Sylvamo (SLVM) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents Sylvamo Corporation's unaudited condensed consolidated financial statements for Q1 2025 and 2024, including statements of operations, comprehensive income, balance sheets, cash flows, and detailed notes Condensed Consolidated Statements of Operations Sylvamo reported Q1 2025 net sales of $821 million, a decrease from $905 million, with net income falling to $27 million and diluted EPS to $0.65 | Financial Metric | Q1 2025 (In millions) | Q1 2024 (In millions) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $821 | $905 | -9.3% | | Income Before Income Taxes | $33 | $60 | -45.0% | | Net Income | $27 | $43 | -37.2% | | Basic EPS | $0.66 | $1.04 | -36.5% | | Diluted EPS | $0.65 | $1.02 | -36.3% | Condensed Consolidated Statements of Comprehensive Income (Loss) Q1 2025 comprehensive income significantly increased to $107 million from $6 million, primarily due to a positive $78 million foreign currency translation adjustment | Component (In millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income | $27 | $43 | | Change in cumulative foreign currency translation adjustment | $78 | $(38) | | Total Other Comprehensive Income (Loss), Net of Taxes | $80 | $(37) | | Comprehensive Income (Loss) | $107 | $6 | Condensed Consolidated Balance Sheets As of March 31, 2025, total assets increased slightly to $2,629 million, and total equity rose to $908 million, driven by comprehensive income | Balance Sheet Item (In millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $1,011 | $1,063 | | Total Assets | $2,629 | $2,604 | | Total Current Liabilities | $616 | $682 | | Long-Term Debt | $794 | $782 | | Total Liabilities | $1,721 | $1,757 | | Total Equity | $908 | $847 | Condensed Consolidated Statements of Cash Flows Q1 2025 operating cash flow decreased to $23 million, with $48 million used for capital projects and $31 million for financing, resulting in a $51 million net cash decrease | Cash Flow Activity (In millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Cash Provided by Operating Activities | $23 | $27 | | Cash Used for Investment Activities | $(48) | $(60) | | Cash Used for Financing Activities | $(31) | $(35) | | Change in Cash | $(51) | $(71) | | Cash at End of Period | $154 | $209 | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, segment revenue, a Brazil tax dispute, debt structure, and segment operating profits, with $20 million in share repurchases and $19 million in dividends | Segment | Product | Q1 2025 Sales (In millions) | Q1 2024 Sales (In millions) | | :--- | :--- | :--- | :--- | | Europe | Uncoated Papers | $170 | $186 | | | Market Pulp | $20 | $21 | | Latin America | Uncoated Papers | $180 | $196 | | | Market Pulp | $13 | $12 | | North America | Uncoated Papers | $417 | $471 | | | Market Pulp | $21 | $19 | | Total | | $821 | $905 | - A significant tax dispute in Brazil regarding the deductibility of goodwill amortization from a 2007 acquisition remains ongoing. The total assessment is approximately $103 million in tax and $260 million in interest and penalties. Under an agreement, International Paper will pay 60% and Sylvamo 40% of any assessment up to $300 million[50][51] - In Q1 2025, the company returned cash to shareholders through $19 million in dividends ($0.45 per share) and $20 million in share repurchases[31] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 financial results, noting decreased net income and sales due to lower volumes and unfavorable price/mix, and provides a Q2 2025 outlook with higher maintenance costs Executive Summary Q1 2025 net income was $27 million on $821 million net sales, driven by lower volumes and unfavorable price/mix, with a Q2 2025 outlook of stable volumes but higher maintenance costs | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income | $27 million | $43 million | | Diluted EPS | $0.65 | $1.02 | | Net Sales | $821 million | $905 million | | Adjusted EBITDA | $90 million | $118 million | | Adjusted EBITDA Margin | 11% | 13% | | Free Cash Flow | $(25) million | $(33) million | - Key performance drivers in Q1 2025 vs Q1 2024 included decreased volume (due to Georgetown mill closure and operational challenges), and lower price/mix in Europe[88] - The outlook for Q2 2025 projects stable volume, favorable price/mix, improved operations and costs, but a significant $36 million increase in planned maintenance outage costs[89] Business Segment Results Europe's operating profit decreased by $20 million, Latin America's increased by $12 million, and North America's decreased by $20 million due to varying regional factors - Europe: Operating profit decreased by $20 million, driven by lower sales price/mix ($9 million) and higher planned maintenance outage costs ($12 million)[97] - Latin America: Operating profit increased by $12 million, mainly due to lower outage costs ($10 million) and lower operating costs ($6 million)[100] - North America: Operating profit decreased by $20 million, primarily due to lower volumes ($13 million impact) and higher operating costs ($7 million)[103] Adjusted EBITDA Reconciliation This section reconciles non-GAAP measures, showing Q1 2025 Adjusted EBITDA of $90 million (11.0% margin) and Free Cash Flow of negative $25 million | In millions | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income | $27 | $43 | | Income tax provision | $6 | $17 | | Interest (income) expense, net | $9 | $9 | | Depreciation, amortization, etc. | $40 | $39 | | Stock-based compensation | $6 | $7 | | Net special items expense | $2 | $3 | | Adjusted EBITDA | $90 | $118 | Free Cash Flow Reconciliation | In millions | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Cash provided by operating activities | $23 | $27 | | Cash invested in capital projects | $(48) | $(60) | | Free Cash Flow | $(25) | $(33) | Liquidity and Capital Resources Q1 2025 operating cash flow decreased to $23 million, capital spending reduced to $48 million, and the company plans $225-$260 million in total capital expenditures for 2025 - Cash provided by operating activities decreased to $23 million for Q1 2025, compared to $27 million for Q1 2024, primarily due to lower net income[110] - Capital spending decreased to $48 million in Q1 2025 from $60 million in Q1 2024[112][113] - Financing activities in Q1 2025 included paying $18 million in dividends and repurchasing $20 million of shares[114] - The company plans total capital expenditures for 2025 to be between $225 million and $260 million, comprising maintenance/regulatory spending and high-return projects[116] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in its market risk exposure since December 31, 2024, as disclosed in its 2024 Form 10-K - There have been no material changes in the Company's exposure to market risk since December 31, 2024[125] Item 4. Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[126] - No changes in the company's internal control over financial reporting occurred in Q1 2025 that have materially affected, or are reasonably likely to materially affect, its internal controls[127] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not involved in any legal proceedings expected to materially adversely affect its financial condition, referencing tax and environmental matters in the financial statement notes - The company is not involved in any legal proceedings that it believes will result in a material adverse effect on its financial condition or results of operations[129] Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's 2024 Form 10-K - No material changes have been made to the risk factors described in the 2024 Form 10-K[131] Item 2. Purchases of Equity Securities by the Issuer and Affiliated Purchasers During Q1 2025, the company repurchased 483,820 shares, including 285,472 shares for $20 million under its program, with $62 million remaining available | Period (2025) | Total Shares Purchased | Average Price Paid Per Share | Shares Purchased as Part of Program | | :--- | :--- | :--- | :--- | | January | 361 | $79.02 | — | | February | 230,601 | $70.20 | 230,601 | | March | 252,858 | $70.75 | 54,871 | | Total | 483,820 | | 285,472 | - The company repurchased $20 million of shares during Q1 2025. As of March 31, 2025, $62 million remains available under the total $300 million share repurchase program[133] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, incentive plans, and required CEO/CFO certifications - The report includes certifications from the principal executive officer and principal financial officer as required by Section 302 of the Sarbanes-Oxley Act[134]