RAYONIER ADVANCED MATERIALS INC. 10-Q

Item 1. Financial Statements Rayonier Advanced Materials Inc. Consolidated Statements of Operations (Unaudited) (in thousands, except per share amounts) Three Months Ended Nine Months Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Net sales $ 401,103 $ 368,670 $ 1,207,804 $ 1,220,844 Cost of sales ( 357,534 ) ( 359,938 ) ( 1,079,165 ) ( 1,160,044 ) Gross margin 43,569 8,732 128,639 60,800 Selling, general and administrative expense ( 22,685 ) ( 21,162 ) ( 65,569 ) ( 58,653 ) Foreign exchange gain (loss) ( 1,828 ) 624 1,641 ( 1,510 ) Asset impairment (Note 2) ( 25,169 ) — ( 25,169 ) — Indefinite suspension charges (Note 2) ( 7,825 ) — ( 14,451 ) — Other operating income (expense), net ( 2,862 ) ( 2,634 ) 3,381 ( 4,939 ) Operating income (loss) ( 16,800 ) ( 14,440 ) 28,472 ( 4,302 ) Interest expense ( 20,479 ) ( 21,015 ) ( 62,604 ) ( 51,949 ) Components of pension and OPEB, excluding service costs (Note 14) 783 501 1,900 ( 834 ) Other income (expense), net ( 173 ) 3,281 1,748 6,894 Loss from continuing operations before income tax ( 36,669 ) ( 31,673 ) ( 30,484 ) ( 50,191 ) Income tax benefit (Note 15) 4,595 5,392 5,916 11,227 Equity in loss of equity method investment ( 524 ) ( 259 ) ( 1,427 ) ( 1,591 ) Loss from continuing operations ( 32,598 ) ( 26,540 ) ( 25,995 ) ( 40,555 ) Income from discontinued operations, net of tax (Note 3) — 1,440 3,217 312 Net loss $ ( 32,598 ) $ ( 25,100 ) $ ( 22,778 ) $ ( 40,243 ) Basic and Diluted earnings per common share (Note 12) Loss from continuing operations $ ( 0.49 ) $ ( 0.41 ) $ ( 0.40 ) $ ( 0.62 ) Income from discontinued operations — 0.02 0.05 — Net loss $ ( 0.49 ) $ ( 0.39 ) $ ( 0.35 ) $ ( 0.62 ) See Notes to Consolidated Financial Statements. 1 Table of Contents Rayonier Advanced Materials Inc. Consolidated Statements of Comprehensive Loss (Unaudited) (in thousands) Three Months Ended Nine Months Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Net loss $ ( 32,598 ) $ ( 25,100 ) $ ( 22,778 ) $ ( 40,243 ) Other comprehensive income (loss), net of tax (Note 11): Foreign currency translation adjustment 8,552 ( 5,212 ) 2,064 ( 1,109 ) Unrealized gain on derivative instruments 37 47 117 150 Net gain (loss) on employee benefit plans ( 14 ) ( 65 ) 2,434 ( 2,432 ) Total other comprehensive income (loss) 8,575 ( 5,230 ) 4,615 ( 3,391 ) Comprehensive loss $ ( 24,023 ) $ ( 30,330 ) $ ( 18,163 ) $ ( 43,634 ) See Notes to Consolidated Financial Statements. 2 Table of Contents Rayonier Advanced Materials Inc. Consolidated Balance Sheets (Unaudited) (in thousands, except share and par value amounts) September 28, 2024 December 31, 2023 Assets Current assets Cash and cash equivalents $ 136,091 $ 75,768 Accounts receivable, net (Note 4) 193,321 197,457 Inventory (Note 5) 234,034 207,474 Income tax receivable 2,773 19,455 Prepaid and other current assets 62,790 74,904 Total current assets 629,009 575,058 Property, plant and equipment (net of accumulated depreciation of $ 1,880,747 and $ 1,797,529 , respectively) 1,021,648 1,075,105 Deferred tax assets 348,419 345,181 Intangible assets, net 12,157 17,414 Other assets 148,127 169,942 Total assets $ 2,159,360 $ 2,182,700 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 166,934 $ 186,226 Accrued and other current liabilities (Note 7) 161,511 154,488 Debt due within one year (Note 8) 25,578 25,283 Current environmental liabilities (Note 9) 9,832 9,833 Total current liabilities 363,855 375,830 Long-term debt (Note 8) 747,675 752,174 Non-current environmental liabilities (Note 9) 160,488 160,458 Pension and other postretirement benefits (Note 14) 93,775 101,493 Deferred tax liabilities 14,821 15,190 Other liabilities 46,034 31,108 Commitments and contingencies (Note 17) Stockholders’ Equity Common stock: 140,000,000 shares authorized at $ 0.01 par value, 65,896,001 and 65,393,014 issued and outstanding, respectively 659 654 Additional paid-in capital 423,545 419,122 Retained earnings 349,810 372,588 Accumulated other comprehensive loss (Note 11) ( 41,302 ) ( 45,917 ) Total stockholders’ equity 732,712 746,447 Total liabilities and stockholders’ equity $ 2,159,360 $ 2,182,700 See Notes to Consolidated Financial Statements. 3 Table of Contents Rayonier Advanced Materials Inc. Consolidated Statements of Stockholders’ Equity (Unaudited) (in thousands, except share data) Common Stock Additional Paid in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Stockholders’ Equity Shares Par Value Three months ended September 28, 2024 Balance at June 29, 2024 65,890,093 $ 659 $ 421,944 $ 382,408 $ ( 49,877 ) $ 755,134 Net loss — — — ( 32,598 ) — ( 32,598 ) Other comprehensive income, net of tax — — — — 8,575 8,575 Issuance of common stock under incentive stock plans 8,619 — — — — — Stock-based compensation — — 1,619 — — 1,619 Repurchase of common stock (a) ( 2,711 ) — ( 18 ) — — ( 18 ) Balance at September 28, 2024 65,896,001 $ 659 $ 423,545 $ 349,810 $ ( 41,302 ) $ 732,712 Three months ended September 30, 2023 Balance at July 1, 2023 65,343,418 $ 654 $ 416,042 $ 459,280 $ ( 61,959 ) $ 814,017 Net loss — — — ( 25,100 ) — ( 25,100 ) Other comprehensive loss, net of tax — — — — ( 5,230 ) ( 5,230 ) Stock-based compensation — — 1,990 — — 1,990 Balance at September 30, 2023 65,343,418 $ 654 $ 418,032 $ 434,180 $ ( 67,189 ) $ 785,677 Nine months ended September 28, 2024 Balance at December 31, 2023 65,393,014 $ 654 $ 419,122 $ 372,588 $ ( 45,917 ) $ 746,447 Net loss — — — ( 22,778 ) — ( 22,778 ) Other comprehensive income, net of tax — — — — 4,615 4,615 Issuance of common stock under incentive stock plans 630,453 6 ( 6 ) — — — Stock-based compensation — — 5,089 — — 5,089 Repurchase of common stock (a) ( 127,466 ) ( 1 ) ( 660 ) — — ( 661 ) Balance at September 28, 2024 65,896,001 $ 659 $ 423,545 $ 349,810 $ ( 41,302 ) $ 732,712 Nine months ended September 30, 2023 Balance at December 31, 2022 64,020,761 $ 640 $ 418,048 $ 474,423 $ ( 63,798 ) $ 829,313 Net loss — — — ( 40,243 ) — ( 40,243 ) Other comprehensive loss, net of tax — — — — ( 3,391 ) ( 3,391 ) Issuance of common stock under incentive stock plans 1,966,815 20 ( 20 ) — — — Stock-based compensation — — 5,361 — — 5,361 Repurchase of common stock (a) ( 644,158 ) ( 6 ) ( 5,357 ) — — ( 5,363 ) Balance at September 30, 2023 65,343,418 $ 654 $ 418,032 $ 434,180 $ ( 67,189 ) $ 785,677 (a) Repurchased to satisfy tax withholding requirements related to the issuance of stock under the Company’s incentive stock plans. See Notes to Consolidated Financial Statements. 4 Table of Contents Rayonier Advanced Materials Inc. Consolidated Statements of Cash Flows (Unaudited) (in thousands) Nine Months Ended September 28, 2024 September 30, 2023 Operating activities Net loss $ ( 22,778 ) $ ( 40,243 ) Adjustments to reconcile net loss to cash provided by operating activities: Income from discontinued operations ( 3,217 ) ( 312 ) Depreciation and amortization 101,988 104,073 Asset impairment 25,169 — Stock-based compensation expense 5,089 5,361 Deferred income tax benefit ( 5,793 ) ( 8,130 ) Net periodic benefit cost of pension and other postretirement plans 3,018 3,060 Unrealized (gain) loss on foreign currency ( 1,124 ) 564 (Gain) loss on disposal of property, plant and equipment 1,701 ( 1,085 ) Other 10,012 6,133 Changes in operating assets and liabilities: Accounts receivable 617 42,865 Income tax receivable 19,723 ( 3,742 ) Inventories ( 26,485 ) 22,301 Accounts payable ( 9,309 ) 5,545 Accrued and other current liabilities 8,391 ( 31,732 ) Duty refund rights 40,111 ( 1,946 ) Other 8,314 ( 11,805 ) Contributions to pension and other postretirement plans ( 6,737 ) ( 8,768 ) Cash provided by operating activities 148,690 82,139 Investing activities Capital expenditures, net of proceeds ( 79,665 ) ( 95,203 ) Investment in equity method investment — ( 415 ) Cash used in investing activities ( 79,665 ) ( 95,618 ) Financing activities Borrowings of long-term debt 232,200 303,217 Repayments of long-term debt ( 238,394 ) ( 397,087 ) Short-term financing, net ( 1,248 ) ( 2,457 ) Debt issuance costs ( 1,875 ) ( 10,082 ) Repurchase of common stock ( 661 ) ( 5,363 ) Cash used in financing activities ( 9,978 ) ( 111,772 ) Net increase (decrease) in cash and cash equivalents 59,047 ( 125,251 ) Net effect of foreign exchange on cash and cash equivalents 1,276 575 Balance, beginning of period 75,768 151,803 Balance, end of period $ 136,091 $ 27,127 Supplemental cash flow information: Interest paid $ ( 71,243 ) $ ( 50,306 ) Income taxes refunded (paid), net 19,608 ( 7,215 ) Capital assets purchased on account 25,575 31,706 See Notes to Consolidated Financial Statements. 5 Table of Contents Rayonier Advanced Materials Inc. Notes to Consolidated Financial Statements (Unaudited) (in thousands unless otherwise stated) 1. Basis of Presentation RYAM is a global leader of specialty cellulose materials with a broad offering of high purity cellulose specialties, a natural polymer used in the production of a variety of specialty chemical products, including liquid crystal displays, filters, textiles and performance additives for pharmaceutical, food and other industrial applications. The Company’s specialized assets are also used to produce biofuels, bioelectricity and other biomaterials such as bioethanol and tall oils. The Company also produces a unique, lightweight multi-ply paperboard product, which is used for production in the commercial printing, lottery ticket and high-end packaging sectors, and a bulky, high-yield pulp product that is used by paperboard producers, as well as in traditional printing, writing and specialty paper manufacturing. The unaudited consolidated financial statements and notes thereto of the Company have been prepared in accordance with GAAP for interim financial information and in accordance with the rules and regulations of the SEC. In the opinion of management, these consolidated financial statements and notes reflect all adjustments, including all normal recurring adjustments, necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented. These statements and notes should be read in conjunction with the consolidated financial statements and supplementary data included in the Company’s 2023 Form 10-K. As a result of the sale of its lumber and newsprint assets in August 2021, the Company presents the historical results for those operations, and any subsequent directly associated impacts, as discontinued operations. Unless otherwise stated, information in these notes to consolidated financial statements relates to continuing operations. See Note 3—Discontinued Operations for further information on the sale. Recent Accounting Developments Change in Accounting Policy On January 1, 2024, the Company changed the method of valuation of its finished goods, work-in-process and raw materials inventories from first-in first-out to average cost. The Company believes the average cost method is preferable because it provides better matching of revenue and expense trends and is a better reflection of periodic income from operations. This change was not retrospectively applied to prior periods presented, as the overall effect of the change is not deemed material to the Company’s consolidated financial statements. Altamaha Green Energy Joint Venture The Company is involved with AGE, under a preliminary joint venture agreement with Beasley Green Power, LLC. AGE aims to construct a biomass boiler and turbine to produce and sell green electricity to Georgia Power Company. AGE is not engaged in any other operating activities and since formation it has only been focused on developing feasibility studies for this project and handling related administrative matters. AGE expenses to date have been shared evenly by RYAM and Beasley and have not been material for the Company for any of the periods presented. The amounts expensed by the Company have been recorded as general and administrative expenses. Once the project evolves from the development stage and the current joint venture agreement between the Company and Beasley is amended to reflect the appropriate terms, the Company will evaluate the accounting and disclosure implications. Accounting Pronouncements There have been no new or recently adopted accounting pronouncements impacting the Company’s consolidated interim financial statements. The Company continues to evaluate the impacts of ASU 2023-05 “Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement,” ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” and ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” as previously disclosed in its 2023 Form 10-K. Subsequent Events Debt Issuance and Redemption In October 2024, the Company raised $ 700 million in aggregate principal amount of secured term loan financing and received net proceeds of $ 683 million after original issue discount, which will be used in the fourth quarter, together with cash on hand, to redeem the respective $ 453 million and $ 246 million outstanding principal balances of the 2026 Notes and 2027 Term Loan and pay estimated fees and expenses related to the transaction of approximately $ 30 million. 6 Table of Contents Rayonier Advanced Materials Inc. Notes to Consolidated Financial Statements (Unaudited) (in thousands unless otherwise stated) The 2029 Term Loan matures in October 2029, bears interest at an annual rate equal to three-month Term SOFR plus an initial spread of 7 percent and requires quarterly principal payments of $ 1.75 million. The initial spread may fluctuate by one half percent based on the Company’s net secured leverage ratio. If net secured leverage is below 2.5 times covenant EBITDA, the spread decreases to 6.5 percent. If net secured leverage exceeds 3.5 times covenant EBITDA, the spread increases to 7.5 percent. 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 premium. For the first 18 months, prepayment of the loan is subject to a make-whole premium. For the following six months, prepayment is subject to a 2 percent premium. In the third year, prepayment is subject to a 1 percent premium. After 3 years, the loan is prepayable at par . The Company will also have the ability to make prepayment using the proceeds from the sale of its Paperboard and High-Yield Pulp businesses at a 2 percent premium during the first year, a 1 percent premium in year two, and par in year three. The Company will be required to maintain a consolidated net secured leverage ratio, based on covenant EBITDA, as follows: • 5.00 to 1.00 for the fourth quarter of 2024 through fiscal year 2025; • 4.75 to 1.00 for fiscal year 2026; and • 4.50 to 1.00 for each fiscal year thereafter. The agreement governing the 2029 Term Loan contains various other customary covenants that limit the ability of the Company and its restricted subsidiaries, as defined by the term loan agreement, 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 2029 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. In conjunction with the above refinancing, the Company secured commitments for a five-year $ 175 million ABL credit facility. The facility is initially priced at Term SOFR plus a spread of 2 percent. The Company expects to record a net loss on debt extinguishment in the fourth quarter of approximately $ 19 million related to these transactions, driven by the write off of deferred financing costs of the 2026 Notes, 2027 Term Loan and ABL Credit Facility. Jesup Plant Fire In October 2024, an isolated fire occurred at the Company’s Jesup plant during planned maintenance activity. There were no injuries to employees or contractors and no risk to the surrounding community. The plant’s C line operations resumed within two days and the A and B lines’ operations resu med within a two-week period. While the Company continues to assess the financial impact of the incident, the unfavorable impact to EBITDA in 2024 is expected to approximate $ 10 million, with an additional required $ 3 million of maintenance capital . Additional capital expenditures will be required over the next couple of years to complete repairs. The Company carries insurance for property and business interruption loss with a $ 15 million combined deductible. 2. Indefinite Suspension of Operations As previously announced, the Company began its indefinite suspension of operations at its Temiscaming High Purity Cellulose plant in July 2024. The suspension does not affect the Temiscaming paperboard and high-yield pulp plants that support the Company’s High-Yield Pulp and Paperboard operating segments, which will continue to operate at full capacity while remaining part of an ongoing sales process. The suspension of operations timeline allows enough lead time for the Company to properly execute the shutdown prior to the arrival of winter in the region. The High Purity Cellulose plant will be idled in a safe and environmentally sound manner. The Company will assess on an annual basis the possibility of restarting the Temiscaming High Purity Cellulose plant. The suspension of operations began on July 16, 2024 and is expected to conclude in the fourth quarter. In connection with the suspension of operations, the Company has incurred total one-time operating charges of $ 14 million. Potential remaining one-time charges to be incurred in the fourth quarter are estimated at $ 2 million to $ 3 million. While most cash costs associated with the suspension of operations will be paid in the third and fourth quarters, severance and other suspension costs are expected to be paid over a period of time. 7 Table of Contents Rayonier Advanced Materials Inc. Notes to Consolidated Financial Statements (Unaudited) (in thousands unless otherwise stated) In the third quarter of 2024, in conjunction with the indefinite suspension of operations, the Company recognized a non-cash asset impairment of $ 25 million, as it was determined that the Temiscaming High Purity Cellulose plant’s net carrying value exceeded its estimated fair value. Determining the fair value of an asset group is judgmental in nature and involves the use of significant estimates and assumptions. The Company determined the fair value of the Temiscaming High Purity Cellulose plant asset group using discounted cash flows under the income approach, which required the use of key assumptions and significant estimates. See Note 10—Fair Value Measurements for further information on the fair value measurement of the Temiscaming plant asset group. The following table presents the accrued liability balance activity related to the suspension during the nine months ended September 28, 2024: Mothballing Costs Severance and Other Employee Costs Total Balance at December 31, 2023 $ — $ — $ — Charges incurred (a) 3,456 5,476 8,932 Payments ( 2,968 ) ( 160 ) ( 3,128 ) Balance at September 28, 2024 $ 488 $ 5,316 $ 5,804 (a) Excludes non-cash items. See below. The following table presents total suspension charges incurred by cost type: Three Months Ended September 28, 2024 Nine Months Ended September 28, 2024 Mothballing costs $ 3,036 $ 3,456 Severance and other employee costs — 6,206 Loss on asset disposal 995 995 Other suspension costs 3,794 3,794 Indefinite suspension charges (a) $ 7,825 $ 14,451 (a) Includes non-cash charges of (i) a $ 2 million write-off of deferred shutdown costs, (ii) $ 2 million for potential contract penalties, (iii) a loss on asset disposal of $ 1 million and (iv) a $ 1 million loss on pension curtailment charges associated with early retirements driven by the suspension of operations. See Note 14—Employee Benefit Plans for further information regarding the loss on pension curtailment charges. The above costs incurred were charged to the High Purity Cellulose segment in “indefinite suspension charges” in the consolidated statements of operations. 3. Discontinued Operations In August 2021, the Company completed the sale of its lumber and newsprint facilities and certain related assets located in Canada. As part of the sale of the lumber assets, the Company retained all refund rights and obligations, including interest, 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 2021, and as of December 31, 2023, the Company had a $ 40 million long-term receivable related to USDOC administrative reviews completed to date. In June 2024, the Company executed on the sale of these refund rights (inclusive of the receivable), including all accrued interest, for $ 39 million, with the opportunity for additional sale proceeds in the future contingent upon the timing and terms of the ultimate outcome of the trade dispute between the USDOC and Canada. The Company recorded a $ 1 million loss on the sale, included in pre-tax income from discontinued operations. Also during the nine months ended September 28, 2024, the Company recognized $ 5 million in pre-tax income from discontinued operations related to CEWS benefit claims deferred since 2021. See Note 7—Accrued and Other Current Liabilities for further information. During the quarter and nine months ended September 30, 2023, the USDOC completed its administrative review of duties applied to Canada softwood lumber exports to the U.S. during 2021 and reduced rates applicable to the Company, for which the Company recorded a pre-tax gain of $ 2 million. Also 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. 8 Table of Contents Rayonier Advanced Materials Inc. Notes to Consolidated Financial Statements (Unaudited) (in thousands unless otherwise stated) Income from discontinued operations was comprised of the following: Three Months Ended Nine Months Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Loss on sale of duty refund rights $ — $ — $ ( 890 ) $ — Selling, general and administrative and other operating income, net — 1,957 5,267 424 Operating income — 1,957 4,377 424 Income from discontinued operations before income tax — 1,957 4,377 424 Income tax expense — ( 517 ) ( 1,160 ) ( 112 ) Income from discontinued operations, net of tax $ — $ 1,440 $ 3,217 $ 312 4. Accounts Receivable, Net Accounts receivable, net included the following: September 28, 2024 December 31, 2023 Accounts receivable, trade $ 173,462 $ 166,137 Accounts receivable, other (a) 20,602 31,973 Allowance for credit loss ( 743 ) ( 653 ) Accounts receivable, net $ 193,321 $ 197,457 (a) Consists primarily of value-added/consumption taxes, grants receivable and accrued billings due from government agencies. 5. Inventory Inventory included the following: September 28, 2024 December 31, 2023 Finished goods $ 184,340 $ 147,930 Work-in-progress 4,866 6,987 Raw materials 39,514 46,120 Manufacturing and maintenance supplies 5,314 6,437 Inventory $ 234,034 $ 207,474 6. Leases The Company’s operating and finance leases are primarily for corporate offices, warehouse space, rail cars and equipment. As of September 28, 2024, the Company’s leases have remaining lease terms of less than one year to 12.1 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. The Company’s lease agreements do not contain any material residual value guarantees or restrictive covenants. 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. 9 Table of Contents 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 Nine Months Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Operating lease cost $ 2,412 $ 1,858 $ 6,050 $ 5,464 Finance lease cost Amortization of ROU assets 109 102 322 301 Interest 19 26 64 85 Total lease cost $ 2,540 $ 1,986 $ 6,436 $ 5,850 Balance Sheet Location September 28, 2024 December 31, 2023 Operating leases (a) ROU assets Other assets $ 32,281 $ 17,475 Lease liabilities, current Accrued and other current liabilities 7,546 4,499 Lease liabilities, non-current Other liabilities 26,472 14,666 Finance leases ROU assets Property, plant and equipment, net 801 1,078 Lease liabilities Long-term debt 1,033 1,355 (a) During the second quarter of 2024, the Company recorded an ROU asset and corresponding lease liability of $ 14 million related to a new warehouse lease agreement in Canada. Nine Months Ended September 28, 2024 September 30, 2023 Operating cash flows - cash paid for amounts included in the measurement of operating lease liabilities $ 6,071 $ 5,182 Operating lease ROU assets obtained in exchange for lease liabilities 18,163 5,650 Finance lease cash flows were immaterial during each of the nine months ended September 28, 2024 and September 30, 2023. September 28, 2024 December 31, 2023 Operating leases Weighted average remaining lease term (in years) 4.9 5.5 Weighted average discount rate 8.3 % 8.3 % Finance leases Weighted average remaining lease term (in years) 2.2 2.8 Weighted average discount rate 7.0 % 7.0 % 10 Table of Contents Rayonier Advanced Materials Inc. Notes to Consolidated Financial Statements (Unaudited) (in thousands unless otherwise stated) Operating lease maturities as of September 28, 2024 were as follows: Remainder of 2024 $ 2,536 2025 9,931 2026 9,147 2027 7,903 2028 6,431 Thereafter 5,857 Total minimum lease payments 41,805 Less: imputed interest ( 7,787 ) Present value of future minimum lease payments $ 34,018 7. Accrued and Other Current Liabilities Accrued and other current liabilities included the following: September 28, 2024 December 31, 2023 Accrued customer incentives $ 43,258 $ 30,036 Accrued payroll and benefits 24,582 13,552 Accrued interest 15,881 32,256 Accrued income taxes 4,446 4,605 Accrued property and other taxes 7,105 2,547 Deferred revenue (a) 8,727 24,061 Other current liabilities (b) 57,512 47,431 Accrued and other current liabilities $ 161,511 $ 154,488 (a) Included at September 28, 2024 and December 31, 2023 was $ 4 million and $ 19 million (CAD $ 5 million and $ 25 million), respectively, associated with funds received in 2021 for CEWS. In the second quarter of 2024, the Company recognized in income $ 15 million of the $ 19 million accrued at December 31, 2023, including $ 10 million in “other operating income (expense), net” and $ 5 million in “income from discontinued operations, net of tax.” The remaining amount will be recognized at the earlier of the conclusion of the final outstanding audit and the expiration of the statute of limitations in July 2025. (b) Included at September 28, 2024 and December 31, 2023 were $ 18 million and $ 13 million, respectively, of energy-related payables associated with Tartas facility operations. 11 Table of Contents Rayonier Advanced Materials Inc. Notes to Consolidated Financial Statements (Unaudited) (in thousands unless otherwise stated) 8. Debt and Finance Leases Debt and finance leases included the following: September 28, 2024 December 31, 2023 ABL Credit Facility due December 2025: $ 135 million net availability, bearing interest of 6.94 % ( 4.94 % adjusted SOFR plus 2.00 % margin) at September 28, 2024 $ — $ — Term Loan due July 2027: bearing interest of 12.59 % ( 4.59 % three-month Term SOFR plus 8.00 % margin) at September 28, 2024 246,250 250,000 7.625 % Senior Secured Notes due January 2026 452,640 464,640 5.50 % CAD-based term loan due April 2028 24,881 30,479 Other loans (a) 60,212 44,754 Short-term factoring facility 4,090 5,292 Finance lease obligations 1,033 1,355 Total principal payments due 789,106 796,520 Less: unamortized premium, discount and issuance costs ( 15,853 ) ( 19,063 ) Total debt 773,253 777,457 Less: debt due within one year ( 25,578 ) ( 25,283 ) Long-term debt $ 747,675 $ 752,174 (a) Consist of low-interest green loans for energy projects and other loans intended for use in biomaterials projects in France. Term Loan In January 2024, the Company amended the 2027 Term Loan to increase the maximum consolidated net secured leverage ratio that it must maintain in the fourth quarter of 2023 and through its 2024 fiscal year (see below). In addition, should the Company exceed the 4.50 to 1.00 maximum ratio established by the original agreement in any of these quarters, it will incur a fee of 0.25 % of the principal balance outstanding at the end of the applicable quarter. The Company incurred total fees of $ 3 million related to this amendment, including $ 1 million in legal and advisory fees recorded to “selling, general and administrative expense” in the consolidated statements of operations in the fourth quarter of 2023, and $ 2 million in lender fees recorded as deferred financing costs in the first quarter of 2024 that will be amortized to “interest expense” over the remaining term of the loan. The Company is required to maintain various financial covenants, including a consolidated net secured leverage ratio, based on covenant EBITDA, as follows: • 5.25 to 1.00 for the fourth quarter of 2023 through the second quarter of 2024; • 5.00 to 1.00 for the third fiscal quarter of 2024; • 4.75 to 1.00 for the fourth fiscal quarter of 2024; and • 4.50 to 1.00 for each fiscal quarter thereafter. Senior Notes 2026 Notes In September 2024, the Company repurchased $ 12 million principal of its 2026 Notes through open-market transactions for $ 12 million cash and recorded an immaterial gain on extinguishment to “other income (expense), net” in the consolidated statements of operations. In April 2023, the Company repurchased $ 10 million principal of its 2026 Notes through open-market transactions and recorded a gain on extinguishment of $ 1 million to “other income (expense), net” in the consolidated statements of operations. 2024 Notes In August 2023, the Company fully redeemed its 2024 Notes through open-market transactions and recorded a loss on extinguishment of $ 1 million to “other income (expense), net” in the consolidated statements of operations. 12 Table of Contents Rayonier Advanced Materials Inc. Notes to Consolidated Financial Statements (Unaudited) (in thousands unless otherwise stated) Covenants and Debt Maturity As of September 28, 2024, the Company was in compliance with all covenants under its debt agreements. As of September 28, 2024, the Company’s debt principal payments, excluding finance lease obligations, were due as follows: Remainder of 2024 (a) $ 11,577 2025 (b) 19,437 2026 (c) 472,391 2027 (d) 247,048 2028 11,422 Thereafter 26,198 Total debt principal payments $ 788,073 (a) Includes $ 3 million of the $ 246 million outstanding principal balance of the 2027 Term Loan. The 2027 Term Loan and 2026 Notes will be fully redeemed with the proceeds of the 2029 Term Loan in the fourth quarter of 2024. The 2029 Term Loan will mature in October 2029. See Note 1—Basis of Presentation for further information regarding the 2029 Term Loan issuance and the refinancing of the 2026 Notes and 2027 Term Loan. (b) Includes $ 5 million principal of the 2027 Term Loan. (c) Includes the $ 453 million outstanding principal balance of the 2026 Notes and $ 5 million principal of the 2027 Term Loan. (d) Includes the remaining $ 234 million principal balance of the 2027 Term Loan. 9. Environmental Liabilities The Company’s environmental liabilities balance changed as follows during the nine months ended September 28, 2024: Balance at December 31, 2023 $ 170,291 Increase in liabilities 3,670 Payments ( 3,606 ) Foreign currency adjustments ( 35 ) Balance at September 28, 2024 170,320 Less: current portion ( 9,832 ) Non-current environmental liabilities $ 160,488 In addition to these estimated liabilities, the Company is subject to the risk of reasonably possible additional liabilities in excess of the established liabilities due to potential changes in circumstances and future events, including, without limitation, changes to current laws and regulations; changes in governmental agency personnel, direction, philosophy or enforcement policies; developments in remediation technologies; increases in the cost of remediation, operation, maintenance and monitoring of its environmental liability sites; changes in the volume, nature or extent of contamination to be remediated or monitoring to be undertaken; the outcome of negotiations with governmental agencies or non-governmental parties; and changes in accounting rules or interpretations. Based on information available as of September 28, 2024, the Company estimates this exposure could range up to approximately $ 87 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. This estimate excludes liabilities that would otherwise be considered reasonably possible but for the fact that they are not currently estimable, primarily due to the factors discussed above. Subject to the previous paragraph, the Company believes its estimates of liabilities are sufficient for probable costs expected to be incurred over the next 20 years with respect to its environmental liabilities. However, no assurance is 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. 13 Table of Contents Rayonier Advanced Materials Inc. Notes to Consolidated Financial Statements (Unaudited) (in thousands unless otherwise stated) 10. Fair Value Measurements Assets Measured at Fair Value on a Nonrecurring Basis Asset Impairment In the third quarter of 2024, the Company recorded a $ 25 million non-cash impairment related to the Temiscaming High Purity Cellulose plant asset group. The fair value of the Temiscaming High Purity Cellulose plant assets was determined using discounted cash flows under the income approach from the perspective of a market participant assuming the highest and best use of the asset group. Discounted cash flows were estimated using key assumptions regarding production levels, price levels, profit margins, capital expenditures and discount rate, which are Level 3 measurements. See Note 2—Indefinite Suspension of Operations for further information on this impairment. Financial Instruments The carrying amounts of the Company’s cash, receivables and payables approximate fair value due to the short-term nature of those instruments. The carrying amount of borrowings outstanding under the ABL Credit Facility, 2027 Term Loan and short-term factoring facility approximate fair value due to their variable interest rates. The fair value of the Company’s fixed rate debt is estimated using quoted market prices for debt with similar terms and maturities, which are Level 2 inputs, and was as follows: September 28, 2024 December 31, 2023 Carrying amount of fixed rate debt (a) $ 535,664 $ 536,393 Fair value of fixed rate debt 531,853 497,563 (a) Excludes finance lease obligations. 14 Table of Contents Rayonier Advanced Materials Inc. Notes to Consolidated Financial Statements (Unaudited) (in thousands unless otherwise stated) 11. Accumulated Other Comprehensive Loss Nine Months Ended September 28, 2024 September 30, 2023 Unrecognized components of employee benefit plans, net of tax Balance, beginning of period $ ( 33,537 ) $ ( 43,694 ) Other comprehensive income (loss) before reclassifications 3,371 ( 3,034 ) Income tax on other comprehensive gain (loss) ( 901 ) 804 Reclassifications to earnings (a) Amortization of gain ( 587 ) ( 531 ) Amortization of prior service cost 540 259 Income tax on reclassifications 11 70 Net comprehensive income (loss) on employee benefit plans, net of tax 2,434 ( 2,432 ) Balance, end of period ( 31,103 ) ( 46,126 ) Unrealized loss on derivative instruments, net of tax Balance, beginning of period ( 373 ) ( 567 ) Reclassifications to earnings - foreign currency exchange contracts (b) 135 173 Income tax on reclassifications ( 18 ) ( 23 ) Net comprehensive gain on derivative instruments, net of tax 117 150 Balance, end of period ( 256 ) ( 417 ) Foreign currency translation Balance, beginning of period ( 12,007 ) ( 19,537 ) Foreign currency translation adjustment, net of tax (c) 2,064 ( 1,109 ) Balance, end of period ( 9,943 ) ( 20,646 ) Accumulated other comprehensive loss, end of period $ ( 41,302 ) $ ( 67,189 ) (a) The AOCI components for defined benefit pension and post-retirement plans are included in the computation of net periodic benefit cost. See Note 14—Employee Benefit Plans for further information. (b) Reclassifications of foreign currency exchange contracts are recorded in “cost of sales,” “other operating income (expense), net” or “other income (expense), net,” as appropriate. (c) Foreign currency translation is net of tax effects of $ 0 for all periods presented, as the French operations are taxed on the foreign functional currency, not the translated reporting currency. 15 Table of Contents Rayonier Advanced Materials Inc. Notes to Consolidated Financial Statements (Unaudited) (in thousands unless otherwise stated) 12. Earnings Per Common Share 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 Nine Months Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Loss from continuing operations $ ( 32,598 ) $ ( 26,540 ) $ ( 25,995 ) $ ( 40,555 ) Income from discontinued operations — 1,440 3,217 312 Net loss available for common stockholders $ ( 32,598 ) $ ( 25,100 ) $ ( 22,778 ) $ ( 40,243 ) Weighted average shares used for determining basic earnings per share of common stock 65,892,750 65,343,418 65,686,397 65,024,654 Dilutive effect of: Stock options — — — — Performance and restricted stock — — — — Weighted average shares used for determining diluted earnings per share of common stock 65,892,750 65,343,418 65,686,397 65,024,654 Anti-dilutive instruments excluded from the computation of diluted earnings per share included (not in thousands): Three Months Ended Nine Months Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Stock options — 46,798 — 46,798 Performance and restricted stock 3,419,691 3,302,332 3,419,691 3,302,332 Total anti-dilutive instruments 3,419,691 3,349,130 3,419,691 3,349,130 13. Incentive Stock Plans Stock-based compensation expense was as follows: Three Months Ended Nine Months Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Stock-based compensation expense $ 3,090 $ 2,116 $ 7,500 $ 5,286 (a) Included equity award expense of $ 2 million during each of the quarters ended September 28, 2024 and September 30, 2023, and $ 5 million during each of the nine months ended September 28, 2024 and September 30, 2023. The Company made new grants of restricted stock units, performance-based stock units and performance-based cash awards during the first and second quarters of 2024. The 2024 restricted stock unit awards cliff vest after three years , except for director awards, which vest after one year . The 2024 performance-based awards cliff vest after three years and are based equally on TSR relative to peers and three-year cumulative adjusted EBITDA. Participants can earn between 0 percent and 200 percent of the target award for each of the TSR and adjusted EBITDA metrics. Performance below threshold for either metric would result in zero payout for that metric. The performance-based cash award is paid in cash and is classified as a liability and remeasured to fair value at the end of each reporting period until settlement. In March 2024, the performance-based awards granted in 2021 vested without meeting the performance thresholds, resulting in no stock units or cash being awarded. 16 Table of Contents Rayonier Advanced Materials Inc. Notes to Consolidated Financial Statements (Unaudited) (in thousands unless otherwise stated) The following table summarizes the 2024 activity of the Company’s incentive stock awards: Stock Options Restricted Stock Units Performance-Based Stock Units Options Weighted Average Exercise Price Awards Weighted Average Grant Date Fair Value Awards Weighted Average Grant Date Fair Value Outstanding at December 31, 2023 46,798 $ 37.77 1,886,694 $ 6.01 1,370,601 $ 7.83 Granted — — 633,603 4.11 582,442 4.52 Forfeited — — ( 94,134 ) 4.97 ( 329,411 ) 10.87 Exercised or settled — — ( 625,104 ) 6.81 ( 5,000 ) 2.41 Expired or cancelled ( 46,798 ) 29.52 — — — — Outstanding at September 28, 2024 — $ — 1,801,059 $ 5.12 1,618,632 $ 6.06 14. Employee Benefit Plans Defined Benefit Plans The Company has defined benefit pension and other long-term and postretirement benefit plans covering certain union and non-union employees, primarily in the U.S. and Canada. The defined benefit pension plans are closed to new participants. The liabilities for these plans are calculated using actuarial estimates and management assumptions. These estimates are based on historical information and certain assumptions about future events. During the nine months ended September 28, 2024, the Company recorded a $ 1 million loss on pension curtailment charges associated with early retirements driven by the indefinite suspension of operations at the Temiscaming High Purity Cellulose plant. The loss on curtailment was recognized in “indefinite suspension charges” in the Company’s consolidated statements of operations. Additionally, the Company decreased its pension liability by $ 3 million. See Note 2—Indefinite Suspension of Operations for further information. 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 wound-up Canadian pension plans. The settlement was recognized in “components of pension and OPEB, excluding service costs” in the Company’s consolidated statements of operations. The following tables present the components of net periodic benefit costs of these plans: Pension Postretirement Three Months Ended Three Months Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Service cost $ 1,440 $ 1,223 $ 138 $ 293 Interest cost 6,972 7,204 247 352 Expected return on plan assets ( 7,987 ) ( 7,967 ) — — Amortization of prior service cost (credit) 205 111 ( 24 ) ( 24 ) Amortization of gain ( 11 ) ( 123 ) ( 185 ) ( 54 ) Net periodic benefit cost $ 619 $ 448 $ 176 $ 567 17 Table of Contents Rayonier Advanced Materials Inc. Notes to Consolidated Financial Statements (Unaudited) (in thousands unless otherwise stated) Pension Postretirement Nine Months Ended Nine Months Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Service cost $ 4,504 $ 3,664 $ 414 $ 879 Interest cost 20,784 21,586 742 1,057 Expected return on plan assets ( 24,115 ) ( 23,854 ) — — Amortization of prior service cost (credit) 613 332 ( 73 ) ( 73 ) Amortization of gain ( 33 ) ( 369 ) ( 554 ) ( 162 ) Pension settlement loss — 2,317 — — Curtailment 736 — — — Net periodic benefit cost $ 2,489 $ 3,676 $ 529 $ 1,701 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 (credit) and amortization of (gain) loss are included in “components of pension and OPEB, excluding service costs” in the consolidated statements of operations. 15. Income Taxes Effective Tax Rate The Company’s effective tax rates were as follows: Three Months Ended Nine Months Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 Loss from continuing operations before income tax $ ( 36,669 ) $ ( 31,673 ) $ ( 30,484 ) $ ( 50,191 ) Effective tax rate 12.5 % 17.0 % 19.4 % 22.4 % The effective tax rates for the quarter and nine months ended September 28, 2024 differed from the federal statutory rate of 21 percent primarily due to changes in the valuation allowance on disallowed interest deductions, the release of certain tax reserves, different statutory tax rates in foreign jurisdictions, U.S. tax credits, excess deficit on vested stock compensation and return-to-accrual adjustments. The effective tax rates for the quarter and nine months ended September 30, 2023 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, 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. Deferred Taxes As of September 28, 2024 and December 31, 2023, the Company’s net DTA included $ 14 million and $ 15 million, respectively, of disallowed U.S. interest deductions that the Company does not believe will be realized. The asset decreased $ 1 million as a result of a tax expense recognized in the current year. In strict compliance with the American Institute of Certified Public Accountants’ Technical Questions and Answers 3300.01-02, which asserts that certain material evidence regarding the realizability of disallowed U.S. interest deductions should be ignored when assessing the need for a valuation allowance, the Company has not recognized a valuation allowance on this portion of the net DTA generated from disallowed interest. 18 Table of Contents Rayonier Advanced Materials Inc. Notes to Consolidated Financial Statements (Unaudited) (in thousands unless otherwise stated) 16. Segments The Company operates in the following business segments: High Purity Cellulose, Paperboard and High-Yield Pulp. Corporate consists primarily of senior management, accounting, information systems, human resources, treasury, tax and legal administrative functions that provide support services to the operating business units. The Company allocates a portion of the cost of maintaining these support functions to its operating units. The Company evaluates the performance of its segments based on operating income (loss). Intersegment sales consist primarily of High-Yield Pulp sales to Paperboard. Intersegment sales prices are at rates that approximate market for the respective operating area. Net sales, disaggregated by product line, was comprised of the following: Three Months Ended Nine Months Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 High Purity Cellulose Cellulose Specialties $ 220,820 $ 164,654 $ 638,382 $ 570,584 Commodity Products 78,129 98,834 253,683 321,548 Other sales (a) 25,865 28,528 72,109 73,447 Total High Purity Cellulose 324,814 292,016 964,174 965,579 Paperboard 54,809 57,212 168,068 164,300 High-Yield Pulp 27,822 25,393 94,981 111,397 Eliminations ( 6,342 ) ( 5,951 ) ( 19,419 ) ( 20,432 ) Net sales $ 401,103 $ 368,670 $ 1,207,804 $ 1,220,844 (a) Includes sales of bioelectricity, lignosulfonates and other by-products to third parties. Operating income (loss) by segment was comprised of the following: Three Months Ended Nine Months Ended September 28, 2024 September 30, 2023 September 28, 2024 September 30, 2023 High Purity Cellulose $ ( 5,688 ) $ ( 5,547 ) $ 45,215 $ 6,965 Paperboard 6,890 13,088 26,999 28,680 High-Yield Pulp 294 ( 6,062 ) 436 2,030 Corporate ( 18,296 ) ( 15,919 ) ( 44,178 ) ( 41,977 ) Operating income (loss) $ ( 16,800 ) $ ( 14,440 ) $ 28,472 $ ( 4,302 ) Identifiable assets by segment were as follows: September 28, 2024 December 31, 2023 High Purity Cellulose $ 1,501,493 $ 1,510,076 Paperboard 101,549 105,804 High-Yield Pulp 48,295 43,811 Corporate (a) 508,023 523,009 Total assets $ 2,159,360 $ 2,182,700 (a) Includes ERP and certain lease assets shared across segments. 19 Table of Contents Rayonier Advanced Materials Inc. Notes to Consolidated Financial Statements (Unaudited) (in thousands unless otherwise stated) 17. Commitments and Contingencies Commitments The Company had no material changes to the purchase obligations presented in its 2023 Form 10-K during the nine months ended September 28, 2024. The Company’s purchase obligations primarily consist of commitments for the purchase of natural gas, electricity and wood chips. The Company remains subject to purchase obligations under the 20-year wood chip and residual fiber supply agreement with GreenFirst, under which total required purchase volumes of wood chips and residual fiber are dependent on sawmill production. In connection with the indefinite suspension of operations at the Temiscaming High Purity Cellulose plant, GreenFirst and the Company have agreed that the Company will purchase the required volumes at market value and sell them to third parties at the same amount for an expected neutral impact. The Company leases certain buildings, machinery and equipment under various operating and finance leases. See Note 6—Leases for further information. Litigation and Contingencies Duties on Canadian Softwood Lumber Sold to the U.S. The Company previously operated six softwood lumber mills in Ontario and Quebec, Canada, and exported softwood lumber into the U.S. from Canada . In connection with these exports, the Company paid approximately $ 112 million of softwood lumber duties between 2017 and August 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 in 2021, the Company retained all refund rights and obligations to softwood duties generated or incurred through the closing date of the sale. As of December 31, 2023 , the Company had a $ 40 million long-term receivable associated with USDOC determinations of the revised duty rates for 2017 through 2021. In June 2024, the Company executed on the sale of these refund rights (inclusive of the receivable), including all accrued interest, for $ 39 million, with the opportunity for additional sale proceeds in the future contingent upon the timing and terms of the ultimate outcome of the trade dispute between the USDOC and Canada. Other In addition to the above, the Company is engaged in various legal and regulatory actions and proceedings and has been named as a defendant in various lawsuits and claims arising in the ordinary course of business. While the Company has procured reasonable and customary insurance covering risks normally occurring in connection with its business, the Company has, in certain cases, retained some risk through the operation of self-insurance, primarily in the areas of workers’ compensation, property insurance, business interruption and general liability. These other lawsuits and claims, either individually or in the aggregate, are not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows. Guarantees and Other The Company provides financial guarantees as required by creditors, insurance programs and various governmental agencies. As of September 28, 2024, the Company had net exposure of $ 37 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; the Company would only be liable upon its default on the related payment obligations. The standby letters of credit have various expiration dates and are expected to be renewed as required. The Company had surety bonds of $ 89 million as of September 28, 2024, 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. LTF is a venture in which the Company owns 45 percent and its partner, Borregaard ASA, owns 55 percent. 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 $ 28 million at September 28, 2024. 20 Table of Contents Rayonier Advanced Materials Inc. Notes to Consolidated Financial Statements (Unaudited) (in thousands unless otherwise stated) 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. In April 2024, collective bargaining agreements covering approximately 225 unionized employees at the Fernandina plant expired. The employees continued to work under the terms of the expired contracts until negotiations concluded in the third quarter of 2024 and final agreements with the union were reached. As of September 28, 2024, all of the Company’s collective bargaining agreements covering its unionized employees were current. 21 Table of Contents