UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September ~~25, 2021~~24, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


			For the transition period from to

Commission File Number 001-36285

RAYONIER ADVANCED MATERIALS INC.

Incorporated in the State of Delaware

I.R.S. Employer Identification No. 46-4559529

1301 RIVERPLACE BOULEVARD, SUITE 2300

JACKSONVILLE, FL 32207

(Principal Executive Office)

Telephone Number: (904) 357-4600

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	RYAM	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

The registrant had ~~63,737,353~~63,971,166 shares of common stock, $.01 par value per share, outstanding as of ~~November 1, 2021.~~October 31, 2022.

Table of Contents


			Page
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Operations for the Three and Nine Months Ended September 2 4 , 2022 and S eptember 25, 2021			1
Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 24, 2022 and September 25, 2021			2
Consolidated Balance Sheets as of September 2 4 , 2022 and December 31, 2021			3
Consolidated Statements of Cash Flows for the Nine Months Ended September 2 4 , 2022 and S eptember 25, 2021			4
Notes to Consolidated Financial Statements			5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			20
Item 3. Quantitative and Qualitative Disclosures about Market Risk			34
Item 4. Controls and Procedures			35

Part II. Other Information
Item 1. Legal Proceedings			36
Item 1A. Risk Factors			36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			36
Item 6. Exhibits			37

Signature			38

Table of Contents


~~Part I.~~			~~Financial Information~~

Part I. Financial Information


~~Item 1.~~			Item 1. Financial Statements

Rayonier Advanced Materials Inc.

Consolidated Statements of ~~Income (Loss)~~Operations

(Unaudited)

(~~Dollars~~ in thousands, except per share amounts)


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020			September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Net Sales	Net Sales	$	374,014	$	323,483	$	1,033,712	$	972,128	Net Sales	$	466,346	$	374,014	$	1,217,282	$	1,033,712
Cost of Sales	Cost of Sales	(354,678)		(301,913)		(971,672)		(919,741)		Cost of Sales	(419,804)		(354,678)		(1,138,118)		(971,672)
Gross Margin	Gross Margin	19,336		21,570		62,040		52,387		Gross Margin	46,542		19,336		79,164		62,040

Selling, general and administrative expenses	Selling, general and administrative expenses	(17,473)		(18,322)		(51,548)		(57,389)		Selling, general and administrative expenses	(19,905)		(17,473)		(68,041)		(51,548)

Foreign exchange gains (losses)		3,315		(1,079)		582		79
Foreign exchange gains										Foreign exchange gains	3,025		3,315		4,480		582
Other operating expense, net	Other operating expense, net	(2,352)		(3,279)		(7,345)		(8,514)		Other operating expense, net	(1,133)		(2,352)		(5,764)		(7,345)
Operating Income (Loss)		2,826		(1,110)		3,729		(13,437)
Operating Income										Operating Income	28,529		2,826		9,839		3,729
Interest expense	Interest expense	(17,185)		(13,739)		(49,003)		(40,554)		Interest expense	(16,433)		(17,185)		(49,318)		(49,003)
Interest income and other, net	Interest income and other, net	2,113		(2,700)		379		(3,263)		Interest income and other, net	4,071		2,113		6,241		379
Other components of pension and OPEB, excluding service costs	Other components of pension and OPEB, excluding service costs	803		1,900		1,545		1,293		Other components of pension and OPEB, excluding service costs	1,009		803		1,910		1,545

Unrealized loss on GreenFirst equity securities		(7,955)		—		(7,955)		—
Gain (loss) on GreenFirst equity securities										Gain (loss) on GreenFirst equity securities	—		(7,955)		5,197		(7,955)
Gain on debt extinguishment	Gain on debt extinguishment	2,326		—		2,326		—		Gain on debt extinguishment	46		2,326		519		2,326
Loss from Continuing Operations Before Income Taxes		(17,072)		(15,649)		(48,979)		(55,961)
Income tax benefit (Note 16)		4,101		28,270		28,665		47,090
Income (Loss) from Continuing Operations Before Income Taxes										Income (Loss) from Continuing Operations Before Income Taxes	17,222		(17,072)		(25,612)		(48,979)
Income tax (expense) benefit (Note 16)										Income tax (expense) benefit (Note 16)	1,824		4,101		(3,230)		28,665
Equity in loss of equity method investment	Equity in loss of equity method investment	(423)		—		(994)		—		Equity in loss of equity method investment	(691)		(423)		(2,127)		(994)
Income (Loss) from Continuing Operations	Income (Loss) from Continuing Operations	(13,394)		12,621		(21,308)		(8,871)		Income (Loss) from Continuing Operations	18,355		(13,394)		(30,969)		(21,308)
Income from discontinued operations, net of taxes (Note 2)	Income from discontinued operations, net of taxes (Note 2)	8,636		16,239		111,751		741		Income from discontinued operations, net of taxes (Note 2)	11,252		8,636		12,458		111,751
Net Income (Loss)	Net Income (Loss)	$	(4,758)	$	28,860	$	90,443	$	(8,130)	Net Income (Loss)	$	29,607	$	(4,758)	$	(18,511)	$	90,443

Basic Earnings (Loss) Per Common Share (Note 13)
Basic Earnings Per Common Share (Note 13)										Basic Earnings Per Common Share (Note 13)
Income (loss) from continuing operations	Income (loss) from continuing operations	$	(0.21)	$	0.20	$	(0.33)	$	(0.14)	Income (loss) from continuing operations	$	0.29	$	(0.21)	$	(0.48)	$	(0.33)
Income from discontinued operations	Income from discontinued operations	0.14		0.26		1.76		0.01		Income from discontinued operations	0.18		0.14		0.20		1.76
Net income (loss) per common share-basic	Net income (loss) per common share-basic	$	(0.07)	$	0.46	$	1.43	$	(0.13)	Net income (loss) per common share-basic	$	0.47	$	(0.07)	$	(0.28)	$	1.43
Diluted Earnings (Loss) Per Common Share (Note 13)

Diluted Earnings Per Common Share (Note 13)										Diluted Earnings Per Common Share (Note 13)
Income (loss) from continuing operations	Income (loss) from continuing operations	$	(0.21)	$	0.20	$	(0.33)	$	(0.14)	Income (loss) from continuing operations	$	0.28	$	(0.21)	$	(0.48)	$	(0.33)
Income from discontinued operations	Income from discontinued operations	0.14		0.25		1.76		0.01		Income from discontinued operations	0.17		0.14		0.20		1.76
Net income (loss) per common share-diluted	Net income (loss) per common share-diluted	$	(0.07)	$	0.45	$	1.43	$	(0.13)	Net income (loss) per common share-diluted	$	0.45	$	(0.07)	$	(0.28)	$	1.43

See Notes to Consolidated Financial Statements.

Table of Contents

Rayonier Advanced Materials Inc.

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(~~Dollars~~ in thousands)

Three Months Ended Nine Months Ended
September 25, 2021 September 26, 2020 September 25, 2021 September 26, 2020
Net Income (Loss) $ (4,758) $ 28,860 $ 90,443 $ (8,130)
Other Comprehensive Income (Loss), net of tax (Note 11):
Foreign currency translation adjustments (4,336) 10,572 (10,558) 9,989
Unrealized gain (loss) on derivative instruments 86 7,589 (2,767) (2,942)
Net gain from pension and postretirement plans 6,177 2,733 12,842 12,047
Total other comprehensive income (loss) 1,927 20,894 (483) 19,094
Comprehensive Income (Loss) $ (2,831) $ 49,754 $ 89,960 $ 10,964


	Three Months Ended				Nine Months Ended
	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Net Income (Loss)	$	29,607	$	(4,758)	$	(18,511)	$	90,443
Other Comprehensive Income (Loss), net of tax (Note 11):
Foreign currency translation adjustments	(14,697)		(4,336)		(30,561)		(10,558)
Unrealized gain (loss) on derivative instruments	67		86		224		(2,767)
Net gain from pension and postretirement plans	1,948		6,177		5,844		12,842
Total other comprehensive income (loss)	(12,682)		1,927		(24,493)		(483)
Comprehensive Income (Loss)	$	16,925	$	(2,831)	$	(43,004)	$	89,960

See Notes to Consolidated Financial Statements.

Table of Contents

Rayonier Advanced Materials Inc.

Consolidated Balance Sheets

(Unaudited)

(~~Dollars~~ in thousands, except ~~per~~ share amounts)


		September 25, 2021		December 31, 2020			September 24, 2022		December 31, 2021
Assets	Assets					Assets
Current Assets	Current Assets					Current Assets
Cash and cash equivalents	Cash and cash equivalents	$	279,156	$	93,653	Cash and cash equivalents	$	131,673	$	253,307
Accounts receivable, net (Note 3)	Accounts receivable, net (Note 3)	203,932		179,208		Accounts receivable, net (Note 3)	217,358		181,604
Inventory (Note 4)	Inventory (Note 4)	206,209		170,647		Inventory (Note 4)	269,526		230,691
Income tax receivable	Income tax receivable	28,921		58,657		Income tax receivable	1,051		21,411
Investment in GreenFirst equity securities (Note 2)		34,204		—
Investment in GreenFirst equity securities (Note 10)						Investment in GreenFirst equity securities (Note 10)	—		38,510
Prepaid and other current assets	Prepaid and other current assets	54,155		58,845		Prepaid and other current assets	68,652		50,597
Assets of discontinued operations-held for sale (Note 2)		—		72,562

Total current assets	Total current assets	806,577		633,572		Total current assets	688,260		776,120

Property, Plant and Equipment (net of accumulated depreciation of $1,637,866 at September 25, 2021 and $1,578,140 at December 31, 2020)		1,133,277		1,177,791
Property, Plant and Equipment (net of accumulated depreciation of $1,703,459 and $1,642,442 as of September 24, 2022 and December 31, 2021, respectively)						Property, Plant and Equipment (net of accumulated depreciation of $1,703,459 and $1,642,442 as of September 24, 2022 and December 31, 2021, respectively)	1,132,128		1,146,162
Deferred Tax Assets	Deferred Tax Assets	340,736		382,959		Deferred Tax Assets	327,807		335,119
Intangible Assets, net	Intangible Assets, net	33,184		38,441		Intangible Assets, net	26,175		31,432
Other Assets	Other Assets	160,763		156,399		Other Assets	162,051		156,191
Assets of discontinued operations-held for sale (Note 2)		—		140,703

Total Assets	Total Assets	$	2,474,537	$	2,529,865	Total Assets	$	2,336,421	$	2,445,024

Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity					Liabilities and Stockholders’ Equity
Current Liabilities	Current Liabilities					Current Liabilities
Accounts payable	Accounts payable	$	143,889	$	156,721	Accounts payable	$	154,140	$	169,456
Accrued and other current liabilities (Note 6)	Accrued and other current liabilities (Note 6)	138,118		109,715		Accrued and other current liabilities (Note 6)	153,566		136,124
Debt due within one year (Note 7)	Debt due within one year (Note 7)	22,482		17,100		Debt due within one year (Note 7)	21,554		37,680
Current environmental liabilities (Note 8)	Current environmental liabilities (Note 8)	8,685		8,684		Current environmental liabilities (Note 8)	11,273		11,303
Liabilities of discontinued operations-held for sale (Note 2)		—		780

Total current liabilities	Total current liabilities	313,174		293,000		Total current liabilities	340,533		354,563

Long-Term Debt (Note 7)	Long-Term Debt (Note 7)	924,040		1,066,837		Long-Term Debt (Note 7)	851,006		891,031
Long-Term Environmental Liabilities (Note 8)	Long-Term Environmental Liabilities (Note 8)	161,547		162,995		Long-Term Environmental Liabilities (Note 8)	159,027		159,919
Pension and Other Postretirement Benefits	Pension and Other Postretirement Benefits	239,733		251,391		Pension and Other Postretirement Benefits	159,149		170,317
Deferred Tax Liabilities	Deferred Tax Liabilities	21,803		24,462		Deferred Tax Liabilities	16,782		20,485
Other Long-Term Liabilities		28,996		24,279
Liabilities of Discontinued Operations-Held for Sale (Note 2)		—		11,814
Other Liabilities						Other Liabilities	30,201		34,366

Commitments and Contingencies (Note 18)	Commitments and Contingencies (Note 18)	0		0		Commitments and Contingencies (Note 18)

Stockholders’ Equity	Stockholders’ Equity					Stockholders’ Equity

Common stock, 140,000,000 shares authorized at $0.01 par value, 63,737,356 and 63,359,839 issued and outstanding, as of September 25, 2021 and December 31, 2020, respectively		637		633
Common stock: 140,000,000 shares authorized at $0.01 par value, 63,971,166 and 63,738,409 issued and outstanding as of September 24, 2022 and December 31, 2021, respectively						Common stock: 140,000,000 shares authorized at $0.01 par value, 63,971,166 and 63,738,409 issued and outstanding as of September 24, 2022 and December 31, 2021, respectively	639		637
Additional paid-in capital	Additional paid-in capital	405,354		405,161		Additional paid-in capital	417,216		408,834
Retained earnings	Retained earnings	513,371		422,928		Retained earnings	470,831		489,342
Accumulated other comprehensive income (loss) (Note 11)		(134,118)		(133,635)
Accumulated other comprehensive loss (Note 11)						Accumulated other comprehensive loss (Note 11)	(108,963)		(84,470)
Total Stockholders’ Equity	Total Stockholders’ Equity	785,244		695,087		Total Stockholders’ Equity	779,723		814,343
Total Liabilities and Stockholders’ Equity	Total Liabilities and Stockholders’ Equity	$	2,474,537	$	2,529,865	Total Liabilities and Stockholders’ Equity	$	2,336,421	$	2,445,024

See Notes to Consolidated Financial Statements.

Table of Contents

Rayonier Advanced Materials Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(~~Dollars~~ in thousands)


		Nine Months Ended					Nine Months Ended
		September 25, 2021		September 26, 2020			September 24, 2022		September 25, 2021
Operating Activities	Operating Activities					Operating Activities
Net income (loss)	Net income (loss)	$	90,443	$	(8,130)	Net income (loss)	$	(18,511)	$	90,443
Loss (income) from discontinued operations		(111,751)		(741)
Income from discontinued operations						Income from discontinued operations	(12,458)		(111,751)
Adjustments to reconcile income (loss) from continuing operations to cash provided by operating activities:	Adjustments to reconcile income (loss) from continuing operations to cash provided by operating activities:					Adjustments to reconcile income (loss) from continuing operations to cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	101,284		101,285		Depreciation and amortization	96,294		101,284
Stock-based incentive compensation expense	Stock-based incentive compensation expense	1,620		6,714		Stock-based incentive compensation expense	8,687		1,620
Deferred income tax expense (benefit)	Deferred income tax expense (benefit)	(29,569)		9,316		Deferred income tax expense (benefit)	372		(29,569)

Gain on debt extinguishment	Gain on debt extinguishment	(2,326)		—		Gain on debt extinguishment	(519)		(2,326)
Unrealized loss on GreenFirst equity securities		7,955		—
(Gain) loss on GreenFirst equity securities						(Gain) loss on GreenFirst equity securities	(5,197)		7,955
Net periodic benefit cost of pension and other postretirement plans	Net periodic benefit cost of pension and other postretirement plans	7,338		6,495		Net periodic benefit cost of pension and other postretirement plans	4,489		7,338

Unrealized loss (gain) on derivative instruments		(3,787)		3,049
Unrealized loss (gain) from foreign currency		(1,304)		(1,482)
Loss on disposal of property, plant and equipment						Loss on disposal of property, plant and equipment	2,917		801
Unrealized gain on derivative instruments						Unrealized gain on derivative instruments	—		(3,787)
Unrealized gain from foreign currency						Unrealized gain from foreign currency	(6,853)		(1,304)
Other	Other	6,615		5,102		Other	5,908		5,814
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Receivables	Receivables	(36,264)		16,113		Receivables	(41,599)		(36,264)
Inventories	Inventories	(33,560)		(5,958)		Inventories	(41,504)		(33,560)
Accounts payable	Accounts payable	(2,903)		(2,203)		Accounts payable	(2,393)		(2,903)
Accrued liabilities	Accrued liabilities	25,858		16,560		Accrued liabilities	23,620		25,858
All other operating activities		30,263		(82,075)
Other						Other	(338)		30,263
Contributions to pension and other postretirement plans	Contributions to pension and other postretirement plans	(5,243)		(7,433)		Contributions to pension and other postretirement plans	(5,467)		(5,243)

Cash Provided by Operating Activities-continuing operations		44,669		56,612
Cash Provided by Operating Activities-discontinued operations		162,230		6,463
Cash Provided by Operating Activities-Continuing Operations						Cash Provided by Operating Activities-Continuing Operations	7,448		44,669
Cash Provided by Operating Activities-Discontinued Operations						Cash Provided by Operating Activities-Discontinued Operations	—		162,230
Cash Provided by Operating Activities	Cash Provided by Operating Activities	206,899		63,075		Cash Provided by Operating Activities	7,448		206,899

Investing Activities	Investing Activities					Investing Activities

Capital expenditures, net	Capital expenditures, net	(61,029)		(35,416)		Capital expenditures, net	(114,159)		(61,029)

Investment in equity method investment	Investment in equity method investment	(4,142)		—		Investment in equity method investment	—		(4,142)

Cash Used for Investing Activities-continuing operations		(65,171)		(35,416)
Cash Provided by (Used for) Investing Activities-discontinued operations		182,690		(7,403)
Cash Provided by (Used for) Investing Activities		117,519		(42,819)
Cash Used in Investing Activities-Continuing Operations						Cash Used in Investing Activities-Continuing Operations	(114,159)		(65,171)
Cash Provided by Investing Activities-Discontinued Operations						Cash Provided by Investing Activities-Discontinued Operations	44,428		182,690
Cash Provided by (Used in) Investing Activities						Cash Provided by (Used in) Investing Activities	(69,731)		117,519

Financing Activities	Financing Activities					Financing Activities

Revolving credit facility and other borrowings		—		22,887
Repayments of revolving credit and other facilities		—		(17,000)
Other borrowings						Other borrowings	5,721		—

Repayment of long-term debt	Repayment of long-term debt	(131,171)		(4,209)		Repayment of long-term debt	(51,128)		(131,171)
Short-term financing, net	Short-term financing, net	(4,492)		—		Short-term financing, net	(4,990)		(4,492)

Common stock repurchased	Common stock repurchased	(1,422)		(456)		Common stock repurchased	(303)		(1,422)
Debt issue costs	Debt issue costs	(636)		(3,378)		Debt issue costs	—		(636)
Other						Other	(282)		—
Cash Used in Financing Activities						Cash Used in Financing Activities	(50,982)		(137,721)

Cash Used for Financing Activities		(137,721)		(2,156)

Cash and Cash Equivalents
Change in cash and cash equivalents	Change in cash and cash equivalents	186,697		18,100		Change in cash and cash equivalents	(113,265)		186,697
Net effect of foreign exchange on cash and cash equivalents	Net effect of foreign exchange on cash and cash equivalents	(1,194)		764		Net effect of foreign exchange on cash and cash equivalents	(8,369)		(1,194)
Balance, beginning of year		93,653		64,025
Balance, beginning of period						Balance, beginning of period	253,307		93,653
Balance, end of period	Balance, end of period	$	279,156	$	82,889	Balance, end of period	$	131,673	$	279,156

See Notes to Consolidated Financial Statements.

Table of Contents

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements

(Unaudited)

(~~Dollar amounts~~ in thousands unless otherwise stated)

1. Basis of Presentation and New Accounting Pronouncements

Basis of Presentation

The unaudited ~~consolidated financial statements~~Consolidated Financial Statements and notes thereto of Rayonier Advanced Materials Inc. (the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, these ~~consolidated financial statements~~Consolidated Financial Statements and notes reflect all adjustments (all of which are 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~~Consolidated Financial Statements and supplementary data included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, as filed with the SEC on March 1, ~~2021.~~2022 (the “2021 Form 10-K”).

~~On August 28, 2021,~~As a result of the ~~Company completed the previously announced~~ sale of its lumber and newsprint ~~facilities and certain related~~ assets ~~(the “Purchased Assets”) located~~ in ~~Ontario and Québec Canada~~August 2021 to GreenFirst Forest Products, Inc. (“GreenFirst”)~~. As a result of~~, the ~~sale,~~Company presents the ~~lumber and newsprint assets and~~results for those operations ~~have been presented~~ as discontinued ~~operations and the Company has reclassified certain prior year amounts to conform to this presentation.~~operations. Unless otherwise stated, information in these notes to ~~consolidated financial statements~~Consolidated Financial Statements relates to continuing operations. The Company presents businesses that represent components as discontinued operations when they meet the criteria for held for sale or are sold, and their disposal represents a strategic shift that has, or will have, a major effect on ~~our~~the Company’s operations and financial results. See Note 2 —Discontinued Operations for ~~additional~~further information.

~~Coronavirus Pandemic~~

During 2020, the Company’s businesses were significantly impacted by the coronavirus ("COVID-19") pandemic. While market demand and pricing for certain of the Company’s products began to recover towards the end of 2020 and have continued to improve throughout 2021, the Company's operations remain vulnerable to a reversal of these trends or other continuing negative effects caused by COVID-19.

In its operating facilities and work spaces, the Company continues to maintain protocols previously implemented to reduce the potential spread of COVID-19 and ensure the safety of its employees and continuity of operations.

~~New or Recently Adopted~~Recent Accounting ~~Pronouncements~~Developments

There have been no ~~new~~newly issued or recently adopted accounting pronouncements impacting the Company’s unaudited consolidated interim financial statements.

Subsequent Events

Events and transactions subsequent to the consolidated balance sheets date have been evaluated for potential recognition and disclosure through the date of issuance of these Consolidated Financial Statements. The following subsequent events warranting disclosure were identified:

OnIn October ~~7, 2021, pursuant to a notice previously provided to the trustee under the indenture governing its 7.625% Senior Secured Notes due 2026 (the “Secured Notes”),~~2022, the Company ~~redeemed $25~~repaid a Canadian dollar (“CAD”) fixed interest rate term loan in the amount of CAD $12 million ~~of the Secured Notes at a redemption price of 103 percent.~~(U.S. dollar (“USD”) $9 million).

~~Rayonier Advanced Materials Inc.~~

~~Notes to Consolidated Financial Statements - (Unaudited) (Continued)~~

2. Discontinued Operations

OnIn August ~~28,~~ 2021, the Company completed the ~~previously announced~~ sale of its lumber and newsprint facilities and certain related assets ~~(the “Purchased Assets”)~~ located in Ontario and Québec Canada, to GreenFirst for cash of $232 ~~million. At closing, the Company received $193~~ million, ~~in cash, approximately~~ 28.7 million shares of ~~GreenFirst’s~~GreenFirst common stock ~~with a deemed fair value of $42 million~~ and a credit note issued to the Company by GreenFirst in the amount of ~~CDN~~CAD $8 million (approximately USD $5 million after present value discount). The ~~credit note may be offset against amounts owed by~~Company sold the ~~Company to~~ GreenFirst common shares for $43 million in the ~~future for wood chip purchases, equally over~~second quarter of 2022. Prior to the ~~next 5 years. The~~sale, the GreenFirst common shares ~~will be held for a minimum of six months and~~were accounted for at fair value, with changes in fair value recorded in the consolidated ~~statement~~statements of ~~income.~~operations. See Note 10 — Fair Value Measurements for ~~additional~~further information. 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 over the next 18 months.

The cash consideration received at closing was preliminary and remains subject to final purchase price ~~adjustments to be completed within 90 days following~~and other sale-related adjustments. During the ~~close~~first quarter of ~~the transaction. Driven primarily by lower inventory balances,~~2022, the Company ~~currently estimates the cash portion of the purchase price will be reduced by $8 million, from $193 million to $185 million. However, concurrently~~trued up certain sale-related items with ~~purchase price adjustments, the Company and~~ GreenFirst ~~will settle other adjustments resulting from events related to the sale, expected to result in~~for a total net cash outflow byof $3 million, as expected and previously disclosed. No adjustments have been made in 2022 to the ~~Company of approximately $2 million to $3 million.~~

As of August 28, 2021, the carrying value of the Purchased Assets was $215 million. The Purchased Assets included 6 lumber facilities, a newsprint facility, inventory and certain real property, machinery, permits, leases, licenses, pension assets and liabilities and other related assets associated with the successful operations of these businesses. Other assets and liabilities, including accounts receivable, accounts payable, certain retained inventory and rights and obligations to softwood lumber duties, generated or incurred through the closing date, are excluded. Since 2017, the Company has paid a total of ~~$112 million~~ ~~in duties. In connection with the sale, the Company recorded a preliminary~~ gain on sale recorded during the year ended December 31, 2021. Pursuant to the terms of ~~$6 million, net of tax, inclusive of currently estimated~~the asset purchase ~~price adjustments. The preliminary net gain is included in~~agreement, GreenFirst and the ~~results of discontinued operations.~~Company continue efforts to finalize the closing inventory valuation adjustment.

In connection with the ~~transaction, the Company entered into a 20-year wood chip and residual fiber supply agreement with GreenFirst, securing supply for the Company’s operations at the Temiscaming plant. Additionally,~~sale, the parties entered into a Transition Services Agreement ~~("TSA"~~(“TSA”) whereby the Company ~~will~~would provide certain transitional services to GreenFirst, ~~for a period of time~~including information technology, accounting, treasury and other services, following the closing of the ~~transaction, not to exceed twelve months from such date.~~transaction. The ~~TSA includes support related to information technology, accounting, treasury, human resources~~transitional services have been completed and ~~payroll, tax, supply chain and procurement functions. Costs incurred by the Company associated with~~ the TSA ~~will be reimbursed by GreenFirst.~~

~~Income (loss) from discontinued operations is comprised~~was terminated during the second quarter of ~~the following:~~2022.

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

Three Months Ended Nine Months Ended
September 25, 2021 September 26, 2020 September 25, 2021 September 26, 2020
Net sales (a) $ 83,994 $ 100,440 $ 442,833 $ 258,356
Cost of sales (68,224) (72,040) (237,912) (230,098)
Gross margin 15,770 28,400 204,921 28,258
Selling, general and administrative expenses and other (7,571) (9,901) (26,465) (24,860)
Operating income (loss) 8,199 18,499 178,456 3,398
Interest expense (b) (1,973) (2,162) (7,290) (6,333)
Other non-operating income 254 711 967 1,969
Income (loss) from discontinued operations before income taxes 6,480 17,048 172,133 (966)
Income tax benefit (expense) (4,239) (793) (66,777) 952
Income (loss) from discontinued operations, net of taxes $ 2,241 $ 16,255 $ 105,356 $ (14)
Gain from sale of discontinued operations, pre-tax 9,217 — 9,217 956
Income tax expense on gain (2,822) (17) (2,822) (200)
Gain from sale of discontinued operations, net of tax (c) 6,395 (17) 6,395 756
Income from Discontinued Operations $ 8,636 $ 16,238 $ 111,751 $ 742
During the third quarter of 2022, the U.S. Department of Commerce (the “USDOC”) completed its third administrative review of duties applied to Canadian softwood lumber exports to the U.S. during 2020 and reduced rates applicable to the Company to a combined 8.6 percent. In connection with this development, the Company recorded a $16 million gain, pre-tax, in the results of discontinued operations within selling, general and administrative expenses and other, and increased the long-term receivable related to the USDOC administrative reviews to $38 million. See Note 18 — Commitments and Contingencies for further information relating to this dispute.

Income from discontinued operations is comprised of the following:


	Three Months Ended				Nine Months Ended
	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Net sales (a)	$	—	$	83,994	$	—	$	442,833
Cost of sales	—		(68,224)		155		(237,912)
Gross margin	—		15,770		155		204,921
Selling, general and administrative expenses and other	15,313		(7,571)		16,808		(26,465)
Operating income	15,313		8,199		16,963		178,456
Interest expense (b)	(4)		(1,973)		(13)		(7,290)
Other non-operating income	—		254		—		967
Income from discontinued operations before income taxes	15,309		6,480		16,950		172,133
Income tax expense	(4,057)		(4,239)		(4,492)		(66,777)
Income from discontinued operations, net of taxes	11,252		2,241		12,458		105,356
Gain on sale of discontinued operations, pre-tax	—		9,217		—		9,217
Income tax expense on gain	—		(2,822)		—		(2,822)
Gain on sale of discontinued operations, net of tax	—		6,395		—		6,395
Income from discontinued operations	$	11,252	$	8,636	$	12,458	$	111,751

——————————————

(a)

~~(a) Net of~~ There were no intercompany sales offor the three and nine months ended September 24, 2022 and $8 million and ~~$10~~$31 million for the three ~~months ended September 25, 2021~~ and ~~September 26, 2020, respectively, and $31 million and $33 million for the~~ nine months ended September 25, 2021, ~~and September 26, 2020,~~ respectively.

(b)

~~(b)~~ The Company ~~has~~ allocated interest expense to discontinued operations based on the total portion of debt not attributable to other operations repaid as a result of the transaction.

(c) Also included in income from discontinued operations for the three and nine months ended September 26, 2020 is income/ (expense) of $(17) thousand and $756 thousand, respectively, from working capital adjustments that arose following the closing of the November 2019 sale of the Company’s Matane, Quebec pulp mill.

Other discontinued operations information ~~is as follows:~~includes the following:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020			September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Depreciation and amortization	Depreciation and amortization	$	—	$	3,477	$	3,172	$	9,259	Depreciation and amortization	$	—	$	—	$	—	$	3,172
Capital expenditures	Capital expenditures	$	2,119	$	3,976	$	7,933	$	7,403	Capital expenditures	$	—	$	2,119	$	—	$	7,933

3. Accounts Receivable, Net

The ~~following table presents~~Company’s accounts receivables included the ~~major classes~~following:


	September 24, 2022		December 31, 2021
Accounts receivable, trade	$	180,492	$	131,371
Accounts receivable, other (a)	38,158		51,007

Allowance for expected credit losses	(1,292)		(774)
Accounts receivable, net	$	217,358	$	181,604

——————————————

(a)Consists primarily of ~~assets~~value added/consumption taxes, grants receivable and ~~liabilities of discontinued operations that are classified as held for sale:~~accrued billings due from government agencies.

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)


	~~September 25, 2021~~		~~December 31, 2020~~

~~Inventory~~	$	—	$	~~62,837~~
~~Prepaid and other current assets~~	—		~~9,725~~
~~Total current assets~~	—		~~72,562~~
~~Property, plant and equipment, net~~	—		~~97,151~~

~~Other assets~~	—		~~43,552~~
~~Total assets~~	$	—	$	~~213,265~~


~~Accrued and other current liabilities~~	$	—	$	~~780~~
~~Total current liabilities~~	—		~~780~~
~~Pension and Other Postretirement Benefits~~	—		~~9,316~~
~~Other long-term liabilities~~	—		~~2,498~~
~~Total liabilities~~	$	—	$	~~12,594~~

As of September 25, 2021, collective bargaining agreements currently covering less than 40 unionized employees in Canada working in the lumber and newsprint operations had expired. The unionized employees have continued to work under the terms of the expired contracts while negotiations continue with GreenFirst. The Company is no longer a party to these negotiations.

~~3. Accounts Receivable, Net~~

~~The Company’s accounts receivable included the following:~~

September 25, 2021 December 31, 2020
Accounts receivable, trade $ 163,022 $ 140,036
Accounts receivable, other (a) 41,646 39,659
Allowance for expected credit losses (736) (487)
Total accounts receivable, net $ 203,932 $ 179,208

~~(a) Accounts receivable, other consists primarily of value added/consumption taxes, grants receivable and accrued billings due from government agencies.~~

4. Inventory

The Company’s inventory included the following:

September 25, 2021 December 31, 2020
Finished goods $ 152,411 $ 119,549
Work-in-progress 4,885 2,242
Raw materials 43,672 43,697
Manufacturing and maintenance supplies 5,241 5,159
Total inventory $ 206,209 $ 170,647


	September 24, 2022		December 31, 2021
Finished goods	$	202,576	$	175,832
Work-in-progress	6,903		6,533
Raw materials	53,527		41,974
Manufacturing and maintenance supplies	6,520		6,352
Inventory	$	269,526	$	230,691

5. Leases

The Company’s operating and finance leases are primarily for corporate offices, warehouse space, rail cars and equipment. As of September ~~25, 2021,~~24, 2022, the Company’s leases ~~have~~had remaining lease terms of 1 year to ~~7.4~~14.1 years with standard renewal and

~~Rayonier Advanced Materials Inc.~~

~~Notes to Consolidated Financial Statements - (Unaudited) (Continued)~~

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 ~~Right~~right of ~~Use~~use (“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 material 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. The weighted average discount rate used in determining the operating lease ROU assets and liabilities as of September ~~25, 2021~~24, 2022 and December 31, ~~2020~~2021 was ~~7.9~~8.7 percent and ~~6.1~~7.6 percent, respectively. The weighted average discount rate used in determining the finance lease ROU assets and liabilities as of September ~~25, 2021~~24, 2022 and December 31, ~~2020~~2021 was 7.0 percent.

The Company’s operating and finance lease cost is as follows:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020			September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Operating Leases	Operating Leases									Operating Leases
Operating lease expense	Operating lease expense	$	1,416	$	1,419	$	4,254	$	4,411	Operating lease expense	$	1,973	$	1,416	$	5,821	$	4,254
Finance Leases	Finance Leases									Finance Leases
Amortization of ROU assets	Amortization of ROU assets	89		83		262		244		Amortization of ROU assets	95		89		281		262
Interest	Interest	40		46		125		142		Interest	34		40		106		125
Total	Total	$	1,545	$	1,548	$	4,641	$	4,797	Total	$	2,102	$	1,545	$	6,208	$	4,641

As of September ~~25, 2021,~~24, 2022, the weighted average remaining lease term ~~is 4.3~~was 5.7 years and ~~5.2~~4.1 years for operating leases and financing leases, respectively. As of December 31, ~~2020,~~2021, the weighted average remaining lease term ~~is 3.5~~was 5.3 years and ~~5.9~~4.9 years for operating leases and finance leases, respectively. Cash provided by operating activities includes approximately $5$2 million and $4$5 million from operating lease payments made during the nine months ended September ~~25, 2021~~24, 2022 and September ~~26, 2020,~~25, 2021, respectively. Finance lease cash flows were immaterial during the nine months ended September ~~25, 2021~~24, 2022 and September ~~26, 2020.~~25, 2021.

As of both September ~~25, 2021~~24, 2022 and December 31, ~~2020,~~2021, assets acquired under finance leases of $2 million ~~and $2 million, respectively,~~ are reflected in ~~Property, Plant~~“property, plant and ~~Equipment, net.~~equipment, net” in the consolidated balance sheets. The Company’s finance leases are included ~~as debt~~in “long-term debt” and ~~the~~their maturities ~~for the remainder of 2021 and the next four years and thereafter~~ are ~~included~~disclosed in Note 7 — Debt and Finance Leases.

The Company’s consolidated balance ~~sheet includes~~sheets include the following operating lease assets and liabilities:

Balance Sheet Classification September 25, 2021 December 31, 2020
Right-of-use assets Other assets $ 12,865 $ 15,847
Lease liabilities, current Accrued and other current liabilities $ 5,256 $ 4,886
Lease liabilities, non-current Other long-term liabilities $ 8,430 $ 11,974

~~As of September 25, 2021, operating lease maturities for the remainder of 2021 through 2025 and thereafter are as follows:~~

September 25, 2021
Remainder of 2021 $ 1,484
2022 5,875
2023 4,998
2024 1,481
2025 648
Thereafter 462
Total minimum lease payments $ 14,948
Less: imputed interest (1,262)
Present value of future minimum lease payments $ 13,686


	Balance Sheet Classification	September 24, 2022		December 31, 2021
ROU assets	Other assets	$	17,068	$	18,316
Lease liabilities, current	Accrued and other current liabilities	$	5,024	$	6,050
Lease liabilities, non-current	Other liabilities	$	12,423	$	12,551

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

Operating lease maturities as of September 24, 2022 were as follows:


Remainder of 2022	$	1,773
2023	5,880
2024	3,676
2025	2,784
2026	2,106
Thereafter	7,180
Total minimum lease payments	23,399
Less: imputed interest	(5,952)
Present value of future minimum lease payments	$	17,447

6. Accrued and Other Current Liabilities

The Company’s accrued and other current liabilities included the following:


		September 25, 2021		December 31, 2020			September 24, 2022		December 31, 2021
Accrued customer incentives and prepayments		$	27,660	$	29,387
Accrued customer incentives						Accrued customer incentives	$	29,546	$	26,726
Accrued payroll and benefits	Accrued payroll and benefits	22,354		21,500		Accrued payroll and benefits	18,533		13,363
Accrued interest	Accrued interest	14,934		3,230		Accrued interest	15,290		19,153
Accrued income taxes	Accrued income taxes	5,697		5,052		Accrued income taxes	7,639		9,210
Accrued stumpage		2,608		10,045
Accrued property and other taxes	Accrued property and other taxes	9,951		3,995		Accrued property and other taxes	9,341		4,074
Deferred revenue (a)	Deferred revenue (a)	20,463		721		Deferred revenue (a)	20,796		22,518

Other current liabilities	Other current liabilities	34,451		35,785		Other current liabilities	52,421		41,080
Total accrued and other current liabilities		$	138,118	$	109,715
Accrued and other current liabilities						Accrued and other current liabilities	$	153,566	$	136,124

——————————————

(a) ~~In January~~Includes CAD $25 million (approximately USD $20 million) associated with funds received in 2021 ~~the Company's Canadian subsidiaries applied~~ for the Canada Emergency Wage Subsidy (“CEWS”) ~~in the amount of CAD $25 million for periods between March 2020 and August 2020. As of September 25, 2021, the Company had received the full amount.~~. All CEWS claims are subject to mandatory audit. The Company will recognize amounts from these claims in income at the time that there is sufficient evidence that it will not be required to repay such amounts.

7. Debt and Finance Leases

The Company’s debt and finance leases included the following:


		September 25, 2021		December 31, 2020			September 24, 2022		December 31, 2021
ABL Credit Facility due 2025, $76 million available, bearing interest 0.25% LIBOR floor plus 2.50%, interest rate of 2.75% at September 25, 2021		$	—	$	—
ABL Credit Facility due 2025: $128 million available, bearing interest of 5.33% (3.08% LIBOR plus 2.25%) at September 24, 2022						ABL Credit Facility due 2025: $128 million available, bearing interest of 5.33% (3.08% LIBOR plus 2.25%) at September 24, 2022	$	—	$	—
Senior Secured Notes due 2026 at a fixed interest rate of 7.625%	Senior Secured Notes due 2026 at a fixed interest rate of 7.625%	500,000		500,000		Senior Secured Notes due 2026 at a fixed interest rate of 7.625%	475,000		475,000
Senior Notes due 2024 at a fixed interest rate of 5.5%	Senior Notes due 2024 at a fixed interest rate of 5.5%	369,185		495,647		Senior Notes due 2024 at a fixed interest rate of 5.5%	334,185		369,185
Canadian dollar, fixed interest rate term loans with rates ranging from 5.5% to 6.86% and maturity dates ranging from July 2022 through April 2028, secured by certain assets of the Temiscaming mill		68,332		73,791
Canadian dollar, fixed interest rate term loans with rates ranging from 5.50% to 6.86% and maturity dates ranging from October 2022 through April 2028, secured by certain assets of the Temiscaming mill						Canadian dollar, fixed interest rate term loans with rates ranging from 5.50% to 6.86% and maturity dates ranging from October 2022 through April 2028, secured by certain assets of the Temiscaming mill	47,218		65,451
Other loans (a)	Other loans (a)	15,574		18,193		Other loans (a)	19,048		18,280
Short-term factoring facility-France	Short-term factoring facility-France	597		5,089		Short-term factoring facility-France	2,127		7,118
Finance lease obligation	Finance lease obligation	2,228		2,489		Finance lease obligation	1,857		2,138
Total debt principal payments due	Total debt principal payments due	955,916		1,095,209		Total debt principal payments due	879,435		937,172
Less: Debt premium, original issue discount and issuance costs, net	Less: Debt premium, original issue discount and issuance costs, net	(9,394)		(11,272)		Less: Debt premium, original issue discount and issuance costs, net	(6,875)		(8,461)
Total debt	Total debt	946,522		1,083,937		Total debt	872,560		928,711
Less: Debt due within one year	Less: Debt due within one year	(22,482)		(17,100)		Less: Debt due within one year	(21,554)		(37,680)
Long-term debt	Long-term debt	$	924,040	$	1,066,837	Long-term debt	$	851,006	$	891,031
(a) Primarily loans for energy projects in France.

——————————————

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

108

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

During the third quarter of 2022, the Company repaid a Canadian dollar fixed interest rate term loan in the amount of CAD $12 million (USD $9 million).

During the second and third quarters of 2022, the Company repurchased ~~approximately $127~~$20 million and $15 million, respectively, of its ~~5.50% Senior Notes~~5.5% unsecured senior notes due 2024 (the “Unsecured Notes”) through open-market transactions and retired ~~such Unsecured Notes~~the notes for cash of approximately ~~$124~~$20 million ~~in cash. In connection with the repurchases, the Company wrote off $1~~and $15 million, ~~of deferred financing costs associated with the Unsecured Notes. The~~respectively. A net gain of $2less than $1 million ison the repurchases was recorded in ~~Gain~~to “gain on debt ~~extinguishment~~extinguishment” in the ~~Consolidated Statement~~consolidated statements of ~~Income.~~

~~As of September 25, 2021, debt and finance lease payments due~~operations during the ~~remainder of 2021,~~nine months ended September 24, 2022.

During the ~~next four years~~three and ~~thereafter are as follows:~~

Finance Lease Payments Debt Principal Payments
Remainder of 2021 $ 129 $ 4,703
2022 515 30,115
2023 515 10,232
2024 515 379,338
2025 515 10,195
Thereafter 472 519,105
Total principal payments $ 2,661 $ 953,688
Less: Imputed interest 433
Present value minimum finance lease payments $ 2,228

~~8. Environmental Liabilities~~

~~An analysis of liabilities for the~~ nine months ended September 25, 2021, isthe Company recorded a $2 million gain on extinguishment on the repurchase of $127 million of Unsecured Notes.

As of September 24, 2022, the Company’s debt principal payments were due as follows:


Remainder of 2022	$	14,515
2023	9,995
2024	344,890
2025	10,594
2026	485,028
Thereafter	12,556
Total debt principal payments, excluding finance lease obligation	$	877,578

8. Environmental Liabilities

The Company’s environmental liabilities balance changed as follows during the nine months ended September 24, 2022:



Balance at December 31, ~~2020~~2021	$	~~171,679~~171,222
Increase in liabilities	~~2,972~~2,803
Payments	~~(4,456)~~(3,071)
Foreign currency adjustments	37 (654)
Balance at September ~~25, 2021~~24, 2022	~~170,232~~170,300
Less: Current portion	~~(8,685)~~(11,273)
Long-term environmental liabilities	$	~~161,547~~159,027

In addition to the 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; changes in governmental agency personnel, direction, philosophy and/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 and non-governmental parties; and changes in accounting rules or interpretations. Based on information available as of September ~~25, 2021,~~24, 2022, the Company estimates this exposure could range up to approximately ~~$78~~$84 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. Further, this estimate excludes reasonably possible liabilities which are not currently estimable primarily due to the factors discussed above.

Subject to the previous paragraph, the Company believes established liabilities are sufficient for probable costs expected to be incurred over the next 20 years with respect to its environmental liabilities. However, no assurances are given they 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.

9. Derivative Instruments

~~Rayonier Advanced Materials Inc.~~

~~Notes to Consolidated Financial Statements - (Unaudited) (Continued)~~

The Company’s earnings and cash flows are subject to fluctuations due to changes in interest rates and foreign currency exchange rates. The Company ~~allows for the use of~~has used derivative financial instruments to manage interest rate and foreign currency exchange rate ~~exposure but~~exposure: it does not ~~allow~~use derivatives ~~to be used~~ for trading or speculative purposes.

~~All derivative~~

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

Derivative instruments are recognized on the consolidated balance sheets at their fair value and are either designated as a hedge of a forecasted transaction or undesignated. Changes in the fair value of a derivative designated as a hedge are recorded in other comprehensive income (loss) until earnings are affected by the hedged transaction and are then reported in current earnings. Changes in the fair value of undesignated derivative instruments and the ineffective portion of designated derivative instruments are reported in current earnings.

In December 2020, the Company terminated all outstanding derivative instruments, which had been previously designated as hedging instruments and had various maturity dates through 2028. Accumulated gains and losses associated with these instruments were deferred as a component of accumulated other comprehensive income (loss)~~, totaling a net after tax gain of $2 million as of December 31, 2020,~~ to be recognized in earnings as the underlying hedged transactions occur and affect earnings. During the three and nine months ended September 25, 2021, the Company recognized after-tax gains of $86 thousand and $2.8 million, respectively, associated with the deferred component in accumulated other comprehensive income (loss) related to these settlements. A $0.9 million net after-tax loss remains deferred within accumulated other comprehensive income (loss) as of September 25, 2021, which will be recognized in earnings as the underlying hedged transactions occur and affect earnings.

~~Interest Rate Risk~~

The Company’s current debt obligations are primarily fixed and therefore not materially exposed to variability in interest payments due to changes in interest rates. The Company previously entered into interest rate swap agreements to reduce the volatility of interest expense, achieve a desired proportion of fixed-rate versus floating-rate debt and to hedge the variability in cash flows attributable to interest rate risks caused by changes in the LIBOR benchmark.

The Company had designated the swaps as cash flow hedges and assesses their effectiveness using the hypothetical derivative method in conjunction with regression. Effective gains and losses deferred to AOCI are reclassified into earnings over the life of the associated hedge. Ineffective gains and losses are classified to earnings immediately. There was no hedge ineffectiveness during 2020.

Foreign Currency Exchange Rate Risk

Foreign currency fluctuations affect investments in foreign subsidiaries and foreign currency cash flows related to third party purchases, product shipments and foreign-denominated debt. The Company is also exposed to the translation of foreign currency earnings to the ~~U.S. dollar.~~USD. Management may use foreign currency forward contracts to selectively hedge its foreign currency cash flows exposure and manage risk associated with changes in currency exchange rates. The Company’s principal foreign currency exposure is to the ~~Canadian dollar,~~CAD, and to a lesser extent, the euro.

There were no derivatives designated as hedging instruments during the three and nine months ended September 24, 2022. The effects of derivatives designated as hedging instruments, the related changes in AOCI and the gains and losses in income ~~is as follows:~~

~~Rayonier Advanced Materials Inc.~~

~~Notes to Consolidated Financial Statements - (Unaudited) (Continued)~~

Three Months Ended September 25, 2021
Derivatives Designated as Hedging Instruments Gain (Loss) Recognized in OCI on Derivative Gain (Loss) Reclassified from AOCI into Income Location on Statement of Income
Foreign exchange forward contracts $ — $ (99) Interest income and other, net
Three Months Ended September 26, 2020
Gain (Loss) Recognized in OCI on Derivative Gain (Loss) Reclassified from AOCI into Income Location on Statement of Income
Interest rate swaps $ 273 $ (595) Interest expense
Foreign exchange forward contracts $ 2,176 $ 223 Other operating income (expense), net
Foreign exchange forward contracts $ 3,197 $ (3,197) Cost of sales
Foreign exchange forward contracts $ 1,992 $ 1,316 Interest income and other, net
Nine Months Ended September 25, 2021
Derivatives Designated as Hedging Instruments Gain (Loss) Recognized in OCI on Derivative Gain (Loss) Reclassified from AOCI into Income Location on Statement of Income
Foreign exchange forward contracts $ — $ 4,088 Cost of sales
Foreign exchange forward contracts $ — $ (301) Interest income and other, net
Nine Months Ended September 26, 2020
Derivatives Designated as Hedging Instruments Gain (Loss) Recognized in OCI on Derivative Gain (Loss) Reclassified from AOCI into Income Location on Statement of Income
Interest rate swaps $ (1,709) $ (1,431) Interest expense
Foreign exchange forward contracts $ (18,442) $ (771) Other operating income (expense), net
Foreign exchange forward contracts $ 6,666 $ (6,666) Cost of sales
Foreign exchange forward contracts $ (2,718) $ (3,281) Interest income and other, net

~~The effects of derivative instruments not designated as hedging instruments on~~for the ~~consolidated statement of income~~three and nine months ended September 25, 2021 were as follows:



			~~Three Months Ended~~				~~Nine Months Ended~~
~~Derivatives Not Designated as Hedging Instruments~~	~~Location of Gain (Loss) Recognized in Income on Derivative~~		~~September 25, 2021~~		~~September 26, 2020~~		~~September 25, 2021~~		~~September 26, 2020~~
~~Foreign exchange forward contracts~~	~~Other operating income (expense), net~~		$	—	$	—	$	—	$	~~(703)~~







	Three Months Ended September 25, 2021
Derivatives Designated as Hedging Instruments	Gain (Loss) Recognized in OCI		Gain (Loss) Reclassified from AOCI into Income		Location on Statement of Income


Foreign exchange forward contracts	$	—	$	(99)	Interest income and other, net









	Nine Months Ended September 25, 2021
Derivatives Designated as Hedging Instruments	Gain (Loss) Recognized in OCI		Gain (Loss) Reclassified from AOCI into Income		Location on Statement of Income


Foreign exchange forward contracts	$	—	$	4,088	Cost of sales
Foreign exchange forward contracts	$	—	$	(301)	Interest income and other, net

The ~~after-tax amounts of~~ unrealized ~~gains (losses)~~gain (loss) in AOCI related to hedge derivatives ~~are~~is presented below:

September 25, 2021 December 31, 2020
Foreign exchange cash flow hedges $ (934) $ 1,834

~~The portion of future reclassifications from AOCI into earnings will fluctuate as the underlying hedged transactions occur and affect earnings.~~


	September 24, 2022		December 31, 2021

Foreign exchange cash flow hedges, net of tax	$	(623)	$	(847)

1310

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

10. 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:


		September 25, 2021						December 31, 2020						September 24, 2022												December 31, 2021
		Carrying Amount		Fair Value				Carrying Amount		Fair Value				Carrying Amount				Fair Value (b)								Carrying Amount		Fair Value (b)
Assets:	Assets:			Level 1		Level 2				Level 1		Level 2			Assets:		Carrying Amount			Level 1			Level 2				Carrying Amount				Level 1				Level 2
Cash and cash equivalents	Cash and cash equivalents	$	279,156	$	279,156	$	—	$	93,653	$	93,653	$	—			Cash and cash equivalents

Cash																Cash		$	97,771		$	97,771		$	—					$	253,307			$	253,307			$	—
Money market and similar funds																Money market and similar funds		33,902			33,902			—				—				—				—

Investment in GreenFirst equity securities	Investment in GreenFirst equity securities	$	34,204	$	—	$	34,204	$	—	$	—	$	—			Investment in GreenFirst equity securities		—			—			—				38,510				—				38,510

Liabilities (a):
Liabilities: (a)																Liabilities: (a)

Fixed-rate long-term debt	Fixed-rate long-term debt	943,697		—		989,112		1,076,359		—		1,050,287				Fixed-rate long-term debt		$	868,576		$	—		$	823,481			$	919,455			$	—			$	964,308

——————————————

(a) Liabilities exclude finance lease obligation.

(b) The Company did not have Level 3 assets or liabilities at September 24, 2022 or December 31, 2021.

The Company uses the following methods and assumptions in estimating the fair value of its financial instruments:

Cash and cash equivalents— ~~The~~Cash and cash equivalents are all highly liquid investments purchased with an original or remaining maturity of three months or less at the date of purchase and the carrying amount is equal to fair market value.

~~Investment~~ The Company had $34 million of investments in ~~GreenFirst shares~~ —money market and similar funds as of September 24, 2022, measured using level 1 inputs. The ~~fair value~~Company did not invest in any such funds as of the shares of common stock received in connection with the sale of the lumber and newsprint assets to GreenFirst reflects a discount for lack of marketability (“DLOM”) given the restriction on sale by the Company for a minimum of six months following the close of the transaction. The primary inputs in the fair value estimate are expected term, dividend yield, volatility and risk-free rate. All inputs to the DLOM are obvservable. GreenFirst is based in Canada and currently does not pay a dividend. The following are the key inputs at each measurement date:

At closing of transaction At period end
Expected Term 0.5 years 0.425 years
Risk-free rate 0.20 % 0.15 %
Dividend yield — —
Volatility 92.04 % 88.79 %

DLOM 14.38 % 12.90 %

December 31, 2021.

Debt — The fair value of fixed rate debt is based upon quoted market prices for debt with similar terms and maturities. The variable rate debt adjusts with changes in the market rate, therefore the carrying value approximates fair value.

Investment in GreenFirst shares — The Company received 28.7 million shares of GreenFirst common stock in connection with the sale of the lumber and newsprint assets to GreenFirst, which the Company was required to hold for a minimum of six months following the close of the transaction. Accordingly, prior to February 28, 2022, the fair value of these shares reflected a discount for lack of marketability (“DLOM”) given the restriction on sale by the Company. The primary inputs in the fair value estimate during the minimum holding period were expected term, dividend yield, volatility and risk-free rate. All inputs to the DLOM were observable. In May 2022, the Company sold the 28.7 million common shares for $43 million.

The following were the key inputs at each measurement date:


	December 31, 2021		At closing of transaction
Expected Term	0.16 years		0.5 years
Risk-free rate	0.10	%	0.20	%
Dividend yield	—		—
Volatility	73.77	%	92.04	%
DLOM	6.77	%	14.38	%

1411

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

11. Accumulated Other Comprehensive Income (Loss)

The components of AOCI ~~are as follows:~~include:


		Nine Months Ended					Nine Months Ended
		September 25, 2021		September 26, 2020			September 24, 2022		September 25, 2021
Unrecognized components of employee benefit plans, net of tax:	Unrecognized components of employee benefit plans, net of tax:					Unrecognized components of employee benefit plans, net of tax:
Balance, beginning of year	Balance, beginning of year	$	(146,614)	$	(126,638)	Balance, beginning of year	$	(76,849)	$	(146,614)
Other comprehensive gain (loss) before reclassifications	Other comprehensive gain (loss) before reclassifications	(236)		4,781		Other comprehensive gain (loss) before reclassifications	—		(236)
Income tax on other comprehensive loss	Income tax on other comprehensive loss	61		(1,238)		Income tax on other comprehensive loss	—		61
Reclassifications to earnings: (a)	Reclassifications to earnings: (a)					Reclassifications to earnings: (a)
Pension settlement loss	Pension settlement loss	226		—		Pension settlement loss	—		226
Amortization of losses	Amortization of losses	12,258		10,143		Amortization of losses	7,466		12,258
Amortization of prior service costs	Amortization of prior service costs	413		422		Amortization of prior service costs	24		413

Income tax on reclassifications	Income tax on reclassifications	(2,853)		(2,061)		Income tax on reclassifications	(1,646)		(2,853)
Plans included in sale of assets to GreenFirst	Plans included in sale of assets to GreenFirst	4,012		—		Plans included in sale of assets to GreenFirst	—		4,012
Income Tax on plans included in sale of assets to GreenFirst	Income Tax on plans included in sale of assets to GreenFirst	(1,039)		—		Income Tax on plans included in sale of assets to GreenFirst	—		(1,039)

Net comprehensive gain on employee benefit plans, net of tax	Net comprehensive gain on employee benefit plans, net of tax	12,842		12,047		Net comprehensive gain on employee benefit plans, net of tax	5,844		12,842
Balance, end of period	Balance, end of period	(133,772)		(114,591)		Balance, end of period	(71,005)		(133,772)

Unrealized gain (loss) on derivative instruments, net of tax:	Unrealized gain (loss) on derivative instruments, net of tax:					Unrealized gain (loss) on derivative instruments, net of tax:
Balance, beginning of year	Balance, beginning of year	1,834		1,290		Balance, beginning of year	(847)		1,834
Other comprehensive gain (loss) before reclassifications		—		(16,203)
Income tax on other comprehensive income		—		3,778

Reclassifications to earnings: (b)	Reclassifications to earnings: (b)					Reclassifications to earnings: (b)
Interest rate contracts		—		1,431

Foreign exchange contracts	Foreign exchange contracts	(3,787)		10,718		Foreign exchange contracts	258		(3,787)
Income tax on reclassifications	Income tax on reclassifications	1,020		(2,666)		Income tax on reclassifications	(34)		1,020
Net comprehensive loss on derivative instruments, net of tax		(2,767)		(2,942)
Net comprehensive gain (loss) on derivative instruments, net of tax						Net comprehensive gain (loss) on derivative instruments, net of tax	224		(2,767)
Balance, end of period	Balance, end of period	(933)		(1,652)		Balance, end of period	(623)		(933)

Foreign currency translation adjustments:	Foreign currency translation adjustments:					Foreign currency translation adjustments:
Balance, beginning of year	Balance, beginning of year	11,145		(13,879)		Balance, beginning of year	(6,774)		11,145
Foreign currency translation adjustment, net of tax of $0 and $0	Foreign currency translation adjustment, net of tax of $0 and $0	(10,558)		9,989		Foreign currency translation adjustment, net of tax of $0 and $0	(30,561)		(10,558)
Balance, end of period	Balance, end of period	587		(3,890)		Balance, end of period	(37,335)		587

Accumulated other comprehensive income (loss), end of period		$	(134,118)	$	(120,133)
Accumulated other comprehensive loss, end of period						Accumulated other comprehensive loss, end of period	$	(108,963)	$	(134,118)

——————————————

(a)The AOCI components for defined benefit pension and post-retirement plans are included in the computation of net periodic benefit cost. See Note ~~15—~~15 — Employee Benefit Plans for ~~additional~~further information.

(b)~~Reclassifications of interest rate contracts are recorded in interest expense.~~ Reclassifications of foreign currency exchange contracts are recorded in cost of sales, other operating income or non-operating income as appropriate. See Note 9 —Derivative Instruments for ~~additional~~further information.

1512

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

12. ~~Stockholders'~~Stockholders’ Equity

An analysis of stockholders’ equity is shown below (share amounts not in thousands):


															Common Stock						Additional Paid in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
		Common Stock			Additional Paid in Capital	Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Shares					Par Value			Additional Paid in Capital		Retained Earnings
		Shares	Par Value
For the nine months ended September 25, 2021
Balance, January 1, 2021		63,359,839	$	633		$	405,161	$	422,928	$	(133,635)		$	695,087
Net income (loss)		—	—			—		90,443		—			90,443
Other comprehensive income (loss), net of tax		—	—			—		—		(483)			(483)
Nine Months Ended September 24, 2022																Nine Months Ended September 24, 2022
Balance at December 31, 2021																Balance at December 31, 2021	63,738,409	$	637					$	408,834		$	489,342		$	(84,470)	$	814,343
Net loss																Net loss	—	—						—			(18,511)			—		(18,511)
Other comprehensive loss, net of tax																Other comprehensive loss, net of tax	—	—						—			—			(24,493)		(24,493)
Issuance of common stock under incentive stock plans	Issuance of common stock under incentive stock plans	509,713	5			(5)		—		—			—			Issuance of common stock under incentive stock plans	294,936	3						(3)			—			—		—
Stock-based compensation	Stock-based compensation	—	—			1,619		—		—			1,619			Stock-based compensation	—	—						8,687			—			—		8,687
Repurchase of common shares (a)	Repurchase of common shares (a)	(132,196)	(1)			(1,421)		—		—			(1,422)			Repurchase of common shares (a)	(62,179)	(1)						(302)			—			—		(303)
Balance September 25, 2021		63,737,356	$	637		$	405,354	$	513,371	$	(134,118)		$	785,244
Balance at September 24, 2022																Balance at September 24, 2022	63,971,166	$	639					$	417,216		$	470,831		$	(108,963)	$	779,723

For the three months ended September 25, 2021
Balance, June 26, 2021		63,737,356	$	637		$	404,120	$	518,129	$	(136,045)		$	786,841
Net income (loss)		—	—			—		(4,758)		—			(4,758)
Three Months Ended September 24, 2022																Three Months Ended September 24, 2022
Balance at June 25, 2022																Balance at June 25, 2022	63,971,166	$	639					$	415,257		$	441,224		$	(96,281)	$	760,839
Net income																Net income	—	—						—			29,607			—		29,607
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	—	—			—		—		1,927			1,927			Other comprehensive income (loss), net of tax	—	—						—			—			(12,682)		(12,682)

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

Balance at September 24, 2022																Balance at September 24, 2022	63,971,166	$	639					$	417,216		$	470,831		$	(108,963)	$	779,723

Nine Months Ended September 25, 2021																Nine Months Ended September 25, 2021
Balance at December 31, 2020																Balance at December 31, 2020	63,359,839	$	633					$	405,161		$	422,928		$	(133,635)	$	695,087
Net income																Net income	—	—						—			90,443			—		90,443
Other comprehensive loss, net of tax																Other comprehensive loss, net of tax	—	—						—			—			(483)		(483)

Issuance of common stock under incentive stock plans	Issuance of common stock under incentive stock plans	—	—			—		—		—			—			Issuance of common stock under incentive stock plans	509,713	5						(5)			—			—		—
Stock-based compensation	Stock-based compensation	—	—			1,234		—		—			1,234			Stock-based compensation	—	—						1,619			—			—		1,619
Repurchase of common shares (a)	Repurchase of common shares (a)	—	—			—		—		—			—			Repurchase of common shares (a)	(132,196)	(1)						(1,421)			—			—		(1,422)

Balance, September 25, 2021		63,737,356	$	637		$	405,354	$	513,371	$	(134,118)		$	785,244
Balance at September 25, 2021																Balance at September 25, 2021	63,737,356	$	637					$	405,354		$	513,371		$	(134,118)	$	785,244

For the nine months ended September 26, 2020
Balance, January 1, 2020		63,136,129	$	632		$	399,020	$	422,373	$	(139,227)		$	682,798
Net income (loss)		—	—			—		(8,130)		—			(8,130)
Other comprehensive income (loss), net of tax		—	—			—		—		19,094			19,094

Issuance of common stock under incentive stock plans		390,448	4			(4)		—		—			—
Stock-based compensation		—	—			6,839		—		—			6,839
Repurchase of common shares (a)		(191,659)	(3)			(454)		—		—			(457)
Three Months Ended September 25, 2021																Three Months Ended September 25, 2021
Balance at June 26, 2021																Balance at June 26, 2021	63,737,356	$	637					$	404,120		$	518,129		$	(136,045)	$	786,841
Net loss																Net loss	—	—						—			(4,758)			—		(4,758)
Other comprehensive income, net of tax																Other comprehensive income, net of tax	—	—						—			—			1,927		1,927

Balance, September 26, 2020		63,334,918	$	633		$	405,401	$	414,243	$	(120,133)		$	700,144

For the three months ended September 26, 2020
Balance, June 27, 2020		63,347,326	$	633		$	403,737	$	385,383	$	(141,027)		$	648,726
Net income (loss)		—	—			—		28,860		—			28,860
Other comprehensive income (loss), net of tax		—	—			—		—		20,894			20,894

Issuance of common stock under incentive stock plans		(6,305)	—			—		—		—			—
Stock-based compensation	Stock-based compensation	—	—			1,682		—		—			1,682			Stock-based compensation	—	—						1,234			—			—		1,234
Repurchase of common shares (a)		(6,103)	—			(18)		—		—			(18)

Balance, September 26, 2020		63,334,918	$	633		$	405,401	$	414,243	$	(120,133)		$	700,144

Balance at September 25, 2021																Balance at September 25, 2021	63,737,356	$	637					$	405,354		$	513,371		$	(134,118)	$	785,244

——————————————

(a) Repurchased to satisfy the tax withholding requirements related to the issuance of stock under the Rayonier Advanced Materials Incentive Stock Plan.

~~Rayonier Advanced Materials Inc.~~

~~Notes to Consolidated Financial Statements - (Unaudited) (Continued)~~

Common Stock Buyback

OnIn January ~~29,~~ 2018, the Board of Directors authorized a share buyback program pursuant to which the Company may, from time to time, purchase shares of its common stock with an aggregate purchase price of up to $100 million. During the three and nine months ended September ~~25, 2021~~24, 2022 and September ~~26, 2020,~~25, 2021 the Company did not repurchase any common shares under this buyback program. As of September ~~25, 2021,~~24, 2022, there was approximately $60 million of share repurchase authorization remaining under the program. The Company does not expect to utilize any further authorization in the near future.

Shareholder Rights Plan

In March 2022, the Company adopted a shareholder rights plan (the “Rights Agreement”) whereby a significant penalty is imposed upon any person or group which acquires beneficial ownership of 10% or more of the Company’s common stock without the approval of the Board of Directors (the “Board”). Also on this date, the Board declared a dividend of one preferred share purchase right (a “Right”) for each outstanding share of common stock of the Company, par value $0.01 per share (“Company Common Stock”), which was paid to Company stockholders of record as of the close of business on March 31, 2022.

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

The Rights trade with, and are inseparable from, shares of the Company Common Stock. Each Right will allow its holder to purchase from the Company one one-hundredth of a share of Series A Junior Participating Preferred Stock for $35.00, once the Rights become exercisable. This portion of a Preferred Share will give the stockholder approximately the same dividend, voting and liquidation rights as would one share of Company Common Stock. The Rights expire on March 20, 2023 and are exercisable 10 days after the public announcement or public disclosure that a person or group has acquired a beneficial ownership of 10% or more of the outstanding Company Common Stock (including certain derivative positions), subject to certain exceptions.

13. Earnings Per ~~Share of~~ Common ~~Stock~~Share

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


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020			September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Income (loss) from continuing operations	Income (loss) from continuing operations	$	(13,394)	$	12,621	$	(21,308)	$	(8,871)	Income (loss) from continuing operations	$	18,355	$	(13,394)	$	(30,969)	$	(21,308)

Income from discontinued operations	Income from discontinued operations	8,636		16,239		111,751		741		Income from discontinued operations	11,252		8,636		12,458		111,751
Net income (loss) available for common stockholders	Net income (loss) available for common stockholders	$	(4,758)	$	28,860	$	90,443	$	(8,130)	Net income (loss) available for common stockholders	$	29,607	$	(4,758)	$	(18,511)	$	90,443

Shares used for determining basic earnings per share of common stock	Shares used for determining basic earnings per share of common stock	63,737,355		63,310,689		63,610,710		63,178,342		Shares used for determining basic earnings per share of common stock	63,971,166		63,737,355		63,882,920		63,610,710
Dilutive effect of:	Dilutive effect of:									Dilutive effect of:
Stock options	Stock options	—		—		—		—		Stock options	—		—		—		—
Performance and restricted stock	Performance and restricted stock	—		605,553		—		—		Performance and restricted stock	1,548,941		—		—		—

Shares used for determining diluted earnings per share of common stock	Shares used for determining diluted earnings per share of common stock	63,737,355		63,916,242		63,610,710		63,178,342		Shares used for determining diluted earnings per share of common stock	65,520,107		63,737,355		63,882,920		63,610,710

Basic per share amounts	Basic per share amounts									Basic per share amounts
Income (loss) from continuing operations	Income (loss) from continuing operations	$	(0.21)	$	0.20	$	(0.33)	$	(0.14)	Income (loss) from continuing operations	$	0.29	$	(0.21)	$	(0.48)	$	(0.33)
Income from discontinued operations	Income from discontinued operations	0.14		0.26		1.76		0.01		Income from discontinued operations	0.18		0.14		0.20		1.76
Net income (loss)	Net income (loss)	$	(0.07)	$	0.46	$	1.43	$	(0.13)	Net income (loss)	$	0.47	$	(0.07)	$	(0.28)	$	1.43

Diluted per share amounts	Diluted per share amounts									Diluted per share amounts
Income (loss) from continuing operations	Income (loss) from continuing operations	$	(0.21)	$	0.20	$	(0.33)	$	(0.14)	Income (loss) from continuing operations	$	0.28	$	(0.21)	$	(0.48)	$	(0.33)
Income from discontinued operations	Income from discontinued operations	0.14		0.25		1.76		0.01		Income from discontinued operations	0.17		0.14		0.20		1.76
Net income (loss)	Net income (loss)	$	(0.07)	$	0.45	$	1.43	$	(0.13)	Net income (loss)	$	0.45	$	(0.07)	$	(0.28)	$	1.43

Anti-dilutive instruments excluded from the computation of diluted earnings per share:

Three Months Ended Nine Months Ended
September 25, 2021 September 26, 2020 September 25, 2021 September 26, 2020
Stock options 115,973 152,281 115,973 152,281
Performance and restricted stock 2,390,153 564,425 2,390,153 2,676,002
Total anti-dilutive instruments 2,506,126 716,706 2,506,126 2,828,283


	Three Months Ended		Nine Months Ended
	September 24, 2022	September 25, 2021	September 24, 2022	September 25, 2021
Stock options	78,660	115,973	78,660	115,973
Performance and restricted stock	1,517,135	2,390,153	3,726,090	2,390,153
Total anti-dilutive instruments	1,595,795	2,506,126	3,804,750	2,506,126

14. Incentive Stock Plans

The Company’s total stock-based compensation expense for the three months ended September 24, 2022 and September 25, 2021 ~~and September 26, 2020~~ was $1$2 million and $2$1 million, respectively. Stock-based compensation expense for the nine months ended September 24, 2022 and September 25, 2021 ~~and September 26, 2020~~ was $2$9 million and $7$2 million, respectively.

1714

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

The Company made new grants of restricted stock units and performance-based stock units to certain employees during the first nine months of ~~2021.~~2022. The ~~2021~~2022 restricted stock unit awards cliff vest after three years. The ~~2021~~2022 performance-based stock unit awards measure total shareholder return ~~(“TSR”)~~ on an absolute basis and relative to peers. Participants can earn between 0 and ~~200~~250 percent of the target award. Performance below ~~the threshold for the absolute TSR~~established thresholds would result in a ~~0 payout for the TSR metric.~~zero payout. There is a performance-based stock award and cash unit stock award that will be measured using the same objectives but paid and accounted for separately. ~~As required by Accounting Standards Codification 718,~~ ~~Compensation-Stock Compensation,~~ ~~the~~The portion of the award to be settled in cash is classified as a liability and remeasured to fair value at the end of each reporting period until settlement.

In March ~~2021,~~2022, the performance-based share units granted in ~~2018 were settled at an average of 60 percent of~~2019 vested without meeting the ~~performance-based~~performance thresholds, resulting in no stock units ~~awarded, resulting in the issuance of 182,811 shares of common stock.~~being awarded.

The following table summarizes the ~~activity on the~~ Company’s incentive stock ~~awards for~~award activity during the nine months ended September ~~25, 2021:~~24, 2022:

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 January 1, 2021 152,281 $ 38.26 828,955 $ 10.27 1,821,402 $ 8.77
Granted — — 561,025 9.71 267,086 17.61
Forfeited — — (132,713) 10.81 (326,256) 22.76
Exercised or settled — — (326,830) 13.50 (302,516) 8.81
Expired or cancelled (36,308) 34.52 — — — —
Outstanding at September 25, 2021 115,973 $ 39.43 930,437 $ 8.72 1,459,716 $ 7.48


	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 January 1, 2022	111,124	$	39.47	927,556	$	8.72	1,459,716	$	6.51
Granted	—	—		1,328,931	5.50		1,661,452	6.97
Forfeited	—	—		(180,103)	5.83		(1,164,249)	6.70
Exercised or settled	—	—		(307,213)	11.08		—	—
Expired or cancelled	(32,464)	38.24		—	—		—	—
Outstanding at September 24, 2022	78,660	$	39.98	1,769,171	$	6.18	1,956,919	$	6.79

15. Employee 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.~~, Canada~~ and ~~France.~~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, along with certain assumptions about future events.

During 2019, the Company settled certain Canadian pension liabilities through the purchase of annuity contracts with an insurance company. The settlement ~~received final government approval, resulting~~resulted in the recognition of a $1 million loss during the nine months ended September 25, ~~2021. The settlement was recognized~~2021 in ~~“Other~~“other components of ~~net periodic benefit~~pension and OPEB, excluding service costs” in ~~our Consolidated Statement~~the consolidated statements of ~~Income~~operations. The Company recorded an additional $1 million loss in “other components of pension and ~~Comprehensive Income for~~OPEB, excluding service costs” during the nine months ended September ~~25, 2021.~~24, 2022, related to the final asset surplus distribution to the plans’ participants.

1815

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

The following tables present the components of net periodic benefit costs from these ~~plans that have been recorded are shown in the following table:~~plans:


		Pension				Postretirement					Pension				Postretirement
		Three Months Ended				Three Months Ended					Three Months Ended				Three Months Ended
Components of Net Periodic Benefit Cost		September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
											September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Service cost	Service cost	$	2,619	$	2,293	$	358	$	340	Service cost	$	2,150	$	2,619	$	352	$	358
Interest cost	Interest cost	4,287		5,875		179		(2,012)		Interest cost	4,561		4,287		215		179
Expected return on plan assets	Expected return on plan assets	(9,586)		(9,284)		—		—		Expected return on plan assets	(8,258)		(9,586)		—		—
Amortization of prior service cost	Amortization of prior service cost	176		179		(38)		(38)		Amortization of prior service cost	38		176		(31)		(38)
Amortization of losses	Amortization of losses	4,084		3,428		5		(47)		Amortization of losses	2,473		4,084		17		5
Pension settlement loss (gain)		90		—		—		—
Pension settlement loss										Pension settlement loss	(25)		90		—		—
Total net periodic benefit cost	Total net periodic benefit cost	$	1,670	$	2,491	$	504	$	(1,757)	Total net periodic benefit cost	$	939	$	1,670	$	553	$	504

		Pension				Postretirement					Pension				Postretirement
		Nine Months Ended				Nine Months Ended					Nine Months Ended				Nine Months Ended
Components of Net Periodic Benefit Cost		September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
											September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Service cost	Service cost	$	7,800	$	6,774	$	1,083	$	1,013	Service cost	$	6,497	$	7,800	$	1,057	$	1,083
Interest cost	Interest cost	13,138		17,621		530		(1,583)		Interest cost	13,764		13,138		646		530
Expected return on plan assets	Expected return on plan assets	(28,865)		(27,896)		—		—		Expected return on plan assets	(24,965)		(28,865)		—		—
Amortization of prior service cost	Amortization of prior service cost	527		537		(115)		(115)		Amortization of prior service cost	116		527		(92)		(115)
Amortization of losses	Amortization of losses	12,247		10,282		11		(138)		Amortization of losses	7,419		12,247		47		11
Pension settlement loss (gain)		980		—		—		—
Pension settlement loss										Pension settlement loss	1,154		980		—		—
Total net periodic benefit cost	Total net periodic benefit cost	$	5,828	$	7,318	$	1,510	$	(823)	Total net periodic benefit cost	$	3,985	$	5,828	$	1,658	$	1,510

Service cost is included in ~~cost~~“cost of ~~sales~~sales” and ~~selling,~~“selling, general and administrative ~~expenses~~expenses” in the statements of ~~income,~~operations, as appropriate. Interest cost, expected return on plan assets, amortization of prior service cost and amortization of losses are included in ~~other~~“other components of pension and OPEB, excluding service ~~cost on~~costs” in the consolidated ~~statement~~statements of ~~income.~~

operations.

16. Income Taxes

Effective Tax Rate

The Company’s effective tax rate on its income from continuing operations for the three months ended September 24, 2022 was a benefit of 11 percent. The effective tax rate on its loss from continuing operations for the nine months ended September 24, 2022 was an expense of 13 percent. The Company’s effective tax rates on its loss from continuing operations for the three and nine months ended September 25, 2021 ~~was~~were benefits of 24 percent and 59 percent, ~~respectively, compared with a~~respectively.

The effective tax benefit rate ~~of 181 percent and 84 percent~~ 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 expense rate for the nine months ended September ~~26, 2020, respectively.~~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.

The ~~year to date~~effective tax benefit rate for the nine months ended September 25, 2021 ~~effective rate differs~~differed from the federal statutory rate of 21 percent primarily due to a tax benefit recognized by remeasuring the Company’s Canadian deferred tax assets at a higher Canadian blended statutory tax rate. The Canadian statutory ~~tax~~ rate is higher as a result of changing the allocation of income between the Canadian provinces ~~as a result of~~after the sale of ~~FPG~~the Company’s lumber and ~~Newsprint.~~newsprint assets. Other factors impacting the effective benefit rate ~~are return to accrual~~were return-to-accrual adjustments and tax credits, partially offset by nondeductible interest expense in the U.S. and lower tax deductions on vested stock compensation.

The effective tax rate benefit for the period ended September 26, 2020 differs from the federal statutory rate primarily due to the release of certain valuation allowances related to nondeductible interest expense, benefits from the CARES Act, return to accrual adjustments and tax credits, partially offset by nondeductible interest expense in the U.S., taxable income generated from the 2020 credit agreement amendment, increases to uncertain tax position reserves, nondeductible executive compensation, and lower tax deductions on vested stock compensation.

~~There has been no material change to the balance of unrecognized tax benefits reported at December 31, 2020.~~

1916

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

Deferred Taxes

The Company’s deferred tax assets include approximately $17 million of disallowed U.S. interest deductions that the Company does not believe it will be able to realize. This asset was reduced by $1 million recognized as tax expense and increased by a net tax benefit of $5 million in the three and nine months ended September 24, 2022, respectively. In December 2019, the American Institute of Certified Public Accountants (“AICPA”) issued Technical Questions and Answers (“TQA”) 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. In strict compliance with the AICPA’s TQA, the Company has not recognized a valuation allowance on a portion of the deferred tax assets generated from disallowed interest.

Other

In August 2022, the Company received cash of $23 million, including interest of $2 million, related to a U.S. federal tax refund.

There has been a $1 million increase to the balance of unrecognized tax benefits reported at December 31, 2021.

17. Segment and Geographical Information

~~As a result of the announced sale of the Company’s lumber and newsprint assets, the~~The Company operates in the following business segments: High Purity Cellulose, Paperboard, High-Yield Pulp and Corporate. The Corporate operations consist 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. 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,~~product line, was comprised of the following:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020			September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
High Purity Cellulose	High Purity Cellulose									High Purity Cellulose
Cellulose Specialties	Cellulose Specialties	$	186,029	$	168,549	$	521,442	$	489,859	Cellulose Specialties	$	243,175	$	186,029	$	645,169	$	521,442
Commodity Products	Commodity Products	74,577		64,916		195,894		206,867		Commodity Products	92,638		74,577		223,151		195,894
Other sales (a)	Other sales (a)	26,902		19,243		74,532		60,614		Other sales (a)	33,080		26,902		84,059		74,532
Total High Purity Cellulose	Total High Purity Cellulose	287,508		252,708		791,868		757,341		Total High Purity Cellulose	368,893		287,508		952,379		791,868
Paperboard	Paperboard									Paperboard	65,039		52,188		182,512		156,799
Paperboard		52,188		46,862		156,799		140,492
High-Yield Pulp
High-Yield Pulp	High-Yield Pulp	41,877		29,622		106,207		91,444		High-Yield Pulp	39,564		41,877		101,992		106,207

Eliminations	Eliminations	(7,559)		(5,709)		(21,163)		(17,148)		Eliminations	(7,150)		(7,559)		(19,601)		(21,163)
Total net sales		$	374,014	$	323,483	$	1,033,712	$	972,128
(a) Other sales include sales of electricity, lignin and other by-products to third-parties
Net sales										Net sales	$	466,346	$	374,014	$	1,217,282	$	1,033,712

——————————————

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

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

Three Months Ended Nine Months Ended
September 25, 2021 September 26, 2020 September 25, 2021 September 26, 2020
High Purity Cellulose $ 1,852 $ 7,752 $ 18,903 $ 9,615
Paperboard 1,978 3,380 10,174 14,315
High-Yield Pulp 7,612 973 8,150 497
Corporate (8,616) (13,215) (33,498) (37,864)
Total operating income (loss) $ 2,826 $ (1,110) $ 3,729 $ (13,437)

~~Identifiable assets by segment were as follows:~~


							Three Months Ended				Nine Months Ended
		September 25, 2021		December 31, 2020			September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
High Purity Cellulose	High Purity Cellulose	$	1,534,149	$	1,528,929	High Purity Cellulose	$	22,536	$	1,852	$	21,221	$	18,903

Paperboard	Paperboard	116,721		129,871		Paperboard	11,293		1,978		27,579		10,174
High-Yield Pulp	High-Yield Pulp	43,708		33,259		High-Yield Pulp	5,646		7,612		3,910		8,150
Corporate and other (a)		779,959		624,541
Assets Held for Sale		—		213,265
Total identifiable assets		$	2,474,537	$	2,529,865
Corporate						Corporate	(10,946)		(8,616)		(42,871)		(33,498)
Operating income (loss)						Operating income (loss)	$	28,529	$	2,826	$	9,839	$	3,729

2017

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

~~(a) Includes the remaining~~Identifiable assets ~~of the lumber and newsprint operations excluded from the sale to GreenFirst.~~by segment were as follows:


	September 24, 2022		December 31, 2021
High Purity Cellulose	$	1,638,666	$	1,579,300

Paperboard	114,990		114,391
High-Yield Pulp	49,742		38,147
Corporate and other	533,023		713,186

Total identifiable assets	$	2,336,421	$	2,445,024

18. Commitments and Contingencies

Commitments

The Company has no material changes to the purchase obligations presented in Note 2221 — Commitments and Contingencies in the Company’s ~~Annual Report on~~2021 Form 10-K, ~~for the year ended December 31, 2020, as filed with the SEC on March 1, 2021,~~ that are outside the normal course of business for the nine months ended September ~~25, 2021.~~24, 2022. The Company’s purchase obligations continue to primarily consist of commitments for the purchase of natural gas, steam energy, wood chips, and electricity contracts entered into within the normal course of business.

The Company leases certain buildings, machinery and equipment under various operating leases. See Note 5 — Leases, for ~~additional~~further information.

Litigation and Contingencies

~~Final Settlement Reached in Dispute with IESO Relating to Investigation of the Kapuskasing Newsprint Facility.~~ From the period from 2014 to early 2021, the Market Assessment and Compliance Division (“MACD”) branch of the Independent Electricity System Operator (“IESO”), the governmental agency responsible for operating the wholesale electricity market and directing the operation of the bulk electrical system in the province of Ontario, Canada, had been engaged in reviewing the Company's compliance with the published rules that govern the operation of the wholesale electricity market in Ontario, Canada. The inquiry was focused primarily on payments made by IESO to the Company between 2010 and 2019 under market rules in connection with multiple planned, extended and unplanned forced outages that caused extensive downtime, in full or in part, of the Company’s Kapuskasing, Ontario newsprint facility.

In May 2020, MACD finalized two of its four investigations into the Company’s electricity management practices at its Kapuskasing newsprint facility and issued orders asserting penalties of CAD $25 million. These orders called for the Company to pay penalties of CAD $3 million immediately and CAD $12 million over a 10 year period, with the remaining CAD $10 million to be deferred and ultimately forgiven assuming the Company otherwise complied with the orders’ remaining terms. The Company, which maintained it had complied in all material respects with the published rules, vigorously contested IESO’s orders, including through the filing of judicial review proceedings with the divisional Court (Superior Court of Justice) of Ontario seeking invalidation of the orders. At the time these orders were issued, the remaining two investigations remained open, subjecting the Company to the risk that MACD may in the future issue additional orders upon finalization of these additional investigations.

On April 19, 2021, the Company and IESO entered into Minutes of Settlement (“MOS”) pursuant to which the parties agreed to fully and finally settle all claims relating to all four of the investigations (whether completed or not) and related orders, the judicial review proceedings and underlying disputes. As part of the settlement, the Company agreed to a fixed obligation to pay a sum of CAD $12 million over a period of 5 years comprised of a CAD $4.5 million up-front payment and a CAD $7.5 million payment to be spread (on a front-weighted basis) over the next 5 anniversaries of the MOS, without interest. In addition to the foregoing, the MOS provides that a “suspended” sum of CAD $10.4 million would become due and payable in the event the Company fails to comply with any of the terms and conditions of the MOS or commits an event of default, as defined under the applicable market rules, unless such breach or event of default is remedied on a timely basis. This contingent “suspended” sum decreases annually as the scheduled fixed, or non-contingent, payments are made under the MOS. Assuming no uncured event of default or breach occurs during the repayment period, upon full payment of the CAD $12 million, the entire "suspended" sum shall be extinguished and RYAM shall be released from any payment obligation with respect thereto.

~~Given the parties’ finalization of and entry into the MOS, the Company considers this matter concluded (subject only to the parties’ obligations yet to be performed under the MOS).~~

Duties on Canadian softwood lumber sold to the ~~U.S~~U.S.. The Company previously operated 6six softwood lumber mills in Ontario and Quebec, Canada and exported softwood lumber into the United States from Canada. In ~~2017, anti-dumping and countervailing duties were assessed by~~connection with these exports, the United States Department of Commerce (“USDOC”) on lumber exported into the United States, with the Company being assigned an anti-dumping duty rate of 6 percent and a countervailing duty rate of 14 percent. In December 2020, following its administrative review of the period of April 28, 2017 through December 31, 2018, USDOC determined revised rates for anti-dumping and countervailing duties. As such, from December 2020 through the closing of the sale of the lumber assets on August 28, 2021, the Company was subject to an anti-dumping duty rate of approximately 1.6

~~Rayonier Advanced Materials Inc.~~

~~Notes to Consolidated Financial Statements - (Unaudited) (Continued)~~

~~percent and a countervailing duty rate of approximately 7.4 percent. Canada’s legal challenge to the USDOC’s assessment of duties continues in spite of the recent revision in rates.~~

~~The~~ Company paid approximately $112 million in softwood lumber duties through August 28, 2021, recorded as expense in the periods incurred. ~~The~~As of September 24, 2022, the Company ~~currently has~~had a ~~$20~~$38 million long-term receivable associated with the USDOC’s December 2020, ~~determination~~December 2021 and August 2022 determinations of the revised rates for the 2017, 2018, 2019 and ~~2018~~2020 periods. Cash is not expected to return to the Company until final resolution of the softwood lumber dispute, which remains subject to legal challenges and to USDOC ~~further~~ administrative review processes covering periods after December 31, ~~2018.~~2020. As part of the sale of its lumber assets, the Company ~~retains~~retained all rights and obligations to softwood lumber duties, generated or incurred through the closing date of the transaction.

~~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 its business. While the Company has procured reasonable and customary insurance covering risks normally occurring in connection with its businesses, the Company has in certain cases retained some risk through the operation of self-insurance, primarily in the areas of workers’ compensation, property insurance and general liability. These other lawsuits and claims, ~~either~~ individually orand in 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 ~~25, 2021,~~24, 2022, the Company had net exposure of ~~$40~~$38 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 letters of credit have various expiration dates and will be renewed as required.

The Company had surety bonds of ~~$86~~$88 million as of September ~~25, 2021,~~24, 2022, 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.

LignoTech Florida (“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 ~~$32~~$31 million at September ~~25, 2021.~~24, 2022.

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

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 the liability under these potential obligations due to the unique set of facts and circumstances likely to be involved with each provision.

As of September ~~25, 2021,~~24, 2022, all of the Company’s collective bargaining agreements covering its unionized employees ~~are~~were current.

19. Supplemental ~~Disclosures~~Disclosure of Cash ~~Flow~~Flows Information

Supplemental ~~disclosures~~disclosure of cash flows information ~~were comprised of the following for the nine months ended:~~follows:


		September 25, 2021		September 26, 2020			Nine Months Ended
							September 24, 2022		September 25, 2021
Interest paid	Interest paid	$	34,852	$	29,350	Interest paid	$	48,384	$	34,852
Income taxes paid (received)		$	(27,268)	$	1,086
Income taxes received						Income taxes received	(16,484)		(27,268)
Capital assets purchased on account	Capital assets purchased on account	$	9,609	$	11,442	Capital assets purchased on account	16,316		9,609

2219

~~Table of Contents~~


~~Item 2.~~			Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

When we refer to “we,” “us,” “our” or “the Company,” we mean Rayonier Advanced Materials Inc. and its consolidated subsidiaries. References herein to “Notes to Consolidated Financial Statements” refer to the Notes to ~~the~~ Consolidated Financial Statements of Rayonier Advanced Materials Inc. included in Item 1 of this Quarterly Report on Form 10-Q (the ~~“Report.”~~“Report”).

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our ~~consolidated financial statements~~Consolidated Financial Statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity and certain other factors which may affect future results. This MD&A should be read in conjunction with our ~~2020~~ Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”) and information contained in our subsequent Forms 8-K and other reports to the U.S. Securities and Exchange Commission (the “SEC”).

As a result of the sale of the lumber and newsprint assets completed on August 28, 2021, these operations are presented as discontinued operations and certain prior year amounts are reclassified to conform to this presentation. Unless otherwise stated, informationAmounts contained in this ~~MD&A relates~~Report may not always add due to continuing operations. We present businesses that represent components as discontinued operations when they meet the criteria for held for sale or are sold, and their disposal represents a strategic shift that has, or will have, a major effect on our operations and financial results. See Note 2 —~~Discontinued Operationsfor additional information on the sale.~~rounding.

As a result of reclassifying the lumber and newsprint operations to discontinued operations as discussed above, we operate in the following business segments: High Purity Cellulose, Paperboard, High-Yield Pulp and Corporate.

~~Note About~~ Forward-Looking Statements

Certain statements in this Report regarding anticipated financial, business, legal or other outcomes, including business and market conditions, outlook and other similar statements relating to ~~Rayonier Advanced Materials’ (“the Company” )~~ future events, developments, or financial or operational performance or results, are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are identified by the use of words such as “may,” “will,” “should,” “expect,” “estimate,” “believe,” “intend,” “forecast,” ~~“anticipate”~~“anticipate,” “guidance” and other similar language. However, the absence of these or similar words or expressions does not mean a statement is not forward-looking. ~~While we believe these forward-looking statements are reasonable when made, forward-looking~~

Forward-looking statements are not guarantees of future performance or events and undue reliance should not be placed on these statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that these expectations will be attained, and it is possible actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties. ~~The~~The following risk factors and those contained in Item 1A — Risk Factors in our ~~Annual Report on~~2021 Form 10-K, ~~for the year ended December 31, 2020 as filed with the SEC,~~ among others, could cause actual results or events to differ materially from the Company’s historical experience and those expressed in forward-looking statements made in this document.

~~Amounts contained~~Forward-looking statements are only as of the date they are made, and the Company undertakes no duty to update its forward-looking statements except as required by law. You are advised to review any further disclosures we have made or may make in ~~this Report may not always add due~~our filings and other submissions to ~~rounding.~~the SEC, including those on Forms 10-Q, 10-K, 8-K and other reports.

Risk Factors

Our operations are subject to a number of risks and uncertainties including, but not limited to, those listed below. When considering an investment in our securities, you should carefully read and consider these risks, together with all other information in our ~~Annual Report on~~2021 Form 10-K ~~for the year ended December 31, 2020 as filed with the SEC~~ and our other filings and submissions to the SEC, which provide much more information and detail on the risks described below. If any of the events described in the following risk factors actually occur, our business, financial condition or operating results, as well as the market price of our securities, could be materially adversely affected. These risks and events include, without limitation:

~~Table of Contents~~

~~Epidemics~~Epidemic and Pandemic Risks

•We are subject to risks associated with epidemics and pandemics, including the COVID-19 pandemic and related impacts. The nature and extent of ongoing and future impacts of the pandemic are highly uncertain and unpredictable.

Macroeconomic and Industry Risks

•The businesses we operate are highly competitive, ~~and many of them are cyclical,~~ which may result in fluctuations in pricing and volume that can materially adversely affect our business, financial condition and results of operations.

•Changes in raw material and energy availability and prices could have a material adverse effect on our business, results of operations and financial condition.

•We are subject to material risks associated with doing business outside of the United States.

•Currency fluctuations may have a material negative impact on our business, financial condition and results of operations.

•Restrictions on trade through tariffs, countervailing and anti-dumping duties, quotas and other trade barriers, in the United States and internationally, could materially adversely affect our ability to access certain markets.

•Our business, financial condition and results of operations could be adversely affected by disruptions in the global economy caused by the ongoing conflict between Russia and Ukraine or other geopolitical conflict.

Business and ~~Operating~~Operational Risks

•~~After giving effect to the sale of the lumber and newsprint assets, our~~Our ten largest customers represented approximately 3740 percent of our ~~2020~~2021 revenue, and the loss of all or a substantial portion of our revenue from these large customers could have a material adverse effect on our business.

•A material disruption at one of our major manufacturing facilities could prevent us from meeting customer demand, reduce our sales and profitability, increase our cost of production and capital needs, or otherwise materially adversely affect our business, financial condition and results of ~~operations and financial condition.~~operations.

•The availability of, and prices for, wood fiber may have a material adverse impact on our business, results of operations and financial condition.

•Our operations require substantial capital.

•We depend on third parties for transportation services and increases in costs and the availability of transportation could materially adversely affect our business.

•Our failure to maintain satisfactory labor relations could have a material adverse effect on our business.

•We are dependent upon attracting and retaining key personnel, the loss of whom could materially adversely affect our business.

•Failure to develop new products or discover new applications for our existing products, or our inability to protect the intellectual property underlying such new products or applications, could have a material negative impact on our business.

•The risk of loss of the Company’s intellectual property and sensitive data, or disruption of its manufacturing operations, in each case due to cyberattacks or cybersecurity breaches, could materially adversely impact the Company.

Regulatory Risks

•Our business is subject to extensive environmental laws, regulations and permits that may materially restrict or adversely affect how we conduct business and our financial results.

•The ~~potential longer-term impacts of climate related risks remain uncertain at this time.~~

•~~The~~ Company considers and evaluates climate-related risks in three general ~~categories;~~categories: Regulatory, Transition to a low-carbon economy, and Physical risks related to ~~climate-change.~~climate change.

•The potential longer-term impacts of climate-related risks remain uncertain at this time.

Financial Risks

•We may need to make significant additional cash contributions to our retirement benefit plans if investment returns on pension assets are lower than expected or interest rates decline, and/or due to changes to regulatory, accounting and actuarial requirements.

•We have debt obligations that could materially adversely affect our business and our ability to meet our obligations.

•The phase-out of the London ~~Inter Bank Office~~Interbank Offered Rate ~~(“LIBOR”)~~ as an interest rate benchmark in 2023 may impact our borrowing costs.

•Challenges in the commercial and credit environments, including material increases in interest rates, may materially adversely affect our future access to capital.

•We may need additional financing in the future to meet our capital needs or to make acquisitions, and such financing may not be available on favorable terms, if at all, and may be dilutive to existing stockholders.

~~Table of Contents~~

Company’s Common Stock and Certain Corporate Matters Risks

•Your percentage of ownership in the Company may be diluted in the future.

•Certain provisions in our amended and restated certificate of incorporation and bylaws, and of Delaware law, could prevent or delay an acquisition of the Company, which could decrease the price of our common stock.

~~Merger and Acquisition Risk~~

•Approximately fifteen percent (15%) of the purchase price for the GreenFirst transaction was payable in the common shares of the capital of GreenFirst (to be held by the Company for a minimum of six (6) months following the transaction closing) and the Company’s ability to ultimately realize the benefit of this consideration is subject to market conditions and GreenFirst’s future performance.

Forward-looking statements are only as of the date they are made, and the Company undertakes no duty to update its forward-looking statements except as required by law. You are advised, however, to review any further disclosures we have made or may make in our filings and other submissions to the SEC, including those on Forms 10-Q, 10-K, 8-K and other reports. Details on ~~each of~~ the above risk factors are more specifically described in Item 1A -— Risk ~~Factor s~~Factorsin our ~~Annual Report on~~2021 Form 10-K ~~for the year ended December 31, 2020 as filed with the SEC.~~

~~Note About Non-GAAP Financial Measures~~

A “non-GAAP financial measure” is generally defined as a numerical measure of a company’s historical or future performance that excludes or includes amounts, or is subject to adjustments, so as to be different from the most directly comparable measure calculated and presented in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). This Report contains certain non-GAAP financial measures, including Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), adjusted EBITDA, and adjusted free cash flows. These non-GAAP measures are reconciled to each of their respective most directly comparable GAAP financial measures in Item 21A — ~~Management’s Discussion and Analysis~~Risk Factors of ~~Financial Condition and Results of Operations~~this Report..

We believe these non-GAAP measures provide useful information to our Board of Directors, management and investors regarding certain trends relating to our financial condition and results of operations. Our management uses these non-GAAP measures to compare our performance to that of prior periods for trend analyses, purposes of determining management incentive compensation and budgeting, forecasting and planning purposes.

We do not consider non-GAAP measures an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is they may exclude significant expense and income items that are required by GAAP to be recognized in our consolidated financial statements. In addition, they reflect the exercise of management’s judgment about which expense and income items are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, reconciliations of the non-GAAP financial measures we use to their most directly comparable GAAP measures are provided. Non-GAAP financial measures should not be relied upon, in whole or part, in evaluating the financial condition, results of operations or future prospects of the Company.

Business

We are a global leader of cellulose-based technologies, which comprise a broad offering of high purity cellulose specialties, a natural polymer commonly used in the production of specialty chemicals and polymers for use in producing ~~LCD~~liquid crystal displays, filters, ~~fibers,~~textiles and performance additives for pharmaceutical, food and other industrial applications. Starting from a tree and building upon more than 9095 years of experience in cellulose chemistry, we provide high quality ~~high-purity~~high-purity cellulose ~~pulp products~~materials that make up the essential building blocks for our customers’ products while providing exceptional service and value. ~~In addition, we~~We also produce unique, lightweight paperboard and a bulky, high-yield pulp for use in consumer products. ~~In connection with the closing~~

We operate in four business segments: High Purity Cellulose, Paperboard, High-Yield Pulp and Corporate.

As a result of the sale of the lumber and newsprint facilities and certain related assets oncompleted in August ~~28,~~ 2021, ~~we ceased~~ the ~~manufacturing of~~ lumber and newsprint ~~products.~~

operations are presented as discontinued operations and certain prior year amounts are reclassified to conform to this presentation. Unless otherwise stated, information in this MD&A relates to continuing operations. See Note 2 — ~~Table of Contents~~Discontinued Operations

to our Consolidated Financial Statements for further information on the sale.

Recent ~~developments~~Developments

~~Debt repayments~~•In October 2022, we repaid a Canadian dollar fixed interest rate term loan in the amount of CAD $12 million (USD $9 million).

•During the third quarter of 2022, we repurchased ~~approximately $127~~$15 million of our 5.50% ~~Senior Notes~~senior notes due 2024 (the “Unsecured Notes”) through open-market transactions and retired ~~such~~the notes for approximately $15 million in cash.

•During the third quarter of 2022, we repaid a Canadian dollar fixed interest rate term loan in the amount of CAD $12 million (USD $9 million).

•During the second quarter of 2022, we repurchased $20 million of our Unsecured Notes through open-market transactions and retired the notes for approximately ~~$124~~$20 million in cash. In

•During the second quarter of 2022, we sold the 28.7 million shares of GreenFirst common stock we received in connection with the ~~repurchases, we wrote off $1 million of deferred financing costs associated with the Unsecured Notes. The net gain of $2 million is recorded in~~ ~~Gain on debt extinguishment~~ ~~in the Consolidated Statement of Income.~~

~~On October 7,~~August 2021 pursuant to a notice previously provided to the trustee under the indenture governing our 7.625% Senior Secured Notes due 2026 (the “Secured Notes”), we redeemed $25 million of the Secured Notes at a redemption price of 103 percent.

~~Sale of lumber and newsprint assets~~

~~On August 28, 2021, we completed the previously announced~~ sale of our lumber and newsprint assets ~~located~~for $43 million. The shares sale agreement contains a purchase price protection clause whereby we are entitled to participate in ~~Ontario~~further stock price appreciation under certain circumstances over the next 18 months.

•Our business has experienced a significant increase in the costs for wood, chemicals, energy and ~~Québec Canada,~~supply chain. In response, we announced a $146 per metric ton (“MT”) cost surcharge applicable to ~~GreenFirst.~~all shipments of our cellulose specialties, effective starting with shipments made on April 1, 2022 and later.

•As of March 2022, our fluff pulp qualifies as an “Inspected Raw Material” by Nordic Swan Ecolabelling. The Nordic Swan Ecolabel sets strict environmental requirements in all phases of manufacturing, including requirements for eco-friendly chemicals used in ecolabeled products. The status will appear on products made with our fluff pulp and indicates to consumers and commercial buyers that the product is sustainably produced and environmentally friendly.

•On March 21, 2022, our Board of Directors adopted a shareholder rights plan and declared a dividend of one preferred share purchase right for each outstanding share of our common stock, par value $0.01 per share. See Note 212 —~~Discontinued Operations~~Stockholders’ Equityto our Consolidated Financial Statements for ~~additional~~further information.

~~Final Settlement Reached in Dispute with IESO Relating to Investigation of the Kapuskasing Newsprint Facility~~

We had previously been engaged in litigation with the Market Assessment and Compliance Division (“MACD”) branch of the Independent Electricity System Operator (“IESO”) regarding their investigations into the Company's compliance with the published rules that govern the operation of the wholesale electricity market in Ontario, Canada. On April 19, 2021, we and the IESO entered into Minutes of Settlement (“MOS”) pursuant to which the parties agreed to fully and finally settle all claims relating to their investigations. We consider this matter concluded (subject only to the parties’ obligations yet to be performed under the MOS). See Note 18 —~~Commitments and Contingencies~~ ~~for additional information.~~

~~Coronavirus-Update~~

Our businesses were significantly impacted by the coronavirus ("COVID-19") pandemic in 2020. While market demand and pricing for certain of our products began to recover towards the end of 2020 and have continued to improve throughout 2021, our operations remain vulnerable to a reversal of these trends or other continuing negative effects caused by COVID-19.

In our operating facilities and work spaces, we continue to maintain protocols previously implemented to reduce the potential spread of COVID-19 and ensure the safety of our employees and continuity of operations.

Market Assessment

~~The~~This market assessment represents our best current estimate of ~~each~~our business segments’ future performance.

We have updated our Adjusted EBITDA guidance to exceed $175 million for 2022, subject to ongoing supply chain constraints. Additionally, we remain on track to reduce our net debt level to $725 million by the end of the year. We have reduced our net leverage ratio to 5.1 times as of the end of the third quarter and as we continue to reduce this ratio towards 4.0 times, we expect to have opportunities to refinance our senior notes due June 2024 in ~~this environment.~~the near future.

High Purity Cellulose

Pricing levels for our commodity products increased during the third quarter; however, prices are expected to moderate for the fourth quarter. Prices for cellulose specialties remain in line with expectations for the full year but are expected to increase for 2022.Demand for cellulose specialties volumes remains strong. Total segment volumes are expected to decline for the full year mainly due to logistics constraints, the kiln disruption in the third quarter at the Jesup, GA facility that negatively impacted production and the extended planned maintenance outages in 2021 and early 2022. Volumes for both cellulose specialties and commodity products remains strong albeit somewhat tempered as global economic growth slows. As such, average sales prices are expected to be down modestly in the fourth quarter driven by a greater mix of commodity sales volumes as production and logistics constraints improve. Key raw material inflation is expected to remain elevated. Adjusted EBITDA for the segment is expected to be down slightly compared to the third quarter but higher for the full year 2022 compared to 2021.

Paperboard

Paperboard prices are expected to remain ~~strong~~elevated in the fourth quarter ~~and into 2022. However, logistic and shipping constraints may negatively impact sales volumes in the near term.~~

Key costs remain difficult to predict. Prices for energy, wood and chemicals as well as logistics costs, have increased significantly for the year and are expected to escalate further in the fourth quarter and into 2022.

With current market conditions, including strong demand in most cellulose specialties end markets, and elevated pricing for commodity viscose and fluff products along with cotton and petroleum-based substitute products, we announced significant price increases for our cellulose specialties products, which positions us well to help offset inflationary pressures in 2022. We also remain committed to investing in our core business to reduce costs, improve reliability and provide new platforms for growth.

~~Paperboard~~

~~Table of Contents~~

~~Paperboard prices continued to increase in the third quarter as expected, due to~~driven by strong demand in both the commercial printing and packaging ~~segments, helping offset increases in~~end-use markets. Sales volumes and raw material costs. Prices for our unique Kallima® brand paperboard are expected to increase further as demand for our products continues to strengthen, while industry supply remains constrained due to competitor production disruptions. Raw material costs are expected to ~~decline as pulp prices moderate.~~remain steady.As a result, Paperboard is anticipated to deliver another solid quarter of Adjusted EBITDA.

High-Yield Pulp

High-yield pulp markets ~~experienced additional price increases during the third quarter~~appear to be peaking as global economic demand slows. However, due to the ~~typical~~ sales lag experienced in ~~the business. However, pulp market prices have recently declined and lower~~this segment, realized prices are still expected to increase in the fourth quarter. Sales volumes are anticipated to increase significantly as production and logistics constraints improve.As such, Adjusted EBITDA for ~~the remainder of the year. Logistics constraints and higher costs also may negatively impact operating results~~High-Yield Pulp is anticipated to improve in the coming quarter.

~~Investing~~A Sustainable Future

For over 95 years, we have invested in renewable product offerings and our biorefinery model provides a platform to grow existing and new products to address needs of the changing economy. We continue to focus on growing our bio-based product offering. In the first nine months of 2022, other sales in the ~~Future~~High Purity Cellulose segment were $84 million primarily related to sales of bioelectricity and lignosulfonates. We expect to grow these sales and increase overall margins over time.

~~With~~Our investment into a bioethanol facility at our Tartas, France facility is anticipated to be operational in 2024, subject to the ~~completion~~approval of the sale of the lumber and newsprint assets, we are focused on our four high purity cellulose plants and capitalizing on the global demand for more sustainable products with our leading cellulose specialties offerings.certain permits. ~~These specialized biorefinery assets are capable of creating~~Further updates will be provided as the world’s leading plant-based high purity cellulose and ideally suited for generating green fuels, bioelectricity and other biomaterials such as lignin and tall oils. We will invest to improve reliability in 2022. Additionally, we are evaluating specific strategic capital projects similar to several recently completed high return projects to enhance the value of our assets.These strategic investments include expenditures in green energy in Tartas, France and in TemSilk™ pulp, a critical input in the production of Lyocell, a more sustainable textile, and in Anomera, Inc., a company that manufactures carboxylated cellulose nanocrystals (CNC), a patented, biodegradable product for use in cosmetics and a wide variety of industrial applications. The Tartas green energy projectschedule is fully operational and we anticipate realizing $10 million in annualized benefits from this investment. We will also leverage our world-class R&D facilities to work with new and existing customers to develop natural-based solutions. The investments in reliability, strategic growth and innovation are expected to drive significant incremental margins in the coming years.

~~Critical Accounting Policies and Use of Estimates~~

The preparation of financial statements requires us to make estimates, assumptions and judgments that affect our assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. We base these estimates and assumptions on historical data and trends, current fact patterns, expectations and other sources of information we believe are reasonable. Actual results may differ from these estimates.

~~For a full description of our critical accounting policies, see Item 7 —~~ ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~ ~~in our 2020 Annual Report on Form 10-K. For recent accounting pronouncements see Item 1 of Part I, Financial Statements — Note 1 —Basis of Presentation and New Accounting Pronouncements~~ ~~for additional information.~~finalized.

2723

~~Table of Contents~~

Results of Operations


Financial Information		Three Months Ended						%	Nine Months Ended						%
																	Three Months Ended							Nine Months Ended
(in millions, except percentages)	(in millions, except percentages)	September 25, 2021			September 26, 2020			Change	September 25, 2021			September 26, 2020			Change	(in millions, except percentages)	September 24, 2022			September 25, 2021			% Change	September 24, 2022			September 25, 2021			% Change
Net Sales	Net Sales	$	374		$	323		16%	$	1,034		$	972		6%	Net Sales	$	466		$	374		25%	$	1,217		$	1,034		18%
Cost of Sales	Cost of Sales	(355)			(302)				(972)			(920)				Cost of Sales	(419)			(355)				(1,138)			(972)
Gross Margin	Gross Margin	19			21			(10)%	62			52			19%	Gross Margin	47			19			147%	79			62			27%

Selling, general and administrative expenses	Selling, general and administrative expenses	(17)			(18)				(52)			(57)				Selling, general and administrative expenses	(20)			(17)				(68)			(52)

Foreign exchange gains (losses)		3			(1)				1			—
Other operating income (expense), net		(2)			(3)				(7)			(9)
Operating Income (Loss)		3			(1)			NA	4			(13)			131%
Foreign exchange gains																Foreign exchange gains	3			3				4			1
Other operating expense, net																Other operating expense, net	(1)			(2)				(5)			(7)
Operating Income																Operating Income	29			3			867%	10			4			150%
Interest expense	Interest expense	(17)			(14)				(49)			(41)				Interest expense	(16)			(17)				(49)			(49)
Interest income and other, net	Interest income and other, net	2			(3)				—			(3)				Interest income and other, net	3			2				6			—

Net periodic pension and OPEB income (expense), excluding service costs		1			2				2			1
Unrealized loss on GreenFirst equity securities		(8)			—				(8)			—
Other components of pension and OPEB, excluding service costs																Other components of pension and OPEB, excluding service costs	1			1				2			2
Gain (loss) on GreenFirst equity securities																Gain (loss) on GreenFirst equity securities	—			(8)				5			(8)
Gain on debt extinguishment	Gain on debt extinguishment	2			—				2			—				Gain on debt extinguishment	—			2				—			2
Income (Loss) From Continuing Operations Before Income Taxes	Income (Loss) From Continuing Operations Before Income Taxes	(17)			(16)			(6)%	(49)			(56)			13%	Income (Loss) From Continuing Operations Before Income Taxes	17			(17)			200%	(26)			(49)			47%
Income tax benefit (expense)		4			29				29			47
Equity in income (loss) of equity method investment		—			$	—			(1)			—
Income tax (expense) benefit																Income tax (expense) benefit	2			4				(3)			29
Equity in loss of equity method investment																Equity in loss of equity method investment	(1)			—				(2)			(1)
Income (Loss) from Continuing Operations	Income (Loss) from Continuing Operations	$	(13)		$	13		(200)%	$	(21)		$	(9)		(133)%	Income (Loss) from Continuing Operations	18			(13)			238%	(31)			(21)			(48)%
Income from discontinued operations, net of taxes	Income from discontinued operations, net of taxes	9			16				112			1				Income from discontinued operations, net of taxes	12			9				12			112
Net Income (Loss)	Net Income (Loss)	$	(5)		$	29			$	90		$	(8)			Net Income (Loss)	$	30		$	(5)			$	(19)		$	90

Gross Margin %	Gross Margin %	5		%	7		%		6		%	5		%		Gross Margin %	10		%	5		%		7		%	6		%
Operating Margin %	Operating Margin %	1		%	—		%		—		%	(1)		%		Operating Margin %	6		%	1		%		1		%	—		%
Effective Tax Rate %	Effective Tax Rate %	24		%	181		%		59		%	84		%		Effective Tax Rate %	(11)		%	24		%		(13)		%	59		%

Net Sales


	Three Months Ended				Nine Months Ended
(in millions)	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
High Purity Cellulose	$	369	$	288	$	952	$	792
Paperboard	66		52		183		157
High-Yield Pulp	40		42		102		106

Eliminations	(9)		(8)		(20)		(21)
Net Sales	$	466	$	374	$	1,217	$	1,034

~~Net sales by segment were as follows~~:

Three Months Ended Nine Months Ended
Net sales (in millions) September 25, 2021 September 26, 2020 September 25, 2021 September 26, 2020
High Purity Cellulose $ 288 $ 253 $ 792 $ 757
Paperboard 52 47 157 140
High-Yield Pulp 42 30 106 91
Eliminations (8) (7) (21) (16)
Total net sales $ 374 $ 323 $ 1,034 $ 972

Net sales increased by ~~$51~~$92 million and ~~$62~~$183 million, respectively, during the three and nine months ended September ~~25, 2021~~24, 2022 when compared to the same prior year periods, ~~ended September 26, 2020, respectively,~~driven primarily ~~driven~~ by higher ~~High Purity~~

~~Table of Contents~~

~~Cellulose commodity~~ sales prices ~~along with stronger Cellulose Specialties sales volumes. In addition, sales prices increased for both Paperboard and High-Yield Pulp. For further discussion, see~~across all segments. See Operating Results by Segment. below for further discussion.

Operating Income


	Three Months Ended				Nine Months Ended
(in millions)	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
High Purity Cellulose	$	22	$	2	$	21	$	19
Paperboard	12		2		28		10
High-Yield Pulp	6		8		4		8
Corporate	(11)		(9)		(43)		(33)
Operating Income	$	29	$	3	$	10	$	4

Operating income ~~(loss) by segment was as follows:~~

Three Months Ended Nine Months Ended
Operating income (loss) (in millions) September 25, 2021 September 26, 2020 September 25, 2021 September 26, 2020
High Purity Cellulose $ 2 $ 8 $ 19 $ 10
Paperboard 2 3 10 14
High-Yield Pulp 8 1 8 —
Corporate (9) (13) (33) (37)
Total operating income (loss) $ 3 $ (1) $ 4 $ (13)

~~The operating results~~ for the three and nine ~~month periods~~months ended September ~~25, 2021 improved by $4~~24, 2022 increased $26 million and ~~$17~~$6 million, respectively, when compared to the same prior year periods ~~ended September 26, 2020. The three months ended September 25, 2021 reflect~~due to higher ~~High Purity Cellulose commodity, Paperboard and High-Yield Pulp~~ sales prices ~~and higher High Purity Cellulose specialty volumes~~across all segments, partially offset by ~~higher input~~increased costs ~~shipping~~resulting from inflation on key inputs, including chemicals, wood fiber and energy costs, lower sales volumes due to supply chain constraints and ~~equipment reliability issues resulting~~lower productivity when comparing the nine-month periods.

Non-Operating Expenses

Included in ~~lower production. The improvement during~~non-operating expenses for the nine months ended September ~~25, 2021~~24, 2022 was primarily driven by higher High Purity Cellulose commodity prices and cellulose specialties sales volumes as well as higher High-Yield Pulp and Paperboard sales prices partly offset by higher input costs, shipping constraints and equipment reliability issues resulting in lower production.

~~Non-operating Expenses~~

~~Interest expense increased $3~~a $5 million and $8 million to $17 million and $49 million during the three and nine months ended September 25, 2021, respectively, when compared to the same prior year periods. The increases were principally driven by the higher interest rate and additional amortization of debt issuance costs related to the December 2020 refinancing of certain debt instruments. See Note 7 — ~~Debt and Finance Leases~~ ~~for further information.~~

~~Included in non-operating expenses during the three and nine months ended September 25, 2021 is a $8 million unrealized loss~~gain associated with the ~~fair value of~~GreenFirst shares ~~of GreenFirst~~ received in connection with the sale of lumber and newsprint assets. A loss of $8 million was recognized on the shares during the three and nine months ended September 25, 2021. The shares were sold in May 2022 for $43 million. See Note 10 — Fair Value Measurements~~for additional information.~~

~~Additionally, we recorded a $2 million net gain on debt extinguishment associated with open-market purchases of the Unsecured Notes. See Note 7 —~~ ~~Debt and Finance Leases~~ to our Consolidated Financial Statements for further information.

Income Tax (Expense) Benefit ~~(Expense)~~

The effective tax rate ~~for~~on the third quarter ~~2021~~2022 income from continuing operations was a benefit of 2411 percent, compared to a benefit of ~~181~~24 percent on the loss from continuing operations in the same quarter of ~~2020.~~ 2021. The effective tax rate on the loss from continuing operations for the nine months ended September 24, 2022 was an expense of 13 percent, compared to a benefit of 59 percent for the comparable prior year period.

The 2022 effective tax rates differ from the statutory rate of 21 percent primarily due to changes in the valuation allowance on disallowed interest deductions in the U.S., nondeductible executive compensation, interest received on overpayments of tax from prior years, U.S. tax credits and tax return-to-accrual adjustments.

The effective tax rate for the nine months ended September 25, 2021 ~~was a benefit of 59 percent compared to a benefit of 84 percent for the comparable prior year period. The 2021 effective tax rate~~ differs from the statutory rate of 21 percent primarily due to a tax benefit recognized by remeasuring ~~the Company’s~~our Canadian deferred tax assets at a higher Canadian blended statutory tax ~~rate in Canada.~~rate. The Canadian statutory tax rate is higher as a result of changing the allocation of income between the Canadian provinces ~~due to~~after the sale of our lumber and newsprint assets. ~~The 2020~~Other factors impacting the effective ~~tax~~benefit rate benefit differs from the federal statutory rate of 21 percent primarily due to the release of certain valuation allowances related to nondeductible interest expense, benefits from the CARES Act, tax return to accrualwere return-to-accrual adjustments and tax credits, partially offset by nondeductible interest expense in the U.S.~~, taxable income generated from the 2020 credit agreement amendment, increases to uncertain tax position reserves, nondeductible executive compensation,~~ and lower tax deductions on vested stock compensation. See Note 16 — Income Taxes to our Consolidated Financial Statements for ~~additional~~further information.

Discontinued Operations

~~Income from discontinued operations,~~The sale of our lumber and newsprint facilities and certain related assets was completed in August 2021. The cash received at closing was preliminary and remains subject to final purchase price and other sale-related adjustments. During the first quarter of 2022, we trued-up certain sale-related items with GreenFirst for a total net cash outflow of ~~taxes, for~~$3 million, as expected and previously disclosed. No adjustments have been made in 2022 to the ~~three months~~gain on sale recorded during the year ended ~~September 25, 2021 was $9 million compared~~December 31, 2021. Pursuant to the terms of the asset purchase agreement, we and GreenFirst continue efforts to finalize the closing inventory valuation adjustment.

During the third quarter of 2022, the U.S. Department of Commerce (the “USDOC”) completed the third administrative review of duties applied to Canadian softwood lumber exports to the U.S. and reduced rates applicable to us to a combined 8.6 percent. We recorded a $16 million ~~for~~gain, pre-tax, in connection with this development and increased the ~~comparable prior period ended September 26, 2020. The decline was driven primarily by lower~~total long-term receivable related to the USDOC’s administrative reviews to $38 million. Cash is not expected to return to us until final resolution of the softwood lumber ~~sales volumes due to only two months of activity in the current quarter, lower lumber prices and higher income tax expense.~~dispute.

2925

~~Table of Contents~~

Income from discontinued operations, net of taxes, during the nine months ended September 25, 2021 was $112 million compared to $1 million for the same prior year period ended September 26, 2020. The improvement was driven by an increase in prices for lumber offset by the impact of Global Intangible Low Taxed Income (“GILTI”) on foreign earnings. The application of GILTI effectively results in double book taxation of the majority of the Company’s high Canadian earnings.

~~We expect minimal cash taxes to be paid in 2021 and 2022 as a result of 2021 earnings associated with discontinued operations.~~

Operating Results by Segment

High Purity Cellulose

Three Months Ended Nine Months Ended
(in millions) September 25, 2021 September 26, 2020 September 25, 2021 September 26, 2020
Net Sales $ 288 $ 253 $ 792 $ 757
Operating income $ 2 $ 8 $ 19 $ 10
Average Sales Prices ($ per metric ton):
High Purity Cellulose $ 1,159 $ 1,020 $ 1,111 $ 983
Sales Volumes (thousands of metric tons):
High Purity Cellulose 225 229 646 709


	Three Months Ended				Nine Months Ended
(in millions)	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Net Sales	$	369	$	288	$	952	$	792
Operating Income	$	22	$	2	$	21	$	19
Average Sales Prices ($ per metric ton)	$	1,402	$	1,159	$	1,329	$	1,111
Sales Volumes (thousands of metric tons)	240		225		653		646

~~Changes in~~Net Sales — Three Months Ended


	Three Months Ended September 25, 2021		Changes Attributable to:				Three Months Ended September 24, 2022
(in millions)			Price		Volume/Mix/Other
Cellulose Specialties	$	186	$	48	$	9	$	243
Commodity Products	75		13		5		93
Other sales (a)	27		—		6		33
Net Sales	$	288	$	61	$	20	$	369

——————————————

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

Net sales of our High Purity Cellulose ~~net sales are as follows:~~

Three Months Ended Changes Attributable to:
Net Sales (in millions)
September 26, 2020 Price Volume/Mix/Other September 25, 2021
Total Net Sales (a) $ 253 $ 15 $ 20 $ 288
(a) includes other sales consisting of electricity, lignin and other by-products to third-parties.

~~Total sales~~segment for the three months ended September ~~25, 2021 improved $35~~24, 2022 increased $81 million when compared to the same prior year quarter. Cellulose specialties sales prices increased 25 percent, inclusive of the $146/MT cost surcharge effective April 2022, and sales volumes increased ~~16 percent driven by improved demand, while sales prices declined by~~ 5 percent ~~during the three months ended September 25, 2021 when compared~~due to the ~~same prior year period.~~impact of contract negotiations. Commodity product sales prices ~~rose 50 percent while commodity product~~and sales volumes ~~decreased 23~~rose 13 percent ~~due~~and 9 percent, respectively, driven by higher demand. Included within net sales for the period was $33 million of other sales, primarily from bio-based energy and lignosulfonates.

Net Sales — Nine Months Ended


	Nine Months Ended September 25, 2021		Changes Attributable to:				Nine Months Ended September 24, 2022
(in millions)			Price		Volume/Mix/Other
Cellulose Specialties	$	521	$	101	$	23	$	645
Commodity Products	196		39		(12)		223
Other sales (a)	75		—		9		84
Net Sales	$	792	$	140	$	20	$	952

——————————————

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

Net sales of ~~cellulose specialties, logistics constraints and the impact of a kiln reliability disruption at the Jesup, GA facility that negatively impacted production by 10,000 metric tons.~~

Nine Months Ended Changes Attributable to:
Net Sales (in millions)
September 26, 2020 Price Volume/Mix/Other September 25, 2021
Total Net Sales (a) $ 757 $ 35 $ 0 $ 792
(a) includes other sales consisting of electricity, lignin and other by-products to third-parties.

~~Total net sales~~our High Purity Cellulose segment for the nine months ended September ~~25, 2021 were $792 million, an improvement of $35~~24, 2022 increased $160 million when compared to the same prior year period. Cellulose specialties sales prices increased 19 percent, inclusive of the $146/MT cost surcharge effective April 2022, and sales volumes ~~improved by 9~~increased 4 percent due to ~~increased demand, while sales prices declined slightly by 3 percent during~~ the ~~year to date ended September 25, 2021 when compared to the same prior year period.~~impact of contract negotiations. Commodity product sales prices ~~increased 34~~rose 19 percent, ~~during the first nine months of 2021 when compared to the same prior year period, however~~driven by higher demand, while commodity product sales volumes decreased 294 percent due to ~~a more favorable mix of cellulose specialties, logistics~~lower production, supply chain constraints and lower commodities volumes in favor of higher specialties volumes. Included within net sales for the ~~extended planned maintenance outage at the Jesup, Georgia facility. Additionally,~~period was $84 million of other sales, ~~were impacted by a kiln reliability disruption at the Jesup, GA facility that negatively impacted production by 10,000 metric tons.~~primarily from bio-based energy and lignosulfonates.

~~Changes in~~

Operating Income — Three Months Ended


	Three Months Ended September 25, 2021			Gross Margin Changes Attributable to:												Three Months Ended September 24, 2022
(in millions)				Sales Price			Sales Volume/ Mix/Other (a)			Cost			SG&A and other
Operating Income	$	2		$	61		$	13		$	(54)		$	—		$	22
Operating Margin %	0.7		%	17.4		%	2.5		%	(14.6)		%	—		%	6.0		%

——————————————

(a) Sales volume computed based on contribution margin.

Operating income of our High Purity Cellulose ~~operating income are as follows~~

~~Table of Contents~~

Three Months Ended Gross Margin Changes Attributable to (a):

(in millions)
September 26, 2020 Sales Price Sales Volume/Mix/Other Cost SG&A and other September 25, 2021
Operating income $ 8 $ 15 $ 17 $ (39) $ 1 $ 2
Operating margin % 3.2 % 5.4 % 5.3 % (13.5) % 0.3 % 0.7 %
(a) Sales Volume computed based on contribution margin.

~~Operating results declined by $6~~segment increased $20 million during the three months ended September ~~25, 2021~~24, 2022 to ~~operating income of $2~~$22 million when compared to the same prior year quarter. Sales prices for the segment increased 1421 percent during the current quarter, driven by ~~higher~~a 25 percent increase, inclusive of the $146/MT cost surcharge, for cellulose specialties and a 13 percent increase for commodity prices. ~~Compared~~Total volumes increased 7 percent when compared to the prior year ~~sales volumes declined 2~~quarter due to 5 percent ~~during the current quarter driven by lower~~and 9 percent increases in cellulose specialties and commodity volumes, ~~shipping constraints and an equipment reliability issue, partially offset by higher cellulose specialties sales volumes. Additionally, costs~~respectively. Costs increased ~~during the third quarter of 2021 primarily due~~compared to the ~~impact of~~prior year period driven by inflation on key ~~material~~ inputs, including chemicals, wood fiber and energy costs, as well as higher ~~maintenance~~supply chain expenses.

Nine Months Ended Gross Margin Changes Attributable to (a):

(in millions)
September 26, 2020 Sales Price Sales Volume/Mix/Other Cost SG&A and other September 25, 2021
Operating income $ 10 $ 35 $ 15 $ (44) $ 3 $ 19
Operating margin % 1.3 % 4.4 % 1.9 % (5.6) % 0.4 % 2.4 %
(a) Sales Volume computed based on contribution margin.
Offsetting higher energy costs in the current period were $2 million of excess emission allowances sales associated with the operations in Tartas, France.

Operating ~~results improved by $9~~Income — Nine Months Ended


	Nine Months Ended September 25, 2021			Gross Margin Changes Attributable to:												Nine Months Ended September 24, 2022
(in millions)				Sales Price			Sales Volume/ Mix/Other (a)			Cost			SG&A and other
Operating Income	$	19		$	140		$	19		$	(154)		$	(3)		$	21
Operating Margin %	2.4		%	14.7		%	1.6		%	(16.2)		%	(0.3)		%	2.2		%

——————————————

(a) Sales volume computed based on contribution margin.

Operating income of our High Purity Cellulose segment increased $2 million during the nine months ended September ~~25, 2021~~24, 2022 to ~~operating income of $19~~$21 million when compared to the same prior year period. Sales prices for the segment increased 1319 percent during the current period driven by 19 percent increases in both cellulose specialties, inclusive of the $146/MT cost surcharge, and commodity prices. Total volumes increased 1 percent, driven by a 4 percent increase in cellulose specialties sales volumes that was almost entirely offset by a 4 percent decrease in commodity product sales volumes that resulted from lower productivity, supply chain constraints and lower commodities volumes in favor of higher specialties volumes. Costs increased compared to the prior year ~~to date~~ period driven by inflation on key inputs, including chemicals, wood fiber and energy costs, as well as higher supply chain expenses, partially offset by improved productivity in the most recent quarter. Offsetting higher energy costs in the current period were $12 million of excess emission allowances sales associated with the operations in Tartas, France.

Paperboard


	Three Months Ended				Nine Months Ended
(in millions)	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Net Sales	$	66	$	52	$	183	$	157
Operating Income	$	12	$	2	$	28	$	10
Average Sales Prices ($ per metric ton)	$	1,587	$	1,184	$	1,450	$	1,149
Sales Volumes (thousands of metric tons)	41		44		126		137

Net Sales — Three Months Ended


	Three Months Ended September 25, 2021		Changes Attributable to:				Three Months Ended September 24, 2022
(in millions)	Three Months Ended September 25, 2021		Price		Volume/Mix		Three Months Ended September 24, 2022
Net Sales	$	52	$	17	$	(3)	$	66

Net sales of our Paperboard segment for the three months ended September 24, 2022 increased $14 million compared to the same prior year period due to a 34 percent increase in sales prices, driven by ~~higher commodity prices. Compared to the prior year,~~strong demand, partially offset by a 7 percent decrease in sales volumes due to lower productivity.

Net Sales — Nine Months Ended


	Nine Months Ended September 25, 2021		Changes Attributable to:				Nine Months Ended September 24, 2022
(in millions)	Nine Months Ended September 25, 2021		Price		Volume/Mix		Nine Months Ended September 24, 2022
Net Sales	$	157	$	38	$	(12)	$	183

Net sales of our Paperboard segment for the ~~segment were impacted by shipping constraints and planned maintenance outages. Total sales volumes for the segment declined 9 percent during the current nine-month period when~~nine months ended September 24, 2022 increased $26 million compared to the same prior year period due to a 26 percent increase in sales prices, driven by ~~lower commodity volumes,~~strong demand, partially offset by ~~higher cellulose specialties~~an 8 percent decrease in sales ~~volumes. Additionally, costs increased during the year to date period ended September 25, 2021 primarily~~volumes due to ~~due to the impact~~lower productivity.

Operating Income — Three Months Ended


	Three Months Ended September 25, 2021			Gross Margin Changes Attributable to:												Three Months Ended September 24, 2022
(in millions)				Sales Price			Sales Volume/Mix (a)			Cost			SG&A and other
Operating Income	$	2		$	17		$	(1)		$	(6)		$	—		$	12
Operating Margin %	3.8		%	23.7		%	(0.3)		%	(9.0)		%	—		%	18.2		%

——————————————

(a) Sales volume computed based on contribution margin.

Operating income of ~~inflation on key material inputs and higher maintenance and logistic expenses.~~

~~Paperboard~~

Three Months Ended Nine Months Ended
(in millions) September 25, 2021 September 26, 2020 September 25, 2021 September 26, 2020
Net Sales $ 52 $ 47 $ 157 $ 140
Operating income $ 2 $ 3 $ 10 $ 14
Average Sales Prices ($ per metric tons):
Paperboard $ 1,184 $ 1,048 $ 1,149 $ 1,082
Sales Volumes (in thousands of metric tons):
Paperboard 44 45 137 130

~~Table of Contents~~

~~Changes in~~our Paperboard ~~net sales are as follows:~~

Three Months Ended September 26, 2020 Changes Attributable to: September 25, 2021
Net Sales
(in millions)
Price Volume/Mix
Paperboard $ 47 $ 6 $ (1) $ 52

~~Sales~~segment for the three months ended September ~~25, 2021~~24, 2022 increased $5 million compared to the three months ended September 26, 2020. During the third quarter ended September 25, 2021, sales volumes decreased 2 percent while sales prices were up 13 percent when compared to the same prior year period.

Nine Months Ended September 26, 2020 Changes Attributable to: September 25, 2021
Net Sales
(in millions)
Price Volume/Mix
Paperboard $ 140 $ 9 $ 8 $ 157

Sales for the nine months ended September 25, 2021 increased $17 million as sales volumes and prices improved by 5 percent and 6 percent, respectively, when compared to the same prior year period. The increased volumes and prices were driven by improved market demand.

~~Changes in Paperboard operating income are as follows:~~

Three Months Ended Gross Margin Changes Attributable to (a):

(in millions)
September 26, 2020 Sales Price Sales Volume/Mix Cost SG&A and other September 25, 2021
Operating income $ 3 $ 6 $ — $ (7) $ — $ 2
Operating margin % 6.4 % 10.6 % 0.3 % (13.5) % — % 3.8 %
(a) Computed based on contribution margin.

~~Operating income for the three months ended September 25, 2021 declined $1~~$10 million when compared to the same prior year period ~~primarily~~ due to higher ~~raw material input costs~~sales prices, partially offset by ~~improvements in sales prices.~~

Nine Months Ended Gross Margin Changes Attributable to (a):

(in millions)
September 26, 2020 Sales Price Sales Volume/Mix Cost SG&A and other September 25, 2021
Operating income $ 14 $ 9 $ 3 $ (16) $ — $ 10
Operating margin % 10.0 % 5.4 % 1.1 % (10.2) % — % 6.4 %
(a) Computed based on contribution margin.

~~Operating results declined by$4 million during the nine months ended September 25, 2021 to operating income of $10 million. The decrease was primarily due to~~ higher raw material ~~input~~pulp, chemicals and logistics costs ~~and higher operational costs partially offset by improvements in~~as well as lower sales ~~prices and volumes driven by increased demand.~~volumes.

Operating Income — Nine Months Ended


	Nine Months Ended September 25, 2021			Gross Margin Changes Attributable to:												Nine Months Ended September 24, 2022
(in millions)				Sales Price			Sales Volume/Mix (a)			Cost			SG&A and other
Operating Income	$	10		$	38		$	(4)		$	(16)		$	—		$	28
Operating Margin %	6.4		%	18.2		%	(0.6)		%	(8.7)		%	—		%	15.3		%

——————————————

(a) Sales volume computed based on contribution margin.

~~Table~~Operating income of ~~Contents~~

~~High-Yield Pulp~~

Three Months Ended Nine Months Ended
(in millions) September 25, 2021 September 26, 2020 September 25, 2021 September 26, 2020
Net Sales $ 42 $ 30 $ 106 $ 91
Operating income (loss) $ 8 $ 1 $ 8 $ —
Average Sales Prices ($ per metric ton):
High-Yield Pulp (a) $ 618 $ 486 $ 549 $ 481
Sales Volumes (in metric tons):
High-Yield Pulp (a) 55 49 154 154
(a) Average sales prices and volumes for external sales only. For the three month period ended September 25, 2021 and September 26, 2020, the High-Yield Pulp segment sold 17,000 metric tons and 16,000 metric tons of high-yield pulp for $8 million and $6 million, respectively, to the Paperboard segment. For the nine months ended September 25, 2021 and September 26, 2020, the High-Yield Pulp segment sold 51,000 metric tons and 50,000 metric tons of high-yield pulp for $22 million and $18 million, respectively, to the Paperboard segment.

~~Table of Contents~~

~~Changes in High-Yield Pulp net sales are as follows:~~

Three Months Ended September 26, 2020 Changes Attributable to: September 25, 2021
Net Sales
(in millions)
Price Volume/Mix
High-Yield Pulp Net Sales $ 30 $ 9 $ 3 $ 42

Sales for the three months ended September 25, 2021 increased $12 million compared to the three months ended September 26, 2020. High-yield pulp sales prices and volumes increased 27 percent and 12 percent, respectively, during the three months ended September 25, 2021 when compared to the same prior year period. The increases were primarily driven by market demand improvements.

Nine Months Ended September 26, 2020 Changes Attributable to: September 25, 2021
Net Sales
(in millions)
Price Volume/Mix
High-Yield Pulp Net Sales $ 91 $ 14 $ 1 $ 106

~~Sales~~our Paperboard segment for the nine months ended September ~~25, 2021~~24, 2022 increased $15 million, or 16 percent, when compared to the comparable period in 2020. High-yield pulp sales prices were up 14 percent while high-yield pulp sales volumes were flat during the period ended September 25, 2021.

~~Changes in High-Yield Pulp operating income are as follows:~~

Three Months Ended Gross Margin Changes Attributable to (a):

(in millions)
September 26, 2020 Sales Price Sales Volume/Mix Cost SG&A and other September 25, 2021
Operating income $ 1 $ 9 $ 2 $ (4) $ — $ 8
Operating margin % 3.3 % 22.3 % 2.9 % (9.5) % — % 19.0 %
(a) Sales Volume computed based on contribution margin.

~~Operating results for the third quarter ended September 25, 2021 increased $7~~$18 million when compared to the same prior year ~~period. Higher high-yield pulp~~period due to higher sales prices, ~~were partly~~partially offset by higher ~~maintenance, wood~~raw material pulp, chemicals and ~~transportation costs.~~logistics costs as well as lower sales volumes.

Nine Months Ended Gross Margin Changes Attributable to (a):

(in millions)
September 26, 2020 Sales Price Sales Volume/Mix Cost SG&A and other September 25, 2021
Operating income (loss) $ — $ 14 $ — $ (6) $ — $ 8
Operating margin % — % 13.3 % (0.1) % (5.7) % — % 7.5 %
(a) Sales Volume computed based on contribution margin.
High-Yield Pulp

~~Operating results~~


	Three Months Ended				Nine Months Ended
(in millions)	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Net Sales	$	40	$	42	$	102	$	106
Operating Income	$	6	$	8	$	4	$	8
Average Sales Prices ($ per metric ton) (a)	$	712	$	618	$	630	$	549
Sales Volumes (metric tons) (a)	45		55		130		154

——————————————

(a) External sales only. For the three months ended September 24, 2022 and September 25, 2021, the High-Yield Pulp segment sold 16,000 metric tons and 17,000 metric tons of high-yield pulp for $7 million and $8 million, respectively, to the Paperboard segment. For the nine months ended September 24, 2022 and September 25, 2021, the High-Yield Pulp segment sold 47,000 metric tons and 51,000 metric tons of high-yield pulp for $20 million and $22 million, respectively, to the Paperboard segment.

Net Sales — Three Months Ended


	Three Months Ended September 25, 2021		Changes Attributable to:				Three Months Ended September 24, 2022
(in millions)			Price		Volume/Mix
Net Sales	$	42	$	4	$	(6)	$	40

Net sales of our High-Yield Pulp segment for the three months ended September 24, 2022 decreased $2 million compared to the same prior year period due to an 18 percent decrease in sales volumes, partially offset by a 15 percent increase in sales prices.

Net Sales — Nine Months Ended


	Nine Months Ended September 25, 2021		Changes Attributable to:				Nine Months Ended September 24, 2022
(in millions)			Price		Volume/Mix
Net Sales	$	106	$	10	$	(14)	$	102

Net sales of our High-Yield Pulp segment for the nine months ended September ~~25, 2021 improved~~24, 2022 decreased $4 million compared to the same prior year period due to a 16 percent decrease in sales volumes,partially offset by $8a 15 percent increase in sales prices.

Operating Income — Three Months Ended


	Three Months Ended September 25, 2021			Gross Margin Changes Attributable to:												Three Months Ended September 24, 2022
(in millions)				Sales Price			Sales Volume/Mix (a)			Cost			SG&A and other
Operating Income	$	8		$	4		$	(3)		$	(3)		$	—		$	6
Operating Margin %	19.0		%	7.1		%	(3.6)		%	(7.5)		%	—		%	15.0		%

——————————————

(a) Sales volume computed based on contribution margin.

Operating income of our High-Yield Pulp segment for the three months ended September 24, 2022 decreased $2 million when compared to the same prior year ~~period. Higher high-yield pulp~~period, as higher sales prices were ~~partly~~more than offset by lower sales volumes due to lower productivity, logistics constraints and higher ~~maintenance, wood~~input and ~~transportation~~supply chain costs.

~~Corporate~~Operating Income — Nine Months Ended

Three Months Ended Nine Months Ended
Operating Income (Loss)
(in millions)
September 25, 2021 September 26, 2020 September 25, 2021 September 26, 2020
Operating loss $ (9) $ (13) $ (33) $ (37)


	Nine Months Ended September 25, 2021			Gross Margin Changes Attributable to:												Nine Months Ended September 24, 2022
(in millions)				Sales Price			Sales Volume/Mix (a)			Cost			SG&A and other
Operating Income	$	8		$	10		$	(6)		$	(8)		$	—		$	4
Operating Margin %	7.5		%	8.0		%	(3.8)		%	(7.8)		%	—		%	3.9		%

——————————————

~~The operating loss~~(a) Sales volume computed based on contribution margin.

Operating income of our High-Yield Pulp segment for the ~~three-month period~~nine months ended September ~~25, 2021 improved by~~24, 2022 decreased $4 million when compared to the same prior year period, ~~primarily~~as higher sales prices were more than offset by lower sales volumes due ~~primarily~~ to ~~favorable foreign currency impacts.~~ lower productivity, logistics constraints and higher input and supply chain costs.

Corporate


	Three Months Ended				Nine Months Ended
(in millions)	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021
Operating Loss	$	(11)	$	(9)	$	(43)	$	(33)

The operating loss of our Corporate segment for the ~~nine-month period~~three months ended September ~~25, 2021, improved~~24, 2022 increased $2 million when compared to the same prior year quarter driven primarily by $4higher variable stock-based compensation costs.

The operating loss of our Corporate segment for the nine months ended September 24, 2022 increased $10 million when compared to the same prior year period driven primarily by ~~lower~~an increase in severance and variable stock-based compensation ~~costs.~~costs, partially offset by favorable foreign exchange impacts.

~~Table of Contents~~

Liquidity and Capital Resources

Overview

Cash flows from operations, primarily driven by operating results, have historically been our primary source of liquidity and capital resources. ~~However, our~~As operating cash flows ~~have been volatile in recent years due to~~can be negatively impacted by fluctuations in market prices for our commodity products, as well as ~~the impact on~~changes in demand ~~driven by the COVID-19 pandemic and the subsequent recovery. In response,~~for our products, we maintain a key focus on cash, managing working capital closely and optimizing the timing and level of our capital expenditures.

Our Board of Directors suspended our quarterly common stock dividend in September 2019. No dividends have been declared since. The declaration and payment of future common stock dividends, if any, will be at the discretion of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements and other factors that the Board of Directors deem relevant. In addition, our debt facilities place limitations on the declaration and payment of future dividends.

In January 2018, our Board of Directors authorized a $100 million common stock share buyback program. We did not repurchase any shares under this program during the three and nine months ended September 24, 2022 and September 25, 2021, and do not expect to utilize any authorization in the near future.

As of September ~~25, 2021,~~24, 2022, we ~~are~~were in compliance with all financial and other customary covenants. We believe our future cash flows from operations and availability under our ABL Credit Facility, as well as our ability to access the capital markets, if necessary or desirable, will be adequate to fund our operations and anticipated long-term funding requirements, including capital expenditures, defined benefit plan contributions and repayment of debt maturities.

~~The~~Our non-guarantor subsidiaries had assets of ~~$730~~$799 million, liabilities of $234 million, year-to-date revenue of ~~$173~~$187 million and a trailing twelve month covenant EBITDA for ~~the last twelve months is a $19 million loss and liabilities~~continuing operations of ~~$267~~$34 million as of September ~~25, 2021.~~24, 2022.

On September 6, 2019, our Board of Directors suspended our quarterly common stock dividend. No dividends have been declared since. The declaration and payment of future common stock dividends, if any, will be at the discretion of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements and other factors the Board of Directors deem relevant. In addition, our debt facilities place limitations on the declaration and payment of future dividends.

On January 29, 2018, our Board of Directors authorized a $100 million common stock share buyback program. For the three and nine months ended September 25, 2021 and September 26, 2020, we did not repurchase any common shares under this buyback program. We do not expect to utilize any further authorization in the near future.

~~A summary of~~Our liquidity and capital resources ~~is shown below (in millions of dollars):~~are summarized below:


		September 25, 2021			December 31, 2020
(in millions, except ratios)								(in millions, except ratios)	September 24, 2022			December 31, 2021
Cash and cash equivalents (a)	Cash and cash equivalents (a)	$	279		$	94		Cash and cash equivalents (a)	$	132		$	253
Availability under the ABL Credit Facility (b)	Availability under the ABL Credit Facility (b)	76			102			Availability under the ABL Credit Facility (b)	128			103
Total debt (c)	Total debt (c)	947			1,084			Total debt (c)	873			929
Stockholders’ equity	Stockholders’ equity	785			695			Stockholders’ equity	780			814
Total capitalization (total debt plus equity)		$	1,732		$	1,779
Total capitalization (total debt plus stockholders’ equity)								Total capitalization (total debt plus stockholders’ equity)	1,653			1,743
Debt to capital ratio	Debt to capital ratio	55		%	61		%	Debt to capital ratio	53		%	53		%

——————————————

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

(b) Amounts available under the ABL Credit Facility fluctuate based on eligible accounts receivable and inventory levels. At September ~~25, 2021,~~24, 2022, we had ~~$116~~$166 million of gross availability and net available borrowings of ~~$76~~$128 million after taking into account standby letters of credit of ~~approximately $40~~$38 million. In addition to the availability under the ABL Credit Facility, we have $23 million available under an accounts receivable factoring line of credit in France.

Other Sources of Cash

In May 2022, we sold our GreenFirst shares for $43 million. See Note 2 — Discontinued Operations to our Consolidated Financial Statements for further information.

In August 2022, we received a U.S. federal tax refund of $23 million. See Note 16 — Income Taxes to our Consolidated Financial Statements for further information.

Cash Requirements

We experienced increased operating expenses and capital spend during the nine months ended September 24, 2022, including for the extensive planned maintenance outages performed in the first half of the year.

Contractual Commitments

Our principal contractual commitments include standby letters of credit, surety bonds, guarantees, purchase obligations and leases. We utilize arrangements such as standby letters of credit and surety bonds to provide credit support for certain suppliers and vendors in case of their default on critical obligations, collateral for certain of our ~~consolidated financial statements~~self-insurance programs and guarantees for the completion of our remediation of environmental liabilities. As part of our ongoing operations, we also periodically issue guarantees to third parties. Our primary purchase obligations payments relate to natural gas, steam energy and wood chips purchase contracts. There have been no material changes to our contractual commitments outside the ordinary course of business during the nine months ended September 24, 2022.

Senior Notes

During the nine months ended September 24, 2022, we repurchased $35 million of our Unsecured Notes through open market transactions and retired the notes for cash of approximately $35 million.

With our next significant debt maturity in mid-2024, we continue to monitor the capital markets and are prepared to opportunistically refinance the Unsecured Notes at the appropriate time considering market conditions and all other relevant factors. We are confident that by executing on our strategy to improve our credit profile, we can obtain a refinancing at acceptable terms based on market conditions. We may also use a portion of our cash balances to opportunistically repay debt or assist in a holistic refinancing of our capital structure.

Canadian Dollar Term Loans

During the nine months ended September 24, 2022, we repaid a Canadian dollar fixed interest rate term loan in the amount of CAD $12 million (USD $9 million). In October 2022, we repaid an additional ~~information.~~term loan in the amount of CAD $12 million (USD $9 million).

Cash Flows ~~(in millions of dollars)~~

The following table summarizes our cash ~~flows from operating, investing and financing activities for the nine months ended:~~flows:

Cash Flows Provided by (Used for): September 25, 2021 September 26, 2020
Operating activities-continuing operations $ 45 $ 57
Operating activities-discontinued operations $ 162 $ 6
Investing activities-continuing operations $ (65) $ (35)
Investing activities-discontinued operations $ 183 $ (7)
Financing activities $ (138) $ (2)

~~Table of Contents~~


	Nine Months Ended
(in millions)	September 24, 2022		September 25, 2021
Cash flows provided by (used in):
Operating activities-continuing operations	$	7	$	45
Operating activities-discontinued operations	—		162
Investing activities-continuing operations	(114)		(65)
Investing activities-discontinued operations	44		183
Financing activities	(51)		(138)

Cash flows provided by operating activities of continuing operations ~~declined $12~~decreased $38 million during the nine months ended September ~~25, 2021~~24, 2022, to ~~$45~~$7 million, when compared to the same prior year period due to ~~higher sales prices across segments~~changes in ~~addition to $27 million~~working capital and other items, which were influenced by the impact of ~~net income tax cash refunds and $20 million~~the extensive planned maintenance outages through the second quarter of ~~CEWS claims received in the period,~~2022, partially offset by ~~higher costs,~~ the ~~impact~~receipt of ~~shipping constraints and lower production. An additional $29~~a $23 million ~~of cash~~U.S. federal tax refunds are expected in the next six to twelve months. The nine months ended September 26, 2020 included a $24 million increase to the U.S. income tax receivable from the passage of the CARES Act in March of 2020.refund.

Cash ~~provided by operating~~flows used in investing activities of ~~discontinued~~continuing operations increased $49 million during the nine months ended September ~~25, 2021 improved by $156 million~~24, 2022 when compared to the same prior year period primarily ~~driven by~~due to increased capital spending related to the ~~increase~~planned maintenance outages in ~~lumber sales prices. In addition, newsprint operations improved driven by sales price increases during~~ the ~~nine months ended September 26, 2021.~~current year.

Cash flows ~~used for~~provided by investing activities of ~~continuing~~discontinued operations ~~increased $30~~decreased $139 million during the nine months ended September ~~25, 2021~~24, 2022, to $44 million, when compared to the same prior year ~~period primarily from increased custodial capital spending.~~period. The ~~increase also includes a $4 million investment~~cash inflow in ~~Anomera, Inc.~~

~~Cash provided by investing activities~~2022 was the result of ~~discontinued operations increased $190 million to $183 million during~~ the ~~nine months ended September 25,~~sale of GreenFirst common stock as well as the first installment on the credit note associated with the sale of our lumber and newsprint assets in August 2021. The cash inflow in 2021 ~~compared to~~consisted of the ~~same prior year period ended. The increase is driven by~~ net cash received in connection with the sale of the lumber and newsprint ~~assets which was completed on August 28, 2021, partially offset by capital expenditures of $8 million during the current period.~~assets.

Cash flows used ~~for~~in financing activities ~~increased by $136~~decreased $87 million during the nine months ended September ~~25, 2021~~24, 2022, to ~~$138~~$51 million, when compared to the same prior year ~~period. The increase is~~period, primarily ~~driven by the open-market purchases~~due to a decrease in repayment of a portion of our Unsecured Notes during the third quarter of 2021. Additionally, cash used to repurchase common stock in lieu of income taxes from the vesting of incentive stock grants was $1 million higher during the current period. The nine months ended September 26, 2020 had $3 million of higher debt issuance costs when compared to the current period. See Note 7 —~~Debt and Finance LeasesandNote 12~~ — ~~Stockholders' Equity, to our consolidated financial statements for additional information.~~long-term debt.

Performance and Liquidity Indicators

The discussion below is presented to enhance the reader’s understanding of our operating performance, liquidity and ability to generate cash and satisfy rating agency and creditor requirements. This information includes the ~~following~~non-GAAP financial measures of ~~financial results:~~ EBITDA, adjusted EBITDA and adjusted free cash flows. These measures are not defined by ~~U.S. Generally Accepted Accounting Principles (“GAAP”)~~GAAP and ~~the~~our discussion of ~~EBITDA, adjusted EBITDA and adjusted free cash flows~~them is not intended to conflict with or change any of ~~the~~our GAAP disclosures ~~described above.~~provided in this Report.

We believe these non-GAAP measures provide useful information to our Board of Directors, management and investors regarding our financial condition and results of operations. Our management uses these non-GAAP measures to compare our performance to that of prior periods for trend analyses, ~~purposes of determining~~to determine management incentive compensation and for budgeting, forecasting and planning purposes. Our management considers these measures, in addition to operating income, to be important ~~to estimate~~in estimating the enterprise and stockholder values of the Company and for making strategic and operating decisions. In addition, analysts, investors and creditors use these measures when analyzing our operating performance, financial condition and ~~cash generating~~cash-generating ability. ~~Our management uses~~We use EBITDA and adjusted EBITDA as performance measures and adjusted free cash flows as a liquidity measure. ~~See~~ ~~Item 2~~ ~~— Note~~

We do not consider non-GAAP measures an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they may exclude significant expense and income items that are required by GAAP to be recognized in our Consolidated Financial Statements. In addition, they reflect the exercise of management’s judgment about which expense and income items are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, reconciliations of our non-GAAP financial measures to their most directly comparable GAAP measures are provided below. Non-GAAP ~~Financial Measures for limitations associated with non-GAAP measures.~~financial measures should not be relied upon, in whole or part, in evaluating the financial condition, results of operations or future prospects of the Company.

EBITDA and Adjusted EBITDA

EBITDA is defined ~~by SEC rules~~ as earnings before interest, taxes, depreciation and amortization. EBITDA is not necessarily indicative of results that may be generated in future periods.

~~Table~~Below are reconciliations of ~~Contents~~

~~Below is a reconciliation of Income (Loss)~~income (loss) from ~~Continuing Operations~~continuing operations to EBITDA from continuing operations, by ~~segment (in millions of dollars):~~segment:


Three Months Ended:		High Purity Cellulose		Paperboard		High-Yield Pulp		Corporate & Other		Total
September 25, 2021
(in millions)												(in millions)	High Purity Cellulose		Paperboard		High-Yield Pulp		Corporate & Other		Total
Three Months Ended September 24, 2022												Three Months Ended September 24, 2022
Income (loss) from continuing operations	Income (loss) from continuing operations	$	2	$	2	$	8	$	(25)	$	(13)	Income (loss) from continuing operations	$	23	$	12	$	6	$	(23)	$	18
Depreciation and amortization	Depreciation and amortization	30		4		1		—		35		Depreciation and amortization	30		3		—		2		35
Interest expense, net	Interest expense, net	—		—		—		17		17		Interest expense, net	—		—		—		17		17
Income tax expense (benefit)		—		—		—		(4)		(4)
EBITDA from continuing operations		$	32	$	6	$	9	$	(12)	$	35
Pension settlement (gain) loss		—		—		—		—		—

Adjusted EBITDA from continuing operations		$	32	$	6	$	9	$	(12)	$	35

September 26, 2020
Income (loss) from continuing operations		$	8	$	3	$	2	$	(1)	$	12
Depreciation and amortization		28		4		1		1		34
Interest expense, net		—		—		—		14		14
Income tax expense (benefit)		—		—		—		(28)		(28)
EBITDA from continuing operations		$	36	$	7	$	3	$	(14)	$	32
Income tax benefit												Income tax benefit	—		—		—		(2)		(2)
EBITDA and Adjusted EBITDA from continuing operations												EBITDA and Adjusted EBITDA from continuing operations	$	53	$	15	$	6	$	(6)	$	68

Nine Months Ended:		High Purity Cellulose		Paperboard		High-Yield Pulp		Corporate & Other		Total
September 25, 2021

Three Months Ended September 25, 2021												Three Months Ended September 25, 2021
Income (loss) from continuing operations												Income (loss) from continuing operations	$	2	$	2	$	8	$	(25)	$	(13)
Depreciation and amortization												Depreciation and amortization	30		4		1		—		35
Interest expense, net												Interest expense, net	—		—		—		17		17
Income tax benefit												Income tax benefit	—		—		—		(4)		(4)
EBITDA from continuing operations												EBITDA from continuing operations	32		6		9		(12)		35

Gain on debt extinguishment												Gain on debt extinguishment	—		—		—		(2)		(2)
Adjusted EBITDA from continuing operations												Adjusted EBITDA from continuing operations	$	32	$	6	$	9	$	(14)	$	33

Nine Months Ended September 24, 2022												Nine Months Ended September 24, 2022

Income (loss) from continuing operations	Income (loss) from continuing operations	$	20	$	11	$	9	$	(61)	$	(21)	Income (loss) from continuing operations	$	22	$	29	$	5	$	(87)	$	(31)
Depreciation and amortization	Depreciation and amortization	85		11		2		3		101		Depreciation and amortization	83		10		1		2		96
Interest expense, net	Interest expense, net	—		—		—		49		49		Interest expense, net	—		—		—		49		49
Income tax expense (benefit)		—		—		—		(29)		(29)
Income tax expense												Income tax expense	—		—		—		3		3
EBITDA from continuing operations	EBITDA from continuing operations	$	105	$	22	$	11	$	(38)	$	100	EBITDA from continuing operations	105		39		6		(33)		117
Pension settlement (gain) loss		—		—		—		1		1

Pension settlement loss												Pension settlement loss	—		—		—		1		1
Severance												Severance	—		—		—		4		4

Adjusted EBITDA from continuing operations	Adjusted EBITDA from continuing operations	$	105	$	22	$	11	$	(37)	$	101	Adjusted EBITDA from continuing operations	$	105	$	39	$	6	$	(28)	$	122

September 26, 2020
Nine Months Ended September 25, 2021												Nine Months Ended September 25, 2021
Income (loss) from continuing operations	Income (loss) from continuing operations	$	8	$	15	$	2	$	(33)	$	(8)	Income (loss) from continuing operations	$	20	$	11	$	9	$	(61)	$	(21)
Depreciation and amortization	Depreciation and amortization	85		11		2		3		101		Depreciation and amortization	85		11		2		3		101
Interest expense, net	Interest expense, net	—		—		—		40		40		Interest expense, net	—		—		—		49		49
Income tax expense (benefit)		—		—		—		(47)		(47)
Income tax benefit												Income tax benefit	—		—		—		(29)		(29)
EBITDA from continuing operations	EBITDA from continuing operations	$	93	$	26	$	4	$	(37)	$	86	EBITDA from continuing operations	105		22		11		(38)		100
Pension settlement loss												Pension settlement loss	—		—		—		1		1

Gain on debt extinguishment												Gain on debt extinguishment	—		—		—		(2)		(2)
Adjusted EBITDA from continuing operations												Adjusted EBITDA from continuing operations	$	105	$	22	$	11	$	(39)	$	99

~~EBITDA from continuing operations for~~For the three and nine months ended September ~~25, 2021 improved by $3~~24, 2022, EBITDA from continuing operations increased $33 million and ~~$15~~$17 million, respectively, and Adjusted EBITDA from continuing operations increased $35 million and $23 million, respectively, when compared to the same ~~periods ended September 26, 2020,~~prior year periods. These increases were primarily ~~from favorable operating results~~ driven by higher ~~High Purity Cellulose~~sales prices across all segments, partially offset by higher ~~operational costs.~~key input and logistics costs due to inflation, lower volumes due to supply chain constraints and lower productivity when comparing the nine-month periods. For ~~the~~a full discussion of changes to operating income, see ~~Management’s Discussion of~~ Results of ~~Operations.~~Operations above.

Adjusted Free Cash Flows

Adjusted free cash flows is defined as cash provided by operating activities of continuing operations adjusted for capital expenditures, net of proceeds from the sale of assets and excluding strategic capital ~~expenditures.~~expenditures deemed discretionary by management. Adjusted free cash flows, as defined by ~~the Company,~~us, is a non-GAAP measure of cash generated during a period which is available for debt reduction, strategic

~~Table of Contents~~

capital expenditures and acquisitions and repurchase of ~~the Company’s~~our common stock. Adjusted free cash flows is not necessarily indicative of the adjusted free cash flows that may be generated in future periods.

Below is a reconciliation of cash flows from operations of continuing operations to adjusted free cash flows of- continuing operations for the respective ~~periods (in millions of dollars):~~periods:

Nine Months Ended
Cash Flows from Operations to Adjusted Free Cash Flows Reconciliation September 25, 2021 September 26, 2020
Cash provided by (used for) operating activities - continuing operations $ 45 $ 57
Capital expenditures (a) (51) (25)
Adjusted Free Cash Flows $ (6) $ 32


	Nine Months Ended
(in millions)	September 24, 2022		September 25, 2021
Cash provided by operating activities-continuing operations	$	7	$	45
Capital expenditures (a)	(92)		(51)
Adjusted Free Cash Flows-continuing operations	$	(85)	$	(6)

——————————————

(a) ~~Capital expenditures exclude strategic capital expenditures which are deemed discretionary by management.~~ Strategic expenditures for the ~~first~~ nine months ofended 2022 and 2021 were approximately $22 million and $10 ~~million. Strategic capital expenditures for the same period of 2020 were approximately $10 million.~~million, respectively.

Adjusted free cash flows of continuing operations declined ~~primarily~~ due to changes in working capital and other items as well as higher capital expenditures. For ~~the~~a full discussion of operating cash flows, see ~~Management’s Discussion and Analysis of~~ Cash ~~Flows.~~Flows above.

~~Contractual Financial Obligations and Off-Balance Sheet Arrangements~~

~~We have no material changes outside the ordinary course of business to the Contractual Financial Obligations table as presented in Item 7 —~~ ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~ ~~in our 2020 Annual Report on Form 10-K.~~

~~See Note 18 —Commitments and Contingencies~~ ~~for details on our letters of credit and surety bonds as of September 25, 2021.~~


~~Item 3.~~			Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market and Other Economic Risks

We are exposed to various market risks, primarily changes in interest rates, foreign currency and commodity prices. Our objective is to minimize the economic impact of these market risks. We may use derivatives in accordance with policies and procedures approved by the Audit Committee of our Board of Directors. Derivatives are managed by a senior executive committee whose responsibilities include initiating, managing and monitoring resulting exposures. See Note 9 — Derivative Instruments to our Consolidated Financial Statements for ~~additional~~further information.

We manage our foreign currency exposures by balancing certain assets and liabilities denominated in foreign currencies. We previously have used, and may do so again, ~~used~~ foreign currency forward contracts to manage these exposures. The principal objective of such contracts is to minimize the potential volatility and financial impact of changes in foreign currency exchange rates. We do not utilize financial instruments for trading or other speculative purposes.

The prices, sales volumes and margins of the commodity products of our High Purity Cellulose segment and all the products of the High-Yield Pulp segment have historically been cyclically affected by economic and market shifts, fluctuations in capacity and changes in foreign currency exchange rates. In general, these products are commodities that are widely available from other ~~producers; because~~producers. Because these products have few distinguishing qualities from producer to producer, competition is based primarily on price, which is determined by supply relative to demand. The overall levels of demand for the products we manufacture, and consequently our sales and profitability, reflect fluctuations in end user demand. Our cellulose specialties product prices are impacted by market supply and demand, raw material and processing costs, changes in global currencies and other factors. While these prices are not directly correlated to commodity dissolving wood pulp and paper pulp prices, changes in commodity dissolving wood pulp and paper pulp prices may impact ~~competitors'~~competitors’ actions which can lead to an impact in prices for cellulose specialties products. In addition, ~~approximately~~slightly over half of our cellulose specialties contracted volumes are under multi-year contracts that expire between ~~2021~~2022 and ~~2023.~~

2024.

As of September ~~25, 2021,~~24, 2022, we had $1$2 million of variable rate debt which is subject to interest rate risk. At this borrowing level, a hypothetical ~~one-percentage point increase/decrease~~one percent change in interest rates would result in an immaterial increase/decrease in interest payments and expense over a 12-month period.

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The fair market value of our long-term fixed interest rate debt is also subject to interest rate risk. However, we intend to hold most of our debt until maturity. The estimated fair value of our fixed-rate debt at September ~~25, 2021~~24, 2022 was ~~$989~~$823 million compared to the ~~$944~~$869 million carrying value of principal amount. We use quoted market prices to estimate the fair value of our fixed-rate debt. Generally, the fair market value of fixed-rate debt will increase as interest rates fall and decrease as interest rates rise.

We may periodically enter into commodity forward contracts to fix some of our energy costs that are subject to price volatility caused by weather, supply conditions, political and economic variables and other unpredictable factors. Such forward contracts partially mitigate the risk of changes to our gross margins resulting from an increase or decrease in these costs. Forward contracts ~~which~~that are derivative instruments are reported in the consolidated balance sheets at their fair values, unless they qualify for the normal purchase normal sale ~~("NPNS"~~(“NPNS”) exception and such exception has been elected. If the NPNS exception is elected, the fair values of such contracts are not recognized on the balance sheet.


~~Item 4.~~			Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining adequate disclosure controls and procedures. Disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)), are designed with the objective of ensuring that information required to be disclosed in reports filed under the Exchange Act, such as this quarterly report on Form 10-Q, is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Because of the inherent limitations in all control systems, no control evaluation can provide absolute assurance that all control exceptions and instances of fraud have been prevented or detected on a timely basis. Even systems determined to be effective can provide only reasonable assurance their objectives are achieved.

Based on an evaluation of our disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q, our management, including the Chief Executive Officer and Chief Financial Officer, concluded the design and operation of the disclosure controls and procedures were effective as of September ~~25, 2021.~~24, 2022.

During the quarter ended September ~~25, 2021,~~24, 2022, based upon the evaluation required by paragraph (d) of SEC Rule 13a-15, there were no changes in our internal control over financial reporting that would materially affect or are reasonably likely to materially affect our internal control over financial reporting.

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~~Part II.~~			Part II. Other Information


~~Item 1.~~			Item 1. Legal Proceedings

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 its business. While the Company has procured reasonable and customary insurance covering risks normally occurring in connection with its businesses, 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. While there can be no assurance, the ultimate outcome of these actions, either individually or in the aggregate, is not expected to have a material adverse effect on the Company’s financial position, results of operations or cash ~~flows, except as may be noted below.~~

~~Final Settlement Reached in Dispute with IESO Relating to Investigation of the Kapuskasing Newsprint Facility~~

From the period from 2014 to early 2021, the Market Assessment and Compliance Division (“MACD”) branch of the Independent Electricity System Operator (“IESO”), the governmental agency responsible for operating the wholesale electricity market and directing the operation of the bulk electrical system in the province of Ontario, Canada, had been engaged in reviewing the Company's compliance with the published rules that govern the operation of the wholesale electricity market in Ontario, Canada. The inquiry was focused primarily on payments made by IESO to the Company between 2010 and 2019 under market rules in connection with multiple planned, extended and unplanned forced outages that caused extensive downtime, in full or in part, of the Company’s Kapuskasing, Ontario newsprint facility.

In May 2020, MACD finalized two of its four investigations into the Company’s electricity management practices at its Kapuskasing newsprint facility and issued orders asserting penalties of CAD $25 million. These orders called for the Company to pay penalties of CAD $3 million immediately and CAD $12 million over a 10-year period, with the remaining CAD $10 million to be deferred and ultimately forgiven assuming the Company otherwise complied with the orders’ remaining terms. The Company, which maintained it had complied in all material respects with the published rules, vigorously contested IESO’s orders, including through the filing of judicial review proceedings with the divisional Court (Superior Court of Justice) of Ontario seeking invalidation of the orders. At the time these orders were issued, the remaining two investigations remained open, subjecting the Company to the risk that MACD may in the future issue additional orders upon finalization of these additional investigations.

On April 19, 2021, the Company and IESO entered into Minutes of Settlement (“MOS”) pursuant to which the parties agreed to fully and finally settle all claims relating to all four of the investigations (whether completed or not) and related orders, the judicial review proceedings and underlying disputes. As part of the settlement, the Company agreed to a fixed obligation to pay a sum of CAD $12 million over a period of 5 years comprised of a CAD $4.5 million up-front payment and a CAD $7.5 payment to be spread (on a front-weighted basis) over the next 5 anniversaries of the MOS, without interest. In addition to the foregoing, the MOS provides that a “suspended” sum of CAD $10.4 million would become due and payable in the event the Company fails to comply with any of the terms and conditions of the MOS or commits an event of default, as defined under the applicable market rules, unless such breach or event of default is remedied on a timely basis. This contingent “suspended” sum decreases annually as the scheduled fixed, or non-contingent, payments are made under the MOS. Assuming no uncured event of default or breach occurs during the repayment period, upon full payment of the CAD $12 million, the entire "suspended" sum shall be extinguished and RYAM shall be released from any payment obligation with respect thereto.

~~Given the parties’ finalization of and entry into the MOS, the Company considers this matter concluded (subject only to the parties’ obligations yet to be performed under the MOS).~~flows.


~~Item 1A.~~			Item 1A. Risk Factors

In addition to the risk factors previously disclosed in our ~~2020~~2021 Annual Report on Form 10-K, the following risk ~~factors are~~factor is hereby added:

~~Merger~~Our business, financial condition and ~~Acquisition Risk~~results of operations could be adversely affected by disruptions in the global economy caused by the ongoing conflict between Russia and Ukraine or other geopolitical conflict.

•~~Approximately fifteen percent (15%)~~The military conflict between Russia and Ukraine, along with economic sanctions placed by Western countries on certain industry sectors and parties in Russia, have negatively impacted the global economy. While we have no direct operations in Russia or Ukraine, we have significant operations in Europe which have experienced shortages in key input materials and increased costs for transportation, energy, and raw materials due to this conflict. Further escalation of geopolitical tensions could result in, among other things, gas shortages in Europe and disruptions of operations for us, our customers and our suppliers, cyberattacks, lower consumer demand and changes to foreign exchange rates and financial markets, any of which would adversely affect our business. These impacts could also directly affect North America and adversely impact our operations in this region. In addition, the effects of the ~~purchase price for the GreenFirst transaction was received~~ongoing conflict could heighten many of our known risks described in ~~the common shares~~ this Item 1A — Risk Factors of ~~the capital of GreenFirst (to be held by the Company for a minimum of six (6) months following transaction~~

~~Table of Contents~~

~~closing), and the Company’s ability to ultimately realize the benefit of this consideration is subject to market conditions and GreenFirst’s future performance.~~

our 2021 Annual Report on Form 10-K.


~~Item 2.~~			Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table provides information regarding our purchases of Rayonier Advanced Materials common stock during the quarter ended September ~~25, 2021:~~24, 2022:


~~Period~~	Total Number of Shares Purchased ~~(b)~~(a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ~~(a)~~(b)
June 2726 to July 30	—	$	—	—	$	60,294,000
July 31 to August 27	—	$	—	—	$	60,294,000
August ~~1 to August~~ 28	—	$	—	—	$	~~60,294,000~~
~~August 29~~ to September 2524	—	$	—	—	$	60,294,000
Total	—			—

——————————————

(a) Repurchased to satisfy the tax withholding requirements related to the issuance of stock under the Rayonier Advanced Materials Incentive Stock Plan.

(b) As of September ~~25, 2021,~~24, 2022, approximately $60 million of share repurchase authorization remains under the authorization declared by the Board of Directors on January 29, 2018.

~~(b) Repurchased to satisfy the tax withholding requirements related to the issuance of stock under the Rayonier Advanced Materials Incentive Stock Plan.~~

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~~Item 6.~~			Item 6. Exhibits


3.1	Amended and Restated Certificate of Incorporation of Rayonier Advanced Materials Inc.	Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed on June 30, 2014
3.2	Certificate of Designations of 8.00% Series A Mandatory Convertible Preferred Stock of Rayonier Advanced Materials Inc., filed with the Secretary of State of the State of Delaware and effective August 10, 2016	Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed on August 10, 2016
3.3	Amended and Restated Bylaws of Rayonier Advanced Materials ~~Inc~~Inc.	Incorporated herein by reference to Exhibit ~~3.2~~3.1 to the Registrant’s Form 8-K filed on ~~June 30, 2014~~October 19, 2022
3.4	Certificate of Designations of Series A Junior Participating Preferred Stock	Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed on March 21, 2022
4.1	Rights Agreement dated as of March 21, 2022, between Rayonier Advanced Materials Inc. and Computershare Trust Company, N.A., which includes the form of Certificate of Designations as Exhibit A, the form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C	Incorporated herein by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed on March 21, 2022
10.1	Seventh Amendment to Retirement Plan for Salaried Employees of Rayonier Advanced Materials Inc., effective December 31, 2022	Filed herewith
10.2	First Amendment to Rayonier Advanced Materials Inc. Excess Benefit Plan, effective December 31, 2022	Filed herewith
31.1	Chief Executive Officer’s Certification Pursuant to Rule 13a-14(a)/15d-14(a) and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
31.2	Chief Financial Officer’s Certification Pursuant to Rule 13a-14(a)/15d-14(a) and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
32	Certification of Periodic Financial Reports Under Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith
101	~~The following financial information from our Quarterly Report on Form 10-Q for the three and nine months ended September 25, 2021 formatted~~Interactive data files (formatted in ~~Extensible Business Reporting Language (“XBRL”), includes: (i) the Condensed Consolidated Statements~~Inline XBRL) pursuant to Rule 405 of Income (Loss) and Comprehensive Income (Loss) for the Three and Nine Months Ended September 25, 2021 and September 26, 2020; (ii) the Condensed Consolidated Balance Sheets as of September 25, 2021 and December 31, 2020; (iii) the Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 25, 2021 and September 26, 2020; and (iv) the Notes to Condensed Consolidated Financial StatementsRegulation S-T	Filed herewith
104	Cover ~~Page Interactive Data File - formatted as~~page interactive data file (formatted in Inline XBRL and contained in Exhibit ~~101~~101) pursuant to Rule 406 of Regulation S-T	Filed herewith

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Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		Rayonier Advanced Materials Inc.
	~~(Registrant)~~

By:	/s/ MARCUS J. MOELTNER
	Marcus J. Moeltner Chief Financial Officer and Senior Vice President, Finance (Duly Authorized Officer and Principal Financial Officer)

Date: November ~~4, 2021~~2, 2022

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Item		Page
	Part I — Financial Information
1.	Financial Statements (U naudited)
	Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the Three and Nine Months Ended September 25 , 2021 and September 26 , 2020	1
	Consolidated Balance Sheets as of September 25 , 2021 and December 31, 2020	3
	Consolidated Statements of Cash Flows for the Nine Months Ended Se ptember 25 , 2021 and September 26, 2020	4
	Notes to Consolidated Financial Statements	5
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
3.	Quantitative and Qualitative Disclosures about Market Risk	38
4.	Controls and Procedures	39
	Part II — Other Information
1.	Legal Proceedings	40
1A.	Risk Factors	40
2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
6.	Exhibits	42
	Signature	43


	September 25, 2021
Remainder of 2021	$	1,484
2022	5,875
2023	4,998
2024	1,481
2025	648
Thereafter	462
Total minimum lease payments	$	14,948
Less: imputed interest	(1,262)
Present value of future minimum lease payments	$	13,686


	Finance Lease Payments		Debt Principal Payments
Remainder of 2021	$	129	$	4,703
2022	515		30,115
2023	515		10,232
2024	515		379,338
2025	515		10,195
Thereafter	472		519,105
Total principal payments	$	2,661	$	953,688
Less: Imputed interest	433
Present value minimum finance lease payments	$	2,228


	Three Months Ended September 25, 2021
Derivatives Designated as Hedging Instruments	Gain (Loss) Recognized in OCI on Derivative		Gain (Loss) Reclassified from AOCI into Income		Location on Statement of Income



Foreign exchange forward contracts	$	—	$	(99)	Interest income and other, net

	Three Months Ended September 26, 2020
	Gain (Loss) Recognized in OCI on Derivative		Gain (Loss) Reclassified from AOCI into Income		Location on Statement of Income
Interest rate swaps	$	273	$	(595)	Interest expense
Foreign exchange forward contracts	$	2,176	$	223	Other operating income (expense), net
Foreign exchange forward contracts	$	3,197	$	(3,197)	Cost of sales
Foreign exchange forward contracts	$	1,992	$	1,316	Interest income and other, net

	Nine Months Ended September 25, 2021
Derivatives Designated as Hedging Instruments	Gain (Loss) Recognized in OCI on Derivative		Gain (Loss) Reclassified from AOCI into Income		Location on Statement of Income


Foreign exchange forward contracts	$	—	$	4,088	Cost of sales
Foreign exchange forward contracts	$	—	$	(301)	Interest income and other, net

	Nine Months Ended September 26, 2020
Derivatives Designated as Hedging Instruments	Gain (Loss) Recognized in OCI on Derivative		Gain (Loss) Reclassified from AOCI into Income		Location on Statement of Income
Interest rate swaps	$	(1,709)	$	(1,431)	Interest expense
Foreign exchange forward contracts	$	(18,442)	$	(771)	Other operating income (expense), net
Foreign exchange forward contracts	$	6,666	$	(6,666)	Cost of sales
Foreign exchange forward contracts	$	(2,718)	$	(3,281)	Interest income and other, net


	September 25, 2021		December 31, 2020

Foreign exchange cash flow hedges	$	(934)	$	1,834


	At closing of transaction		At period end
Expected Term	0.5 years		0.425 years
Risk-free rate	0.20	%	0.15	%
Dividend yield	—		—
Volatility	92.04	%	88.79	%

DLOM	14.38	%	12.90	%


	Three Months Ended				Nine Months Ended
Net sales (in millions)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
High Purity Cellulose	$	288	$	253	$	792	$	757
Paperboard	52		47		157		140
High-Yield Pulp	42		30		106		91

Eliminations	(8)		(7)		(21)		(16)
Total net sales	$	374	$	323	$	1,034	$	972


	Three Months Ended				Nine Months Ended
Operating income (loss) (in millions)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
High Purity Cellulose	$	2	$	8	$	19	$	10
Paperboard	2		3		10		14
High-Yield Pulp	8		1		8		—
Corporate	(9)		(13)		(33)		(37)
Total operating income (loss)	$	3	$	(1)	$	4	$	(13)


Three Months Ended				Gross Margin Changes Attributable to (a):
(in millions)	September 26, 2020			Sales Price			Sales Volume/Mix/Other			Cost			SG&A and other			September 25, 2021
Operating income	$	8		$	15		$	17		$	(39)		$	1		$	2
Operating margin %	3.2		%	5.4		%	5.3		%	(13.5)		%	0.3		%	0.7		%
(a) Sales Volume computed based on contribution margin.


	Three Months Ended				Nine Months Ended
Operating Income (Loss) (in millions)	September 25, 2021		September 26, 2020		September 25, 2021		September 26, 2020
Operating loss	$	(9)	$	(13)	$	(33)	$	(37)


Cash Flows Provided by (Used for):	September 25, 2021		September 26, 2020
Operating activities-continuing operations	$	45	$	57
Operating activities-discontinued operations	$	162	$	6
Investing activities-continuing operations	$	(65)	$	(35)
Investing activities-discontinued operations	$	183	$	(7)
Financing activities	$	(138)	$	(2)


	Nine Months Ended
Cash Flows from Operations to Adjusted Free Cash Flows Reconciliation	September 25, 2021		September 26, 2020
Cash provided by (used for) operating activities - continuing operations	$	45	$	57
Capital expenditures (a)	(51)		(25)
Adjusted Free Cash Flows	$	(6)	$	32