What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-08 compared with 2023-08-09 · 157 added, 167 removed, 433 unchanged (43% of the section changed)

3 unchanged sentences

(in thousands, except per share amounts)

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 30, 2023 September 24, 2022 September 30, 2023 September 24, 2022

Net sales $ 368,670 $ 466,346 $ 1,220,844 $ 1,217,282

7 unchanged sentences

Other components of pension and OPEB, excluding service costs (Note 14) 501 1,009 ( 834 ) 1,910

Gain (loss) on GreenFirst equity securities (Note 2) — ( 3,703 ) — 5,197

Gain on GreenFirst equity securities (Note 2) — — — 5,197

Other income, net 3,281 4,117 6,894 6,760

Loss from continuing operations before income taxes ( 18,188 ) ( 20,241 ) ( 18,518 ) ( 42,835 )

Income (loss) from continuing operations before income taxes ( 31,673 ) 17,222 ( 50,191 ) ( 25,612 )

Income tax (expense) benefit (Note 15) 5,392 1,824 11,227 ( 3,230 )

Equity in loss of equity method investment ( 259 ) ( 691 ) ( 1,591 ) ( 2,127 )

Loss from continuing operations ( 15,622 ) ( 24,943 ) ( 14,015 ) ( 49,323 )

Income (loss) from discontinued operations, net of taxes (Note 2) ( 1,128 ) 1,676 ( 1,128 ) 1,205

Net loss $ ( 16,750 ) $ ( 23,267 ) $ ( 15,143 ) $ ( 48,118 )

Basic and Diluted earnings per common share (Note 12)

Loss from continuing operations $ ( 0.24 ) $ ( 0.39 ) $ ( 0.22 ) $ ( 0.77 )

Income (loss) from discontinued operations ( 0.02 ) 0.03 ( 0.02 ) 0.02

Net loss per common share $ ( 0.26 ) $ ( 0.36 ) $ ( 0.24 ) $ ( 0.75 )

Income (loss) from continuing operations ( 26,540 ) 18,355 ( 40,555 ) ( 30,969 )

Income from discontinued operations, net of taxes (Note 2) 1,440 11,252 312 12,458

Net income (loss) $ ( 25,100 ) $ 29,607 $ ( 40,243 ) $ ( 18,511 )

Basic earnings per common share (Note 12)

Income (loss) from continuing operations $ ( 0.41 ) $ 0.29 $ ( 0.62 ) $ ( 0.48 )

Income from discontinued operations 0.02 0.18 — 0.20

Net income (loss) per common share-basic $ ( 0.39 ) $ 0.47 $ ( 0.62 ) $ ( 0.28 )

Diluted earnings per common share (Note 12)

Income (loss) from continuing operations $ ( 0.41 ) $ 0.28 $ ( 0.62 ) $ ( 0.48 )

Income from discontinued operations 0.02 0.17 — 0.20

Net income (loss) per common share-diluted $ ( 0.39 ) $ 0.45 $ ( 0.62 ) $ ( 0.28 )

See Notes to Consolidated Financial Statements.

Rayonier Advanced Materials Inc.

Consolidated Statements of Comprehensive Loss

Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

Three Months Ended Six Months Ended

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

Net loss $ ( 16,750 ) $ ( 23,267 ) $ ( 15,143 ) $ ( 48,118 )

Other comprehensive income (loss), net of tax (Note 10)

Three Months Ended Nine Months Ended

September 30, 2023 September 24, 2022 September 30, 2023 September 24, 2022

Net income (loss) $ ( 25,100 ) $ 29,607 $ ( 40,243 ) $ ( 18,511 )

Other comprehensive loss, net of tax (Note 10)

Foreign currency translation adjustment ( 5,212 ) ( 14,697 ) ( 1,109 ) ( 30,561 )

1 unchanged sentence

Net gain (loss) on employee benefit plans ( 65 ) 1,948 ( 2,432 ) 5,844

Total other comprehensive income (loss) ( 2,301 ) ( 7,557 ) 1,839 ( 11,811 )

Comprehensive loss $ ( 19,051 ) $ ( 30,824 ) $ ( 13,304 ) $ ( 59,929 )

Total other comprehensive loss ( 5,230 ) ( 12,682 ) ( 3,391 ) ( 24,493 )

Comprehensive income (loss) $ ( 30,330 ) $ 16,925 $ ( 43,634 ) $ ( 43,004 )

See Notes to Consolidated Financial Statements.

2 unchanged sentences

(in thousands, except share and par value amounts)

July 1, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Current assets

35 unchanged sentences

(in thousands, except share data)

Common Stock Additional Paid in Capital Retained

Earnings Accumulated Other Comprehensive Loss Total Stockholders’

Common Stock Additional Paid in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders’ Equity

Shares Par Value

Three months ended July 1, 2023

Balance at April 1, 2023

Three months ended September 30, 2023

Balance at July 1, 2023

65,343,418 $ 654 $ 416,042 $ 459,280 $ ( 61,959 ) $ 814,017

1 unchanged sentence

Other comprehensive loss, net of tax — — — — ( 5,230 ) ( 5,230 )

Issuance of common stock under incentive stock plans 266,321 3 ( 3 ) — — —

Stock-based compensation — — 1,990 — — 1,990

Repurchase of common stock (a)

( 29,251 ) — ( 254 ) — — ( 254 )

Balance at July 1, 2023

Balance at September 30, 2023

65,343,418 $ 654 $ 418,032 $ 434,180 $ ( 67,189 ) $ 785,677

Three months ended June 25, 2022

Balance at March 26, 2022

Three months ended September 24, 2022

Balance at June 25, 2022

63,971,166 $ 639 $ 415,257 $ 441,224 $ ( 96,281 ) $ 760,839

Net loss — — — ( 23,267 ) — ( 23,267 )

Net income — — — 29,607 — 29,607

Other comprehensive loss, net of tax — — — — ( 12,682 ) ( 12,682 )

Issuance of common stock under incentive stock plans 122,016 1 ( 1 ) — — —

Stock-based compensation — — 1,959 — — 1,959

Balance at June 25, 2022

Balance at September 24, 2022

63,971,166 $ 639 $ 417,216 $ 470,831 $ ( 108,963 ) $ 779,723

Six months ended July 1, 2023

Nine months ended September 30, 2023

Balance at December 31, 2022

1 unchanged sentence

Net loss — — ( 40,243 ) — ( 40,243 )

Other comprehensive income, net of tax — — — 1,839 1,839

Other comprehensive loss, net of tax — — — ( 3,391 ) ( 3,391 )

Issuance of common stock under incentive stock plans 1,966,815 20 ( 20 ) — — —

2 unchanged sentences

( 644,158 ) ( 6 ) ( 5,357 ) — — ( 5,363 )

Balance at July 1, 2023

Balance at September 30, 2023

65,343,418 $ 654 $ 418,032 $ 434,180 $ ( 67,189 ) $ 785,677

Six months ended June 25, 2022

Nine months ended September 24, 2022

Balance at December 31, 2021

6 unchanged sentences

( 62,179 ) ( 1 ) ( 302 ) — — ( 303 )

Balance at June 25, 2022

63,971,166 $ 639 $ 415,257 $ 441,224 $ ( 96,281 ) $ 760,839

Balance at September 24, 2022

63,971,166 $ 639 $ 417,216 $ 470,831 $ ( 108,963 ) $ 779,723

4 unchanged sentences

(in thousands)

Six Months Ended

July 1, 2023 June 25, 2022

Nine Months Ended

September 30, 2023 September 24, 2022

Operating activities

Net loss $ ( 40,243 ) $ ( 18,511 )

Adjustments to reconcile net loss to cash provided by (used in) operating activities:

(Income) loss from discontinued operations 1,128 ( 1,205 )

Adjustments to reconcile net loss to cash provided by operating activities:

Income from discontinued operations ( 312 ) ( 12,458 )

Depreciation and amortization 104,073 96,294

13 unchanged sentences

Contributions to pension and other postretirement plans ( 8,768 ) ( 5,467 )

Cash provided by (used in) operating activities 83,860 ( 36,282 )

Cash provided by operating activities 82,139 7,448

Investing activities

5 unchanged sentences

Financing activities

Borrowing of long-term debt 1,509 5,569

Repayment of long-term debt ( 20,305 ) ( 25,215 )

Borrowings of long-term debt 303,217 5,721

Repayments of long-term debt ( 397,087 ) ( 51,410 )

Short-term financing, net ( 2,457 ) ( 4,990 )

Debt issuance costs ( 10,082 ) —

Repurchase of common stock ( 5,363 ) ( 303 )

Cash used in financing activities ( 111,772 ) ( 50,982 )

Net increase (decrease) in cash and cash equivalents 3,899 ( 101,253 )

Net decrease in cash and cash equivalents ( 125,251 ) ( 113,265 )

Net effect of foreign exchange on cash and cash equivalents 575 ( 8,369 )

3 unchanged sentences

Interest paid $ ( 50,306 ) $ ( 48,384 )

Income taxes paid, net ( 7,090 ) ( 6,331 )

Income taxes refunded (paid), net ( 7,215 ) 16,484

Capital assets purchased on account 31,706 16,316

13 unchanged sentences

Subsequent Events

Duties on Canadian Softwood Lumber Sold to the U.S.

On July 26, 2023, the USDOC completed its fourth administrative review of duties applied to Canadian softwood lumber exports to the U.S.

during 2021 and reduced rates applicable to the Company to a combined 8.0 percent.

In connection with this development, in the third quarter the Company will record a pre-tax gain of approximately $ 2 million in “income (loss) from discontinued operations, net of taxes” and increase the long-term receivable related to the USDOC administrative reviews to approximately $ 40 million.

On July 20, 2023, the Company 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 Company will record a loss on debt extinguishment of approximately $ 1 million in the third quarter related to the redemption.

The 2027 Term Loan matures in July 2027, bears interest at a rate per annum 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 commencing in the fourth quarter of 2023.

The Company may voluntarily make prepayments at any time, subject to customary breakage costs and, if within the first three anniversaries of closing, an additional make-whole premium.

The agreement governing the 2027 Term Loan contains various customary covenants that limit the ability of the Company and its restricted subsidiaries, as defined by the term loan agreement and in particular the Company’s French subsidiaries, to take certain specified actions, subject to certain exceptions, including:

incurring debt or liens, making investments, entering into mergers, consolidations, and acquisitions, paying dividends and making other restricted payments.

Additionally, the 2027 Term Loan contains customary affirmative covenants and customary events of default (subject, in certain cases, to customary grace or cure periods), including, without limitation, late payment, breach of covenant, bankruptcy, judgment and defaults under certain other indebtedness and changes in control.

The Company recently began plans towards a realignment of its High Purity Cellulose assets to optimize production mix, including a consolidation of its commodity products production into the Temiscaming plant.

The Company is currently evaluating the potential impact of this realignment on its consolidated financial statements and disclosures.

Discontinued Operations

3 unchanged sentences

The shares sale agreement contains a purchase price protection clause whereby the Company is entitled to participate in further share price appreciation under certain circumstances until December 2023.

As part of the sale of the lumber assets, the Company retained all rights and obligations to softwood duties generated or incurred through the closing date of the sale.

In total, the Company paid $ 112 million in softwood lumber duties from 2017 through August 2021, and expects to receive all or the vast majority of these duties upon final resolution of the dispute between the USDOC and Canada.

During the third quarter of 2023, the USDOC completed its fourth administrative review of duties applied to Canada softwood lumber exports to the U.S.

during 2021 and reduced rates applicable to the Company to a combined 8.05 percent.

In connection with this development, the Company recorded a pre-tax gain of $ 2 million in “income from discontinued operations, net of taxes” and increased the long-term receivable related to USDOC administrative reviews to $ 40 million.

During the third quarter of 2022, the USDOC completed its third administrative review of duties applied to Canada softwood lumber exports during 2020 and reduced applicable rates to a combined 8.6 percent, for which the Company recorded a pre-tax gain of $ 16 million.

During the nine months ended September 30, 2023, the Company incurred a $ 2 million loss related to the settlement of a claim pursuant to the representations and warranties in the asset purchase agreement.

Rayonier Advanced Materials Inc.

1 unchanged sentence

(in thousands unless otherwise stated)

As part of the sale of the lumber assets, the Company retained all rights and obligations to softwood duties generated or incurred through the closing date of the sale.

As of July 1, 2023, the Company had a $ 38 million long-term receivable related to USDOC administrative reviews completed to date.

During the three and six months ended July 1, 2023, the Company incurred $ 2 million related to the settlement of a claim pursuant to the representations and warranties in the asset purchase agreement.

Income (loss) from discontinued operations was comprised of the following:

Three Months Ended Six Months Ended

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

Income from discontinued operations was comprised of the following:

Three Months Ended Nine Months Ended

September 30, 2023 September 24, 2022 September 30, 2023 September 24, 2022

Cost of sales $ — $ — $ — $ 155

Gross margin — — — 155

Selling, general and administrative and other operating income (expense) ( 1,533 ) 1,953 ( 1,533 ) 1,495

Operating income (loss) ( 1,533 ) 2,279 ( 1,533 ) 1,648

Other non-operating expense — ( 4 ) — ( 9 )

Income (loss) from discontinued operations before income taxes ( 1,533 ) 2,275 ( 1,533 ) 1,639

Income tax (expense) benefit 405 ( 599 ) 405 ( 434 )

Income (loss) from discontinued operations, net of taxes $ ( 1,128 ) $ 1,676 $ ( 1,128 ) $ 1,205

Selling, general and administrative expense and other operating income, net 1,957 15,313 424 16,808

Operating income 1,957 15,313 424 16,963

Non-operating expense — ( 4 ) — ( 13 )

Income from discontinued operations before income taxes 1,957 15,309 424 16,950

Income tax expense ( 517 ) ( 4,057 ) ( 112 ) ( 4,492 )

Income from discontinued operations, net of taxes $ 1,440 $ 11,252 $ 312 $ 12,458

Accounts Receivable, Net

Accounts receivable, net included the following:

July 1, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Accounts receivable, trade $ 141,998 $ 171,144

3 unchanged sentences

Accounts receivable, net $ 175,814 $ 211,526

——————————————

(a) Consists primarily of value-added/consumption taxes, grants receivable and accrued billings due from government agencies.

Inventory included the following:

July 1, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Finished goods $ 182,209 $ 198,931

3 unchanged sentences

Inventory $ 242,691 $ 265,334

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements (Unaudited)

(in thousands unless otherwise stated)

The Company’s operating and finance leases are primarily for corporate offices, warehouse space, rail cars and equipment.

As of July 1, 2023, the Company’s leases have remaining lease terms of less than one year to 13.3 years with standard renewal and termination options available at the Company’s discretion.

As of September 30, 2023, the Company’s leases have remaining lease terms of less than one year to 13.1 years with standard renewal and termination options available at the Company’s discretion.

Certain equipment leases have purchase options at the end of the term of the lease, which are not included in the ROU assets, as it is not reasonably certain that the Company will exercise such options.

1 unchanged sentence

The Company uses its incremental borrowing rate in determining the present value of lease payments unless the lease provides an implicit or explicit interest rate.

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements (Unaudited)

(in thousands unless otherwise stated)

Financial and other information related to the Company’s operating and finance leases follow:

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 30, 2023 September 24, 2022 September 30, 2023 September 24, 2022

Operating lease cost $ 1,858 $ 1,973 $ 5,464 $ 5,821

3 unchanged sentences

Total lease cost $ 1,986 $ 2,102 $ 5,850 $ 6,208

Balance Sheet Classification July 1, 2023 December 31, 2022

Balance Sheet Classification September 30, 2023 December 31, 2022

Operating leases

5 unchanged sentences

Lease liabilities Long-term debt 1,459 1,760

Six Months Ended

July 1, 2023 June 25, 2022

Nine Months Ended

September 30, 2023 September 24, 2022

Operating cash flows - cash paid for amounts included in the measurement of operating lease liabilities $ 5,182 $ 1,770

Operating lease ROU assets obtained in exchange for lease liabilities 5,650 2,975

Finance lease cash flows were immaterial during each of the three and six months ended July 1, 2023 and June 25, 2022.

July 1, 2023 December 31, 2022

Finance lease cash flows were immaterial during each of the three and nine months ended September 30, 2023 and September 24, 2022.

September 30, 2023 December 31, 2022

Operating leases

9 unchanged sentences

Accrued and other current liabilities included the following:

July 1, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Accrued customer incentives $ 22,815 $ 28,702

8 unchanged sentences

Accrued and other current liabilities $ 133,716 $ 164,369

——————————————

(a) Included at both July 1, 2023 and December 31, 2022 was CAD $ 25 million (USD $ 19 million) associated with funds received in 2021 for CEWS.

(a) Included at both September 30, 2023 and December 31, 2022 was CAD $ 25 million (USD $ 19 million) associated with funds received in 2021 for CEWS.

All CEWS claims are subject to mandatory audit.

The Company will recognize amounts from these claims in income at the time there is sufficient evidence that it will not be required to repay such amounts.

(b) Included at July 1, 2023 and December 31, 2022 was $ 17 million and $ 30 million, respectively, of energy-related payables associated with Tartas facility operations.

(b) Included at September 30, 2023 and December 31, 2022 was $ 17 million and $ 30 million, respectively, of energy-related payables associated with Tartas facility operations.

Debt and Finance Leases

Debt and finance leases included the following:

July 1, 2023 December 31, 2022

September 30, 2023 December 31, 2022

ABL Credit Facility due 2025:

$ 109 million available, bearing interest of 7.42 % ( 5.17 % adjusted SOFR plus 2.25 % margin) at July 1, 2023

$ 112 million available, bearing interest of 7.42 % ( 5.42 % adjusted SOFR plus 2.00 % margin) at September 30, 2023

Term Loan due 2027:

bearing interest of 13.33 % ( 5.33 % three-month Term SOFR plus 8.00 % margin) at September 30, 2023

7.625 % Senior Secured Notes due 2026

1 unchanged sentence

5.50 % Senior Unsecured Notes due 2024

317,675 322,675

5.50 % CAD-based term loan due 2028

9 unchanged sentences

Long-term debt $ 730,453 $ 838,508

——————————————

(a) Consist of loans for energy and bioethanol projects in France.

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

A gain on extinguishment of $ 1 million for the repurchase was recorded to “other income, net” in the consolidated statements of operations.

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

An immaterial gain on extinguishment for the repurchase was recorded to “other income, net” in the consolidated statements of operations.

In July 2023, the Company secured term loan financing of $ 250 million in aggregate principal amount and received net proceeds of $ 243 million after original issue discount.

In addition, the Company incurred issuance costs of $ 10 million, which, together with the original issue discount, were recorded in “long-term debt” in the consolidated balance sheets and will be amortized to “interest expense” in the consolidated statements of operations over the term of the loan.

The net proceeds, together with cash on hand, were used to redeem the 2024 Notes and pay transaction costs.

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 $ 1.25 million.

The Company may voluntarily make prepayments at any time, subject to customary breakage costs and, if within the first three anniversaries of closing, an additional make-whole premium.

Rayonier Advanced Materials Inc.

1 unchanged sentence

(in thousands unless otherwise stated)

As of July 1, 2023, the Company’s debt principal payments, excluding finance lease obligations, were due as follows:

Remainder of 2023 (a)

incurring debt or liens, making investments, entering into mergers, consolidations, and acquisitions, paying dividends and making other restricted payments.

The Company will be required to maintain a consolidated secured net leverage ratio, based on covenant EBITDA, of no greater than 4.50 to 1.00.

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

A gain on extinguishment of $ 1 million for the repurchase was recorded to “other income, net” in the consolidated statements of operations.

In August 2023, the Company redeemed the $ 318 million principal balance and accrued interest of $ 4 million of the 2024 Notes.

A loss on extinguishment of $ 1 million related to the redemption was recorded to “other income, net” in the consolidated statements of operations.

Prior to the full redemption of its 2024 Notes, in March 2023, the Company repurchased $ 5 million of the 2024 Notes through open-market transactions and retired the notes for cash of $ 5 million.

An immaterial gain on extinguishment for the repurchase was recorded to “other income, net” in the consolidated statements of operations.

As of September 30, 2023, the Company’s debt principal payments, excluding finance lease obligations, were due as follows:

Remainder of 2023 $ 5,597

Thereafter 6,490

Total debt principal payments $ 768,215

——————————————

(a) Includes $ 68 million of the $ 318 million in aggregate principal balance of the 2024 Notes, which will be redeemed with cash on hand in the third quarter of 2023 in accordance with the 2027 Term Loan financing agreement.

(b) Includes the remaining $ 250 million principal balance of the 2024 Notes, which will be redeemed with the proceeds of the 2027 Term Loan in the third quarter of 2023.

The 2027 Term Loan will mature in 2027.

See Note 1—Basis of Presentation for further information on the refinancing of the 2024 Notes.

Environmental Liabilities

The Company’s environmental liabilities balance changed as follows during the six months ended July 1, 2023:

The Company’s environmental liabilities balance changed as follows during the nine months ended September 30, 2023:

Balance at December 31, 2022

2 unchanged sentences

Foreign currency adjustments 85

Balance at July 1, 2023

Balance at September 30, 2023

current portion ( 10,740 )

Non-current environmental liabilities $ 158,854

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements (Unaudited)

(in thousands unless otherwise stated)

In addition to these estimated liabilities, the Company is subject to the risk of reasonably possible additional liabilities in excess of the established reserves due to potential changes in circumstances and future events, including, without limitation, changes to current laws and regulations;

5 unchanged sentences

and changes in accounting rules or interpretations.

Based on information available as of July 1, 2023, the Company estimates this exposure could range up to approximately $ 85 million, although no assurances can be given that this amount will not be exceeded given the factors described above.

Based on information available as of September 30, 2023, the Company estimates this exposure could range up to approximately $ 85 million, although no assurances can be given that this amount will not be exceeded given the factors described above.

These potential additional costs are attributable to several sites and other applicable liabilities.

2 unchanged sentences

However, no assurances are given that these estimates will be sufficient for the reasons described above and additional liabilities could have a material adverse effect on the Company’s financial position, results of operations and cash flows.

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements (Unaudited)

(in thousands unless otherwise stated)

Fair Value Measurements

The following table presents the carrying amount, estimated fair values and categorization under the fair value hierarchy for financial instruments held by the Company, using market information and what management believes to be appropriate valuation methodologies:

July 1, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Amount Fair Value Carrying

6 unchanged sentences

$ 513,004 $ — $ 439,787 $ 847,591 $ — $ 838,502

——————————————

(a) Excludes finance lease obligations.

8 unchanged sentences

Accumulated Other Comprehensive Loss

Six Months Ended

July 1, 2023 June 25, 2022

Nine Months Ended

September 30, 2023 September 24, 2022

Unrecognized components of employee benefit plans, net of tax

20 unchanged sentences

Accumulated other comprehensive loss, end of period $ ( 67,189 ) $ ( 108,963 )

——————————————

(a) The AOCI components for defined benefit pension and post-retirement plans are included in the computation of net periodic benefit cost.

12 unchanged sentences

The following table provides the inputs to the calculations of basic and diluted earnings per common share (share amounts not in thousands):

Three Months Ended Six Months Ended

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

Loss from continuing operations $ ( 15,622 ) $ ( 24,943 ) $ ( 14,015 ) $ ( 49,323 )

Income (loss) from discontinued operations ( 1,128 ) 1,676 ( 1,128 ) 1,205

Net loss available for common stockholders $ ( 16,750 ) $ ( 23,267 ) $ ( 15,143 ) $ ( 48,118 )

Three Months Ended Nine Months Ended

September 30, 2023 September 24, 2022 September 30, 2023 September 24, 2022

Income (loss) from continuing operations $ ( 26,540 ) $ 18,355 $ ( 40,555 ) $ ( 30,969 )

Income from discontinued operations 1,440 11,252 312 12,458

Net income (loss) available for common stockholders $ ( 25,100 ) $ 29,607 $ ( 40,243 ) $ ( 18,511 )

Shares used for determining basic earnings per share of common stock 65,343,418 63,971,166 65,024,654 63,882,920

Dilutive effect of:

Stock options — — — —

Performance and restricted stock — 1,548,941 — —

1 unchanged sentence

Anti-dilutive instruments excluded from the computation of diluted earnings per share included (not in thousands):

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 30, 2023 September 24, 2022 September 30, 2023 September 24, 2022

Stock options 46,798 78,660 46,798 78,660

3 unchanged sentences

Stock-based compensation expense was as follows:

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 30, 2023 September 24, 2022 September 30, 2023 September 24, 2022

Stock-based compensation expense

20 unchanged sentences

Expired or cancelled ( 30,969 ) 43.32 — — — —

Outstanding at July 1, 2023

Outstanding at September 30, 2023

46,798 $ 37.77 1,931,731 $ 6.03 1,370,601 $ 7.83

5 unchanged sentences

These estimates are based on historical information and certain assumptions about future events.

During the three and six months ended June 25, 2022, the Company recorded a $ 1 million loss related to the final asset surplus distribution to the plan participants of certain wound-up Canadian pension plans.

During the six months ended July 1, 2023, the Company recorded a $ 2 million loss related to the final asset surplus distribution to the plan participants of certain other wound-up Canadian pension plans.

During the nine months ended September 24, 2022, the Company recorded a $ 1 million loss related to the final asset surplus distribution to the plan participants of certain wound-up Canadian pension plans.

During the nine months ended September 30, 2023, the Company recorded a $ 2 million loss related to the final asset surplus distribution to the plan participants of certain other wound-up Canadian pension plans.

The settlements were recognized in “other components of pension and OPEB, excluding service costs” in the Company’s consolidated statements of operations.

The following table presents the components of net periodic benefit costs of these plans:

The following tables present the components of net periodic benefit costs of these plans:

Pension Postretirement

Three Months Ended Three Months Ended

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

September 30, 2023 September 24, 2022 September 30, 2023 September 24, 2022

Service cost $ 1,223 $ 2,150 $ 293 $ 352

1 unchanged sentence

Expected return on plan assets ( 7,967 ) ( 8,258 ) — —

Amortization of prior service cost 184 39 ( 25 ) ( 30 )

Amortization of prior service cost (credit) 111 38 ( 24 ) ( 31 )

Amortization of (gain) loss ( 123 ) 2,473 ( 54 ) 17

2 unchanged sentences

Pension Postretirement

Six Months Ended Six Months Ended

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

Nine Months Ended Nine Months Ended

September 30, 2023 September 24, 2022 September 30, 2023 September 24, 2022

Service cost $ 3,664 $ 6,497 $ 879 $ 1,057

1 unchanged sentence

Expected return on plan assets ( 23,854 ) ( 24,965 ) — —

Amortization of prior service cost 221 78 ( 49 ) ( 61 )

Amortization of prior service cost (credit) 332 116 ( 73 ) ( 92 )

Amortization of (gain) loss ( 369 ) 7,419 ( 162 ) 47

5 unchanged sentences

Service cost is included in “cost of sales” or “selling, general and administrative expense” in the consolidated statements of operations, as appropriate.

Interest cost, expected return on plan assets, amortization of prior service cost and amortization of (gain) loss are included in “other components of pension and OPEB, excluding service costs” in the consolidated statements of operations.

Interest cost, expected return on plan assets, amortization of prior service cost (credit) and amortization of (gain) loss are included in “other components of pension and OPEB, excluding service costs” in the consolidated statements of operations.

Effective Tax Rate

The Company utilized the discrete effective rate method for the six months ended July 1, 2023, as allowed by ASC 740-270-30-18 Income Tax—Interim Reporting.

The discrete method is applied when the application of the estimated AETR is impractical because it is not possible to reliably estimate the AETR.

The discrete method treats the year-to-date period as if it was the annual period and calculates the income tax expense or benefit on a discrete basis, rather than forecasting the full year AETR and applying it against current period book earnings.

The Company believes the use of the discrete method represents the best estimate of its AETR in the current period.

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 Company’s effective tax rates were as follows:

Three Months Ended Nine Months Ended

September 30, 2023 September 24, 2022 September 30, 2023 September 24, 2022

Income (loss) from continuing operations

$ ( 26,540 ) $ 18,355 $ ( 40,555 ) $ ( 30,969 )

Effective tax rate 17.0 % ( 10.6 ) % 22.4 % ( 12.6 ) %

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.

tax credits, return-to-accrual adjustments related to previously filed tax returns, changes in the valuation allowance on disallowed interest deductions and interest received on overpayments of tax from prior years .

The effective tax rate for the nine-month period was also impa cted by an excess tax benefit on vested stock compensation.

The effective tax rate for the three months ended September 24, 2022 differed from the federal statutory rate of 21 percent primarily due to changes in the valuation allowance on disallowed interest deductions in the U.S.

and interest received on overpayments of tax from prior years, partially offset by unfavorable tax return-to-accrual adjustments.

The effective tax rate for the nine months ended September 24, 2022 differed from the federal statutory rate primarily due to changes in the valuation allowance on disallowed interest deductions in the U.S.

and nondeductible executive compensation, partially offset by interest received on overpayments of tax from prior years, U.S.

tax credits and favorable tax return-to-accrual adjustments.

Deferred Taxes

As of July 1, 2023 and December 31, 2022, the Company’s net DTA included $ 18 million and $ 17 million, respectively, of disallowed U.S.

As of both September 30, 2023 and December 31, 2022, the Company’s net DTA included $ 17 million of disallowed U.S.

interest deductions that the Company does not believe will be realized.

12 unchanged sentences

Net sales, disaggregated by product line, was comprised of the following:

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 30, 2023 September 24, 2022 September 30, 2023 September 24, 2022

High Purity Cellulose

8 unchanged sentences

Net sales $ 368,670 $ 466,346 $ 1,220,844 $ 1,217,282

——————————————

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

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

Operating income (loss) by segment was comprised of the following:

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 30, 2023 September 24, 2022 September 30, 2023 September 24, 2022

High Purity Cellulose $ ( 5,547 ) $ 22,536 $ 6,965 $ 21,221

4 unchanged sentences

Identifiable assets by segment were as follows:

July 1, 2023 December 31, 2022

September 30, 2023 December 31, 2022

High Purity Cellulose $ 1,544,041 $ 1,654,214

4 unchanged sentences

Commitments and Contingencies

The Company had no material changes to the purchase obligations presented in its 2022 Form 10-K that were outside the normal course of business during the six months ended July 1, 2023.

The Company had no material changes to the purchase obligations presented in its 2022 Form 10-K that were outside the normal course of business during the nine months ended September 30, 2023.

The Company’s purchase obligations continue to primarily consist of commitments for the purchase of natural gas, steam energy and wood chips.

The Company leases certain buildings, machinery and equipment under various operating leases.

The Company leases certain buildings, machinery and equipment under various operating and finance leases.

See Note 5—Leases for further information.

7 unchanged sentences

In connection with these exports, the Company paid approximately $ 112 million for softwood lumber duties between 2017 and August 28, 2021, including $ 1 million of ancillary fees, which were recorded as expense in the periods incurred.

As part of the sale of its lumber assets, the Company retained all rights and obligations to softwood duties generated or incurred through the closing date of the transaction.

As of July 1, 2023 , the Company had a $ 38 million long-term receivable associated with the USDOC’s determinations of the revised rates for the 2017, 2018, 2019 and 2020 periods.

As part of the sale of its lumber assets, the Company retained all rights and obligations to softwood duties generated or incurred through the closing date of the sale.

As of September 30, 2023 , the Company had a $ 40 million long-term receivable associated with the USDOC’s determinations of the revised rates for the 2017, 2018, 2019, 2020 and 2021 periods.

This amount does not include interest, which will be due on any amounts refunded.

The Company estimates interest earned on the total amount of softwood lumber duties paid to be approximately $ 6 million.

On July 26, 2023, the USDOC completed its fourth administrative review of duties applied to Canadian softwood lumber exports to the U.S.

during 2021 and reduced rates applicable to the Company to a combined 8.0 percent.

Cash is not expected to return to the Company until final resolution of the softwood lumber dispute, which remains subject to legal challenges.

4 unchanged sentences

The Company provides financial guarantees as required by creditors, insurance programs and various governmental agencies.

As of July 1, 2023, the Company had net exposure of $ 34 million from various standby letters of credit, primarily for financial assurance relating to environmental remediation, credit support for natural gas and electricity purchases and guarantees related to foreign retirement plan obligations.

As of September 30, 2023, the Company had net exposure of $ 34 million from various standby letters of credit, primarily for financial assurance relating to environmental remediation, credit support for natural gas and electricity purchases and guarantees related to foreign retirement plan obligations.

These standby letters of credit represent a contingent liability;

1 unchanged sentence

The standby letters of credit have various expiration dates and are expected to be renewed as required.

The Company had surety bonds of $ 86 million as of July 1, 2023, primarily to comply with financial assurance requirements relating to environmental remediation and post closure care, to provide collateral for the Company’s workers’ compensation program and to guarantee taxes and duties for products shipped internationally.

The Company had surety bonds of $ 90 million as of September 30, 2023, primarily to comply with financial assurance requirements relating to environmental remediation and post closure care, to provide collateral for the Company’s workers’ compensation program and to guarantee taxes and duties for products shipped internationally.

These surety bonds expire at various dates and are expected to be renewed annually as required.

1 unchanged sentence

The Company is a guarantor of LTF’s financing agreements and, in the event of default, expects it would only be liable for its proportional share of any repayment under the agreements.

The Company’s proportion of the LTF financing agreement guarantee was $ 31 million at July 1, 2023.

The Company’s proportion of the LTF financing agreement guarantee was $ 29 million at September 30, 2023.

The Company has not recorded any liabilities for these financial guarantees in its consolidated balance sheets, either because the Company has recorded the underlying liability associated with the guarantee or the guarantee is dependent on the Company’s own performance and, therefore, is not subject to the measurement requirements or because the Company has calculated the estimated fair value of the guarantee and determined it to be immaterial based upon the current facts and circumstances that would trigger a payment obligation.

It is not possible to determine the maximum potential amount of liability under these potential obligations due to the unique set of facts and circumstances likely to be involved with each provision.

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements (Unaudited)

(in thousands unless otherwise stated)

As of December 31, 2022, a collective bargaining agreement covering approximately 575 unionized employees was expired.

The employees continued to work under the terms of the expired contract until negotiations concluded in the second quarter of 2023 and final agreement with the union was reached.

All other of the Company’s collective bargaining agreements covering its unionized employees were current as of the date of this filing.

As of September 30, 2023, all of the Company’s collective bargaining agreements covering its unionized employees were current.

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 1. Financial Statements