XML 34 R16.htm IDEA: XBRL DOCUMENT
v3.24.1.u1

Derivative Financial Instruments | 3 Months Ended
--- | ---
Mar. 31, 2024
Summary of Derivative Instruments [Abstract] |
Derivative Financial Instruments | Tredegar uses derivative financial instruments for the purpose of hedging margin exposure from fixed-price forward sales contracts in Aluminum Extrusions and exposure from currency volatility that exists as part of ongoing business operations in Flexible Packaging Films. These derivative financial instruments are designated as and qualify as cash flow hedges and are recognized in the condensed consolidated balance sheet at fair value. If individual derivative instruments with the same counterparty can be settled on a net basis, the Company records the corresponding derivative fair values as a net asset or net liability. In the normal course of business, Aluminum Extrusions enters into fixed-price forward sales contracts with a small subset of its customers for the future sale of fixed quantities of aluminum extrusions at scheduled intervals. In order to hedge margin exposure created from the fixing of future sales prices relative to volatile raw material (aluminum) costs, Aluminum Extrusions enters into a combination of forward purchase commitments and futures contracts to acquire or hedge aluminum, based on the scheduled purchases for the firm sales commitments. The fixed-price firm sales commitments and related hedging instruments have durations generally no longer than 12 months. The notional amount of aluminum futures contracts that hedged future purchases of aluminum to meet fixed-price forward sales contract obligations was $6.8 million (5.1 million pounds of aluminum) at March 31, 2024 and $7.7 million (5.6 million pounds of aluminum) at December 31, 2023. The table below summarizes the location and gross amounts of aluminum futures contract fair values (Level 2) in the condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023:
| March 31, 2024 |  | December 31, 2023
(In thousands) | Balance Sheet Account |  | Fair Value |  | Balance Sheet Account |  | Fair Value
Derivatives Designated as Hedging Instruments |  |  |  |  |  |  |
Asset derivatives: Aluminum futures contracts | Other assets |  | 28 |  |  | Other assets |  | — |
Liability derivatives: Aluminum futures contracts | Accrued expenses |  | (318) |  |  | Accrued expenses |  | (483) |
Aluminum futures contracts | Other non-current liabilities |  | — |  |  | Other non-current liabilities |  | (9) |
Net asset (liability) |  |  | $ | (290) |  |  |  |  | $ | (492) |
In the event that a counterparty to an aluminum fixed-price forward sales contract chooses not to take delivery of its aluminum extrusions, the customer is contractually obligated to compensate Aluminum Extrusions for any losses on the related aluminum futures and/or forward contracts through the date of cancellation. The Company's earnings are exposed to foreign currency exchange risk primarily through the translation of the financial statements of subsidiaries that have a functional currency other than the U.S. Dollar. The Company estimates that the net mismatch translation exposure for the Flexible Packaging Film's business unit in Brazil (“Terphane Ltda.”) of its sales and raw materials quoted or priced in U.S. Dollars and its variable conversion, fixed conversion and sales, general and administrative costs (before depreciation and amortization) quoted or priced in Brazilian Real ("R$") will result in an annual net cost of R$139 million for the full year of 2024. Terphane Ltda. had the following outstanding foreign exchange average forward rate contracts to purchase Brazilian Real and sell U.S. Dollars as of March 31, 2024:
USD Notional Amount (000s) | Average Forward Rate Contracted on USD/BRL | R$ Equivalent Amount (000s) | Applicable Month | Estimated % of Terphane Ltda. R$ Operating Cost Exposure Hedged
$1,827 | 5.3373 | R$9,751 | Apr-24 | 84%
$1,798 | 5.3588 | R$9,635 | May-24 | 83%
$1,812 | 5.3708 | R$9,732 | Jun-24 | 84%
$1,804 | 5.3848 | R$9,714 | Jul-24 | 84%
$1,806 | 5.4014 | R$9,755 | Aug-24 | 84%
$1,857 | 5.4107 | R$10,048 | Sep-24 | 87%
$1,851 | 5.4225 | R$10,037 | Oct-24 | 87%
$1,837 | 5.4403 | R$9,994 | Nov-24 | 86%
$1,801 | 5.4580 | R$9,830 | Dec-24 | 85%
$16,393 | 5.3984 | R$88,496 |  | 84%
These foreign currency exchange contracts have been designated and qualify as cash flow hedges of Terphane Ltda.’s forecasted sales to customers quoted or priced in U.S. Dollars over that period. By changing the currency risk associated with these U.S. Dollar sales, the derivatives have the effect of offsetting operating costs quoted or priced in Brazilian Real and decreasing the net exposure to Brazilian Real in the condensed consolidated statements of income. The table below summarizes the location and gross amounts of foreign currency forward contract fair values (Level 2) in the condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023:
| March 31, 2024 |  | December 31, 2023
(In thousands) | Balance Sheet Account |  | Fair Value |  | Balance Sheet Account |  |  | Fair Value
Derivatives Designated as Hedging Instruments |  |  |  |  |  |  |  |
Asset derivatives: Foreign currency forward contracts | Prepaid expenses and other |  | $ | 1,154 |  |  | Prepaid expenses and other |  |  | $ | 2,050 |
Foreign currency forward contracts | Other assets |  | — |  |  | Other assets |  |  | 146 |
Liability derivatives: Foreign currency forward contracts | Accrued expenses |  | (6) |  |  | Other non-current liabilities |  |  | — |
Foreign currency forward contracts | Other non-current liabilities |  | (2) |  |  | Other non-current liabilities |  |  | — |
Net asset (liability) |  |  | $ | 1,146 |  |  |  |  |  | $ | 2,196 |
These derivative contracts involve elements of market risk that are not reflected on the condensed consolidated balance sheet, including the risk of dealing with counterparties and their ability to meet the terms of the contracts. The counterparties to any forward purchase commitments are major aluminum brokers and suppliers, and the counterparties to any aluminum futures contracts are major financial institutions. Fixed-price forward sales contracts are only made available to the most credit-worthy customers. The counterparties to the Company’s foreign currency cash flow hedge contracts are major financial institutions. The pre-tax effect on net income (loss) and other comprehensive income (loss) of derivative instruments classified as cash flow hedges and described in the previous paragraphs for the three month periods ended March 31, 2024 and 2023 is summarized in the table below:
| Cash Flow Derivative Hedges
| Three Months Ended March 31,
| Aluminum Futures Contracts |  | Foreign Currency Forwards
(In thousands) | 2024 |  | 2023 |  | 2024 |  | 2023
Amount of pre-tax gain (loss) recognized in other comprehensive income (loss) | $ | 721 |  |  | $ | 1,402 |  |  | $ | — |  | $ | (439) |  |  | $ | — |  |  | $ | 1,676 |
Location of gain (loss) reclassified from accumulated other comprehensive income (loss) into net income (effective portion) | Cost of goods sold |  | Cost of goods sold |  | Cost of goods sold | Selling, general & admin |  | Cost of goods sold |  | Selling, general & admin
Amount of pre-tax gain (loss) reclassified from accumulated other comprehensive income (loss) to net income (effective portion) | $ | 519 |  |  | $ | 672 |  |  | $ | 15 |  | $ | 393 |  |  | $ | 15 |  |  | $ | 286 |
As of March 31, 2024, the Company expects $0.4 million of unrealized after-tax gains on aluminum and foreign currency derivative instruments reported in accumulated other comprehensive income (loss) to be reclassified to earnings within the next 12 months. For the three month periods ended March 31, 2024 and 2023, net gains or losses realized, from previously unrealized net gains or losses on hedges that had been discontinued, were not material.

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_SummaryOfDerivativeInstrumentsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration