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)

Customer Concentration - Rayonier Advanced Materials' ten largest customers accounted for approximately 31% of its 2020 sales, indicating a significant reliance on a small customer base[15] Market Risks - The company faces risks associated with fluctuations in raw material and energy prices, which could adversely impact its financial condition and results of operations[15] - The availability and pricing of wood fiber are critical factors that could materially affect the company's business and financial results[15] - Rayonier Advanced Materials operates in a highly competitive and cyclical industry, which may lead to pricing and volume fluctuations[15] Financial Obligations - The company has significant debt obligations that could adversely affect its business and ability to meet obligations[21] - Future financing needs may arise, and the availability of such financing on favorable terms is uncertain, which could dilute existing stockholders[21] - Significant debt obligations could adversely affect the company's business and ability to meet obligations[21] Interest Rate Risks - The phase-out of LIBOR as an interest rate benchmark in 2023 may impact the company's borrowing costs[21] - The phase-out of LIBOR in 2023 may impact the company's borrowing costs[21] Financial Performance Metrics - The company utilizes non-GAAP financial measures such as EBITDA and adjusted free cash flows to provide insights into its financial performance[19] - The company emphasizes that non-GAAP financial measures should not be relied upon for evaluating financial condition or future prospects[21] Labor Relations - Management's discussion highlights the importance of maintaining satisfactory labor relations to avoid adverse effects on business operations[21] - The company faces risks related to labor relations, which could adversely affect business operations[21] - Attracting and retaining key personnel is critical, as their loss could negatively impact the company[21] Cybersecurity Risks - The company is at risk of losing intellectual property and sensitive information due to potential cyberattacks[21] Environmental Regulations - The company is subject to extensive environmental laws and regulations that may restrict its operations and impact financial results[21] - Environmental laws and regulations may restrict business operations and adversely affect financial results[21] Retirement Benefits - The company may need to make significant cash contributions to retirement benefit plans if investment returns are lower than expected[21] Capital Access - Future access to capital may be materially affected by challenges in the commercial and credit environments[21] Acquisition Delays - Provisions in the company's bylaws could delay acquisitions, potentially decreasing the stock price[21]