 2020, the consolidated cash flows for the nine months ended September 30, 2021 and 2020, and the consolidated changes in shareholders’ equity for the three and nine months ended September 30, 2021 and 2020, in accordance with U.S. generally accepted accounting principles (“GAAP”). All such adjustments, unless otherwise detailed in the notes to the condensed consolidated financial statements, are deemed to be of a normal, recurring nature.
The Company operates on a calendar fiscal year except for the Aluminum Extrusions segment, which operates on a 52/53-week fiscal year basis.  As such, the fiscal third quarter for 2021 and 2020 for this segment references 13-week periods ended September 25, 2021 and September 27, 2020.  The Company does not believe the impact of reporting the results of this segment as stated above is material to the consolidated financial results. The Company may fund or receive cash from the Aluminum Extrusions segment based on Aluminum Extrusion’s cash flows from operations during the intervening period from Aluminum Extrusion’s fiscal quarter end and the Company’s fiscal quarter end. There was no intercompany funding with Aluminum Extrusions between September 25, 2021 and September 30, 2021. As of September 30, 2021 and December 31, 2020, the Company’s cash and cash equivalents declined by $0.5 million and $3.8 million, respectively, since the Company made payments to the Aluminum Extrusions segment to fund its working capital during the intervening period.
The financial position data as of December 31, 2020 that is included herein was derived from the audited consolidated financial statements provided in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K”) but does not include all disclosures required by GAAP. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in the 2020 Form 10-K.
On October 30, 2020, the Company completed the sale of its personal care films business (“Personal Care Films”), which was part of its PE Films segment. 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. All historical results for Personal Care Films have been presented as discontinued operations.
On December 31, 2020, the Company completed the sale of Bright View Technologies, which was part of its PE Films segment. The sale did not represent a strategic shift nor did it have a major effect on the Company's historical and ongoing operations, thus all financial information for Bright View Technologies has been presented in continuing operations.
The results of operations for the three and nine months ended September 30, 2021, are not necessarily indicative of the results to be expected for the full year.
Accounting Standards Adopted:
In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2019-12, which simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, hybrid taxes and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. In the first quarter of 2021, the Company adopted ASU 2019-12, which did not have a material impact on the Company's consolidated financial statements.
2    DIVESTITURES AND ASSETS HELD FOR SALE
Divestitures
Personal Care Films
In 2020, the Company completed the sale of Personal Care Films for an aggregate purchase price of $60.5 million, subject to customary adjustments. The Company agreed to provide certain transition services related to finance, human resources and information technology ("IT") that ended during the second quarter of 2021, resulting in final cash proceeds of $64.1 million. Personal Care Films was previously reported in the PE Films segment.


10



The following table summarizes the financial results of discontinued operations reflected in the consolidated statements of income for the three and nine months ended September 30, 2021 and 2020:
Three Months Ended September 30,Nine Months Ended September 30,
(In thousands)2021202020212020
Revenues and other items:
Sales$ $29,509 $ $98,053 
Other income (expense), net (37) (298)
 29,472  97,755 
Costs and expenses:
Cost of goods sold 25,481  83,408 
Freight 1,436  4,711 
Selling, general and administrative33 6,502 1,251 13,649 
Research and development 3,138  8,451 
Asset impairments and costs associated with exit and disposal activities, net of adjustments 801  1,327 
Adjustment to the fair value estimates used in the disposal of Personal Care Films(a)
  (1,118) 
Held for sale impairment loss on divested assets 45,054  45,054 
Total33 82,412 133 156,600 
Income (loss) from discontinued operations before income taxes(33)(52,940)(133)(58,845)
Income tax expense (benefit)(7)(4,703)(29)(5,814)
Income (loss) from discontinued operations, net of tax$(26)$(48,237)$(104)$(53,031)
(a) Represents a net increase to the estimated fair value of Personal Care Films primarily due to lower costs associated with IT transition-related services to provide the seller developed assets, which did not exist at the time of the sale, to support the seller's IT infrastructure.
The assets and liabilities of the discontinued operations reflected in the consolidated balance sheets as of September 30, 2021 and December 31, 2020, respectively, were as follows:
September 30,December 31,
(In thousands)20212020
Assets
Prepaid expenses and other (a)
$151 $1,339 
Other non-current assets151 151 
Total assets of discontinued operations$302 $1,490 
Liabilities
Accrued expenses (a)
$370 $7,521 
(a) The consolidated balance sheet of discontinued operations as of September 30, 2021 includes $0.2 million of other receivables related to the settlement of customary post-closing adjustments, accrued severance of $0.3 million, and other miscellaneous accrued expenses of $0.1 million. The consolidated balance sheet of discontinued operations as of December 31, 2020 includes $0.4 million of other receivables related to the settlement of customary post-closing adjustments, deferred assets of $0.9 million and deferred obligations of $5.3 million related to transition services, accrued severance of $2.1 million, and other miscellaneous accrued expenses of $0.2 million.




11


The following table provides significant operating and investing cash flow information for discontinued operations:
Nine Months Ended September 30,
(In thousands)20212020
Operating activities
Depreciation and amortization$ $6,625 
Held for sale impairment loss on divested assets 45,054 
Other(1,118) 
Total(1,118)51,679 
Investing activities
Capital expenditures$ $2,989 

Assets Held For Sale
In July 2019, the Company committed to a plan to close its manufacturing facility in Lake Zurich, Illinois, which historically was reported by the Company within the Personal Care Films component of its PE Films segment. During the third quarter of 2020, the disposal group carrying value of $4.6 million was reported in "Prepaid expenses and other" in the consolidated balance sheet as the held for sale criteria was met. During the third quarter of 2021, the Company completed the sale of the remaining assets in Lake Zurich, Illinois resulting in total cash proceeds of $4.7 million.
3    LONG-LIVED ASSETS & GOODWILL IMPAIRMENT
The Company assesses its long-lived assets for impairment when events and circumstances indicate that the carrying amount of the assets may not be recoverable. Long-lived assets consist primarily of buildings, machinery and equipment. During the three months ended September 30, 2021, the Company did not identify any indicators of impairment for long-lived assets.
The Company annually assesses goodwill for impairment on December 1st of each year or more frequently when events or circumstances indicate that the carrying amount of a reporting unit that includes goodwill exceeds its fair value. The Company evaluated whether triggering events occurred during the three months ended September 30, 2021 and 2020 for all reporting units that include goodwill and determined no events or circumstances existed that indicated the fair value of the reporting units are below their carrying amounts.
During the first three months of 2020, the Company determined that trigger events did occur for the Aluminum Extrusions’ reporting units created as a result of acquisitions in 2012 (“AACOA”) and in 2017 (“Futura”). As a result of the impairment testing performed, 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. No impairment was identified for Futura.
The Company continues to monitor developments related to the coronavirus ("COVID-19") pandemic and may perform updated event-driven analyses during 2021, as necessary.
4    INVENTORIES
The components of inventories are as follows:
(In thousands)September 30, 2021December 31, 2020
Finished goods$21,614 $15,251 
Work-in-process12,586 9,098 
Raw materials32,836 25,913 
Stores, supplies and other18,650 16,175 
Total$85,686 $66,437 
12


5    EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income (loss) from continuing and discontinued operations by the weighted average number of shares of common stock outstanding. Diluted earnings per share is computed by dividing net income (loss) from continuing and discontinued operations by the weighted average common and potentially dilutive common equivalent shares outstanding, determined as follows:
Three Months EndedNine Months Ended
 September 30,September 30,
(In thousands)2021202020212020
Weighted average shares outstanding used to compute basic earnings per share33,620 33,439 33,541 33,396 
Incremental dilutive shares attributable to stock options and restricted stock29  137  
Shares used to compute diluted earnings per share33,649 33,439 33,678 33,396 

Incremental shares attributable to stock options and restricted stock are computed under the treasury stock method using the average market price during the related period. The average out-of-the-money options to purchase shares that were excluded from the calculation of incremental shares attributable to stock options and restricted stock were 2,433,213 and 1,280,376, respectively, for the three and nine months ended September 30, 2021. The Company had a net loss from continuing operations for the three and nine months ended September 30, 2020, so there was no dilutive impact for such shares. If the Company had reported net income from continuing operations for the three and nine months ended September 30, 2020, average out-of-the-money options to purchase shares that were excluded from the calculation of incremental shares attributable to stock options and restricted stock were 1,509,429 and 1,253,278, respectively.
6    ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Reclassifications of balances out of accumulated other comprehensive income (loss) into net income (loss) for the three months ended September 30, 2021 are summarized as follows:
(In thousands)Amount reclassified from accumulated other comprehensive income (loss)Location of gain (loss) reclassified from accumulated other comprehensive income (loss) to net income (loss)
Gain (loss) on derivative financial instruments:
Aluminum future contracts, before taxes$2,160 Cost of goods sold
Foreign currency forward contracts, before taxes(34)Selling, general & administrative
Foreign currency forward contracts, before taxes15 Cost of goods sold
Total, before taxes2,141 
Income tax expense (benefit)476 Income tax expense (benefit)
Total, net of tax$1,665 
Amortization of pension and other post-retirement benefits:
Actuarial gain (loss) and prior service costs, before taxes$(4,244)(a)
Income tax expense (benefit)(927)Income tax expense (benefit)
Total, net of tax$(3,317)
(a)    This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost (see Note 9 for additional detail).
13


Reclassifications of balances out of accumulated other comprehensive income (loss) into net income (loss) for the nine months ended September 30, 2021 are summarized as follows:
(In thousands)Amount reclassified from accumulated other comprehensive income (loss)Location of gain (loss) reclassified from accumulated other comprehensive income (loss) to net income (loss)
Gain (loss) on derivative financial instruments:
Aluminum future contracts, before taxes$4,172 Cost of goods sold
Foreign currency forward contracts, before taxes(183)Selling, general & administrative
Foreign currency forward contracts, before taxes48 Cost of goods sold
Total, before taxes4,037 
Income tax expense (benefit)880 Income tax expense (benefit)
Total, net of tax$3,157 
Amortization of pension and other post-retirement benefits:
Actuarial gain (loss) and prior service costs, before taxes$(12,727)(a)
Income tax expense (benefit)(2,773)Income tax expense (benefit)
Total, net of tax$(9,954)
(a)    This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost (see Note 9 for additional detail).

Reclassifications of balances out of accumulated other comprehensive income (loss) into net income for the three months ended September 30, 2020 are summarized as follows:
(In thousands)Amount reclassified from accumulated other comprehensive income (loss)Location of gain (loss) reclassified from accumulated other comprehensive income (loss) to net income (loss)
Gain (loss) on derivative financial instruments:
Aluminum future contracts, before taxes$(575)Cost of goods sold
Foreign currency forward contracts, before taxes(1,767)Selling, general & administrative
Foreign currency forward contracts, before taxes15 Cost of goods sold
Total, before taxes(2,327)
Income tax expense (benefit)(496)Income tax expense (benefit)
Total, net of tax$(1,831)
Amortization of pension and other post-retirement benefits:
Actuarial gain (loss) and prior service costs, before taxes$(3,767)(a)
Income tax expense (benefit)(836)Income tax expense (benefit)
Total, net of tax$(2,931)
(a)    This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost (see Note 9 for additional detail).
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Reclassifications of balances out of accumulated other comprehensive income (loss) into net income for the nine months ended September 30, 2020 are summarized as follows:
(In thousands)Amount reclassified from accumulated other comprehensive income (loss)Location of gain (loss) reclassified from accumulated other comprehensive income (loss) to net income (loss)
Gain (loss) on derivative financial instruments:
Aluminum future contracts, before taxes$(2,766)Cost of goods sold
Foreign currency forward contracts, before taxes(4,359)Selling, general & administrative
Foreign currency forward contracts, before taxes46 Cost of goods sold
Total, before taxes(7,079)
Income tax expense (benefit)(1,523)Income tax expense (benefit)
Total, net of tax$(5,556)
Amortization of pension and other post-retirement benefits:
Actuarial gain (loss) and prior service costs, before taxes$(11,300)(a)
Income tax expense (benefit)(2,507)Income tax expense (benefit)
Total, net of tax$(8,793)
(a)    This component of accumulated other comprehensive income (loss) is included in the computation of net periodic pension cost (see Note 9 for additional detail).
7    INVESTMENTS
The Company's aggregate investment of $7.5 million, for an approximate 18% ownership interest, in kaleo, Inc. (“kaléo”), a privately held specialty pharmaceutical company dedicated to building innovative solutions for serious and life-threatening medical conditions, is accounted for under the fair value method in the condensed consolidated financial statements.
The estimated fair value of the Company’s investment was $35.5 million as of September 30, 2021 and $34.6 million as of December 31, 2020. kaléo’s stock is not publicly traded. The ultimate value of the Company’s ownership interest in kaléo could be materially different from the estimated fair value and will ultimately be determined and realized only if and when a liquidity event occurs. Amounts recognized associated with the Company’s investment in kaléo are included in “Other income (expense), net” in the consolidated statements of income and separately stated in the net sales and earnings before interest, taxes, depreciation and amortization ("EBITDA") from ongoing operations by segment table in Note 11.
The Company estimated the fair value of its investment in kaléo at September 30, 2021 by: (i) computing the weighted average estimated enterprise value (“EV”) utilizing both the discounted cash flow method (the “DCF Method”) and the application of a market multiple to EBITDA (the “EBITDA Multiple Method”), (ii) applying adjustments for any surplus or deficient working capital and estimates of contingent liabilities, (iii) adding cash and cash equivalents, (iv) subtracting interest-bearing debt, (v) subtracting a private company liquidity discount estimated at approximately 20% at September 30, 2021 (consistent with 20% at both December 31, 2020 and September 30, 2020) of the net result of (i) through (iv), and (vi) applying liquidation preferences and fully diluted ownership percentages to the estimated equity value computed in (i) through (v).
The Company’s estimate of kaléo’s EV as of September 30, 2021 and December 31, 2020 was determined by weighting the EBITDA Multiple Method by 20% and the DCF Method by 80%. A heavier weighting towards the DCF Method was used since kaléo’s projections better reflect ongoing pricing pressures and expected changes in market access. The DCF Method projections rely on numerous assumptions and Level 3 inputs. In addition, there are various regulatory and legal enforcement efforts, including an ongoing Department of Justice investigation related to kaléo’s discontinued Evzio business, which could have a material adverse effect on kaléo’s business that require assessment in any valuation method applied.
8    DERIVATIVES
Tredegar uses derivative financial instruments for the purpose of hedging margin exposure from fixed-price forward sales contracts in Aluminum Extrusions and exposure from currency volatility that exists as part of ongoing business operations in Flexible Packaging Films. These derivative financial instruments are designated as and qualify as cash flow hedges and are recognized in the consolidated balance sheet at fair value. The fair value of derivative instruments is recorded on the consolidated balance sheets. If individual derivative instruments with the same counterparty can be settled on a net basis, the Company records the corresponding derivative fair values as a net asset or net liability.
In the normal course of business, Aluminum Extrusions enters into fixed-price forward sales contracts with certain customers for the future sale of fixed quantities of aluminum extrusions at scheduled intervals. In order to hedge margin
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exposure created from the fixing of future sales prices relative to volatile raw material (aluminum) costs, Aluminum Extrusions enters into a combination of forward purchase commitments and futures contracts to acquire or hedge aluminum, based on the scheduled purchases for the firm sales commitments. The fixed-price firm sales commitments and related hedging instruments generally have durations of not more than 12 months. The notional amount of aluminum futures contracts that hedged future purchases of aluminum to meet fixed-price forward sales contract obligations was $18.7 million (13.9 million pounds of aluminum) at September 30, 2021 and $12.1 million (13.0 million pounds of aluminum) at December 31, 2020.
The table below summarizes the location and gross amounts of aluminum futures contract fair values (Level 2) in the consolidated balance sheets as of September 30, 2021 and December 31, 2020:
 September 30, 2021December 31, 2020
(In thousands)Balance Sheet
Account
Fair
Value
Balance Sheet
Account
Fair
Value
Derivatives Designated as Hedging Instruments
Asset derivatives:
Aluminum futures contracts
Prepaid expenses and other$3,996 Prepaid expenses and other$1,560 
Liability derivatives:
Aluminum futures contracts
Accrued expenses(1)Accrued expenses(22)
Net asset$3,995 $1,538 

In the event that a counterparty to an aluminum fixed-price forward sales contract chooses not to take delivery of its aluminum extrusions, the customer is contractually obligated to compensate Aluminum Extrusions for any losses on the related aluminum futures and/or forward contracts through the date of cancellation.
The Company's earnings are exposed to foreign currency exchange risk primarily through the translation of the financial statements of subsidiaries that have a functional currency other than the U.S. Dollar. The Company estimates that the net mismatch translation exposure for the Flexible Packaging Film's business unit in Brazil (“Terphane Ltda.”) of its sales and raw materials quoted or priced in U.S. Dollars and its variable conversion, fixed conversion and sales, general and administrative costs (before depreciation and amortization) quoted or priced in Brazilian Real ("R$") is annual net costs of R$150 million.
Terphane Ltda. has the following outstanding foreign exchange average forward rate contracts to purchase Brazilian Real and sell U.S. Dollars:
USD Notional Amount (000s)Average Forward Rate Contracted on USD/BRLR$ Equivalent Amount (000s)Applicable MonthEstimated % of Terphane Ltda. R$ Operating Cost Exposure Hedged
$1,4005.5100R$7,714Oct-2178%
$1,4955.5224R$8,256Nov-2183%
$1,1705.5060R$6,442Dec-21