14. CONTINGENCIES
Tredegar is involved in various stages of investigation and remediation relating to environmental matters at certain current and former plant locations. Where the Company has determined the nature and scope of any required environmental remediation activity, estimates of cleanup costs have been obtained and accrued. As efforts to maintain compliance with applicable environmental laws and regulations continue, additional contingencies may be identified. If additional contingencies are identified in the future, the Company’s practice is to determine at that time the nature and scope of those contingencies, obtain and accrue estimates of the cost of remediation, and perform remediation. While the Company believes it is currently adequately accrued for known environmental issues, it is possible that unexpected future costs for known or unknown environmental issues could have a material adverse effect on its financial condition, results of operations and cash flows at that time.
The Company is involved in various other legal actions arising in the normal course of business. After taking into consideration the relevant information, the Company believes that it has sufficiently accrued for probable losses and that the actions will not have a material adverse effect on its financial position.
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 in which 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 its 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. For these reasons, Tredegar is unable to estimate the maximum amount of the potential future liability under the indemnity provisions of these agreements. The Company 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 considered to be material.
Under the terms of the agreement pursuant to which the Company sold its former flexible packaging business headquartered in Brazil to Oben, the Company agreed to indemnify Oben for certain liabilities related to Terphane. On January 16, 2026, Oben informed the Company that Terphane received a tax infraction notice from the State Treasury of Pernambuco (“State Treasury”) providing an assessment for the collection of ICMS state value-added tax as well as interest and penalties alleging Terphane made use of certain tax credits without complying with the requirements for the use of such tax credits, for the 2021 and 2022 tax years.
The Company assumed the defense of the matter and filed a response with the State Treasury contesting the assessment. The proceedings are in the early stages of the administrative review process. Any adverse outcomes at the administrative level will be eligible for appeal through judicial processes. The Company has not recorded any liability relating to this notice and cannot reasonably estimate any reasonably possible loss at this time.