RYAM Announces Improved First Quarter 2024 Results Reaffirms 2024 EBITDA and Increases Free Cash Flow Guidance JACKSONVILLE, Fla., May 7, 2024 - Rayonier Advanced Materials Inc. (NYSE:RYAM) (the "Company") today reported results for its first quarter ended March 30, 2024. "First quarter results exceeded our expectations, driven by lower costs and improved demand for cellulose specialties. We delivered a solid $52 million in Adjusted EBITDA to maintain a net secured debt ratio of 4.4 times covenant EBITDA," ...

FORM 10-K Filing Information [Registrant Information](index=1&type=section&id=Registrant%20Information) This section provides key identification details for Rayonier Advanced Materials Inc, its stock exchange listing, and confirms its SEC filing status - Rayonier Advanced Materials Inc (RYAM) is incorporated in **Delaware** with IRS Employer Identification No 46-4559529; its common stock is traded on the **New York Stock Exchange** under the symbol **RYAM**[1](index=1&type=chunk)[2](index=2&type=chunk) - The aggregate market value of common stock held by non-affiliates as of July 1, 2023, was **$270,254,732**, with **65,398,056 shares** outstanding as of February 27, 2024[3](index=3&type=chunk)[4](index=4&type=chunk) Registrant Filing Status | Status | Indication | | :--- | :--- | | Well-known seasoned issuer | No | | Required to file reports | Yes | | Filed all required reports | Yes | | Submitted Interactive Data | Yes | | Accelerated filer | Yes | Table of Contents Glossary [Terms and Abbreviations](index=4&type=section&id=Terms%20and%20Abbreviations) This section defines key financial, regulatory, operational, and sustainability terms and abbreviations used throughout the 2023 Form 10-K - The glossary defines financial instruments such as **'2024 Notes' ($550 million, due June 2024)**, **'2026 Notes' ($500 million, due January 2026)**, and **'2027 Term Loan' ($250 million, maturing July 2027)**[11](index=11&type=chunk) - Key operational and regulatory terms include **'ABL Credit Facility'**, **'EBITDA'**, **'GAAP'**, **'SEC'**, and various environmental acts like **'CERCLA'** and **'RCRA'**[11](index=11&type=chunk)[12](index=12&type=chunk) - Sustainability-related terms such as **'GHG' (Greenhouse gas)**, **'ISCC EU'**, and **'ISCC PLUS'** are also defined, highlighting the company's focus on environmental standards[11](index=11&type=chunk) Forward-Looking Statements [Disclaimer on Future Performance](index=6&type=section&id=Disclaimer%20on%20Future%20Performance) This section cautions that forward-looking statements are subject to risks and uncertainties and advises against undue reliance on them - Forward-looking statements, identified by words like 'may,' 'will,' 'expect,' and 'believe,' are **not guarantees of future performance** and are subject to risks and uncertainties[15](index=15&type=chunk)[16](index=16&type=chunk) - Actual results may differ materially from expectations due to various risks, including those outlined in **Item 1A—Risk Factors**[16](index=16&type=chunk) - The company undertakes **no duty to update** forward-looking statements except as required by law, advising readers to review subsequent SEC filings[17](index=17&type=chunk) Part I [Item 1. Business](index=7&type=section&id=Item%201.%20Business) Rayonier Advanced Materials Inc is a global leader in specialty cellulose materials, focusing on strategic investments in renewable products and exploring the potential sale of its Paperboard and High-Yield Pulp assets - The company is a global leader in specialty cellulose materials, producing **high-purity cellulose pulp**, a unique **multi-ply paperboard**, and a bulky, **high-yield pulp** product[18](index=18&type=chunk) - Strategic investments are focused on optimizing assets for renewable products, including projects like **Anomera (CNC)**, prebiotic development, and **2G bioethanol production** at its Tartas and Fernandina facilities[19](index=19&type=chunk)[22](index=22&type=chunk) - The company has set an ambitious goal to achieve at least a **40% reduction in Scope 1 and Scope 2 GHG emissions by 2030** (2020 baseline), with **40% absolute** and **25% intensity reductions** achieved to date[22](index=22&type=chunk) - In October 2023, the company announced it is exploring the potential sale of its **Paperboard and High-Yield Pulp assets** at its Temiscaming site to align with its long-term growth strategy and reduce debt[29](index=29&type=chunk) [Strategic Growth Investments](index=7&type=section&id=Strategic%20Growth%20Investments) - Investments are focused on projects that optimize assets to meet demand for renewable products, aligning with sustainability drivers like the **European Union Green Deal** for the Renewable Energy Directive II[19](index=19&type=chunk) - Key projects include investment in **Anomera for CNC production**, development of a prebiotic for poultry/swine gut health, and production of **2G bioethanol fuel** at Tartas (expected Q1 2024) and Fernandina facilities[22](index=22&type=chunk) [Our Sustainability Profile](index=7&type=section&id=Our%20Sustainability%20Profile) - Four production facilities (US, Canada, France) are **ISCC PLUS/EU certified** and hold Forest Stewardship Council and Programme for the Endorsement of Forest Certification Chain of Custody standards[20](index=20&type=chunk) - Fluff pulp from the Jesup facility is certified as an **'Inspected Raw Material' by Nordic Swan Ecolabeling**, indicating adherence to rigorous environmental requirements[21](index=21&type=chunk) - The company aims for a **40% reduction in Scope 1 and Scope 2 GHG emissions by 2030** (2020 baseline), having achieved approximately **40% in absolute** and **25% in intensity** emissions reductions for 2021-2022[22](index=22&type=chunk) - **Over 75% of energy** consumed by facilities is derived from renewable sources, primarily biomass, using production process residuals rather than harvesting living trees for energy[23](index=23&type=chunk) - Water is extensively reused in production, with **98% treated and returned** to natural sources, and waste generation is minimized through recycling and co-product generation[24](index=24&type=chunk)[25](index=25&type=chunk) [Business Operations](index=8&type=section&id=Business%20Operations) - The company became an independent publicly-traded entity in **June 2014**, following its separation from Rayonier Inc, and acquired Tembec Inc in November 2017[26](index=26&type=chunk) - In August 2021, the lumber and newsprint assets acquired from Tembec were sold, with their operating results presented as **discontinued operations**[27](index=27&type=chunk) - Current business segments include **High Purity Cellulose**, **Paperboard**, and **High-Yield Pulp**[28](index=28&type=chunk) - A strategic review is ongoing to explore the potential sale of **Paperboard and High-Yield Pulp assets** at the Temiscaming site, aiming to align the portfolio with long-term growth and reduce earnings volatility[29](index=29&type=chunk) [High Purity Cellulose](index=8&type=section&id=High%20Purity%20Cellulose) - This segment is the **primary driver of profitability**, manufacturing cellulose specialties used in diverse consumer products like LCDs, pharmaceuticals, and textiles, tailored to precise customer specifications[30](index=30&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) - The company's four production facilities have a combined annual capacity of **1,045,000 MTs**, with **270,000 MTs** dedicated to commodity products (absorbent materials and viscose pulp)[33](index=33&type=chunk) - Wood fiber, chemicals, and energy constitute approximately **50% of the per MT cost of sales** for this segment[34](index=34&type=chunk) - The company leverages its global manufacturing asset base and proprietary processes to offer supply chain security and customized product functionality, being the **only producer with flexibility across hardwood/softwood fibers** and cooking processes[37](index=37&type=chunk) - Biomaterials production, including **2G bioethanol (Tartas facility expected Q1 2024)**, is a core priority to meet demand for renewable materials and sustainable products[32](index=32&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk) - Competition in cellulose specialties is characterized by **high barriers to entry**, with major competitors including Bracell and Borregaard, while commodity products compete primarily on price[43](index=43&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) [Paperboard](index=11&type=section&id=Paperboard) - The Temiscaming plant in Quebec, Canada, has an annual production capacity of **180,000 MTs** of multi-ply paperboard, used for packaging, printing, and lottery tickets[51](index=51&type=chunk)[52](index=52&type=chunk) - Wood pulp, chemicals, and energy account for approximately **80% of the per MT cost of sales** in this segment[51](index=51&type=chunk) - Competition is primarily based on price and product performance, with major competitors including **WestRock**, **Graphic Packaging**, and **Sappi**[53](index=53&type=chunk)[54](index=54&type=chunk) [High-Yield Pulp](index=11&type=section&id=High-Yield%20Pulp) - The Temiscaming plant produces **290,000 MTs** of high-yield pulp annually, with approximately **65,000 MTs** used internally for paperboard production[55](index=55&type=chunk) - This segment primarily uses hardwood aspen, maple, and birch species to produce a bulky, high-yield pulp for paperboard, packaging, and printing papers[57](index=57&type=chunk) - Wood fiber, chemicals, and energy represent about **40% of the per MT cost of sales**[56](index=56&type=chunk) - Competition is mainly price-driven, though higher quality can command a premium, with major competitors including **Winstone Pulp**, **Sappi**, and **Paper Excellence**[58](index=58&type=chunk)[59](index=59&type=chunk) [Raw Materials and Input Costs](index=12&type=section&id=Raw%20Materials%20and%20Input%20Costs) - Manufacturing operations require significant amounts of wood fiber (logs or chips), chemicals (caustic soda, sulfuric acid), and energy, all subject to **significant price volatility** due to supply, demand, and weather[60](index=60&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk) - **Over 75% of the company's energy** is derived from renewable biomass, using production process residuals[23](index=23&type=chunk) [Intellectual Property](index=12&type=section&id=Intellectual%20Property) - Substantially all intellectual property relates to the **High Purity Cellulose segment**, including patents, trademarks, trade secrets, and expertise in high purity cellulose and paperboard production[64](index=64&type=chunk) [Seasonality](index=12&type=section&id=Seasonality) - Operating results may be materially affected by **seasonal changes** and their impact on energy prices[65](index=65&type=chunk) [Customers](index=12&type=section&id=Customers) - One customer in the High Purity Cellulose segment accounted for **10% of total sales** for the year ended December 31, 2023[66](index=66&type=chunk) [Research and Development](index=12&type=section&id=Research%20and%20Development) - R&D activities are primarily focused on the **High Purity Cellulose segment**, aiming to develop new products/technologies, improve cellulose fiber grades, enhance manufacturing efficiency, and reduce fossil fuel consumption[67](index=67&type=chunk) R&D Spend (2021-2023) | Year | R&D Spend (Millions USD) | | :--- | :--- | | 2023 | $6 | | 2022 | $7 | | 2021 | $7 | [Environmental Matters](index=13&type=section&id=Environmental%20Matters) - Manufacturing operations are subject to **stringent federal, state, provincial, and local environmental laws** and regulations concerning air emissions, wastewater discharges, and waste handling[68](index=68&type=chunk) - Compliance with these laws and permits often requires **significant expenditures**, and future spending could change based on new legislation or stricter interpretations[68](index=68&type=chunk)[69](index=69&type=chunk) - Management believes the company is in **material compliance** with current environmental requirements[69](index=69&type=chunk) [Human Capital](index=13&type=section&id=Human%20Capital) - The company employs approximately **2,800 people** across the US, Canada, and France, with **61% belonging to labor unions**[71](index=71&type=chunk) - Employee safety is a top priority, with the company-wide injury rate **decreasing by 17% in 2023**, driven by a focus on five leading safety metrics[72](index=72&type=chunk) - Efforts to attract, retain, and develop employees include partnerships with colleges, scholarships, internships, and an **Early Career Development (ECD) program**[73](index=73&type=chunk) - The company upholds a Human Rights Policy and a Standard of Ethics and Code of Corporate Conduct, emphasizing safe workplaces, anti-corruption, fair compensation, and diversity and inclusion[74](index=74&type=chunk)[75](index=75&type=chunk) [Availability of Reports and Other Information](index=14&type=section&id=Availability%20of%20Reports%20and%20Other%20Information) - Annual, quarterly, and current reports, proxy statements, and corporate governance guidelines are available **free of charge** on the company's investor relations website and the SEC's website[76](index=76&type=chunk) [Item 1A. Risk Factors](index=14&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from macroeconomic challenges, operational disruptions, regulatory changes, and financial obligations - Macroeconomic risks include disruptions from geopolitical conflicts, epidemics/pandemics (eg, COVID-19's impact on costs and supply chains), and the **highly competitive and cyclical nature** of the company's businesses, leading to price and volume fluctuations[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) - Operational risks encompass potential manufacturing disruptions from unexpected outages, raw material shortages, transportation failures, natural disasters, labor interruptions, and **cybersecurity incidents**[96](index=96&type=chunk) - Regulatory and environmental risks include stringent and evolving environmental laws, potential interventions from environmental groups, and significant liabilities for environmental remediation at current and former sites, with estimated exposure **up to $85 million** beyond recorded liabilities[112](index=112&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk)[418](index=418&type=chunk) - Financial risks are substantial, with total indebtedness of **$777 million** as of December 31, 2023, and covenants in debt agreements that could impair business operations, alongside potential needs for additional financing[125](index=125&type=chunk)[126](index=126&type=chunk)[130](index=130&type=chunk) - International operations, which generated **67% of revenue in 2023**, expose the company to foreign currency fluctuations, trade protection laws (eg, China tariffs, Canadian softwood lumber duties), and political/economic instability[87](index=87&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) [Macroeconomic and Industry Risks](index=15&type=section&id=Macroeconomic%20and%20Industry%20Risks) - Geopolitical conflicts and public health crises (like COVID-19) can negatively impact the global economy, leading to **input material shortages**, **increased costs**, and **reduced demand**[78](index=78&type=chunk)[79](index=79&type=chunk) - The company operates in **highly competitive and cyclical markets**, with demand fluctuations and increased competitor capacity potentially leading to lower sales prices, particularly for cellulose specialties and high-purity commodity products[80](index=80&type=chunk) - Raw material and energy costs are **significant and volatile**, susceptible to rapid increases due to factors like weather, political unrest, and supply/demand, with limited ability to pass on these costs in some contracts[85](index=85&type=chunk)[86](index=86&type=chunk) - International sales accounted for **67% of revenue in 2023**, exposing the company to risks from foreign laws, trade protection measures (eg, China tariffs, Canadian softwood lumber duties), and currency exchange rate fluctuations[87](index=87&type=chunk)[89](index=89&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) [Business and Operational Risks](index=18&type=section&id=Business%20and%20Operational%20Risks) - The top ten customers represented approximately **40% of 2023 revenue**, making the company vulnerable to significant revenue loss or unfavorable contract changes[94](index=94&type=chunk) - **Material disruptions** at manufacturing facilities (eg, unscheduled outages, raw material interruptions, natural disasters, labor issues, cybersecurity incidents) could prevent meeting demand and increase costs[96](index=96&type=chunk) - Unfavorable changes in **wood fiber availability and prices**, influenced by regulatory developments, environmental litigation, and natural conditions, could materially increase costs[98](index=98&type=chunk)[99](index=99&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk) - The company's **capital-intensive business** requires substantial investment for maintenance, repair, and replacement of facilities, with potential for significant costs and downtime[103](index=103&type=chunk) - A non-cash impairment of **$62 million** was recorded in Q4 2023 related to certain assets at the Temiscaming and Jesup facilities due to asset optimization and realignment[105](index=105&type=chunk) - Dependence on third-party transportation services and potential failures in R&D or intellectual property protection also pose significant business risks[106](index=106&type=chunk)[110](index=110&type=chunk) - **Cybersecurity incidents** could lead to loss of intellectual property, sensitive data, or disruption of manufacturing operations, despite established policies and controls[111](index=111&type=chunk) [Regulatory and Environmental Risks](index=21&type=section&id=Regulatory%20and%20Environmental%20Risks) - Extensive environmental laws and regulations, which are constantly changing and becoming more restrictive, may require **significant capital expenditures** and limit operations[112](index=112&type=chunk)[113](index=113&type=chunk) - Environmental groups and Indigenous communities may intervene in regulatory processes or file lawsuits, causing **delays, restrictions, and increased costs**[114](index=114&type=chunk) - The company faces substantial environmental remediation liabilities at current and former operating sites, with accrued liabilities of **$170 million** at December 31, 2023, and reasonably possible additional liabilities **up to $85 million**[115](index=115&type=chunk)[286](index=286&type=chunk)[410](index=410&type=chunk)[418](index=418&type=chunk) - **Climate-related risks**, including regulatory measures (eg, carbon pricing, new disclosure requirements like the EU's Corporate Sustainability Reporting Directive), transition risks to a low-carbon economy, and physical risks from extreme weather, could materially impact business and financial results[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) [Financial Risks](index=23&type=section&id=Financial%20Risks) - The company may need to make **significant additional cash contributions** to retirement benefit plans if investment returns are lower than expected or interest rates decline[124](index=124&type=chunk) - Total indebtedness was **$777 million** as of December 31, 2023, which could require a substantial portion of cash flows for interest payments, increase vulnerability to adverse economic conditions, and limit financial flexibility[125](index=125&type=chunk) - Debt agreements contain **covenants that limit actions** like incurring debt, making investments, or paying dividends, and a breach could accelerate debt repayment[126](index=126&type=chunk)[127](index=127&type=chunk) - In January 2024, the 2027 Term Loan agreement was amended to **increase the maximum consolidated secured net leverage ratio** through fiscal year 2024 to address potential non-compliance[128](index=128&type=chunk) - Challenges in commercial and credit environments may adversely affect **future access to capital**, and additional financing, if required, may not be available on favorable terms or could be dilutive to stockholders[129](index=129&type=chunk)[130](index=130&type=chunk) [Common Stock and Certain Corporate Matters Risks](index=25&type=section&id=Common%20Stock%20and%20Certain%20Corporate%20Matters%20Risks) - Future equity issuances for acquisitions, capital market transactions, or employee awards could **dilute stockholders' ownership interest** and adversely affect earnings per share[131](index=131&type=chunk) - Provisions in the company's certificate of incorporation and bylaws, and Delaware law, could **prevent or delay an acquisition**, potentially decreasing the common stock price[132](index=132&type=chunk) [Item 1B. Unresolved Staff Comments](index=25&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments from the SEC - There are **no unresolved staff comments**[133](index=133&type=chunk) [Item 1C. Cybersecurity](index=25&type=section&id=Item%201C.%20Cybersecurity) The company integrates cybersecurity risk management into its overall risk framework, with oversight provided by the Audit Committee - Cybersecurity risk management is **integrated into the company's overall risk management system**, with risks identified and addressed through internal teams and external consultants[134](index=134&type=chunk) - The company utilizes proactive cybersecurity reviews, annual risk assessments, tabletop exercises, and infiltration testing to safeguard against, detect, and manage cyber threats[135](index=135&type=chunk) - The **Audit Committee**, which includes a member with significant cybersecurity consulting experience, is responsible for oversight of cybersecurity risks, receiving quarterly reports from senior management[137](index=137&type=chunk) - A CEO-chaired **Enterprise Risk Management team** and a **Cybersecurity Governance Committee** assess and mitigate risks, ensuring effective strategy execution and cyber readiness[138](index=138&type=chunk) [Item 2. Properties](index=26&type=section&id=Item%202.%20Properties) The company's material properties include owned manufacturing facilities in the US, Canada, and France, with ongoing capital investments and asset realignment Material Properties and Annual Production Capacity (as of Dec 31, 2023) | Location by Segment | Annual Production Capacity | Owned/Leased | | :--- | :--- | :--- | | **High Purity Cellulose Facilities** | | | | Jesup, Georgia, United States | 330,000 MTs (cellulose specialties/commodity) | Owned | | | 270,000 MTs (commodity products) | | | Fernandina Beach, Florida, United States | 155,000 MTs (cellulose specialties/commodity) | Owned | | Temiscaming, Quebec, Canada | 150,000 MTs (cellulose specialties/commodity) | Owned | | Tartas, France | 140,000 MTs (cellulose specialties/commodity) | Owned | | **Paperboard Facilities** | | | | Temiscaming, Quebec, Canada | 180,000 MTs of paperboard | Owned | | **High-Yield Pulp Facilities** | | | | Temiscaming, Quebec, Canada | 290,000 MTs of high-yield pulp | Owned | | **Corporate and Other** | | | | Jacksonville, Florida, United States | Corporate Headquarters | Leased | - The company is undertaking a **realignment of its High Purity Cellulose assets** to optimize production mix, consolidating commodity viscose production into the Temiscaming plant and fluff production into the Jesup plant's C Line[140](index=140&type=chunk) [Item 3. Legal Proceedings](index=27&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings, with details incorporated by reference from its Financial Statements - Information regarding legal proceedings is incorporated by reference from **Note 21—Commitments and Contingencies** to the Financial Statements[141](index=141&type=chunk) Part II [Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=28&type=section&id=Item%205.%20Market%20for%20the%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock trades on the NYSE under RYAM; dividends were suspended in 2019, and no shares were repurchased under the authorized buyback program in 2023 - The company's common stock is traded on the **New York Stock Exchange** under the symbol **'RYAM'**, with 3,116 record holders as of February 27, 2024[143](index=143&type=chunk) - Quarterly common stock dividends were **suspended in September 2019**, and no dividends have been declared since, with future payments dependent on financial condition and debt facility limitations[144](index=144&type=chunk) - As of December 31, 2023, **$60 million remained unused** under the $100 million share buyback program authorized in January 2018, with **no repurchases under this program in 2023, 2022, or 2021**[145](index=145&type=chunk)[189](index=189&type=chunk) Issuer Purchases of Equity Securities (Q4 2023) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs | | :--- | :--- | :--- | :--- | :--- | | October 1 to November 4 | — | $— | — | $60,294,000 | | November 5 to December 2 | — | $— | — | $60,294,000 | | December 3 to December 31 | 15,964 | $348 | — | $60,294,000 | | **Total** | **15,964** | | **—** | | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company experienced a decline in net sales and operating income in 2023 due to lower commodity prices, reduced volumes, and a significant asset impairment, though strategic initiatives are progressing - In January 2024, the **2027 Term Loan agreement was amended** to increase the maximum consolidated secured net leverage ratio through fiscal year 2024, providing operational flexibility[164](index=164&type=chunk) - A **$62 million non-cash asset impairment** was recorded in Q4 2023 due to the optimization and realignment of High Purity Cellulose assets, aimed at reducing commodity exposure and earnings volatility[164](index=164&type=chunk) - The company secured **$250 million in term loan financing** in July 2023, using the proceeds to redeem the **$318 million principal balance of the 2024 Notes**[164](index=164&type=chunk) Consolidated Financial Summary (2023 vs 2022) | Metric | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | | :--- | :--- | :--- | :--- | | Net sales | $1,643 | $1,717 | $(74) | | Cost of sales | $(1,555) | $(1,594) | $39 | | Gross margin | $88 | $123 | $(35) | | Operating income (loss) | $(65) | $26 | $(91) | | Net loss | $(102) | $(15) | $(87) | | Gross margin % | 54% | 72% | (18)% | | Operating margin % | (40)% | 15% | (55)% | | Effective tax rate | 244% (benefit) | (38)% (expense) | 282% | Adjusted EBITDA and Adjusted Free Cash Flows (2023 vs 2022) | Metric | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | | :--- | :--- | :--- | :--- | | EBITDA-continuing operations | $75 | $173 | $(98) | | Adjusted EBITDA-continuing operations | $139 | $177 | $(38) | | Adjusted free cash flows-continuing operations | $53 | $(35) | $88 | [Overview of Operations](index=30&type=section&id=Overview%20of%20Operations) - The company operates in three business segments: **High Purity Cellulose**, **Paperboard**, and **High-Yield Pulp**[151](index=151&type=chunk) - High Purity Cellulose is the leading global producer of cellulose specialties, with **1,045,000 MTs** combined annual capacity, and **50% of cost of sales** from wood fiber, chemicals, and energy[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) - Paperboard has an annual capacity of **180,000 MTs**, with **80% of cost of sales** from wood pulp, chemicals, and energy[155](index=155&type=chunk) - High-Yield Pulp has an annual capacity of **290,000 MTs**, with **40% of cost of sales** from wood fiber, chemicals, and energy[156](index=156&type=chunk)[157](index=157&type=chunk) [Recent Business Developments](index=31&type=section&id=Recent%20Business%20Developments) - In January 2024, the 2027 Term Loan agreement was amended to **increase the maximum consolidated secured net leverage ratio** through fiscal year 2024, incurring a 025% fee if the original ratio is exceeded[164](index=164&type=chunk) - A **$62 million non-cash asset impairment** was recorded in Q4 2023 at the Temiscaming and Jesup plants due to the optimization and realignment of High Purity Cellulose assets[164](index=164&type=chunk) - The company secured **$250 million in term loan financing** in July 2023, using the proceeds to redeem the **$318 million principal balance of the 2024 Notes** in August 2023[164](index=164&type=chunk) - Debt repurchases in 2023 included **$10 million of 2026 Notes for $9 million cash** in April and **$5 million of 2024 Notes for $5 million cash** in March[164](index=164&type=chunk) [2024 Outlook](index=31&type=section&id=2024%20Outlook) - The company is exploring the potential sale of its **Paperboard and High-Yield Pulp assets** at Temiscaming to align with long-term growth and reduce debt[160](index=160&type=chunk) - For High Purity Cellulose, average sales prices are expected to **increase by a low single-digit percentage** in 2024, with flat sales volumes and improving commodity prices from Q4 2023 levels[162](index=162&type=chunk) - The Tartas bioethanol facility is expected to be commissioned in Q1 2024, projected to deliver **$4 million EBITDA in 2024**, growing to **$8-10 million by 2025**[162](index=162&type=chunk) - Paperboard prices are expected to decrease slightly, but sales volumes should improve, while High-Yield Pulp prices and volumes are expected to increase, leading to **positive EBITDA** for the segment[163](index=163&type=chunk)[164](index=164&type=chunk) - Corporate costs are expected to remain flat or increase slightly in 2024 due to the final year of ERP implementation, which is anticipated to drive efficiencies from 2025[165](index=165&type=chunk) [Biomaterials Strategy](index=32&type=section&id=Biomaterials%20Strategy) - The company is investing in new products targeting green energy and products markets, with a goal of generating **$42 million in annual EBITDA** from these products by 2027[166](index=166&type=chunk) - The commissioning of the bioethanol facility is a **significant milestone** in this strategy[166](index=166&type=chunk) [Results of Operations: Year Ended December 31, 2023 versus December 31, 2022](index=32&type=section&id=Results%20of%20Operations%3A%20Year%20Ended%20December%2031%2C%202023%20versus%20December%2031%2C%202022) - Net sales **decreased by $74 million** in 2023, driven by lower sales prices in commodity products and High-Yield Pulp, and reduced sales volumes in cellulose specialties, Paperboard, and High-Yield Pulp[169](index=169&type=chunk) - Operating results **declined by $91 million**, primarily due to a **$62 million non-cash asset impairment** in High Purity Cellulose and decreased net sales across all segments[170](index=170&type=chunk) - Interest expense **increased by $8 million** due to a higher average effective interest rate, partially offset by a decrease in average outstanding debt balance[171](index=171&type=chunk) - The effective tax rate for continuing operations was a **benefit of 24% in 2023**, compared to an expense of 4% in 2022, influenced by foreign statutory rates, US tax credits, and valuation allowance changes[174](index=174&type=chunk)[175](index=175&type=chunk) - Discontinued operations recorded a pre-tax gain of **$2 million in 2023** related to reduced Canadian softwood lumber export duties, compared to **$16 million in 2022**[177](index=177&type=chunk)[178](index=178&type=chunk) Consolidated Statements of Operations (2023 vs 2022) | Metric | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | | :--- | :--- | :--- | :--- | | Net sales | $1,643 | $1,717 | $(74) | | Cost of sales | $(1,555) | $(1,594) | $39 | | Gross margin | $88 | $123 | $(35) | | Selling, general and administrative expenses | $(76) | $(91) | $15 | | Foreign exchange gain (loss) | $(3) | $4 | $(7) | | Asset impairment | $(62) | — | $(62) | | Other operating expense, net | $(12) | $(10) | $(2) | | Operating income (loss) | $(65) | $26 | $(91) | | Interest expense | $(74) | $(66) | $(8) | | Components of pension and OPEB, excluding service costs | $0 | $5 | $(5) | | Gain on GreenFirst equity securities | — | $5 | $(5) | | Other income, net | $7 | $6 | $1 | | Loss from continuing operations before income tax | $(132) | $(24) | $(108) | | Income tax (expense) benefit | $32 | $(1) | $33 | | Equity in loss of equity method investment | $(2) | $(2) | $0 | | Loss from continuing operations | $(102) | $(27) | $(75) | | Income from discontinued operations, net of tax | $0 | $12 | $(12) | | Net loss | $(102) | $(15) | $(87) | | Gross margin % | 54% | 72% | (18)% | | Operating margin % | (40)% | 15% | (55)% | | Effective tax rate | 244% | (38)% | 282% | [Operating Results by Segment](index=34&type=section&id=Operating%20Results%20by%20Segment) - High Purity Cellulose net sales **decreased $23 million**, with an **11% increase in cellulose specialties prices** offset by a **13% decrease in commodity prices**; sales volumes increased 4% due to a **39% rise in commodity volumes**, partially offset by an **18% drop in cellulose specialties volumes**[180](index=180&type=chunk) - Operating results for High Purity Cellulose **declined $73 million**, primarily due to the **$62 million non-cash asset impairment**, lower cellulose specialties volumes, and higher labor costs, partially offset by higher cellulose specialties prices and commodity volumes[181](index=181&type=chunk) - Paperboard net sales **decreased $31 million** due to a **13% decrease in sales volumes** from customer destocking, while operating income remained flat due to lower costs offsetting reduced volumes[182](index=182&type=chunk)[183](index=183&type=chunk) - High-Yield Pulp net sales **decreased $24 million**, driven by **12% lower sales prices** and **5% lower sales volumes** due to reduced demand, resulting in a **$19 million decline in operating results**[184](index=184&type=chunk)[185](index=185&type=chunk) - Corporate operating loss **decreased $1 million** in 2023, primarily due to lower variable compensation and one-time severance costs in 2022, partially offset by unfavorable foreign exchange rates and higher ERP transformation project expenditures[186](index=186&type=chunk) High Purity Cellulose Segment Performance (2023 vs 2022) | Metric | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | | :--- | :--- | :--- | :--- | | Net sales | $1,313 | $1,336 | $(23) | | Operating income (loss) | $(42) | $31 | $(73) | | Average sales prices ($/MT) | $1,273 | $1,330 | $(57) | | Sales volumes (thousands MTs) | 955 | 918 | 37 | Paperboard Segment Performance (2023 vs 2022) | Metric | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | | :--- | :--- | :--- | :--- | | Net sales | $219 | $250 | $(31) | | Operating income | $37 | $37 | $0 | | Average sales prices ($/MT) | $1,491 | $1,478 | $13 | | Sales volumes (thousands MTs) | 147 | 169 | (22) | High-Yield Pulp Segment Performance (2023 vs 2022) | Metric | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | | :--- | :--- | :--- | :--- | | Net sales | $136 | $160 | $(24) | | Operating income (loss) | $(3) | $16 | $(19) | | Average sales prices ($/MT) | $606 | $685 | $(79) | | Sales volumes (thousands MTs) | 182 | 191 | (9) | [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) - Cash flows from operations are the primary source of liquidity, with the company believing future cash flows, ABL Credit Facility availability, and capital market access will be adequate[187](index=187&type=chunk)[190](index=190&type=chunk) - The 2027 Term Loan was amended in January 2024 to **increase the maximum consolidated secured net leverage ratio**, providing operational flexibility[191](index=191&type=chunk) - Total noncancellable unconditional purchase obligations amounted to **$728 million** as of December 31, 2023, primarily for natural gas, steam energy, and wood chips[194](index=194&type=chunk)[491](index=491&type=chunk) Liquidity and Capital Resources Summary (as of Dec 31) | Metric | 2023 (Millions USD) | 2022 (Millions USD) | | :--- | :--- | :--- | | Cash and cash equivalents | $76 | $152 | | Availability under the ABL Credit Facility | $118 | $130 | | Total debt | $777 | $853 | | Stockholders' equity | $747 | $829 | | Total capitalization | $1,524 | $1,682 | | Debt to capital ratio | 51% | 51% | Cash Flows (2023 vs 2022) | Activity | 2023 (Millions USD) | 2022 (Millions USD) | Change (Millions USD) | | :--- | :--- | :--- | :--- | | Cash provided by operating activities | $136 | $69 | $67 | | Cash used in investing activities-continuing operations | $(128) | $(138) | $10 | | Cash used in financing activities | $(87) | $(73) | $(14) | [Performance and Liquidity Indicators](index=38&type=section&id=Performance%20and%20Liquidity%20Indicators) - EBITDA from continuing operations **decreased by $98 million** in 2023, primarily due to the **$62 million non-cash asset impairment**, lower net sales, and increased labor/wood costs[205](index=205&type=chunk) - Adjusted free cash flows from continuing operations **increased by $88 million**, driven by changes in working capital and lower capital expenditures[207](index=207&type=chunk) EBITDA and Adjusted EBITDA (2023 vs 2022) | Metric | 2023 (Millions USD) | 2022 (Millions USD) | | :--- | :--- | :--- | | Loss from continuing operations | $(102) | $(27) | | Depreciation and amortization | $140 | $135 | | Interest expense, net | $69 | $64 | | Income tax expense (benefit) | $(32) | $1 | | **EBITDA-continuing operations** | **$75** | **$173** | | Asset impairment | $62 | — | | Pension settlement loss | $2 | $1 | | Severance | — | $4 | | Gain on debt extinguishment | — | $(1) | | **Adjusted EBITDA-continuing operations** | **$139** | **$177** | Adjusted Free Cash Flows (2023 vs 2022) | Metric | 2023 (Millions USD) | 2022 (Millions USD) | | :--- | :--- | :--- | | Cash provided by operating activities-continuing operations | $136 | $69 | | Capital expenditures, net | $(83) | $(104) | | **Adjusted free cash flows-continuing operations** | **$53** | **$(35)** | [Critical Accounting Estimates](index=39&type=section&id=Critical%20Accounting%20Estimates) - Revenue is recognized when performance obligations are satisfied, typically upon delivery, and measured based on contractual arrangements or published indices, with variable consideration like sales volume-based rebates estimated and recorded[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk) - Property, plant, and equipment depreciation uses the **units-of-production method** for manufacturing assets and straight-line for others, with useful lives and salvage values based on historical experience and future expectations[212](index=212&type=chunk) - Long-lived assets are reviewed annually for impairment, with recoverability measured by net undiscounted cash flows; a **$62 million non-cash impairment** was recognized in Q4 2023 due to High Purity Cellulose asset realignment[213](index=213&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk) - Environmental liabilities, totaling **$170 million** at December 31, 2023, are estimated based on current laws, specialist advice, and management experience, with potential for reasonably possible additional liabilities **up to $85 million**[216](index=216&type=chunk)[410](index=410&type=chunk)[418](index=418&type=chunk) - Defined benefit pension and postretirement plans require numerous estimates and assumptions (discount rate, return on assets, salary increases) to determine liabilities and annual expense, with the weighted average discount rate **decreasing from 495% in 2022 to 471% in 2023**[217](index=217&type=chunk)[218](index=218&type=chunk) - Income tax expense, deferred tax assets/liabilities, and unrecognized tax benefits involve significant judgments and estimates, particularly regarding the realizability of deferred tax assets (mostly in Canada) and the impact of the Tax Cuts and Jobs Act on US cash taxes[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk)[228](index=228&type=chunk)[484](index=484&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=42&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exposed to market risks from interest rates, foreign currency, and commodity prices, with policies in place to minimize their impact - The company is exposed to market risks from changes in **interest rates, foreign currency, and commodity prices**, and may use derivatives to minimize their economic impact[229](index=229&type=chunk)[230](index=230&type=chunk) - Prices, sales volumes, and margins of commodity products (High Purity Cellulose, High-Yield Pulp) are **cyclically affected** by economic shifts, capacity fluctuations, and currency exchange rates[231](index=231&type=chunk) - Key input costs like **wood fiber, chemicals, and energy** are subject to significant price fluctuations, which the company may mitigate through commodity forward contracts[232](index=232&type=chunk) - As of December 31, 2023, the company had **$255 million of variable rate debt**, where a hypothetical **one percent change in interest rates** would result in a **$2 million annual change** in interest expense[233](index=233&type=chunk) Fixed Rate Debt Fair Value (as of Dec 31) | Metric | 2023 (Millions USD) | 2022 (Millions USD) | | :--- | :--- | :--- | | Carrying amount of fixed rate debt | $536,393 | $847,591 | | Fair value of fixed rate debt | $497,563 | $838,502 | [Item 8. Financial Statements and Supplementary Data](index=43&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section incorporates the company's financial statements and supplementary data by reference from Part IV Item 15 - The required financial statements and supplementary data, including reports of the independent registered accounting firm, are incorporated by reference from **Part IV Item 15**[235](index=235&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=43&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reported no changes in or disagreements with accountants on accounting and financial disclosure - There were **no changes in or disagreements with accountants** on accounting and financial disclosure[236](index=236&type=chunk) [Item 9A. Controls and Procedures](index=43&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2023 - Management concluded that the design and operation of the company's disclosure controls and procedures were **effective** as of December 31, 2023[239](index=239&type=chunk) - The company's internal control over financial reporting was assessed as **effective** as of December 31, 2023, based on the COSO framework, and received an **unqualified opinion** from Grant Thornton LLP[240](index=240&type=chunk)[277](index=277&type=chunk)[278](index=278&type=chunk)[294](index=294&type=chunk) - **No changes** in internal control over financial reporting occurred during the quarter ended December 31, 2023, that would materially affect it[241](index=241&type=chunk) [Item 9B. Other Information](index=43&type=section&id=Item%209B.%20Other%20Information) The company reported no adoption, modification, or termination of Rule 10b5-1 or non-Rule 10b5-1 trading arrangements by any director or officer - **No director or officer** adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended December 31, 2023[242](index=242&type=chunk) [Item 9C. Disclosure regarding Foreign Jurisdictions that Prevent Inspections](index=43&type=section&id=Item%209C.%20Disclosure%20regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) The company stated that this item is not applicable - This item is **not applicable**[243](index=243&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=45&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's Proxy Statement - Information on directors, executive officers, and corporate governance is **incorporated by reference from the Proxy Statement**, including details on corporate governance best practices and audit committee financial experts[246](index=246&type=chunk) - The company's **Standard of Ethics and Code of Corporate Conduct**, applicable to principal executive, financial, and accounting officers, is available on its website[247](index=247&type=chunk) [Item 11. Executive Compensation](index=45&type=section&id=Item%2011.%20Executive%20Compensation) Details on executive compensation are incorporated by reference from the company's Proxy Statement - Information on executive compensation is **incorporated by reference from the Proxy Statement**, covering compensation discussion and analysis, committee reports, and director compensation[248](index=248&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=45&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information concerning security ownership and equity compensation plans is incorporated by reference from the company's Proxy Statement - Details on security ownership of beneficial owners and management, as well as equity compensation plan information, are **incorporated by reference from the Proxy Statement**[249](index=249&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=45&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related person transactions and director independence is incorporated by reference from the company's Proxy Statement - Information on certain relationships, related person transactions, and director independence is **incorporated by reference from the Proxy Statement**[250](index=250&type=chunk) [Item 14. Principal Accounting Fees and Services](index=45&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information concerning principal accounting fees and services is incorporated by reference from the company's Proxy Statement - Information on principal accounting fees and services is **incorporated by reference from the Proxy Statement**[251](index=251&type=chunk) Part IV [Item 15. Exhibits, Financial Statement Schedules](index=46&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed as part of the 2023 Form 10-K - The section includes a list of **financial statements and financial statement schedules**, as detailed on page F-1 of the 2023 Form 10-K[253](index=253&type=chunk)[254](index=254&type=chunk) - Numerous exhibits are filed, including the Separation and Distribution Agreement, Arrangement Agreement, Amended and Restated Certificate of Incorporation and Bylaws, and various **incentive stock plans**[255](index=255&type=chunk)[256](index=256&type=chunk)[257](index=257&type=chunk)[258](index=258&type=chunk)[259](index=259&type=chunk) - Key financial agreements such as the **Revolving Credit Agreement**, **Term Loan Credit Agreement**, and related amendments are also listed as exhibits[258](index=258&type=chunk) - **Certifications from the Chief Executive Officer and Chief Financial Officer** (pursuant to Rule 13a-14(a)/15d-14(a) and Section 302 of Sarbanes-Oxley Act) and a Certification of Periodic Financial Reports Under Section 906 are included[259](index=259&type=chunk) Signatures [Officer and Director Signatures](index=52&type=section&id=Officer%20and%20Director%20Signatures) This section contains the duly authorized signatures of the company's officers and Board of Directors, affirming their responsibility for the 2023 Form 10-K - The report is signed by **Marcus J Moeltner (Chief Financial Officer)**, **De Lyle W Bloomquist (Chief Executive Officer, President, and Director)**, and **Gabriela Garcia (Chief Accounting Officer)** on February 29, 2024[264](index=264&type=chunk)[265](index=265&type=chunk) - The Board of Directors, including **Lisa M Palumbo (Chair)** and other directors, also signed the report on various dates in January 2024[269](index=269&type=chunk) - A **Power of Attorney** grants Marcus J Moeltner and R Colby Slaughter authority to sign and file the Annual Report on Form 10-K and any amendments[267](index=267&type=chunk) Index to Financial Statements [Financial Statements and Schedules](index=54&type=section&id=Financial%20Statements%20and%20Schedules) This index provides a comprehensive list of the financial statements and schedules included in the 2023 Form 10-K - The index lists Management's Report on Internal Control over Financial Reporting, Reports of Independent Registered Public Accounting Firm, Consolidated Statements of Operations, Comprehensive Income (Loss), Balance Sheets, Stockholders' Equity, and Cash Flows[271](index=271&type=chunk) - It also includes the **Notes to Financial Statements** and **Schedule II—Valuation and Qualifying Accounts**[271](index=271&type=chunk)[273](index=273&type=chunk) Management's Report on Internal Control over Financial Reporting [Effectiveness of Internal Controls](index=55&type=section&id=Effectiveness%20of%20Internal%20Controls) Management concluded that the company's internal control over financial reporting was effective as of December 31, 2023, based on the COSO framework - Management is responsible for establishing and maintaining **adequate internal control over financial reporting**, designed to provide reasonable assurance regarding financial reporting reliability[275](index=275&type=chunk) - As of December 31, 2023, management concluded that the company's internal control over financial reporting was **effective**, based on the 2013 Internal Control—Integrated Framework issued by COSO[277](index=277&type=chunk) - Grant Thornton LLP, the independent registered public accounting firm, audited and issued an **unqualified report** on the effectiveness of the company's internal control over financial reporting as of December 31, 2023[278](index=278&type=chunk)[282](index=282&type=chunk)[294](index=294&type=chunk) Reports of Independent Registered Public Accounting Firm [Opinion on Financial Statements and Internal Control](index=56&type=section&id=Opinion%20on%20Financial%20Statements%20and%20Internal%20Control) Grant Thornton LLP issued an unqualified opinion on the company's financial statements and internal controls, highlighting critical audit matters related to environmental liabilities and asset impairment - Grant Thornton LLP issued an **unqualified opinion** on the company's consolidated financial statements as of December 31, 2023 and 2022, and for the three years ended December 31, 2023, in conformity with GAAP[281](index=281&type=chunk) - An **unqualified opinion** was also expressed on the company's internal control over financial reporting as of December 31, 2023, based on the COSO framework[282](index=282&type=chunk)[294](index=294&type=chunk) - Critical audit matters identified include accruals for **environmental liabilities (totaling $170 million** at December 31, 2023) due to significant estimates and specialized knowledge required[285](index=285&type=chunk)[286](index=286&type=chunk)[287](index=287&type=chunk) - Another critical audit matter is the **impairment of long-lived assets**, specifically a **$25 million charge** related to High Purity Cellulose assets at Temiscaming, which involved significant management judgment in estimating fair value[289](index=289&type=chunk)[290](index=290&type=chunk) Consolidated Statements of Operations [Financial Performance Overview](index=59&type=section&id=Financial%20Performance%20Overview) The company reported a net loss of $1018 million in 2023, a significant increase from $149 million in 2022, driven by a $623 million asset impairment and lower gross margin - Net sales **decreased by $74 million** from $1,7173 million in 2022 to $1,6433 million in 2023[302](index=302&type=chunk) - The company reported a gross margin of **$882 million in 2023**, down from $1231 million in 2022[302](index=302&type=chunk) - Operating income shifted from a gain of $261 million in 2022 to a **loss of $653 million in 2023**, largely due to a **$623 million asset impairment**[302](index=302&type=chunk) - The net loss for 2023 was **$1018 million**, compared to a net loss of **$149 million in 2022**[302](index=302&type=chunk) Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net sales | $1,643,330 | $1,717,267 | $1,407,558 | | Cost of sales | $(1,555,176) | $(1,594,184) | $(1,332,836) | | Gross margin | $88,154 | $123,083 | $74,722 | | Selling, general and administrative expense | $(75,712) | $(91,475) | $(75,789) | | Foreign exchange gain (loss) | $(2,999) | $4,726 | $875 | | Asset impairment | $(62,300) | — | — | | Other operating expense, net | $(12,407) | $(10,199) | $(10,253) | | Operating income (loss) | $(65,264) | $26,135 | $(10,445) | | Interest expense | $(73,810) | $(66,183) | $(66,394) | | Components of pension and OPEB, excluding service costs | $98 | $4,960 | $(4,337) | | Gain (loss) on GreenFirst equity securities | — | $5,197 | $(3,597) | | Other income, net | $6,502 | $6,069 | $1,901 | | Loss from continuing operations before income tax | $(132,474) | $(23,822) | $(82,872) | | Income tax (expense) benefit | $32,311 | $(902) | $34,688 | | Equity in loss of equity method investment | $(1,984) | $(2,653) | $(1,585) | | Loss from continuing operations | $(102,147) | $(27,377) | $(49,769) | | Income from discontinued operations, net of tax | $312 | $12,458 | $116,183 | | Net income (loss) | $(101,835) | $(14,919) | $66,414 | | Basic and Diluted earnings per common share: | | | | | Loss from continuing operations | $(157) | $(042) | $(078) | | Income from discontinued operations | — | $019 | $183 | | Net income (loss) | $(157) | $(023) | $105 | Consolidated Statements of Comprehensive Income (Loss) [Comprehensive Income (Loss) Analysis](index=60&type=section&id=Comprehensive%20Income%20(Loss)%20Analysis) The company reported a comprehensive loss of $839 million in 2023, an improvement from the net loss due to positive other comprehensive income components - The company reported a net loss of **$1018 million in 2023**, which was partially offset by total other comprehensive income of **$179 million**, resulting in a comprehensive loss of **$839 million**[305](index=305&type=chunk) - Other comprehensive income in 2023 included a **$75 million foreign currency translation adjustment gain** and a **$102 million net gain on employee benefit plans**[305](index=305&type=chunk) Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net income (loss) | $(101,835) | $(14,919) | $66,414 | | Other comprehensive income (loss), net of tax: | | | | | Foreign currency translation adjustment | $7,530 | $(12,763) | $(17,919) | | Unrealized gain (loss) on derivative instruments | $194 | $280 | $(2,681) | | Net gain on employee benefit plans | $10,157 | $33,155 | $69,765 | | Total other comprehensive income (loss) | $17,881 | $20,672 | $49,165 | | Comprehensive income (loss) | $(83,954) | $5,753 | $115,579 | Consolidated Balance Sheets [Financial Position Overview](index=61&type=section&id=Financial%20Position%20Overview) Total assets decreased to $2,1827 million in 2023, primarily due to reductions in cash, accounts receivable, and inventory, while total liabilities also decreased - Total assets **decreased by $1648 million**, from $2,3475 million in 2022 to $2,1827 million in 2023[308](index=308&type=chunk) - Cash and cash equivalents **decreased by $76 million**, from $1518 million in 2022 to $758 million in 2023[308](index=308&type=chunk) - Property, plant and equipment, net, **decreased by $762 million**, from $1,1513 million in 2022 to $1,0751 million in 2023[308](index=308&type=chunk) - Total debt (current and long-term) **decreased by $757 million**, from $8531 million in 2022 to $7775 million in 2023[308](index=308&type=chunk) - Total stockholders' equity **decreased by $829 million**, from $8293 million in 2022 to $7464 million in 2023[308](index=308&type=chunk) Consolidated Balance Sheets (in thousands, except share amounts) | Asset/Liability/Equity Category | December 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $75,768 | $151,803 | | Accounts receivable, net | $197,457 | $211,526 | | Inventory | $207,474 | $265,334 | | Total current assets | $575,058 | $689,530 | | Property, plant and equipment, net | $1,075,105 | $1,151,268 | | Deferred tax assets | $345,181 | $322,164 | | Total assets | $2,182,700 | $2,347,528 | | **Liabilities** | | | | Accounts payable | $186,226 | $163,962 | | Accrued and other current liabilities | $154,488 | $164,369 | | Debt due within one year | $25,283 | $14,617 | | Total current liabilities | $375,830 | $353,680 | | Long-term debt | $752,174 | $838,508 | | Non-current environmental liabilities | $160,458 | $159,949 | | Total liabilities and stockholders' equity | $2,182,700 | $2,347,528 | | **Stockholders' Equity** | | | | Total stockholders' equity | $746,447 | $829,313 | Consolidated Statements of Stockholders' Equity [Stockholders' Equity Changes](index=62&type=section&id=Stockholders'%20Equity%20Changes) Total stockholders' equity decreased to $7464 million at year-end 2023, primarily driven by a net loss and common stock repurchases - Total stockholders' equity **decreased by $829 million**, from $8293 million at December 31, 2022, to $7464 million at December 31, 2023[310](index=310&type=chunk) - The **net loss of $1018 million** and **common stock repurchases of $54 million** were the primary drivers of the decrease in equity[310](index=310&type=chunk) - Other comprehensive income, net of tax, contributed **$179 million**, and stock-based compensation added **$65 million** to equity in 2023[310](index=310&type=chunk) Consolidated Statements of Stockholders' Equity (in thousands, except share data) | Metric | December 31, 2023 | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | :--- | | Balance at beginning of year | $829,313 | $814,343 | $695,087 | | Net income (loss) | $(101,835) | $(14,919) | $66,414 | | Other comprehensive income, net of tax | $17,881 | $20,672 | $49,165 | | Issuance of common stock under incentive stock plans | — | — | — | | Stock-based compensation | $6,507 | $9,650 | $5,099 | | Repurchase of common stock | $(5,419) | $(433) | $(1,422) | | Balance at end of year | $746,447 | $829,313 | $814,343 | Consolidated Statements of Cash Flows [Cash Flow Analysis](index=63&type=section&id=Cash%20Flow%20Analysis) Cash from operations increased significantly in 2023 due to improved working capital, while cash used in financing increased due to debt repayments - Cash provided by operating activities **increased significantly by $675 million**, from $688 million in 2022 to $1363 million in 2023, primarily due to increased cash inflows from working capital[198](index=198&type=chunk)[312](index=312&type=chunk) - Cash used in investing activities of continuing operations **decreased by $101 million**, from $1386 million in 2022 to $1285 million in 2023, mainly due to lower capital spending[199](index=199&type=chunk)[312](index=312&type=chunk) - Cash used in financing activities **increased by $138 million**, from $731 million in 2022 to $869 million in 2023, driven by debt redemptions and issuance costs, partially offset by new term loan proceeds[200](index=200&type=chunk)[312](index=312&type=chunk) - The cash and cash equivalents balance at the end of 2023 was **$758 million**, down from $1518 million in 2022[312](index=312&type=chunk) Consolidated Statements of Cash Flows (in thousands) | Activity | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net income (loss) | $(101,835) | $(14,919) | $66,414 | | Cash provided by operating activities-continuing operations | $136,274 | $68,813 | $73,686 | | Cash provided by operating activities-discontinued operations | — | — | $159,538 | | Cash provided by operating activities | $136,274 | $68,813 | $233,224 | | Cash used in investing activities-continuing operations | $(128,450) | $(138,602) | $(97,359) | | Cash provided by investing activities-discontinued operations | $1,169 | $44,428 | $182,750 | | Cash provided by (used in) investing activities | $(127,281) | $(94,174) | $85,391 | | Cash used in financing activities | $(86,947) | $(73,115) | $(156,662) | | Net increase (decrease) in cash and cash equivalents | $(77,954) | $(98,476) | $161,953 | | Balance, end of period | $75,768 | $151,803 | $253,307 | Notes to Financial Statements [1. Nature of Operations and Basis of Presentation](index=65&type=section&id=1.%20Nature%20of%20Operations%20and%20Basis%20of%20Presentation) The company operates in three business segments, with financial statements prepared under GAAP and reflecting discontinued operations - The company operates in three business segments: **High Purity Cellulose**, **Paperboard**, and **High-Yield Pulp**[316](index=316&type=chunk) - High Purity Cellulose manufactures cellulose specialties and commodity products (absorbent materials, viscose pulp) across four facilities in the US, Canada, and France[317](index=317&type=chunk) - Paperboard and High-Yield Pulp are manufactured at a Canadian facility, serving packaging, printing, and other paper product markets[318](index=318&type=chunk)[319](index=319&type=chunk) - Financial statements are prepared in accordance with GAAP, requiring management to make estimates and assumptions, and present the results of lumber and newsprint operations as discontinued[321](index=321&type=chunk)[323](index=323&type=chunk) - A subsequent event in January 2024 involved an **amendment to the 2027 Term Loan** to increase the maximum consolidated secured net leverage ratio[325](index=325&type=chunk) [2. Significant Accounting Policies and Recent Accounting Developments](index=66&type=section&id=2.%20Significant%20Accounting%20Policies%20and%20Recent%20Accounting%20Developments) This note details significant accounting policies for foreign currency, revenue recognition, and asset valuation, and discusses recent accounting standard updates - Assets and liabilities of foreign subsidiaries are translated using balance sheet date exchange rates, while revenues and expenses use average rates, with translation gains/losses reported in AOCI[326](index=326&type=chunk) - Property, plant, and equipment are depreciated using the **units-of-production method** for manufacturing assets and straight-line for others; a **$62 million non-cash impairment** was recorded in Q4 2023 related to High Purity Cellulose assets[330](index=330&type=chunk)[333](index=333&type=chunk) - The company capitalizes certain software costs, amortizing them over 5 years, and defers major maintenance shutdown costs, amortizing them over the period benefited (12-18 months)[335](index=335&type=chunk)[336](index=336&type=chunk) - Revenue is recognized when performance obligations are satisfied, typically u

Rayonier Advanced Materials Inc. (NYSE:RYAM) Q4 2023 Earnings Conference Call February 28, 2024 9:00 AM ET Company Participants Mickey Walsh - Treasurer and VP of IR De Lyle Bloomquist - President and CEO Marcus Moeltner - SVP, Finance and CFO Conference Call Participants Daniel Harriman - Sidoti & Company Matthew McKellar - RBC Capital Markets Dmitry Silversteyn - Water Tower Research Operator Good morning, and welcome to the RYAM Fourth Quarter and Full Year 2023 Earnings Conference Call. During today's p ...

[Financial & Operational Highlights](index=1&type=section&id=Financial%20%26%20Operational%20Highlights) The company's 2023 performance fell short of expectations, leading to cost-cutting and debt compliance efforts, while 2024 anticipates improved Adjusted EBITDA and free cash flow driven by strategic initiatives [Full Year 2023 Performance Summary](index=1&type=section&id=Full%20Year%202023%20Performance%20Summary) RYAM's 2023 financial results did not meet expectations, primarily due to soft demand in cellulose ethers, Paperboard, and weak pricing in High-Yield Pulp. In response, the company focused on cost-cutting and strategic downtime to generate free cash flow, successfully remaining in compliance with its debt covenants. The year concluded with $139 million in Adjusted EBITDA and $53 million in free cash flow - 2023 EBITDA results were below expectations due to weak demand in construction-related cellulose ethers, Paperboard, and poor pricing for High-Yield Pulp[3](index=3&type=chunk) - The company implemented cost-cutting measures and market-driven downtime, shifting its primary focus to generating free cash flow and adhering to lending commitments[3](index=3&type=chunk) Full Year 2023 Key Financial Metrics | Metric | Value (in millions) | | :--- | :--- | | Net Sales | $1,643 | | Loss from Continuing Operations | $(102) | | Adjusted EBITDA | $139 | | Adjusted Free Cash Flow | $53 | | Total Debt Reduction | $76 | - The company remained in compliance with its debt covenants, ending the year with a net secured debt ratio of **4.2 times Adjusted EBITDA**[3](index=3&type=chunk)[5](index=5&type=chunk) [2024 Outlook](index=1&type=section&id=2024%20Outlook) The company anticipates improved results in 2024, projecting an Adjusted EBITDA of $180 to $200 million and free cash flow of $20 to $40 million. This positive outlook is supported by a competitor's closure, a strategy of prioritizing value over volume, higher pricing for key products, lower production costs, and the expected commencement of its new bioethanol facility in Q1 2024 2024 Financial Guidance | Metric | Guidance Range (in millions) | | :--- | :--- | | Adjusted EBITDA | $180 - $200 | | Adjusted Free Cash Flow | $20 - $40 | - Key drivers for the improved 2024 outlook include a competitor's closure, higher pricing for cellulose specialties, and lower input and logistics costs[4](index=4&type=chunk) - The new bioethanol facility is expected to begin operations in Q1 2024, contributing to improved earnings[4](index=4&type=chunk) [Financial Performance](index=2&type=section&id=Financial%20Performance) The company reported a significant net loss in 2023, driven by decreased sales and operating losses across key segments, particularly High Purity Cellulose [Consolidated Results](index=2&type=section&id=Consolidated%20Results) For the full year 2023, the company reported a net loss of $102 million, a significant increase from the $15 million net loss in 2022. Net sales decreased from $1,717 million in 2022 to $1,643 million in 2023, while operating results shifted from a $26 million income to a $65 million loss, largely driven by performance in the High Purity Cellulose segment Net Sales by Segment (in millions) | Segment | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | High Purity Cellulose | $347 | $384 | $1,313 | $1,336 | | Paperboard | $55 | $67 | $219 | $250 | | High-Yield Pulp | $25 | $58 | $136 | $160 | | **Total Net Sales** | **$422** | **$500** | **$1,643** | **$1,717** | Operating Income (Loss) by Segment (in millions) | Segment | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | High Purity Cellulose | $(49) | $10 | $(42) | $31 | | Paperboard | $8 | $9 | $37 | $37 | | High-Yield Pulp | $(5) | $12 | $(3) | $16 | | Corporate | $(15) | $(15) | $(57) | $(58) | | **Total Operating Income (Loss)** | **$(61)** | **$16** | **$(65)** | **$26** | - The net loss for the year ended December 31, 2023, was **$102 million**, or **$(1.57) per diluted share**, compared to a net loss of **$15 million**, or **$(0.23) per diluted share**, in the prior year[6](index=6&type=chunk) [Segment Performance: High Purity Cellulose](index=2&type=section&id=Segment%20Performance%3A%20High%20Purity%20Cellulose) Full-year net sales for High Purity Cellulose decreased by 2% to $1,313 million, as an 11% price increase in cellulose specialties was offset by a 13% drop in commodity prices and an 18% decline in cellulose specialties volumes due to customer destocking. Operating results fell by $73 million year-over-year, significantly impacted by a $62 million non-cash impairment charge in Q4 related to asset realignment - For FY 2023, net sales decreased by **$23 million (2%)** due to a **4% decrease in total sales prices**, despite a **4% increase in total sales volumes**[8](index=8&type=chunk) - Cellulose specialties sales volumes were negatively impacted by significant customer destocking and market-driven demand declines, particularly in construction markets[8](index=8&type=chunk)[9](index=9&type=chunk) - Operating results for Q4 and FY 2023 declined by **$59 million** and **$73 million** respectively, driven by a **$62 million non-cash impairment charge** in Q4 from the optimization and realignment of assets[10](index=10&type=chunk) [Segment Performance: Paperboard](index=3&type=section&id=Segment%20Performance%3A%20Paperboard) Paperboard net sales for 2023 decreased by 12% to $219 million, driven by a 13% decline in sales volumes from customer destocking, while sales prices saw a slight increase. Operating income for the full year remained flat compared to 2022, as lower input costs offset the impact of reduced sales volumes - FY 2023 net sales decreased by **$31 million (12%)** primarily due to a **13% decrease in sales volumes** from customer destocking[15](index=15&type=chunk) - Full-year operating income was flat compared to the prior year, as lower purchased pulp, maintenance, and logistics costs were offset by lower sales volumes[16](index=16&type=chunk) [Segment Performance: High-Yield Pulp](index=3&type=section&id=Segment%20Performance%3A%20High-Yield%20Pulp) The High-Yield Pulp segment experienced a challenging year, with 2023 net sales falling 15% to $136 million due to 12% and 5% decreases in sales prices and volumes, respectively. Operating results declined by $19 million year-over-year, driven by lower sales and increased wood costs - FY 2023 net sales decreased by **$24 million (15%)** due to a **12% decrease in sales prices** and a **5% decrease in sales volumes**[18](index=18&type=chunk) - The year-over-year decline in operating results was driven by lower sales prices and volumes, along with increased wood costs[19](index=19&type=chunk) [Corporate Expenses](index=3&type=section&id=Corporate%20Expenses) Corporate operating loss was flat for the fourth quarter and decreased by $1 million for the full year 2023 compared to the prior year. Improvements from lower variable compensation were largely offset by unfavorable foreign exchange rates and higher costs related to an ERP transformation project and senior notes refinancing - Corporate operating loss was largely flat year-over-year, with lower variable compensation and benefit costs offset by unfavorable foreign exchange rates and higher project-related expenses[21](index=21&type=chunk) [Other Financial Items, Cash Flow, and Liquidity](index=4&type=section&id=Other%20Financial%20Items%2C%20Cash%20Flow%20and%20Liquidity) Interest expense increased in 2023 despite debt reduction, while the company generated positive operating cash flow and maintained global liquidity, amending its term loan for flexibility [Non-Operating Items and Income Taxes](index=4&type=section&id=Non-Operating%20Items%20and%20Income%20Taxes) Interest expense rose by $8 million in 2023 due to higher interest rates, despite a $76 million reduction in total debt. The effective tax rate for the year was a 24% benefit, differing from the 21% federal statutory rate due to foreign tax rates, U.S. tax credits, and changes in valuation allowances - Interest expense increased by **$8 million** for the full year 2023 due to a higher average effective interest rate, partially offset by a lower average debt balance[23](index=23&type=chunk) - The effective tax rate on the loss from continuing operations for FY 2023 was a benefit of **24%**, differing from the statutory rate primarily due to foreign tax rates and U.S. tax credits[26](index=26&type=chunk) [Cash Flow and Liquidity](index=4&type=section&id=Cash%20Flow%20and%20Liquidity) The company generated $136 million in operating cash flow for 2023, driven by working capital improvements. Total debt was reduced by $76 million during the year. The company ended 2023 with $199 million in global liquidity, and in January 2024, amended its term loan to provide greater operational flexibility 2023 Cash Flow Summary (in millions) | Activity | Cash Flow | | :--- | :--- | | Cash from Operating Activities | $136 | | Cash used in Investing Activities | $(128) | | Cash used in Financing Activities | $(87) | - The company ended the year with **$199 million of global liquidity**, comprising **$76 million in cash** and **$123 million in borrowing capacity**[33](index=33&type=chunk) - In January 2024, the company amended its 2027 Term Loan to increase the maximum consolidated secured net leverage ratio, providing more operational flexibility for 2024[35](index=35&type=chunk) [2024 Outlook and Strategic Initiatives](index=5&type=section&id=2024%20Outlook%20and%20Strategic%20Initiatives) The company is exploring asset sales and projects improved 2024 Adjusted EBITDA, with segment-specific growth strategies and a focus on biomaterials for long-term profitability [Strategic Review and Guidance](index=5&type=section&id=Strategic%20Review%20and%20Guidance) RYAM is exploring the potential sale of its Paperboard and High-Yield Pulp assets at its Temiscaming site to reduce debt and earnings volatility. Excluding any asset sales, the company expects to generate between $180 and $200 million of Adjusted EBITDA in 2024 - The company is conducting a strategic review for the potential sale of its Paperboard and High-Yield Pulp assets located at the Temiscaming site[37](index=37&type=chunk) 2024 Adjusted EBITDA Guidance | Metric | Guidance Range (in millions) | | :--- | :--- | | Adjusted EBITDA | $180 - $200 | [Segment Outlook for 2024](index=5&type=section&id=Segment%20Outlook%20for%202024) For 2024, High Purity Cellulose anticipates a low single-digit increase in specialty prices with flat volumes, and the new bioethanol facility is expected to contribute $4 million to EBITDA. Paperboard expects slightly lower prices but improved volumes. High-Yield Pulp forecasts increases in both prices and volumes, expecting to generate positive EBITDA - **High Purity Cellulose:** Average sales prices for cellulose specialties are expected to increase by a low single-digit percentage, while sales volumes are expected to remain flat compared to 2023[39](index=39&type=chunk) - **Paperboard:** Prices are expected to decrease slightly, while sales volumes are expected to improve as production ramps up to meet demand[40](index=40&type=chunk) - **High-Yield Pulp:** Prices and sales volumes are expected to increase in Q1 2024, with the segment anticipated to generate positive EBITDA[41](index=41&type=chunk) [Biomaterials Strategy](index=6&type=section&id=Biomaterials%20Strategy) The company is actively investing in new biomaterial products to diversify its end markets and increase profitability, targeting the growing green energy sector. A key goal is to generate $42 million of annual EBITDA from these new products by 2027, with the commissioning of the bioethanol facility marking a significant first step - The company aims to generate **$42 million of annual EBITDA** from new biomaterial products by 2027[44](index=44&type=chunk) - The commissioning of the bioethanol facility is a significant milestone towards this goal, expected to contribute **$4 million of EBITDA in 2024** and grow to **$8-$10 million annually** starting in 2025[39](index=39&type=chunk)[44](index=44&type=chunk) [Appendices: Financial Statements & Non-GAAP Reconciliations](index=8&type=section&id=Appendices%3A%20Financial%20Statements%20%26%20Non-GAAP%20Reconciliations) This section provides comprehensive unaudited consolidated financial statements, including statements of operations, balance sheets, cash flows, and reconciliations of non-GAAP measures [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section provides the unaudited consolidated statements of operations for the fourth quarter and full years of 2023 and 2022, detailing net sales, costs, operating income, and net income (loss) [Condensed Consolidated Balance Sheets](index=9&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the unaudited consolidated balance sheets as of December 31, 2023, and December 31, 2022, outlining assets, liabilities, and stockholders' equity [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section contains the unaudited consolidated statements of cash flows for the years ended December 31, 2023, and 2022, showing cash flows from operating, investing, and financing activities [Sales Volumes and Average Prices](index=11&type=section&id=Sales%20Volumes%20and%20Average%20Prices) This table provides a breakdown of average sales prices per metric ton and sales volumes in thousands of metric tons for the High Purity Cellulose, Paperboard, and High-Yield Pulp segments for recent quarters and full years [Reconciliation of Non-GAAP Measures](index=12&type=section&id=Reconciliation%20of%20Non-GAAP%20Measures) This section provides detailed reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures, including EBITDA and Adjusted EBITDA by segment, Adjusted Free Cash Flow, Adjusted Net Debt, and Adjusted Income from Continuing Operations

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 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 001-36285 RAYONIER ADVANCED MATERIALS INC. Incorporated in the State of Delaware I.R.S. Employer Identification No.: 46-4559529 ...

Financial Data and Key Metrics Changes - The company reported an EBITDA of $24 million for Q3 2023, a decline of $44 million or 65% compared to the prior year, primarily due to weak demand across many product categories [66] - Sales volumes decreased by 10% to 217,000 metric tons, with commodity sales volumes rising by 37% while Cellulose Specialty (CS) volumes decreased by 36% [67] - Net debt at the end of the quarter was $743 million, a reduction of $5 million from the same period in 2022, but increased sequentially due to higher working capital [91] Business Line Data and Key Metrics Changes - The Paperboard segment saw a decrease in sales of $9 million due to a 5% reduction in sales volumes and an 8% decline in sales prices, although EBITDA increased by $2 million to $17 million due to lower pulp costs [1][66] - The High-Yield Pulp segment experienced a sales decline of $15 million, with a 31% drop in external sales prices and a 13% reduction in sales volumes, resulting in an EBITDA of negative $5 million [68] - The CS segment's sales included $28 million from biomaterial sales, with a year-to-date price increase of 12% compared to the prior year [67][71] Market Data and Key Metrics Changes - The company faced sustained weakness in demand across multiple end markets, particularly in construction markets, impacting the ethers market [15][8] - The closure of the GP Foley facility is expected to tighten the CS markets, potentially benefiting pricing negotiations in 2024 [20] - Acetates demand is anticipated to normalize in Q4, with expectations of stronger performance compared to Q3 [24] Company Strategy and Development Direction - The company aims to reduce debt by $70 million over the next year through free cash flow and potential divestitures of passive assets [4][75] - A strategic shift is underway to consolidate viscose production to the Temiscaming facility, optimizing production and reducing costs [85] - The company is targeting an annual EBITDA of $325 million by 2027, with ongoing initiatives to enhance profitability and reduce leverage [78] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a stronger Q4 due to expected improvements in demand and pricing, particularly in the CS segment [66][87] - The company anticipates a substantial working capital benefit in Q4 from aggressive inventory management [9] - Management acknowledged ongoing challenges but emphasized a commitment to enhancing profitability while reducing debt [47] Other Important Information - The company has revised its adjusted EBITDA guidance to approximately $150 million for 2023, reflecting ongoing demand weakness [72] - Free cash flow guidance has been increased to a range of $65 million to $75 million, driven by better-than-expected working capital monetization [9][73] - The company is actively negotiating the potential sale of its paperboard and high-yield pulp assets, which are seen as valuable in the market [93] Q&A Session All Questions and Answers Question: Can you provide more color on the ethers market and its impact on demand? - Management noted that higher interest rates globally are impacting construction markets, leading to continued weakness in ethers demand through 2024 [15] Question: How did the downtime on Paperboard or High Yield Pulp lines impact the high purity line? - Management confirmed that the high purity line operated well during downtime and restarted without issues [17] Question: With the Foley mill closure, do you see potential upside in pricing negotiations for the CS segment? - Management acknowledged that the closure would tighten the CS markets, particularly impacting the other CS market, and expects improved pricing dynamics [20] Question: Can you discuss the raw material pricing situation? - Management indicated improvements in raw material pricing, particularly in caustic, and noted that wood prices are expected to decline due to industry closures [107][108] Question: Is the pricing increase in specialty cellulose due to improved market fundamentals or the Foley plant closure? - Management clarified that the pricing increase is primarily due to prior negotiations and not yet reflecting the impact of the Foley closure [38]

Financial Performance - The company reported an operating loss of $14 million for Q3 2023, compared to an operating loss of $43 million in Q3 2022[8] - Adjusted EBITDA for Q3 2023 was $24 million, a decrease of $44 million or 65% from Q3 2022[8] - Revenue for Q3 2023 was $369 million, a decrease of $97 million or 21% from Q3 2022[17] - Adjusted Free Cash Flow was -$25 million, with breakdowns by segment: High Purity Cellulose -$26 million, Paperboard +$2 million, High-Yield Pulp -$11 million, and Corporate -$9 million[17] Segment Performance - High Purity Cellulose sales volumes decreased by 10%, driven by a 36% decrease in Cellulose Specialties volumes, partially offset by a 37% increase in commodity product volumes[20] - Paperboard sales prices decreased by 8% due to product mix, and sales volumes decreased by 5%[23] - High-Yield Pulp sales prices decreased by 31% and sales volumes decreased by 13%[44] Financial Strategy and Outlook - The company aims for a target debt reduction of $70 million in the next year through Free Cash Flow generation and passive asset sales[18] - The company is updating Adjusted EBITDA guidance to approximately $150 million and raising Adjusted Free Cash Flow guidance to $65-75 million[32] - Adjusted Net Debt is $743 million, a $5 million decrease from Q3 2022, with a Net Debt to LTM Covenant EBITDA ratio of 44x[28]

Production Capacity and Sales - The company has a combined annual production capacity of 1,045,000 MTs for cellulose specialties and commodity products, with 270,000 MTs dedicated to commodity products [142]. - Average sales prices for cellulose specialties in 2023 are expected to be high single-digit percent higher than average 2022 sales prices [150]. - Paperboard prices for 2023 are expected to continue increasing from 2022 levels, driven by strong demand in packaging and commercial printing [151]. - High Purity Cellulose segment net sales rose by $245 million to $1,336 million, with average sales prices increasing by 19% [164]. - Paperboard segment net sales increased by $42 million to $250 million, driven by a 27% rise in sales prices, despite a 6% decrease in sales volumes [166]. - High-Yield Pulp segment net sales grew by $24 million to $160 million, with sales prices increasing by 25% [169]. - Net sales increased by $309 million or 22% in 2022 compared to 2021, reaching $1,717 million, primarily driven by higher sales prices across all segments [155]. Financial Performance - The company reported a net loss of $14.9 million for the year ended December 31, 2022, compared to a net income of $66.4 million in 2021 [291]. - Operating income improved by $36 million in 2022, totaling $26 million, due to higher sales prices, partially offset by increased costs from inflation on chemicals, wood fiber, energy, and logistics [156]. - The company reported comprehensive income of $5,753 in 2022, a significant decrease from $115,579 in 2021, highlighting challenges in overall financial performance [283]. - Loss from continuing operations was $27,377 in 2022, compared to a loss of $49,769 in 2021, showing a reduction in losses year-over-year [280]. - The company reported a net income of $150 million, up from $120 million in the previous year, marking a 25% increase [238]. Cash Flow and Liquidity - Cash flows from operations remain the primary source of liquidity, with a focus on managing working capital and optimizing capital expenditures [172]. - Cash provided by operating activities from continuing operations was $68.8 million in 2022, down from $73.7 million in 2021 [291]. - As of December 31, 2022, the company had cash and cash equivalents of $152 million, down from $253 million in 2021 [176]. - The company reported a cash balance of $151.8 million at the end of 2022, down from $253.3 million at the end of 2021 [291]. Debt and Shareholder Actions - The company repurchased a total of $47 million of Senior Notes during the second, third, and fourth quarters of 2022 [154]. - The total debt as of December 31, 2022, was $853 million, a decrease from $929 million in 2021, resulting in a debt to capital ratio of 51% [176]. - The company has a remaining unused authorization of $60 million under its share buyback program as of December 31, 2022 [132]. - The company suspended its quarterly common stock dividend in September 2019, with no dividends declared since then [131]. Environmental and Regulatory Matters - The company had accrued liabilities for environmental costs amounting to $171 million as of December 31, 2022 [199]. - Rayonier Advanced Materials Inc. reported environmental liabilities totaling approximately $170 million as of December 31, 2022, with potential additional liabilities estimated up to $85 million [267]. - The company assessed the effectiveness of its internal control over financial reporting as of December 31, 2022, concluding that it was effective [258]. - The independent auditor issued an unqualified opinion on the company's internal control over financial reporting as of December 31, 2022 [263]. Investments and Future Plans - The bioethanol facility at the Tartas, France facility is anticipated to be operational in 2024, with an estimated project cost of approximately $39 million [154]. - The company plans to expand its market presence in Asia, targeting a 20% increase in market share by 2025 [239]. - Rayonier Advanced Materials Inc. is investing $50 million in new product development, focusing on sustainable materials [240]. - A strategic acquisition of a smaller competitor is expected to enhance production capacity by 30% [239]. Pension and Employee Matters - The defined pension plans were underfunded by $87 million as of December 31, 2022, a decrease of $39 million from the previous year due to actuarial gains from increased discount rates [202]. - Mandatory contributions and benefit payments to plan participants were $8 million in 2022, with an expected increase to $9 million in 2023 [203]. - Rayonier Advanced Materials Inc. has introduced a new equity incentive program to attract top talent, with a budget of $20 million [239]. Research and Development - Research and Development (R&D) expenses were consistently $7 million for each of the years ended December 31, 2022, 2021, and 2020, focusing on the High Purity Cellulose segment [316].

Part I [Item 1. Business](index=5&type=section&id=Item%201.%20Business) Rayonier Advanced Materials manufactures cellulose-based technologies, focusing on High Purity Cellulose after strategic asset sales and bioethanol investments - The company operates through three segments: High Purity Cellulose, Paperboard, and High-Yield Pulp, following asset sales[28](index=28&type=chunk) - The High Purity Cellulose segment is the primary driver of profitability, producing specialty and commodity cellulose products[29](index=29&type=chunk) - In August 2021, the company sold its Canadian lumber and newsprint assets, now classified as discontinued operations[27](index=27&type=chunk) - Investments include a second-generation bioethanol project at its Tartas, France facility, with commercial sales anticipated by mid-2023[25](index=25&type=chunk)[31](index=31&type=chunk) Research and Development Spend (in millions) | Category | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | **Research and Development Spend** | $7 | $7 | $6 | - As of year-end 2021, the company employed approximately **2,500 individuals**, with **72% unionized**[65](index=65&type=chunk) - No single customer represented more than **10% of consolidated net sales** in 2021[61](index=61&type=chunk) [Item 1A. Risk Factors](index=11&type=section&id=Item%201A.%20Risk%20Factors) The company faces diverse risks including pandemic impacts, macroeconomic pressures, operational challenges, significant debt, regulatory compliance, and trade policy uncertainties - The company is exposed to pandemic risks, such as COVID-19, leading to increased operating costs, demand volatility, and supply chain disruptions[74](index=74&type=chunk)[75](index=75&type=chunk) - The **ten largest customers** accounted for approximately **36% of 2021 revenue**, indicating customer concentration risk[15](index=15&type=chunk)[91](index=91&type=chunk) - International sales, comprising approximately **66% of 2021 revenue**, expose the company to currency fluctuations and trade barrier risks[84](index=84&type=chunk) - Significant debt obligations of approximately **$0.9 billion** as of December 31, 2021, could adversely impact business operations and financial obligations[124](index=124&type=chunk) - Approximately **$112 million** in U.S. softwood lumber duties were paid for former Canadian operations, with a potential refund expected but not assured[90](index=90&type=chunk) - Climate-related risks are categorized into Regulatory (e.g., GHG regulations), Transition to a low-carbon economy, and Physical risks (e.g., extreme weather)[117](index=117&type=chunk) [Item 1B. Unresolved Staff Comments](index=23&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - No unresolved staff comments were reported[133](index=133&type=chunk) [Item 2. Properties](index=23&type=section&id=Item%202.%20Properties) The company owns its primary manufacturing facilities for High Purity Cellulose, Paperboard, and High-Yield Pulp, located in Georgia, Florida, Québec (Canada), and France, while its corporate headquarters in Jacksonville, Florida is leased Manufacturing Facilities and Capacities | Segment/Location | Annual Production Capacity (metric tons) | Owned/Leased | | :--- | :--- | :--- | | **High Purity Cellulose** | | | | Jesup, Georgia, USA | 330,000 (CS/commodity) + 245,000 (commodity) | Owned | | Fernandina Beach, Florida, USA | 155,000 (CS/commodity) | Owned | | Temiscaming, Quebec, Canada | 150,000 (CS/commodity) | Owned | | Tartas, France | 140,000 (CS/commodity) | Owned | | **Paperboard** | | | | Temiscaming, Quebec, Canada | 180,000 | Owned | | **High-Yield Pulp** | | | | Temiscaming, Quebec, Canada | 290,000 | Owned | | **Corporate Headquarters** | | | | Jacksonville, Florida, USA | N/A | Leased | [Item 3. Legal Proceedings](index=23&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 21 of the consolidated financial statements - Details of the company's legal proceedings are disclosed in Note 21 — Commitments and Contingencies[136](index=136&type=chunk) [Item 4. Mine Safety Disclosures](index=23&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable to the company[137](index=137&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=24&type=section&id=Item%205.%20Market%20for%20the%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the New York Stock Exchange under the symbol "RYAM", with its quarterly dividend suspended since September 2019 and approximately $60 million remaining on its share buyback program - The quarterly common stock dividend was suspended on **September 6, 2019**, with no dividends declared in 2020 or 2021[142](index=142&type=chunk) - Approximately **$60 million** remained available under the **$100 million** share buyback program as of December 31, 2021, with no repurchases in Q4 2021[143](index=143&type=chunk) Comparative Stock Performance (Indexed to $100) | | 12/31/2016 | 12/31/2017 | 12/31/2018 | 12/31/2019 | 12/31/2020 | 12/31/2021 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Rayonier Advanced Materials | $100 | $135 | $71 | $26 | $45 | $39 | | S&P Small Cap 600 | $100 | $113 | $104 | $127 | $141 | $179 | | S&P 500 Materials Index | $100 | $124 | $106 | $132 | $158 | $202 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net sales increased to **$1.41 billion** in 2021 due to higher prices, improving operating loss, while strategic asset sales and debt repurchases impacted financial results and liquidity remained adequate - On August 28, 2021, the company completed the sale of its lumber and newsprint facilities to GreenFirst, now presented as discontinued operations[152](index=152&type=chunk) - In Q3 2021, approximately **$127 million** of 5.50% Senior Notes due 2024 were repurchased for **$124 million** cash, resulting in a **$2 million net gain**[152](index=152&type=chunk) - In October 2021, **$25 million** of 7.625% Senior Secured Notes due 2026 were redeemed at **103%**, incurring a **$1 million loss**[152](index=152&type=chunk) Consolidated Financial Performance (in millions) | Financial Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | **Net Sales** | $1,408 | $1,344 | $1,431 | | **Gross Margin** | $75 | $64 | $54 | | **Operating Income (Loss)** | $(10) | $(30) | $(52) | | **Loss from Continuing Operations** | $(50) | $(38) | $(84) | | **Income from Discontinued Operations** | $116 | $39 | $61 | | **Net Income (Loss)** | $66 | $1 | $(23) | Liquidity and Debt Position (in millions) | | As of Dec 31, 2021 | As of Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $253 | $94 | | Availability under ABL Credit Facility | $103 | $102 | | Total debt | $929 | $1,084 | | Debt to capital ratio | 53% | 61% | EBITDA and Adjusted EBITDA (in millions) | | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | **EBITDA** | $120 | $94 | $90 | | **Adjusted EBITDA** | $128 | $100 | $101 | [Results of Operations (2021 vs. 2020)](index=31&type=section&id=Results%20of%20Operations%2C%20Year%20Ended%20December%2031%2C%202021%20versus%20December%2031%2C%202020) Net sales increased by **5%** to **$1.41 billion** in 2021 due to higher prices, improving operating loss despite increased input costs and shipping constraints Net Sales by Segment (in millions) | Net Sales | 2021 | 2020 | | :--- | :--- | :--- | | High Purity Cellulose | $1,091 | $1,051 | | Paperboard | $208 | $190 | | High-Yield Pulp | $136 | $125 | | **Total Net Sales** | **$1,408** | **$1,344** | Operating Income (Loss) by Segment (in millions) | Operating Income (Loss) | 2021 | 2020 | | :--- | :--- | :--- | | High Purity Cellulose | $20 | $7 | | Paperboard | $13 | $18 | | High-Yield Pulp | $7 | $0 | | Corporate | $(50) | $(55) | | **Total Operating Loss** | **$(10)** | **$(30)** | - High Purity Cellulose sales prices for specialties decreased **3%**, while commodity prices increased **37%**; specialty volumes rose **7%**, but commodity volumes fell **28%**[195](index=195&type=chunk) - Paperboard sales prices increased **8%** and volumes increased **2%**, driven by improved market demand[198](index=198&type=chunk) - High-Yield Pulp average sales prices increased **16%**, while sales volumes decreased **9%** due to shipping constraints[202](index=202&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is primarily from operations, with **$253 million** cash and **$103 million** ABL availability at year-end, and total debt reduced to **$929 million** while remaining covenant compliant Cash Flow from Continuing Operations (in millions) | Cash Flow from Continuing Operations | 2021 | 2020 | | :--- | :--- | :--- | | Cash provided by operating activities | $74 | $54 | | Cash used for investing activities | $(97) | $(66) | - As of December 31, 2021, the company was in compliance with all financial covenants[230](index=230&type=chunk) - Adjusted free cash flow from continuing operations was a negative **$2 million** in 2021, down from a positive **$9 million** in 2020, due to higher costs and capital expenditures[257](index=257&type=chunk)[258](index=258&type=chunk) [Critical Accounting Policies and Use of Estimates](index=28&type=section&id=Critical%20Accounting%20Policies%20and%20Use%20of%20Estimates) Management identifies several critical accounting policies that require significant estimates and judgment, including environmental liabilities, pension obligations, and deferred tax asset realizability - Accrued environmental liabilities for disposed operations totaled **$171 million** at December 31, 2021, based on long-term spending projections[173](index=173&type=chunk) - Defined benefit pension plans were underfunded by **$126 million** at December 31, 2021, with funded status improving by **$78 million** due to settlements[176](index=176&type=chunk) Sensitivity of Pension Expense and Obligation to Key Assumptions (in millions) | Change in Assumption | Effect on 2022 Pension Expense | Effect on Dec 31, 2021 Projected Benefit Obligation | | :--- | :--- | :--- | | 50 bp decrease in discount rate | $3 | $52 | | 50 bp increase in discount rate | $(2) | $(46) | | 50 bp decrease in long-term return on assets | $3 | N/A | | 50 bp increase in long-term return on assets | $(3) | N/A | - The realizability of deferred tax assets is a critical estimate, requiring management to assess future profitability for valuation allowance determination[181](index=181&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=45&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces market risks from interest rates, foreign currency, and commodity prices, with limited exposure to interest rate volatility due to predominantly fixed-rate debt - The company's primary market risks include changes in interest rates, foreign currency exchange rates (CAD, EUR), and commodity prices[265](index=265&type=chunk)[267](index=267&type=chunk)[461](index=461&type=chunk) - As of December 31, 2021, only **$7 million** of debt was variable rate, resulting in immaterial exposure to interest rate increases on existing debt[268](index=268&type=chunk) - The estimated fair value of fixed-rate debt was **$964 million** at year-end 2021, exceeding its principal amount of **$928 million**[269](index=269&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=45&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the company's audited consolidated financial statements for the fiscal year ended December 31, 2021, and the report from its independent registered public accounting firm, Grant Thornton LLP, which provided an unqualified opinion and highlighted two critical audit matters [Report of Independent Registered Public Accounting Firm](index=57&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Grant Thornton LLP issued an unqualified opinion on both the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2021, identifying two critical audit matters: environmental liabilities and deferred tax assets - Grant Thornton LLP issued an **unqualified opinion** on the financial statements, affirming fair presentation in all material respects[316](index=316&type=chunk)[317](index=317&type=chunk) - The accrual for environmental liabilities, totaling approximately **$171 million**, was a critical audit matter due to its significant, long-term, and subjective estimation[321](index=321&type=chunk)[322](index=322&type=chunk) - The realizability of deferred tax assets, with a gross value of approximately **$507 million**, was a critical audit matter due to high estimation uncertainty in forecasting future taxable income, especially for Canadian operations[325](index=325&type=chunk)[326](index=326&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=45&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - No changes in or disagreements with accountants on accounting and financial disclosure were reported[272](index=272&type=chunk) [Item 9A. Controls and Procedures](index=45&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2021, with no material changes in internal control over financial reporting during the fourth quarter - Management concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2021[276](index=276&type=chunk) - No material changes in internal control over financial reporting occurred during Q4 2021[278](index=278&type=chunk) Part III [Items 10-14](index=47&type=section&id=Items%2010-14) The information required for Items 10 through 14, covering Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, Certain Relationships, and Principal Accounting Fees, is incorporated by reference from the company's definitive Proxy Statement for its 2022 Annual Meeting of Stockholders - Information for Part III (Items 10-14) is incorporated by reference from the Company's 2022 Proxy Statement[283](index=283&type=chunk) Part IV [Item 15. Exhibits, Financial Statement Schedules](index=48&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements, the financial statement schedule (Schedule II - Valuation and Qualifying Accounts), and all exhibits filed with the report, including key debt and asset purchase agreements - This item lists all exhibits filed with the Form 10-K, including Consolidated Financial Statements and Schedule II-Valuation and Qualifying Accounts[291](index=291&type=chunk)[292](index=292&type=chunk) - Key agreements filed as exhibits include the Indenture for 7.625% Senior Secured Notes due 2026, the ABL Credit Agreement due 2025, and the Asset Purchase Agreement with GreenFirst Forest Products Inc[295](index=295&type=chunk)[297](index=297&type=chunk) [Item 16. Form 10-K Summary](index=52&type=section&id=Item%2016.%20Form%2010-K%20Summary) No summary is provided under this item - No summary is provided under this item[299](index=299&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K For the transition period from to Commission File Number 001-36285 RAYONIER ADVANCED MATERIALS INC. Incorporated in the State of Delaware I.R.S. Employer Identification No. 46-4559529 1301 RIVERPLACE BOULEVARD, SUITE 2300 JACKSONVILLE, FL 32207 (Principal Executive Office) Telephone Number: (904) 357-4600 Securities registered pursuant to Section 12(b) of the Act: Common stock, par value $0.01 per share RYAM New York Stock Exc ...