What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-09 compared with 2023-05-10 · 204 added, 136 removed, 190 unchanged (64% of the section changed)

7 unchanged sentences

Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that these expectations will be attained, and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties.

T he risk factors contained in Item 1A—Risk Factors of our 2022 Form 10-K, among others, could cause actual results or events to differ materially from RYAM’s historical experience and those expressed in forward-looking statements made in this report.

Forward-looking statements are only as of the date of the filing of this Quarterly Report on Form 10-Q and RYAM undertakes no duty to update its forward-looking statements except as required by law.

T he risk factors contained in Item 1A—Risk Factors of our 2022 Form 10-K, among others, could cause actual results or events to differ materially from our historical experience and those expressed in forward-looking statements made in this report.

Forward-looking statements are only as of the date of the filing of this Quarterly Report on Form 10-Q and we undertake no duty to update its forward-looking statements except as required by law.

You are advised to review any further disclosures that we have made or may make in our filings and other submissions to the SEC, including those on Forms 10-K, 10-Q, 8-K and other reports.

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Recent Business Developments

• In April 2023, we repurchased $10 million of Senior Secured Notes through open-market transactions and retired the notes for cash of $9 million.

• In March 2023, we repurchased $5 million of our Senior Unsecured Notes through open-market transactions and retired the notes for cash of $5 million.

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements (Unaudited)

(in thousands unless otherwise stated)

• In July 2023, we secured term loan financing of $250 million in aggregate principal amount, the proceeds of which will be used, together with cash on hand, to redeem the remaining $318 million in aggregate principal balance of the 2024 Notes.

• In April 2023, we repurchased $10 million of our 2026 Notes through open-market transactions and retired the notes for cash of $9 million.

• In March 2023, we repurchased $5 million of our 2024 Notes through open-market transactions and retired the notes for cash of $5 million.

Market Assessment

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High Purity Cellulose

Demand for cellulose specialties remains mixed.

Strength in acetate and certain other cellulose specialty end markets is offsetting softness in construction and food-related end markets.

Average sales prices for cellulose specialties in 2023 are expected to be high single digit percent higher than average 2022 sales prices, while sales volumes are expected to decrease due to the softness in demand.

Market demand for commodity products remains resilient but at lower prices than first quarter levels.

Fluff sales prices are expected to decline versus 2022 levels, in line with industry forecasts.

Viscose pulp sales prices have stabilized and are expected to increase slightly in the second half of the year.

Commodity sales volumes are expected to increase as production and logistics constraints improve.

Additional benefits from prior strategic capital investments are expected throughout the year.

Certain raw material and energy prices have come off the 2022 highs, but are expected to remain significantly elevated versus pre-COVID pandemic levels.

We experienced a slower than anticipated return to production after the annual maintenance outage of our Tartas facility, which has been completed but is expected to impact the second quarter, but overall production is anticipated to be made up in the balance of the year.

Additionally, in the second quarter, annual maintenance outages will be executed at our two largest facilities in Jesup and Temiscaming.

Paperboard prices are expected to moderate slightly over the balance of the year but remain elevated from 2022 levels, while sales volumes are expected to remain steady.

Raw material prices are expected to reduce as pulp markets decline.

Average sales prices for cellulose specialties in 2023 are expected to be in the high single-digit percent higher than average 2022 sales prices, while sales volumes are expected to decrease from prior year due to softness in sales orders driven principally by significant customer destocking.

Market demand for commodity products remains resilient but at lower prices than the first half of the year, in line with industry forecasts.

Commodity sales volumes are expected to continue to increase through the end of 2023.

The prices for certain inputs have come off the 2022 highs but are expected to remain significantly elevated versus pre-COVID pandemic levels.

Paperboard prices are expected to moderate over the balance of the year but remain elevated from 2022 levels, while sales volumes are expected to improve in the second half of the year.

Raw material prices are expected to moderate further as pulp markets decline.

High-Yield Pulp

High-yield pulp markets have declined as global economic demand slows and new capacity ramps up, impacting sales price.

Prices are expected to decline in 2023, in line with industry forecasts for the global paper pulp market.

Sales volumes are expected to improve slightly in 2023, primarily due to improved logistics and production reliability.

High-yield pulp prices have declined due to soft demand and new paper pulp capacity ramping up.

Prices are expected to decline overall in 2023 despite an expected uptick in the fourth quarter, in line with industry forecasts for the global paper pulp market.

Sales volumes are expected to decline in the coming quarter as we take downtime in the third quarter due to market conditions.

A Sustainable Future

We continue to focus on growing our bio-based product offering and expects to grow our sales of bioelectricity and lignosulfonates and increase overall margins over time.

The bioethanol facility at our Tartas, France facility is under construction and is anticipated to be operational in the first half of 2024.

We continue to focus on growing our bio-based product offering and expect to grow our biomaterials sales and increase overall margins over time.

The bioethanol facility at our Tartas, France plant is under construction and is anticipated to be operational in early 2024.

The total estimated cost of the project is approximately $41 million, with $26 million to be spent in 2023.

We plan to utilize $28 million of low-cost green loans to help fund the project, including $8 million already raised, and $4 million in grants.

The project is expected to provide $9 million to $11 million of annual incremental EBITDA beginning in 2024.

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements (Unaudited)

(in thousands unless otherwise stated)

The project is expected to provide $8 million to $10 million of annual incremental EBITDA, based on current exchange rates, beginning in 2025.

Results of Operations

Three Months Ended

(in millions, except percentages) April 1, 2023 March 26, 2022

Three Months Ended Six Months Ended

(in millions, except percentages) July 1, 2023 June 25, 2022 July 1, 2023 June 25, 2022

Net sales $ 385 $ 399 $ 852 $ 751

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Gross margin 15 27 52 33

Selling, general and administrative expenses (19) (20)

Selling, general and administrative expense (18) (28) (37) (48)

Foreign exchange gain (loss) (2) 2 (2) 1

Other operating expense, net (2) (4) (3) (5)

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Other components of pension and OPEB, excluding service costs 1 — (1) 1

Unrealized gain on GreenFirst equity securities — 9

Other expense, net — (1)

Gain (loss) on GreenFirst equity securities — (4) — 5

Other income, net 3 3 3 3

Loss from continuing operations before income taxes (19) (20) (19) (43)

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Equity in loss of equity method investment — (1) (1) (1)

Income (loss) from continuing operations 2 (24)

Loss from discontinued operations, net of taxes — (1)

Net income (loss) $ 2 $ (25)

Loss from continuing operations (16) (25) (14) (49)

Income (loss) from discontinued operations, net of taxes (1) 2 (1) 1

Net loss $ (17) $ (23) $ (15) $ (48)

Gross margin % 3.9 % 6.8 % 6.1 % 4.4 %

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Effective tax rate 17.9 % (18.1) % 31.5 % (11.8) %

Three Months Ended

(in millions) April 1, 2023 March 26, 2022

Three Months Ended Six Months Ended

(in millions) July 1, 2023 June 25, 2022 July 1, 2023 June 25, 2022

High Purity Cellulose $ 300 $ 302 $ 674 $ 583

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Net sales $ 385 $ 399 $ 852 $ 751

Net sales for the three months ended April 1, 2023 increased $115 million, or 33 percent, compared to the prior year quarter, driven primarily by higher sales prices across all segments and higher sales volumes in the High Purity Cellulose and High-Yield Pulp segments due to strong demand, increased productivity and improved logistics.

Net sales for the quarter ended July 1, 2023 decreased $14 million, or 4 percent, compared to the same prior year quarter, driven by lower commodity products sales prices in our High Purity Cellulose segment and lower sales volumes in cellulose specialties and our Paperboard segment, partially offset by higher sales prices in cellulose specialties, Paperboard and High-Yield Pulp and higher sales volumes in commodity products and High-Yield Pulp.

Net sales for the six months ended July 1, 2023 increased $101 million or 13 percent, compared to the same prior year period, driven primarily by higher sales prices across all segments and higher sales volumes in commodity products and our High-Yield Pulp segment, partially offset by lower sales volumes in cellulose specialties and our Paperboard segment.

See Operating Results by Segment below for further discussion.

Operating Income (Loss)

Three Months Ended

(in millions) April 1, 2023 March 26, 2022

Three Months Ended Six Months Ended

(in millions) July 1, 2023 June 25, 2022 July 1, 2023 June 25, 2022

High Purity Cellulose $ — $ 7 $ 13 $ (1)

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Operating income (loss) $ (7) $ (3) $ 10 $ (19)

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements (Unaudited)

(in thousands unless otherwise stated)

Operating results for the three months ended April 1, 2023 improved $33 million, or 206 percent, compared to the prior year quarter due to higher sales prices across all segments and higher sales volumes in the High Purity Cellulose and High-Yield Pulp segments, partially offset by higher chemicals, purchased pulp and logistics costs and the impact of the extended maintenance outage in the prior year.

Operating loss for the quarter ended July 1, 2023 increased $4 million, or 133 percent, compared to the same prior year quarter, driven by the decrease in net sales and increased labor, maintenance, input and logistics costs, partially offset by a decrease in Corporate expense items.

Operating results for the six months ended July 1, 2023 improved $29 million, or 153 percent, compared to the same prior year period, driven by the increase in net sales and a decrease in Corporate expense items, partially offset by increased labor, maintenance, input and logistics costs.

Included in operating results in the current three- and six-month periods was the recognition of a $3 million benefit from payroll tax credit carryforwards.

See Operating Results by Segment below for further discussion.

Non-operating Expenses

Included in non-operating expenses for the three months ended April 1, 2023 was a $2 million pension settlement loss.

Included in non-operating expenses for the three months ended March 26, 2022 was a $9 million unrealized gain on GreenFirst common shares received in connection with the sale of our lumber and newsprint assets.

The effective tax rate for the three months ended April 1, 2023 is not meaningful due to near break-even pretax income for the period, which results in any discrete tax adjustments significantly impacting the rate.

The largest adjustments creating a difference between the effective tax rate and the statutory rate of 21 percent were an excess tax benefit on vested stock compensation and return-to-accrual adjustments related to previously filed tax returns.

The effective tax rate on the loss from continuing operations for the three months ended March 26, 2022 was an expense of 6 percent.

The 2022 effective tax rate differed from the federal statutory rate of 21 percent primarily due to disallowed interest deductions in the U.S.

and nondeductible executive compensation, partially offset by US tax credits and tax return-to-accrual adjustments.

Non-Operating Income & Expense

Included in “other income, net” in the three and six months ended July 1, 2023 was a $2 million gain on a passive land sale and a $1 million net gain on debt extinguishment, partially offset by unfavorable foreign exchange rates.

Also included in the six-month period was a pension settlement loss of $2 million.

Included in non-operating in the three and six months ended June 25, 2022 was a $4 million loss and a $5 million gain, respectively, associated with the GreenFirst common shares received in connection with the sale of our lumber and newsprint assets.

The effective tax rate on the loss from continuing operations for the three and six months ended July 1, 2023 was a benefit of 18 percent and 32 percent, respectively.

The 2023 effective tax rates differed from the federal statutory rate of 21 percent primarily due to disallowed interest deductions in the U.S.

and nondeductible executive compensation, offset by U.S.

tax credits, return-to-accrual adjustments related to previously filed tax returns and an excess tax benefit on vested stock compensation.

The effective tax rate on the loss from continuing operations for the three and six months ended June 25, 2022 was an expense of 18 percent and 12 percent, respectively.

The 2022 effective tax rates differed from the federal statutory rate of 21 percent primarily due to disallowed interest deductions in the U.S.

and nondeductible executive compensation, partially offset by U.S.

tax credits and tax return-to-accrual adjustments.

Operating Results by Segment

High Purity Cellulose

Three Months Ended

(in millions, unless otherwise stated) April 1, 2023 March 26, 2022

Three Months Ended Six Months Ended

(in millions, except where otherwise stated) July 1, 2023 June 25, 2022 July 1, 2023 June 25, 2022

Net sales $ 300 $ 302 $ 674 $ 583

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Sales volumes (thousands of MTs)

214 206 479 414

Net Sales - Three Months Ended

Three Months Ended

March 26, 2022

June 25, 2022

Changes Attributable to:

Three Months Ended

April 1, 2023

(in millions) Price Volume/Mix/Other

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(a) Includes sales of bioelectricity, lignosulfonates and other by-products to third parties.

Net sales of our High Purity Cellulose segment for the three months ended April 1, 2023 increased $93 million compared to the prior year quarter.

Net sales of our High Purity Cellulose segment for the quarter ended July 1, 2023 decreased $2 million compared to the same prior year quarter.

Included in the current and prior year quarters were $22 million and $24 million, respectively, of other sales primarily from bio-based energy and lignosulfonates.

Sales prices increased 8 percent during the current quarter compared to the prior year quarter, driven by increases in cellulose specialties and commodity products prices of 18 percent and 6 percent, respectively.

Total sales volumes increased 27 percent during the current quarter compared to the prior year quarter, including 65 percent and 5 percent increases in commodity products and cellulose specialties, respectively, which were primarily driven by strong demand, increased productivity and improved logistics and cellulose specialties customer contract terms.

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements (Unaudited)

(in thousands unless otherwise stated)

Operating Income (Loss)

Sales prices decreased 4 percent during the current quarter, driven by a 4 percent decrease in commodity products prices, partially offset by a 13 percent increase in cellulose specialties prices.

Total sales volumes increased 4 percent during the current quarter, driven by a 72 percent increase in commodity products volumes, partially offset by a 27 percent decrease in cellulose specialties volumes.

Sales volumes for cellulose specialties were negatively impacted by market-driven demand declines primarily due to significant customer destocking, particularly those customers associated with construction markets.

Net Sales - Six Months Ended

Six Months Ended

June 25, 2022

Changes Attributable to:

Six Months Ended

(in millions) Price Volume/Mix/Other

Cellulose specialties $ 402 $ 52 $ (48) $ 406

Commodity products 130 4 89 223

Other sales (a)

Net sales $ 583 $ 56 $ 35 $ 674

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(a) Includes sales of bioelectricity, lignosulfonates and other by-products to third parties.

Net sales of our High Purity Cellulose segment for the six months ended July 1, 2023 increased $91 million compared to the same prior year period.

Included in the current and prior year periods were $45 million and $51 million, respectively, of other sales primarily from bio-based energy and lignosulfonates.

Sales prices increased 2 percent during the current period, driven by increases in cellulose specialties and commodity products prices of 15 percent and 1 percent, respectively.

Total sales volumes increased 16 percent during the current period, driven by a 69 percent increase in commodity products volumes, partially offset by a 12 percent decrease in cellulose specialties volumes.

Sales volumes for cellulose specialties were negatively impacted by market-driven demand declines primarily due to significant customer destocking, particularly in construction markets.

Operating Income - Three Months Ended

Three Months Ended

March 26, 2022 Gross Margin Changes Attributable to:

June 25, 2022 Gross Margin Changes Attributable to:

Three Months Ended

April 1, 2023

(in millions, except percentages)

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Cost SG&A and other

Operating income $ 7 $ 16 $ (10) $ (16) $ 3 $ —

Operating margin % 2.3 % 4.9 % (2.9) % (5.3) % 1.0 % — %

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(a) Computed based on contribution margin.

Operating income of our High Purity Cellulose segment for the quarter ended July 1, 2023 decreased $7 million compared to the same prior year quarter, driven by the lower cellulose specialties sales volumes and commodity products sales prices and increased labor and maintenance costs due to inflation, partially offset by higher cellulose specialties sales prices and commodity products sales volumes and decreased costs of certain inputs.

Included in operating income in the current quarter was the recognition of a $3 million benefit from payroll tax credit carryforwards.

Operating Income (Loss) - Six Months Ended

Six Months Ended

June 25, 2022 Gross Margin Changes Attributable to:

Six Months Ended

(in millions, except percentages)

Sales Price Sales Volume/Mix/Other (a)

Cost SG&A and other

Operating income (loss) $ (1) $ 56 $ 16 $ (62) $ 4 $ 13

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(a) Computed based on contribution margin.

Operating income of our High Purity Cellulose segment for the three months ended April 1, 2023 increased $21 million compared to the prior year quarter, driven by the higher sales prices and sales volumes discussed above, partially offset by higher chemicals and logistics costs and the impact of the extended maintenance outage in the prior year.

Three Months Ended

(in millions, unless otherwise stated) April 1, 2023 March 26, 2022

The operating results of our High Purity Cellulose segment for the six months ended July 1, 2023 improved $14 million compared to the same prior year period, driven by the higher cellulose specialties and commodity products sales prices and commodity products sales volumes and decreased costs of certain inputs, partially offset by the decrease in cellulose specialties sales volumes and higher labor and maintenance costs due to inflation.

Included in operating income in the current period was the recognition of a $3 million benefit from payroll tax credit carryforwards.

Three Months Ended Six Months Ended

(in millions, except where otherwise stated) July 1, 2023 June 25, 2022 July 1, 2023 June 25, 2022

Net sales $ 48 $ 63 $ 107 $ 117

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Sales volumes (thousands of MTs)

Net Sales - Three Months Ended

Three Months Ended

March 26, 2022 Changes Attributable to:

June 25, 2022 Changes Attributable to:

Three Months Ended

April 1, 2023

(in millions) Price Volume/Mix

Net sales $ 63 $ 2 $ (17) $ 48

Net sales of our Paperboard segment for the three months ended April 1, 2023 increased $5 million compared to the prior year quarter due to an 18 percent increase in sales prices, driven primarily by demand for packaging, partially offset by a 7 percent decrease in sales volumes, driven by the timing of sales.

Operating Income

Net sales of our Paperboard segment for the quarter ended July 1, 2023 decreased $15 million compared to the same prior year quarter due to a 27 percent decrease in sales volumes, driven by lower productivity and customer destocking, partially offset by a 4 percent increase in sales prices, driven by continued demand for sustainable packaging.

Net Sales - Six Months Ended

Six Months Ended

June 25, 2022 Changes Attributable to:

Six Months Ended

(in millions) Price Volume/Mix

Net sales $ 117 $ 11 $ (21) $ 107

Net sales of our Paperboard segment for the six months ended July 1, 2023 decreased $10 million compared to the same prior year period due to an 18 percent decrease in sales volumes, driven by lower productivity and customer destocking, partially offset by an 11 percent increase in sales prices, driven by continued demand for sustainable packaging.

Operating Income - Three Months Ended

Three Months Ended

March 26, 2022 Gross Margin Changes Attributable to:

June 25, 2022 Gross Margin Changes Attributable to:

Three Months Ended

April 1, 2023

(in millions, except percentages)

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(a) Computed based on contribution margin.

Operating income of our Paperboard segment for the three months ended April 1, 2023 increased $4 million compared to the prior year quarter, driven primarily by the higher sales prices, partially offset by the lower sales volumes and higher chemicals and purchased pulp costs.

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements (Unaudited)

(in thousands unless otherwise stated)

Operating income of our Paperboard segment for the quarter ended July 1, 2023 decreased $4 million compared to the same prior year quarter, driven by the lower sales volumes, partially offset by the higher sales prices.

Operating Income - Six Months Ended

Six Months Ended

June 25, 2022 Gross Margin Changes Attributable to:

Six Months Ended

(in millions, except percentages)

Sales Price Sales Volume/Mix (a)

Cost SG&A and other

Operating income $ 16 $ 11 $ (8) $ (3) $ — $ 16

Operating margin % 13.7 % 7.4 % (3.3) % (2.8) % — % 15.0 %

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(a) Computed based on contribution margin.

Operating income of our Paperboard segment for the six months ended July 1, 2023 was flat compared to the same prior year period, as the higher sales prices were offset by the lower sales volumes and higher purchased pulp, chemicals and energy costs.

High-Yield Pulp

Three Months Ended

(in millions, unless otherwise stated) April 1, 2023 March 26, 2022

Three Months Ended Six Months Ended

(in millions, except where otherwise stated) July 1, 2023 June 25, 2022 July 1, 2023 June 25, 2022

Net sales $ 44 $ 40 $ 86 $ 62

Operating income $ 7 $ —

Operating income (loss) $ 1 $ (2) $ 8 $ (2)

Average sales prices ($ per MT) (a)

$ 633 $ 603 $ 691 $ 586

Sales volumes (thousands of MTs) (a)

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(a) Average sales prices and sales volumes for external sales only.

For the three months ended April 1, 2023 and March 26, 2022, the High-Yield Pulp segment sold 17,000 MTs and 15,000 MTs of high-yield pulp for $8 million and $6 million, respectively, to the Paperboard segment.

(a) External sales only.

For the three months ended July 1, 2023 and June 25, 2022, the High-Yield Pulp segment sold 14,000 MTs and 17,000 MTs of high-yield pulp to the Paperboard segment for $6 million and $7 million, respectively.

For the six months ended July 1, 2023 and June 25, 2022, the High-Yield Pulp segment sold 32,000 MTs and 31,000 MTs of high-yield pulp to the Paperboard segment for $15 million and $13 million, respectively.

Net Sales - Three Months Ended

Three Months Ended

March 26, 2022 Changes Attributable to:

June 25, 2022 Changes Attributable to:

Three Months Ended

April 1, 2023

(in millions)

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Net sales $ 40 $ 2 $ 2 $ 44

Net sales of our High-Yield Pulp segment for the three months ended April 1, 2023 increased $20 million compared to the prior year quarter, driven by 39 percent and 43 percent increases in sales prices and sales volumes, respectively, driven by stronger demand, increased productivity and easing logistics constraints.

Operating Income

Net sales of our High-Yield Pulp segment for the quarter ended July 1, 2023 increased $4 million compared to the same prior year quarter, driven by 5 percent and 9 percent increases in sales prices and sales volumes, respectively, driven by stronger demand, increased productivity and easing logistics constraints.

Net Sales - Six Months Ended

Six Months Ended

June 25, 2022 Changes Attributable to:

Six Months Ended

(in millions)

Price Volume/Mix

Net sales $ 62 $ 13 $ 11 $ 86

Net sales of our High-Yield Pulp segment for the six months ended July 1, 2023 increased $24 million compared to the same prior year period, driven by 18 percent and 21 percent increases in sales prices and sales volumes, respectively, driven by stronger demand, increased productivity and easing logistics constraints.

Operating Income (Loss) - Three Months Ended

Three Months Ended

March 26, 2022 Gross Margin Changes Attributable to:

June 25, 2022 Gross Margin Changes Attributable to:

Three Months Ended

April 1, 2023

(in millions, except percentages)

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Cost SG&A and other

Operating income $ — $ 11 $ 3 $ (7) $ — $ 7

Operating income (loss) $ (2) $ 2 $ 1 $ — $ — $ 1

Operating margin % (5.0) % 5.0 % 2.3 % — % — % 2.3 %

1 unchanged sentence

(a) Computed based on contribution margin.

Operating income of our High-Yield Pulp segment for the three months ended April 1, 2023 increased $7 million compared to the prior year quarter, driven by the higher sales prices and sales volumes, partially offset by higher chemicals and logistics costs.

Three Months Ended

The operating results of our High-Yield Pulp segment for the quarter ended July 1, 2023 improved $3 million compared to the same prior year quarter, driven by the higher sales prices and sales volumes.

Operating Income (Loss) - Six Months Ended

Six Months Ended

June 25, 2022 Gross Margin Changes Attributable to:

Six Months Ended

(in millions, except percentages)

Sales Price Sales Volume/Mix (a)

Cost SG&A and other

Operating income (loss) $ (2) $ 13 $ 4 $ (7) $ — $ 8

Operating margin % (3.2) % 17.9 % 2.8 % (8.2) % — % 9.3 %

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(a) Computed based on contribution margin.

The operating results of our High-Yield Pulp segment for the six months ended July 1, 2023 improved $10 million compared to the same prior year period, driven by the higher sales prices and sales volumes, partially offset by increased wood and logistics costs and higher labor and maintenance costs due to inflation.

Three Months Ended Six Months Ended

(in millions)

April 1, 2023 March 26, 2022

July 1, 2023 June 25, 2022 July 1, 2023 June 25, 2022

Operating loss $ (14) $ (18) $ (27) $ (32)

The Corporate operating loss for the three months ended April 1, 2023 improved by $1 million, driven primarily by lower variable stock-based compensation costs.

The Corporate operating loss for the three and six months ended July 1, 2023 decreased $4 million and $5 million, respectively, compared to the same prior year periods, driven by lower variable stock-based compensation costs and lower severance, partially offset by unfavorable foreign exchange rates in the current year periods.

Liquidity and Capital Resources

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As operating cash flows can be negatively impacted by fluctuations in market prices for our commodity products and changes in demand for our products, we maintain a key focus on cash, managing working capital closely and optimizing the timing and level of our capital expenditures.

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements (Unaudited)

(in thousands unless otherwise stated)

Our Board of Directors suspended our quarterly common stock dividend in September 2019.

3 unchanged sentences

In January 2018, our Board of Directors authorized a $100 million common stock share buyback program.

We did not repurchase any shares under this program during either of the three months ended April 1, 2023 and March 26, 2022, and do not expect to utilize any authorization in the future.

As of April 1, 2023, we were in compliance with all financial and other customary covenants under our credit arrangements.

We did not repurchase any shares under this program during the three and six months ended July 1, 2023 and June 25, 2022, and do not expect to utilize any authorization in the future.

As of July 1, 2023, we were in compliance with all financial and other customary covenants under our credit arrangements.

We believe our future cash flows from operations, availability under our ABL Credit Facility and our ability to access the capital markets, if necessary or desirable, will be adequate to fund our operations and anticipated long-term funding requirements, including capital expenditures, defined benefit plan contributions and repayment of debt maturities.

Our non-guarantor subsidiaries had assets of $474 million, liabilities of $146 million, year-to-date revenue of $40 million and a trailing twelve month ABL Credit Facility covenant EBITDA for continuing operations of $42 million as of April 1, 2023.

Our non-guarantor subsidiaries had assets of $466 million, liabilities of $139 million, year-to-date revenue of $79 million and a trailing twelve month ABL Credit Facility covenant EBITDA for continuing operations of $34 million as of July 1, 2023.

Our liquidity and capital resources are summarized below:

(in millions, except ratios) April 1, 2023 December 31, 2022

(in millions, except ratios) July 1, 2023 December 31, 2022

Cash and cash equivalents (a)

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(a) Cash and cash equivalents consisted of cash, money market deposits and time deposits with original maturities of 90 days or less.

(a) Cash and cash equivalents consist of cash, money market deposits and time deposits with original maturities of 90 days or less.

(b) Amounts available under the ABL Credit Facility fluctuate based on eligible accounts receivable and inventory levels.

At April 1, 2023, we had $136 million of gross availability and net available borrowings of $100 million after taking into account standby letters of credit of $36 million.

We recently purchased credit insurance, which we estimate would have resulted in pro forma ABL Credit Facility net availability as of quarter end of $136 million.

At July 1, 2023, we had $143 million of gross availability and net available borrowings of $109 million after taking into account standby letters of credit of $34 million.

In addition to the availability under the ABL Credit Facility, we have $6 million available under our accounts receivable factoring line of credit in France.

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Our primary purchase obligation payments relate to natural gas, steam energy and wood chips purchase contracts.

There have been no material changes to our contractual commitments outside the ordinary course of business during the three months ended April 1, 2023.

There have been no material changes to our contractual commitments outside the ordinary course of business during the six months ended July 1, 2023.

See Note 17—Commitments and Contingencies to our Financial Statements for further information.

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements (Unaudited)

(in thousands unless otherwise stated)

During the three months ended April 1, 2023, we repurchased $5 million of our Senior Unsecured Notes through open-market transactions and retired the notes for cash of $5 million.

In April 2023, we repurchased $10 million of Senior Secured Notes through open-market transactions and retired the notes for cash of $9 million.

Our next significant debt maturity is in June 2024.

We are actively monitoring the capital markets and are prepared to refinance the Senior Unsecured Notes at acceptable terms in the coming quarter.

We have partnered with Goldman Sachs to act as the lead financial advisor to support the refinancing effort.

We are considering using a portion of our cash balance to repay debt or assist in a holistic refinancing of our capital structure.

Three Months Ended

(in millions) April 1, 2023 March 26, 2022

Senior Notes and Term Loan

In March 2023, we repurchased $5 million of our 2024 Notes through open-market transactions and retired the notes for cash of $5 million.

In April 2023, we repurchased $10 million of our 2026 Notes through open-market transactions and retired the notes for cash of $9 million.

In July 2023, we secured term loan financing of $250 million in aggregate principal amount and received net proceeds of $243 million after original issue discount, which will be used, together with cash on hand, to redeem the remaining $318 million in aggregate principal balance of the 2024 Notes and pay fees and expenses related to the transaction.

The 2027 Term Loan matures in July 2027, bears interest at an annual rate equal to three-month Term SOFR (or, if greater, 3.00 percent) plus 8.00 percent and requires quarterly principal payments of 0.50 percent of the initial principal amount.

Six Months Ended

(in millions) July 1, 2023 June 25, 2022

Cash flows provided by (used in):

Operating activities $ 84 $ (36)

Investing activities (21) (45)

Investing activities-continuing operations (54) (87)

Investing activities-discontinued operations — 43

Financing activities (26) (22)

Cash provided by operating activities during the three months ended April 1, 2023 increased $75 million compared to the prior year quarter primarily due to increased cash inflows from working capital, partially offset by payments on deferred energy liabilities associated with our Tartas facility operations.

Cash used in investing activities during the three months ended April 1, 2023 decreased $24 million compared to the prior year quarter due to lower capital spending.

Cash used in financing activities during the three months ended April 1, 2023 increased by $10 million compared to the prior year quarter, primarily due to higher repayments of long-term debt and repurchases of common stock to satisfy tax withholding requirements related to the issuance of stock under our incentive stock plans, partially offset by a decrease in net short-term borrowings.

Cash provided by operating activities increased $120 million primarily due to increased cash inflows from working capital, partially offset by payments on deferred energy liabilities associated with our Tartas facility operations.

Cash used in investing activities of continuing operations decreased $33 million due to lower capital spending.

Cash provided by investing activities of discontinued operations of $43 million in 2022 related to the proceeds from the sale of GreenFirst equity securities.

Cash used in financing activities increased $4 million primarily due to higher repurchases of common stock to satisfy tax withholding requirements related to the issuance of stock under our incentive stock plans and decreased borrowings of long-term debt, partially offset by lower repayments of long-term debt.

Performance and Liquidity Indicators

12 unchanged sentences

Non-GAAP financial measures are not necessarily indicative of results that may be generated in future periods and should not be relied upon, in whole or part, in evaluating our financial condition, results of operations or future prospects.

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements (Unaudited)

(in thousands unless otherwise stated)

EBITDA and Adjusted EBITDA

EBITDA is defined as earnings before interest, taxes, depreciation and amortization.

Adjusted EBITDA is defined as EBITDA adjusted for a settlement of certain pension plans and other items.

Adjusted EBITDA is defined as EBITDA adjusted for the settlement of certain pension plans and other items.

Reconciliations of income (loss) from continuing operations to EBITDA and Adjusted EBITDA from continuing operations, by segment, follow:

1 unchanged sentence

High Purity Cellulose Paperboard High-Yield Pulp Corporate & Other Total

Three Months Ended April 1, 2023

Three Months Ended July 1, 2023

Income (loss) from continuing operations $ — $ 6 $ 1 $ (23) $ (16)

3 unchanged sentences

EBITDA-continuing operations 28 10 1 (11) 28

Gain on debt extinguishment — — — (1) (1)

Adjusted EBITDA-continuing operations $ 28 $ 10 $ 1 $ (12) $ 27

Three Months Ended June 25, 2022

Income (loss) from continuing operations $ 6 $ 11 $ (1) $ (41) $ (25)

Depreciation and amortization 30 3 1 — 34

Interest expense, net — — — 16 16

Income tax expense — — — 4 4

EBITDA-continuing operations 36 14 — (21) 29

Pension settlement loss — — — 1 1

Severance — — — 4 4

Adjusted EBITDA-continuing operations $ 36 $ 14 $ — $ (16) $ 34

Three Months Ended March 26, 2022

Six Months Ended July 1, 2023

Income (loss) from continuing operations $ 13 $ 16 $ 8 $ (51) $ (14)

1 unchanged sentence

Interest expense, net — — — 29 29

Income tax benefit — — — (6) (6)

EBITDA-continuing operations 72 23 9 (27) 77

Pension settlement loss — — — 2 2

Gain on debt extinguishment — — — (1) (1)

Adjusted EBITDA-continuing operations $ 72 $ 23 $ 9 $ (26) $ 78

Six Months Ended June 25, 2022

Income (loss) from continuing operations $ (1) $ 17 $ (1) $ (64) $ (49)

Depreciation and amortization 53 7 1 — 61

Interest expense, net — — — 32 32

Income tax expense — — — 5 5

EBITDA and Adjusted EBITDA-continuing operations $ 16 $ 10 $ — $ (6) $ 20

EBITDA from continuing operations for the three months ended April 1, 2023 improved by $29 million compared to the prior year quarter, primarily driven by higher sales prices across all segments and higher sales volumes in the High Purity Cellulose and High-Yield Pulp segments, partially offset by higher chemicals and logistics costs.

EBITDA-continuing operations 52 24 — (27) 49

Pension settlement loss — — — 1 1

Severance — — — 4 4

Adjusted EBITDA-continuing operations $ 52 $ 24 $ — $ (22) $ 54

EBITDA from continuing operations for the quarter ended July 1, 2023 decreased $1 million compared to the same prior year quarter, driven by the decrease in net sales and increased labor, maintenance, input and logistics costs, offset by a decrease in Corporate expense items and the recognition of a $3 million benefit from payroll tax credit carryforwards.

EBITDA from continuing operations for the six months ended July 1, 2023 increased $28 million compared to the same prior year period, driven by the increase in net sales, a decrease in Corporate expense items and the income recognized on the payroll tax credit carryforwards, partially offset by increased labor, maintenance, input and logistics costs.

See Results of Operations above for additional discussion of the changes in our operating results.

4 unchanged sentences

Cash flows of operating activities of continuing operations is reconciled to adjusted free cash flows as follows:

Three Months Ended

(in millions) April 1, 2023 March 26, 2022

Six Months Ended

(in millions) July 1, 2023 June 25, 2022

Cash provided by (used in) operating activities-continuing operations $ 84 $ (36)

3 unchanged sentences

(a) Net of proceeds from the sale of assets and excluding strategic capital expenditures.

Strategic capital expenditures for the three months ended April 1, 2023 and March 26, 2022 were $6 million and $9 million, respectively.

Strategic capital expenditures for the six months ended July 1, 2023 and June 25, 2022 were $22 million and $16 million, respectively.

Adjusted free cash flows of continuing operations increased primarily due to changes in working capital and lower capital expenditures.

See Cash Flows above for additional discussion of our operating cash flows.

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements (Unaudited)

(in thousands unless otherwise stated)

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis