TREDEGAR CORP

Previous wording

Tredegar Corporation is an industrial manufacturer with two primary businesses: custom aluminum extrusions for the building & construction (“B&C”), automotive and specialty end-use markets in the United States through its Aluminum Extrusions segment (with exports comprising less than 5% of total sales volume) and surface protection films for high-technology applications in the global electronics industry through its High Performance Films segment. With approximately 1,700 employees, the Company operates manufacturing facilities in the U.S. and China.

Current wording

Tredegar Corporation is an industrial manufacturer with two primary businesses: custom aluminum extrusions for the building & construction (“B&C”), automotive and specialty end-use markets in the United States through its Aluminum Extrusions segment (with exports comprising less than 5% of total sales volume) and surface protection films for high-technology applications in the global electronics industry through its High Performance Films segment. With approximately 1,800 employees, the Company operates manufacturing facilities in the U.S. and China.

Previous wording

First quarter 2026 net income (loss) from continuing operations was $5.1 million ($0.15 per diluted share) compared to $0.7 million ($0.02 per diluted share) in the first quarter of 2025.

Current wording

Second quarter 2026 net income (loss) from continuing operations was $6.0 million ($0.17 per diluted share) compared to $1.8 million ($0.05 per diluted share) in the second quarter of 2025.

Previous wording

•EBITDA from ongoing operations for Aluminum Extrusions was $11.7 million in the first quarter of 2026 versus $9.2 million in the first quarter of 2025 and versus $15.7 million in the fourth quarter of 2025.

Current wording

•EBITDA from ongoing operations for Aluminum Extrusions was $14.5 million in the second quarter of 2026 versus $9.3 million in the second quarter of 2025 and versus $11.7 million in the first quarter of 2026.

Previous wording

•EBITDA from ongoing operations for High Performance Films was $5.1 million in the first quarter of 2026 versus $7.5 million in the first quarter of 2025 and versus $5.7 million in the fourth quarter of 2025.

Current wording

•EBITDA from ongoing operations for High Performance Films was $5.8 million in the second quarter of 2026 versus $6.7 million in the second quarter of 2025 and versus $5.1 million in the first quarter of 2026.

Previous wording

The following table presents a bridge of consolidated net income (loss) from continuing operations from the first quarter of 2025 to the first quarter of 2026 with management's related discussion and analysis below the table.

Current wording

The following table presents a bridge of consolidated net income (loss) from continuing operations from the second quarter of 2025 to the second quarter of 2026 with management's related discussion and analysis below the table.

Previous wording

As a percentage of sales, selling, general and administrative (“SG&A”) and research and development ("R&D") expenses were 8.9% in the first quarter of 2026 compared with 12.6% in the first quarter of 2025. First quarter sales increased 13.2% while SG&A decreased 20.5% compared to the prior period. Lower SG&A spending was primarily due to lower professional fees associated with business development activities ($2.9 million), lower employee compensation ($0.7 million), and lower stock-based compensation ($0.4 million).

Current wording

As a percentage of sales, selling, general and administrative (“SG&A”) and research and development ("R&D") expenses were 9.4% in the second quarter of 2026 compared with 11.6% in the second quarter of 2025. Second quarter sales increased 20.7% while SG&A decreased 2.1% compared to the prior period. Lower SG&A spending was primarily due to lower professional fees associated with business development activities ($1.1 million) and lower stock-based compensation ($0.4 million), partially offset by higher employee compensation ($0.8 million).

Previous wording

Interest expense was $0.4 million in the first quarter of 2026 in comparison to $1.0 million in the first quarter of 2025. The decrease in interest expense was primarily due to lower weighted average total debt outstanding and lower interest rates.

Current wording

Interest expense was $0.5 million in the second quarter of 2026 in comparison to $1.8 million in the second quarter of 2025. The decrease in interest expense was primarily due to the write-off of deferred financing fees related to Amendment No. 5 to the Company's Second Amended and Restated Credit Agreement of $0.8 million during the second quarter of 2025, lower weighted average total debt outstanding and lower interest rates.

Previous wording

Pre-tax gains and losses associated with plant shutdowns, asset impairments, restructurings and other items for the first quarters of 2026 and 2025 detailed below are shown in the reconciliation of net sales and EBITDA from ongoing operations by segment in the table in the Segment Operations Review section below and are included in “Asset impairments and costs associated with exit and disposal activities, net of adjustments” in the condensed consolidated statements of income, unless otherwise noted.

Current wording

Pre-tax gains and losses associated with plant shutdowns, asset impairments, restructurings and other items for the second quarters of 2026 and 2025 detailed below are shown in the reconciliation of net sales and EBITDA from ongoing operations by segment in the table in the Segment Operations Review section below and are included in “Asset impairments and costs associated with exit and disposal activities, net of adjustments” in the condensed consolidated statements of income, unless otherwise noted.

Previous wording

First Quarter of 2026 Compared with the First Quarter of 2025 Results

Current wording

First Six Months of 2026 Compared with the First Six Months of 2025 Results

Previous wording

Sales in the first quarter of 2026 increased by $21.8 million compared with the first quarter of 2025. Net sales (sales less freight) in Aluminum Extrusions increased $25.8 million, primarily due to the pass-through of higher metal costs, partially offset by lower volume. Net sales in High Performance Films decreased $4.0 million, primarily due to a decrease in sales volume and unfavorable mix in surface protection films. For more information on net sales and volume, see the Segment Operations Review below.

Current wording

Sales in the first six months of 2026 increased by $58.9 million compared with the first six months of 2025. Net sales (sales less freight) in Aluminum Extrusions increased $61.6 million, primarily due to the pass-through of higher metal costs, partially offset by lower volume. Net sales in High Performance Films decreased $3.0 million, primarily due to unfavorable mix in surface protection films. For more information on net sales and volume, see the Segment Operations Review below.

Previous wording

Consolidated gross profit (sales minus cost of goods sold and freight) as a percentage of sales (gross profit margin) was 12.6% in the first quarter of 2026 compared to 14.3% in the first quarter of 2025. The gross profit margin in Aluminum Extrusions remains consistent with the prior period. The gross profit margin in High Performance Films decreased due to a lower Surface Protection contribution margin associated with lower volume and unfavorable mix, partially offset by higher advanced packaging volume and favorable mix.

Current wording

Consolidated gross profit (sales minus cost of goods sold and freight) as a percentage of sales (gross profit margin) was 13.0% in the first six months of 2026 compared to 13.9% in the first six months of 2025. The gross profit margin in Aluminum Extrusions remained consistent with the prior period. The gross profit margin in High Performance Films decreased due to a lower Surface Protection contribution margin associated with lower volume, unfavorable mix, and the pass-through lag associated with higher resin costs, partially offset by favorable productivity and cost improvements.

Previous wording

The effective tax rate used to compute income taxes (benefit) from continuing operations in the first quarter of 2026 was 16.9% compared to 46.2% in the first quarter of 2025. The effective tax rate for the first three months of 2026 varies from the statutory rate of 21% due to research and development tax credits while the effective tax rate for the first three months of 2025 varies from the statutory rate due to a mix of lower pre-tax income and higher nondeductible discrete items as a percentage of pre-tax income.

Current wording

The effective tax rate from continuing operations in the first six months of 2026 was 19.9% compared to 38.4% in the first six months of 2025. The effective tax rate for the first six months of 2026 varied from the statutory rate of 21% due to research and development tax credits while the effective tax rate for the first six months of 2025 varied from the statutory rate due to a mix of lower pre-tax income and higher nondeductible discrete items as a percentage of pre-tax income.

Previous wording

A summary of results for Aluminum Extrusions is provided below:

Current wording

A summary of results for Aluminum Extrusions (also "Bonnell Aluminum") is provided below:

Previous wording

The following table presents the sales volume by end use market for the three months ended March 31, 2026 and 2025, and the three months ended December 31, 2025.

Current wording

The following table presents the sales volume by end use market for the three and six months ended June 30, 2026 and 2025, and the three months ended March 31, 2026.

Previous wording

Net sales in the first quarter of 2026 increased 19.3% versus the first quarter of 2025 primarily due to the pass-through of higher metal costs, partially offset by lower volume. Sales volume in the first quarter of 2026 decreased 7.3% versus the first quarter of 2025 and 5.4% versus the fourth quarter of 2025. The Company reported a 6% decline in nonresidential building and construction volume, driven by higher costs and ongoing economic uncertainty. Within the specialty market, electrical shipments decreased 45% following the expiration of federal tax credits for solar panels. Also in the specialty market, TSLOTSTM shipments, representing approximately 13% of total volume, increased 70%, supported by increased demand for data‑containment and data‑center infrastructure. Automotive and transportation volume declined 19% as manufacturers continued to face rising cost pressures.

Current wording

Net sales in the second quarter of 2026 increased 24.1% versus the second quarter of 2025 primarily due to the pass-through of higher metal costs, partially offset by lower volume. Sales volume in the second quarter of 2026 decreased 5.8% versus the second quarter of 2025 and increased 8.8% versus the first quarter of 2026. Bonnell Aluminum experienced a 16% decline in nonresidential building and construction volume, driven by higher costs, including significantly higher metal costs, and ongoing economic uncertainty. Nonresidential building and construction volume represented approximately 48% of total volume and remains Bonnell Aluminum’s most significant end-use market. Within the specialty market, consumer durables volume, representing 8% of total volume, decreased 18% due to consumer cautionary spending on discretionary purchases. Also within the specialty market, TSLOTSTM shipments, representing approximately 11% of total volume, increased 45%, supported by increased demand for data‑containment and data‑center infrastructure. Automotive and transportation volume declined 16%, reflecting continued cost pressures on manufacturers and lower sales compared with the prior year period, which benefited from tariff-related pull-forward demand in the second quarter of 2025. Automotive and transportation represents approximately 7% of total volume.

Previous wording

Net new orders in the first quarter of 2026 decreased 20% versus the first quarter of 2025 from an average of 3.4 million pounds per week in the first quarter of 2025 to 2.8 million pounds per week in the first quarter of 2026. The Company believes this year-over-year decline reflects both softer U.S. demand and the continued undervaluation of imported extrusions, attributed to the tariff structure associated with the increase of Section 232 tariffs on aluminum products to 50%, discussed below. Open orders at the end of the first quarter of 2026 were 19 million pounds versus 25 million pounds at the end of the first quarter of 2025 and 17 million pounds at the end of the fourth quarter of 2025. This level of open orders falls below the normalized level that is typically associated with stable demand patterns and healthy market dynamics.

Current wording

Net new orders in the second quarter of 2026 increased slightly to an average of 3.2 million pounds per week versus an average of 3.1 million pounds per week in the second quarter of 2025, supported by increased activity in TSLOTSTMfor modular aluminum framing systems and renewable energy applications. Open orders at the end of the second quarter of 2026 were 23 million pounds versus 25 million pounds at the end of the second quarter of 2025 and 19 million pounds at the end of the first quarter of 2026. This level of open orders falls within the normalized level that is typically associated with stable demand patterns and healthy market dynamics.

Previous wording

•A $2.0 million increase in contribution margin (net sales less variable costs) associated with:

Current wording

•A $5.2 million increase in contribution margin (net sales less variable costs) associated with:

Previous wording

◦Pricing increases ($4.6 million) and lower manufacturing costs associated with material yield ($2.0 million favorable in the first quarter of 2026 versus $0.1 million unfavorable in the first quarter of 2025), partially offset by lower volume ($2.1 million), higher labor rates ($0.7 million), unfavorable labor productivity ($0.6 million), higher maintenance and supply expense ($0.8 million), higher freight expense ($0.4 million), higher utilities ($0.5 million), and higher die expense ($0.8 million).

Current wording

◦Lower volume ($1.9 million), higher labor rates ($2.0 million), unfavorable labor productivity primarily due to more labor intensive requirements for higher-value products ($1.0 million), higher maintenance, supply and die expense, partially associated with tariff impact ($0.8 million), and higher freight expense ($0.8 million), partially offset by pricing increases ($0.6 million) and favorable manufacturing costs primarily associated with casting capabilities due to scrap spreads, reflecting a wider cost differential between primary aluminum and recycled scrap input, and higher scrap utilization ($5.1 million favorable in the second quarter of 2026 versus $0.7 million unfavorable in the second quarter of 2025).

Previous wording

◦The timing of the flow-through under the first-in, first-out ("FIFO") method of aluminum raw materials costs, which were previously acquired in a quickly changing commodity pricing environment, causing a temporary mismatch in the change in the cost of raw materials included in variable costs and the pass through to customers included in sales, resulted in a benefit of $2.9 million in the first quarter of 2026 versus a benefit of $1.7 million in the first quarter of 2025.

Current wording

◦The timing of the flow-through under the first-in, first-out ("FIFO") method of aluminum raw materials costs, which were previously acquired in a quickly changing commodity pricing environment, causing a temporary mismatch in the change in the cost of raw materials included in variable costs and the pass through to customers included in sales, resulted in a benefit of $4.9 million in the second quarter of 2026 versus a charge of $0.7 million in the second quarter of 2025.

Previous wording

•Higher fixed costs primarily associated with wage increases ($0.5 million).

Current wording

•Higher fixed costs primarily associated with wage and benefits increases ($0.5 million).

Previous wording

•Lower other expense for employee-related medical costs associated with medical claims ($0.6 million).

Current wording

•Lower other expense for lower employee-related medical costs associated with medical claims ($1.5 million).

Previous wording

•Lower SG&A expenses primarily associated with lower employee-related compensation and lower routine environmental compliance expense ($0.5 million).

Current wording

•Higher SG&A expenses primarily associated with higher incentive compensation, partially offset by lower routine environmental compliance expense ($0.4 million).

Previous wording

Conflict-driven disruptions in the Strait of Hormuz beginning in March 2026 have constrained shipments and raised costs, contributing to historically low U.S. inventory levels. In response to recent geopolitical tensions in the Middle East and resulting contraction of the global aluminum market, we have proactively diversified our supply chain portfolio to support long-term stability. Through the third quarter of 2026, we have successfully transitioned nearly all of our aluminum supply previously sourced from the Middle East to North American partners. Simultaneously, we are optimizing billet casting operations at our Carthage, TN, and Newnan, GA facilities to overcome localized production constraints. These strategic shifts in our supply chain and internal capabilities continue to strengthen our operational resilience, positioning the Company to meet customer demand through 2026.

Current wording

Conflict-driven disruptions in the Strait of Hormuz beginning in March 2026 have constrained shipments and raised costs, contributing to historically low U.S. inventory levels. In response to ongoing geopolitical tensions in the Middle East and resulting contraction of the global aluminum market, we have proactively diversified Bonnell Aluminum’s supply chain portfolio to support long-term stability. Through the remainder of 2026, we have successfully secured nearly all of Bonnell Aluminum’s aluminum supply requirements and are proactively reviewing Bonnell Aluminum’s 2027 supply needs and sources to minimize exposure to the Middle East. Simultaneously, we are optimizing billet casting operations at our Carthage, TN, and Newnan, GA facilities to overcome localized production constraints. These strategic shifts in our supply chain and internal capabilities continue to strengthen our operational resilience, positioning Bonnell Aluminum to meet customer demand.

Previous wording

Capital expenditures for Bonnell Aluminum are projected to be $20 million in 2026, including $4 million for productivity projects and $16 million for capital expenditures required to support continuity of operations. Depreciation expense is projected to be $14 million in 2026. Amortization expense is projected to be $2 million in 2026. The Company anticipates capital spending to increase from the levels of the past two years and return to a pattern more closely aligned with depreciation and amortization, consistent with long-term historical patterns. This approach supports ongoing maintenance and efficiency initiatives while maintaining disciplined capital allocation.

Current wording

Capital expenditures for Bonnell Aluminum are projected to be $20 million in 2026, including $4 million for productivity projects and $16 million for capital expenditures required to support continuity of operations. Depreciation expense is projected to be $14 million in 2026. Amortization expense is projected to be $2 million in 2026. The Company anticipates capital spending for Bonnell Aluminum to increase from the levels of the past two years and return to a pattern more closely aligned with depreciation and amortization, consistent with long-term historical patterns. This approach supports ongoing maintenance and efficiency initiatives while maintaining disciplined capital allocation.

Previous wording

•A decrease in contribution margin of $2.4 million resulting from:

Current wording

•A decrease in contribution margin of $0.7 million resulting from:

Previous wording

•A foreign currency transaction loss of $0.3 million in the first quarter of 2026 versus no gain or loss in the first quarter of 2025.

Current wording

•A foreign currency transaction loss of $0.3 million in the second quarter of 2026 versus no gain or loss in the second quarter of 2025.

Previous wording

Net sales in the first quarterof 2026 decreased 15.7% versus the first quarter of 2025 due to a decrease in sales volume and unfavorable mix in surface protection films. Surface Protection sales volume decreased 17.5% in the first quarter of 2026 versus the first quarter of 2025. Sales volume for surface protection films declined in the first quarter of 2026 as expected due to a significant customer’s inventory correction and scheduled maintenance activity for another customer. Volume for advanced packaging films, which are predominantly manufactured and sold in the U.S. and used in consumer staple items, increased 5.6% in the first quarter of 2026 versus the first quarter of 2025. The top four customers comprised 87% and 91% of the net sales for High Performance Films for the first three months of 2026 and first three months of 2025, respectively.

Current wording

Net sales in the first six months of 2026 decreased 5.9% compared to the first six months of 2025 primarily due to unfavorable mix in surface protection films. Surface Protection sales volume decreased 0.8% in the first six months of 2026 versus the first six months of 2025. Sales volume for surface protection films declined in the first six months of 2026 versus the first six months of 2025 as expected due to a significant customer’s inventory correction and scheduled maintenance activity for another customer in the first six months of 2026. Volume for advanced packaging films decreased 6.9% in the first six months of 2026 versus the first six months of 2025 primarily due to lower margin product. The top four customers comprised 85% and 86% of the net sales for High Performance Films for the first six months of 2026 and first six months of 2025, respectively.

Previous wording

◦A $2.8 million decrease from Surface Protection associated with lower volume and unfavorable mix ($3.4 million), partially offset by cost improvements and favorable productivity ($0.6 million).

Current wording

◦A $2.7 million decrease from Surface Protection associated with lower volume and unfavorable mix ($3.4 million) and the pass-through lag associated with higher resin costs (a charge of $0.6 million in the first six months of 2026 versus a charge of $0.1 million in the first six months of 2025), partially offset by favorable productivity and cost improvements ($1.3 million).

Previous wording

Corporate expenses, net in the first three months of 2026 decreased $2.9 million compared to the first three months of 2025 due to lower professional fees associated with business development activities ($2.9 million). The Company does not expect significant expenses from business development activities in 2026.

Current wording

Corporate expenses, net in the first six months of 2026 decreased $2.7 million compared to the first six months of 2025 due to lower professional fees associated with business development activities ($4.1 million), partially offset by a gain on the sale of corporate-owned land in 2025 ($1.5 million). The Company does not expect significant expenses from business development activities in 2026.

Previous wording

A reconciliation of segment financial information to consolidated results for the Company for the three months ended March 31, 2026 and 2025.

Current wording

A reconciliation of segment financial information to consolidated results for the Company for the three and six months ended June 30, 2026 and 2025.

Previous wording

◦Accounts and other receivables in Aluminum Extrusions increased $10.8 million primarily due to the pass-through of higher metal costs. DSO (represents trailing 12 months net sales divided by a rolling 12-month average of accounts and other receivables balances) was approximately 45.0 days for the 12 months ended March 31, 2026 and 44.8 days for the 12 months ended December 31, 2025.

Current wording

◦Accounts and other receivables in Aluminum Extrusions increased $13.8 million primarily due to the pass-through of higher metal costs. DSO (represents trailing 12 months net sales divided by a rolling 12-month average of accounts and other receivables balances) was approximately 44.9 days for the 12 months ended June 30, 2026 and 44.8 days for the 12 months ended December 31, 2025.

Previous wording

◦Accounts and other receivables in High Performance Films increased $1.1 million primarily due to higher sales volume in advanced packaging films. DSO was approximately 25.9 days for the 12 months ended March 31, 2026 and 25.4 days for the 12 months ended December 31, 2025.

Current wording

◦Accounts and other receivables in High Performance Films increased $1.8 million primarily due to higher sales volume. DSO was approximately 26.0 days for the 12 months ended June 30, 2026 and 25.4 days for the 12 months ended December 31, 2025.

Previous wording

◦Inventories in Aluminum Extrusions increased $18.9 million primarily due to increased raw material levels from seasonally low levels at the end of last year, higher metal costs and raw material stocking as a result of the geopolitical uncertainty impacting aluminum‑related supply chains. DIO (represents trailing 12 months costs of goods sold calculated on a FIFO basis divided by a rolling 12-month average of inventory balances calculated on the FIFO basis) was approximately 50.7 days for the 12 months ended March 31, 2026 and 48.8 days for the 12 months ended December 31, 2025.

Current wording

◦Inventories in Aluminum Extrusions increased $21.7 million primarily due to increased raw material levels from seasonally low levels at the end of last year, higher metal costs and raw material stocking as a result of the geopolitical uncertainty impacting aluminum-related supply chains. DIO (represents trailing 12 months costs of goods sold calculated on a FIFO basis divided by a rolling 12-month average of inventory balances calculated on the FIFO basis) was approximately 51.1 days for the 12 months ended June 30, 2026 and 48.8 days for the 12 months ended December 31, 2025.

Previous wording

◦Inventories in High Performance Films remain consistent with prior year. DIO was approximately 55.7 days for the 12 months ended March 31, 2026 and 54.6 days for the 12 months ended December 31, 2025.

Current wording

◦Inventories in High Performance Films increased $1.4 million primarily due to higher raw material levels and higher resin costs. DIO was approximately 56.7 days for the 12 months ended June 30, 2026 and 54.6 days for the 12 months ended December 31, 2025.

Previous wording

•Net property, plant and equipment increased $0.1 million primarily due to capital expenditures of $4.9 million and favorable foreign exchange of $0.1 million, partially offset by depreciation expense of $4.9 million.

Current wording

•Net property, plant and equipment increased $2.1 million primarily due to capital expenditures of $11.8 million and favorable foreign exchange of $0.2 million, partially offset by depreciation expense of $9.9 million.

Previous wording

•Identifiable intangible assets, net decreased $0.4 million (7.9%) due to amortization expense.

Current wording

•Identifiable intangible assets, net decreased $0.9 million (15.8%) due to amortization expense.

Previous wording

◦Accounts payable in Aluminum Extrusions increased $20.1 million primarily due to increased raw material levels from seasonally low levels at the end of last year, higher metal costs and raw material stocking as a result of the geopolitical uncertainty impacting aluminum‑related supply chains. DPO (represents trailing 12 months costs of goods sold calculated on a FIFO basis divided by a rolling 12-month average of accounts payable balances) was approximately 47.7 days for the 12 months ended March 31, 2026 and 46.6 days for the 12 months ended December 31, 2025.

Current wording

◦Accounts payable in Aluminum Extrusions increased $15.5 million primarily due to increased raw material levels from seasonally low levels at the end of last year, higher metal costs and raw material levels. DPO (represents trailing 12 months costs of goods sold calculated on a FIFO basis divided by a rolling 12-month average of accounts payable balances) was approximately 46.6 days for both the 12 months ended June 30, 2026 and the 12 months ended December 31, 2025.

Previous wording

◦Accounts payable in High Performance Films increased $1.1 million primarily due to effective working capital management and the timing of vendor payments. DPO was approximately 39.3 days for the 12 months ended March 31, 2026 and 40.6 days for the 12 months ended December 31, 2025.

Current wording

◦Accounts payable in High Performance Films increased $4.0 million primarily due to the timing of vendor payments and increased raw material purchases. DPO was approximately 40.6 days for both the 12 months ended June 30, 2026 and the 12 months ended December 31, 2025.

Previous wording

Net cash provided by operating activities was $2.0 million in the first three months of 2026 compared to net cash used in operating activities of $5.0 million in the first three months of 2025. The change primarily reflects more favorable working capital movements in the first quarter of 2026 compared to the first quarter of 2025.

Current wording

Net cash provided by operating activities was $7.7 million in the first six months of 2026 compared to net cash used in operating activities of $2.9 million in the first six months of 2025. The change primarily reflects more favorable working capital movements in the first six months of 2026 compared to the first six months of 2025.

Previous wording

Net cash used in investing activities was $4.6 million in the first three months of 2026 compared to net cash provided by investing activities of $6.9 million the first three months of 2025. The change is primarily due to $9.8 million post-closing settlement proceeds associated with the sale of Terphane received in the first three months of 2025, partially offset by higher capital expenditures ($2.2 million).

Current wording

Net cash used in investing activities was $8.7 million in the first six months of 2026 compared to net cash provided by investing activities of $6.1 million the first six months of 2025. The change is primarily due to decreased post-closing settlement proceeds associated with the sale of Terphane ($9.3 million) and a gain on the sale corporate-owned land ($1.5 million), partially offset by higher capital expenditures ($3.6 million).