~~Table of Contents~~

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 24, 2022~~July 1, 2023


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


For the transition period from to			~~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

Principal Executive Office:

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:~~

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

Title of each class

Trading ~~Symbol(s)~~Symbol

Name of ~~each~~ exchange on which registered

Common ~~Stock,~~stock, par value $0.01 ~~par value~~per share

RYAM

New York Stock Exchange

Securities to be registered pursuant to Section 12(g) of the Act: None

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 ~~63,971,166~~65,343,418 shares of common stock ~~$.01 par value per share,~~ outstanding as of ~~October 31, 2022.~~August 7, 2023.

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~~Loss			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~~Stockholders’ Equity			4
Consolidated Statements of Cash Flows			5
Notes to Consolidated Financial Statements			56
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			2019
Item 3. Quantitative and Qualitative Disclosures about Market Risk			3430
Item 4. Controls and Procedures			3531

Part II. Other Information
Item 1. Legal Proceedings			3632
Item 1A. Risk Factors			3632
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			3632
Item 6. Exhibits			3733

Signature			3834

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Glossary

The following terms and abbreviations appearing in the text of this report have the meanings indicated below.


2022 Form 10-K			RYAM Annual Report on Form 10-K for the year ended December 31, 2022
2024 Notes			$550 million original aggregate principal amount of 5.50 percent senior unsecured notes due 2024, issued May 2014
2026 Notes			$500 million original aggregate principal amount of 7.625 percent senior secured notes due 2026, issued December 2020
2027 Term Loan			$250 million original aggregate principal amount of variable rate term loan maturing July 2027, entered into July 2023
ABL Credit Facility			5-year senior secured asset-based revolving credit facility due December 2025
AETR			Annual effective tax rate
AOCI			Accumulated other comprehensive income (loss)
CAD			Canadian dollar
CEWS			Canada Emergency Wage Subsidy
CNC			Carboxylated cellulose nanocrystals
DTA			Deferred tax asset
EBITDA			Earnings before interest, taxes, depreciation and amortization
Exchange Act			Securities Exchange Act of 1934, as amended
Financial Statements			Consolidated financial statements included in Part I Item 1 of this Quarterly Report on Form 10-Q
GAAP			United States generally accepted accounting principles
GreenFirst			GreenFirst Forest Products, Inc.
IESO			Independent Electricity System Operator
LTF			LignoTech Florida LLC
MACD			Market Assessment and Compliance Division
MOS			Minutes of Settlement
MT			Metric ton
Purchase Right			Board-declared dividend of one preferred share purchase right for each outstanding share of RYAM common stock
ROU			Right-of-use
RYAM, the Company, our, we, us			Rayonier Advanced Materials Inc. and its consolidated subsidiaries
SEC			United States Securities and Exchange Commission
SG&A			Selling, general and administrative expense
SOFR			Secured Overnight Financing Rate
TSA			Transition Services Agreement
TSR			Total shareholder return
U.S.			United States of America
USD			United States of America dollar
USDOC			United States Department of Commerce

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

Rayonier Advanced Materials Inc.

Consolidated Statements of Operations

(Unaudited)

(in thousands, except per share amounts)

Three Months Ended Nine Months Ended
September 24, 2022 September 25, 2021 September 24, 2022 September 25, 2021
Net Sales $ 466,346 $ 374,014 $ 1,217,282 $ 1,033,712
Cost of Sales (419,804) (354,678) (1,138,118) (971,672)
Gross Margin 46,542 19,336 79,164 62,040
Selling, general and administrative expenses (19,905) (17,473) (68,041) (51,548)
Foreign exchange gains 3,025 3,315 4,480 582
Other operating expense, net (1,133) (2,352) (5,764) (7,345)
Operating Income 28,529 2,826 9,839 3,729
Interest expense (16,433) (17,185) (49,318) (49,003)
Interest income and other, net 4,071 2,113 6,241 379
Other components of pension and OPEB, excluding service costs 1,009 803 1,910 1,545
Gain (loss) on GreenFirst equity securities — (7,955) 5,197 (7,955)
Gain on debt extinguishment 46 2,326 519 2,326
Income (Loss) from Continuing Operations Before Income Taxes 17,222 (17,072) (25,612) (48,979)
Income tax (expense) benefit (Note 16) 1,824 4,101 (3,230) 28,665
Equity in loss of equity method investment (691) (423) (2,127) (994)
Income (Loss) from Continuing Operations 18,355 (13,394) (30,969) (21,308)
Income from discontinued operations, net of taxes (Note 2) 11,252 8,636 12,458 111,751
Net Income (Loss) $ 29,607 $ (4,758) $ (18,511) $ 90,443
Basic Earnings Per Common Share (Note 13)
Income (loss) from continuing operations $ 0.29 $ (0.21) $ (0.48) $ (0.33)
Income from discontinued operations 0.18 0.14 0.20 1.76
Net income (loss) per common share-basic $ 0.47 $ (0.07) $ (0.28) $ 1.43
Diluted Earnings Per Common Share (Note 13)
Income (loss) from continuing operations $ 0.28 $ (0.21) $ (0.48) $ (0.33)
Income from discontinued operations 0.17 0.14 0.20 1.76
Net income (loss) per common share-diluted $ 0.45 $ (0.07) $ (0.28) $ 1.43


	Three Months Ended				Six Months Ended
	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
Net sales	$	385,413	$	399,220	$	852,174	$	750,936
Cost of sales	(370,785)		(372,525)		(800,106)		(718,314)
Gross margin	14,628		26,695		52,068		32,622
Selling, general and administrative expense	(17,996)		(28,029)		(37,491)		(48,137)
Foreign exchange gain (loss)	(1,461)		1,950		(2,134)		1,454
Other operating expense, net	(1,627)		(3,513)		(2,305)		(4,629)
Operating income (loss)	(6,456)		(2,897)		10,138		(18,690)
Interest expense	(15,438)		(16,687)		(30,934)		(32,885)
Other components of pension and OPEB, excluding service costs (Note 14)	399		(109)		(1,335)		901
Gain (loss) on GreenFirst equity securities (Note 2)	—		(3,703)		—		5,197

Other income, net	3,307		3,155		3,613		2,642
Loss from continuing operations before income taxes	(18,188)		(20,241)		(18,518)		(42,835)
Income tax (expense) benefit (Note 15)	3,249		(3,656)		5,835		(5,052)
Equity in loss of equity method investment	(683)		(1,046)		(1,332)		(1,436)
Loss from continuing operations	(15,622)		(24,943)		(14,015)		(49,323)
Income (loss) from discontinued operations, net of taxes (Note 2)	(1,128)		1,676		(1,128)		1,205
Net loss	$	(16,750)	$	(23,267)	$	(15,143)	$	(48,118)

Basic and Diluted earnings per common share (Note 12)
Loss from continuing operations	$	(0.24)	$	(0.39)	$	(0.22)	$	(0.77)
Income (loss) from discontinued operations	(0.02)		0.03		(0.02)		0.02
Net loss per common share	$	(0.26)	$	(0.36)	$	(0.24)	$	(0.75)

See Notes to Consolidated Financial Statements.

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Rayonier Advanced Materials Inc.

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

(Unaudited)

(in thousands)

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


	Three Months Ended				Six Months Ended
	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
Net loss	$	(16,750)	$	(23,267)	$	(15,143)	$	(48,118)
Other comprehensive income (loss), net of tax (Note 10)
Foreign currency translation adjustment	(109)		(9,582)		4,103		(15,864)
Unrealized gain on derivative instruments	48		77		103		157
Net gain (loss) on employee benefit plans	(2,240)		1,948		(2,367)		3,896
Total other comprehensive income (loss)	(2,301)		(7,557)		1,839		(11,811)
Comprehensive loss	$	(19,051)	$	(30,824)	$	(13,304)	$	(59,929)

See Notes to Consolidated Financial Statements.

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Rayonier Advanced Materials Inc.

Consolidated Balance Sheets

(Unaudited)

(in thousands, except share and par value amounts)

September 24, 2022 December 31, 2021
Assets
Current Assets
Cash and cash equivalents $ 131,673 $ 253,307
Accounts receivable, net (Note 3) 217,358 181,604
Inventory (Note 4) 269,526 230,691
Income tax receivable 1,051 21,411
Investment in GreenFirst equity securities (Note 10) — 38,510
Prepaid and other current assets 68,652 50,597
Total current assets 688,260 776,120
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 327,807 335,119
Intangible Assets, net 26,175 31,432
Other Assets 162,051 156,191
Total Assets $ 2,336,421 $ 2,445,024
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable $ 154,140 $ 169,456
Accrued and other current liabilities (Note 6) 153,566 136,124
Debt due within one year (Note 7) 21,554 37,680
Current environmental liabilities (Note 8) 11,273 11,303
Total current liabilities 340,533 354,563
Long-Term Debt (Note 7) 851,006 891,031
Long-Term Environmental Liabilities (Note 8) 159,027 159,919
Pension and Other Postretirement Benefits 159,149 170,317
Deferred Tax Liabilities 16,782 20,485
Other Liabilities 30,201 34,366
Commitments and Contingencies (Note 18)
Stockholders’ Equity
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 417,216 408,834
Retained earnings 470,831 489,342
Accumulated other comprehensive loss (Note 11) (108,963) (84,470)
Total Stockholders’ Equity 779,723 814,343
Total Liabilities and Stockholders’ Equity $ 2,336,421 $ 2,445,024


	July 1, 2023		December 31, 2022
Assets
Current assets
Cash and cash equivalents	$	156,860	$	151,803
Accounts receivable, net (Note 3)	177,465		211,526
Inventory (Note 4)	219,313		265,334

Prepaid and other current assets	85,976		60,867
Total current assets	639,614		689,530

Property, plant and equipment (net of accumulated depreciation of $1,769,179 and $1,721,898, respectively)	1,151,720		1,151,268
Deferred tax assets	327,015		322,164
Intangible assets, net	20,918		24,423
Other assets	166,735		160,143
Total assets	$	2,306,002	$	2,347,528

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	179,497	$	163,962
Accrued and other current liabilities (Note 6)	138,573		164,369
Debt due within one year (Note 7)	81,525		14,617
Current environmental liabilities (Note 8)	10,754		10,732
Total current liabilities	410,349		353,680

Long-term debt (Note 7)	752,804		838,508
Non-current environmental liabilities (Note 8)	159,103		159,949
Pension and other postretirement benefits (Note 14)	121,015		119,571
Deferred tax liabilities	18,663		17,021
Other liabilities	30,051		29,486

Commitments and contingencies (Note 17)

Stockholders’ Equity
Common stock: 140,000,000 shares authorized at $0.01 par value, 65,343,418 and 64,020,761 issued and outstanding, respectively	654		640
Additional paid-in capital	416,042		418,048
Retained earnings	459,280		474,423
Accumulated other comprehensive loss (Note 10)	(61,959)		(63,798)
Total stockholders’ equity	814,017		829,313
Total liabilities and stockholders’ equity	$	2,306,002	$	2,347,528

See Notes to Consolidated Financial Statements.

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Rayonier Advanced Materials Inc.

Consolidated Statements of ~~Cash Flows~~Stockholders’ Equity

(Unaudited)

(in ~~thousands)~~thousands, except share data)

Nine Months Ended
September 24, 2022 September 25, 2021
Operating Activities
Net income (loss) $ (18,511) $ 90,443
Income from discontinued operations (12,458) (111,751)
Adjustments to reconcile income (loss) from continuing operations to cash provided by operating activities:
Depreciation and amortization 96,294 101,284
Stock-based incentive compensation expense 8,687 1,620
Deferred income tax expense (benefit) 372 (29,569)
Gain on debt extinguishment (519) (2,326)
(Gain) loss on GreenFirst equity securities (5,197) 7,955
Net periodic benefit cost of pension and other postretirement plans 4,489 7,338
Loss on disposal of property, plant and equipment 2,917 801
Unrealized gain on derivative instruments — (3,787)
Unrealized gain from foreign currency (6,853) (1,304)
Other 5,908 5,814
Changes in operating assets and liabilities:
Receivables (41,599) (36,264)
Inventories (41,504) (33,560)
Accounts payable (2,393) (2,903)
Accrued liabilities 23,620 25,858
Other (338) 30,263
Contributions to pension and other postretirement plans (5,467) (5,243)
Cash Provided by Operating Activities-Continuing Operations 7,448 44,669
Cash Provided by Operating Activities-Discontinued Operations — 162,230
Cash Provided by Operating Activities 7,448 206,899
Investing Activities
Capital expenditures, net (114,159) (61,029)
Investment in equity method investment — (4,142)
Cash Used in Investing Activities-Continuing Operations (114,159) (65,171)
Cash Provided by Investing Activities-Discontinued Operations 44,428 182,690
Cash Provided by (Used in) Investing Activities (69,731) 117,519
Financing Activities
Other borrowings 5,721 —
Repayment of long-term debt (51,128) (131,171)
Short-term financing, net (4,990) (4,492)
Common stock repurchased (303) (1,422)
Debt issue costs — (636)
Other (282) —
Cash Used in Financing Activities (50,982) (137,721)
Change in cash and cash equivalents (113,265) 186,697
Net effect of foreign exchange on cash and cash equivalents (8,369) (1,194)
Balance, beginning of period 253,307 93,653
Balance, end of period $ 131,673 $ 279,156


	Common Stock			Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Par Value
Three months ended July 1, 2023
Balance at April 1, 2023	65,106,348	$	651	$	414,406	$	476,030	$	(59,658)	$	831,429
Net loss	—	—		—		(16,750)		—		(16,750)
Other comprehensive loss, net of tax	—	—		—		—		(2,301)		(2,301)
Issuance of common stock under incentive stock plans	266,321	3		(3)		—		—		—
Stock-based compensation	—	—		1,893		—		—		1,893
Repurchase of common stock(a)	(29,251)	—		(254)		—		—		(254)
Balance at July 1, 2023	65,343,418	$	654	$	416,042	$	459,280	$	(61,959)	$	814,017

Three months ended June 25, 2022
Balance at March 26, 2022	63,849,150	$	638	$	410,788	$	464,491	$	(88,724)	$	787,193
Net loss	—	—		—		(23,267)		—		(23,267)
Other comprehensive loss, net of tax	—	—		—		—		(7,557)		(7,557)
Issuance of common stock under incentive stock plans	122,016	1		(1)		—		—		—
Stock-based compensation	—	—		4,470		—		—		4,470

Balance at June 25, 2022	63,971,166	$	639	$	415,257	$	441,224	$	(96,281)	$	760,839

Six months ended July 1, 2023
Balance at December 31, 2022	64,020,761	$	640	$	418,048	$	474,423	$	(63,798)	$	829,313
Net loss		—		—		(15,143)		—		(15,143)
Other comprehensive income, net of tax		—		—		—		1,839		1,839
Issuance of common stock under incentive stock plans	1,966,815	20		(20)		—		—		—
Stock-based compensation	—	—		3,371		—		—		3,371
Repurchase of common stock(a)	(644,158)	(6)		(5,357)		—		—		(5,363)
Balance at July 1, 2023	65,343,418	$	654	$	416,042	$	459,280	$	(61,959)	$	814,017

Six months ended June 25, 2022
Balance at December 31, 2021	63,738,409	$	637	$	408,834	$	489,342	$	(84,470)	$	814,343
Net loss	—	—		—		(48,118)		—		(48,118)
Other comprehensive loss, net of tax	—	—		—		—		(11,811)		(11,811)
Issuance of common stock under incentive stock plans	294,936	3		(3)		—		—		—
Stock-based compensation	—	—		6,728		—		—		6,728
Repurchase of common stock(a)	(62,179)	(1)		(302)		—		—		(303)
Balance at June 25, 2022	63,971,166	$	639	$	415,257	$	441,224	$	(96,281)	$	760,839

——————————————

(a) Repurchased to satisfy tax withholding requirements related to the issuance of stock under the Company’s incentive stock plans.

See Notes to Consolidated Financial Statements.

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Rayonier Advanced Materials Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


	Six Months Ended
	July 1, 2023		June 25, 2022
Operating activities
Net loss	$	(15,143)	$	(48,118)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
(Income) loss from discontinued operations	1,128		(1,205)
Depreciation and amortization	67,689		61,144
Stock-based compensation expense	3,371		6,728

Deferred income tax expense (benefit)	(2,312)		1,536

Gain on GreenFirst equity securities	—		(5,197)

Net periodic benefit cost of pension and other postretirement plans	2,045		2,972
Unrealized (gain) loss on foreign currency	1,669		(2,729)
(Gain) loss on disposal of property, plant and equipment	(1,376)		2,756

Other	2,927		3,645
Changes in operating assets and liabilities:
Accounts receivable	36,139		(31,100)

Inventories	46,680		(13,156)
Accounts payable	3,181		12,248
Accrued liabilities	(27,981)		14,478
Other	(27,440)		(36,625)
Contributions to pension and other postretirement plans	(6,717)		(3,659)



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

Investing activities
Capital expenditures, net	(54,154)		(86,589)
Investment in equity method investment	(169)		—
Cash used in investing activities-continuing operations	(54,323)		(86,589)
Cash provided by investing activities-discontinued operations	—		43,288
Cash used in investing activities	(54,323)		(43,301)

Financing activities

Borrowing of long-term debt	1,509		5,569
Repayment of long-term debt	(20,305)		(25,215)
Short-term financing, net	(1,479)		(1,720)

Repurchase of common stock	(5,363)		(304)

Cash used in financing activities	(25,638)		(21,670)

Net increase (decrease) in cash and cash equivalents	3,899		(101,253)
Net effect of foreign exchange on cash and cash equivalents	1,158		(4,306)
Balance, beginning of period	151,803		253,307
Balance, end of period	$	156,860	$	147,748

Supplemental cash flow information:
Interest paid	$	(28,404)	$	(29,430)
Income taxes paid, net	(7,090)		(6,331)
Capital assets purchased on account	41,846		29,518

See Notes to Consolidated Financial Statements.

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Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements

(Unaudited)

(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”)~~the Company have been prepared in accordance with ~~generally accepted accounting principles in the United States of America (“GAAP”)~~GAAP for interim financial information and in accordance with the rules and regulations of the ~~Securities and Exchange Commission (“SEC”).~~SEC. In the opinion of management, these ~~Consolidated Financial Statements~~consolidated financial statements and notes reflect all adjustments, ~~(all of which are~~including all normal recurring ~~adjustments)~~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~~2022 Form ~~10-K for the year ended December 31, 2021, as filed with the SEC on March 1, 2022 (the “2021 Form 10-K”).~~10-K.

As a result of the sale of its lumber and newsprint assets in August 2021, ~~to GreenFirst Forest Products, Inc. (“GreenFirst”),~~ the Company presents the results for those operations and any associated impacts as discontinued 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 the Company’s operations and financial results. See Note ~~2 —~~2—Discontinued Operations for further ~~information.~~information on the sale.

Recent Accounting Developments

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

Subsequent Events

~~In October 2022,~~Duties on Canadian Softwood Lumber Sold to the U.S.

On July 26, 2023, the USDOC completed its fourth administrative review of duties applied to Canadian softwood lumber exports to the U.S. during 2021 and reduced rates applicable to the Company ~~repaid~~to a ~~Canadian dollar (“CAD”) fixed interest rate~~combined 8.0 percent. In connection with this development, in the third quarter the Company will record a pre-tax gain of approximately $2 million in “income (loss) from discontinued operations, net of taxes” and increase the long-term receivable related to the USDOC administrative reviews to approximately $40 million.

Term Loan

On July 20, 2023, the Company secured term loan financing of $250 million in aggregate principal amount and received net proceeds of $243 million after original issue discount, which will be used, together with cash on hand, to redeem the remaining $318 million in aggregate principal balance of the 2024 Notes and pay fees and expenses related to the transaction. The Company will record a loss on debt extinguishment of approximately $1 million in the third quarter related to the redemption.

The 2027 Term Loan matures in July 2027, bears interest at a rate per annum equal to three-month Term SOFR (or, if greater, 3.00 percent) plus 8.00 percent and requires quarterly principal payments of 0.50 percent of the initial principal amount commencing in the fourth quarter of ~~CAD $12 million (U.S. dollar (“USD”) $9 million).~~2023. The Company may voluntarily make prepayments at any time, subject to customary breakage costs and, if within the first three anniversaries of closing, an additional make-whole premium.

The agreement governing the 2027 Term Loan contains various customary covenants that limit the ability of the Company and its restricted subsidiaries, as defined by the term loan agreement and in particular the Company’s French subsidiaries, to take certain specified actions, subject to certain exceptions, including: incurring debt or liens, making investments, entering into mergers, consolidations, and acquisitions, paying dividends and making other restricted payments. Additionally, the 2027 Term Loan contains customary affirmative covenants and customary events of default (subject, in certain cases, to customary grace or cure periods), including, without limitation, late payment, breach of covenant, bankruptcy, judgment and defaults under certain other indebtedness and changes in control.

2. Discontinued Operations

In August 2021, the Company completed the sale of its lumber and newsprint facilities and certain related assets located in ~~Ontario and Québec~~ Canada to GreenFirst for ~~cash of~~ $232 million, which included 28.7 million shares of GreenFirst common stock ~~and~~with a ~~credit note issued to~~deemed fair value of $42 million. In the ~~Company by GreenFirst in~~second quarter of 2022, the ~~amount of CAD $8 million (approximately USD $5 million after present value discount). The~~ Company sold the GreenFirst common shares for $43 ~~million in the second quarter of 2022.~~million. Prior to the sale of shares, the GreenFirst common shares were accounted for at fair value, with changes in fair value recorded in the consolidated statements of operations. ~~See Note 10 —~~ ~~Fair Value Measurements~~ ~~for 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 and other sale-related adjustments. During the first quarter of 2022, the Company trued up certain sale-related items with GreenFirst for a total net cash outflow of $3 million, as expected and previously disclosed. No adjustments have been made in 2022 to the gain on sale recorded during the year endeduntil December ~~31, 2021. Pursuant to the terms of the asset purchase agreement, GreenFirst and the Company continue efforts to finalize the closing inventory valuation adjustment.~~

In connection with the sale, the parties entered into a Transition Services Agreement (“TSA”) whereby the Company would provide certain transitional services to GreenFirst, including information technology, accounting, treasury and other services, following the closing of the transaction. The transitional services have been completed and the TSA was terminated during the second quarter of 2022.2023.

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Rayonier Advanced Materials Inc.

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

(in thousands unless otherwise stated)

~~During~~As part of the ~~third quarter~~sale of ~~2022,~~ the ~~U.S. Department~~lumber assets, the Company retained all rights and obligations to softwood duties generated or incurred through the closing date of ~~Commerce (the “USDOC”) completed its third administrative review of duties applied to Canadian~~the sale. In total, the Company paid $112 million in softwood lumber ~~exports~~duties from 2017 through August 2021, and expects to receive all or the ~~U.S. during 2020~~vast majority of these duties upon final resolution of the dispute between the USDOC and ~~reduced rates applicable to~~Canada. As of July 1, 2023, the Company tohad a ~~combined 8.6 percent. In connection with this development, the Company recorded a $16~~$38 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 completed to ~~$38 million. See Note 18 —~~ ~~Commitments~~date.

During the three and ~~Contingencies~~ ~~for further information relating~~six months ended July 1, 2023, the Company incurred $2 million related to ~~this dispute.~~the settlement of a claim pursuant to the representations and warranties in the asset purchase agreement.

Income (loss) from discontinued operations iswas 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


	Three Months Ended				Six Months Ended
	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022

Cost of sales	$	—	$	326	$	—	$	153
Gross margin	—		326		—		153
Selling, general and administrative and other operating income (expense)	(1,533)		1,953		(1,533)		1,495
Operating income (loss)	(1,533)		2,279		(1,533)		1,648

Other non-operating expense	—		(4)		—		(9)
Income (loss) from discontinued operations before income taxes	(1,533)		2,275		(1,533)		1,639
Income tax (expense) benefit	405		(599)		405		(434)
Income (loss) from discontinued operations, net of taxes	$	(1,128)	$	1,676	$	(1,128)	$	1,205

3. Accounts Receivable, Net

Accounts receivable, net included the following:


	July 1, 2023		December 31, 2022
Accounts receivable, trade	$	145,045	$	171,144
Accounts receivable, other(a)	32,927		41,446
Allowance for credit loss	(507)		(1,064)
Accounts receivable, net	$	177,465	$	211,526

——————————————

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

~~(b)~~ ~~The Company 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.~~

~~Other discontinued operations information includes the following:~~

Three Months Ended Nine Months Ended
September 24, 2022 September 25, 2021 September 24, 2022 September 25, 2021
Depreciation and amortization $ — $ — $ — $ 3,172
Capital expenditures $ — $ 2,119 $ — $ 7,933

~~3. Accounts Receivable, Net~~

~~The Company’s accounts receivables included the 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 ~~value added/~~value-added/consumption taxes, grants receivable and accrued billings due from government agencies.

4. Inventory

Inventory included the following:


	July 1, 2023		December 31, 2022
Finished goods	$	156,469	$	198,931
Work-in-progress	5,023		5,230
Raw materials	50,637		52,967
Manufacturing and maintenance supplies	7,184		8,206
Inventory	$	219,313	$	265,334

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Rayonier Advanced Materials Inc.

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

~~4. Inventory~~(in thousands unless otherwise stated)

~~The Company’s inventory included the following:~~

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 24, 2022,~~July 1, 2023, the Company’s leases ~~had~~have remaining lease terms of 1less than one year to ~~14.1~~13.3 years with standard renewal and termination options available at the Company’s discretion. Certain equipment leases have purchase options at the end of the term of the lease, which are not included in the ~~right of use (“ROU”)~~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~~

Financial and other information related to the operating lease ROU assets and liabilities as of September 24, 2022 and December 31, 2021 was 8.7 percent and 7.6 percent, respectively. The weighted average discount rate used in determining the finance lease ROU assets and liabilities as of September 24, 2022 and December 31, 2021 was 7.0 percent.

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

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


	Three Months Ended				Six Months Ended
	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
Operating lease cost	$	1,791	$	1,917	$	3,485	$	3,848

Finance lease cost
Amortization of ROU assets	100		94		199		185
Interest	29		35		59		72
Total lease cost	$	1,920	$	2,046	$	3,743	$	4,105

As of September 24, 2022, the weighted average remaining lease term was 5.7 years and 4.1 years for operating leases and financing leases, respectively. As of December 31, 2021, the weighted average remaining lease term was 5.3 years and 4.9 years for operating leases and finance leases, respectively. Cash provided by operating activities includes approximately $2 million and $5 million from operating lease payments made during the nine months ended September 24, 2022 and September 25, 2021, respectively.


	Balance Sheet Classification	July 1, 2023		December 31, 2022
Operating leases
ROU assets	Other assets	$	16,207	$	15,623
Lease liabilities, current	Accrued and other current liabilities	4,465		4,741
Lease liabilities, non-current	Other liabilities	12,573		11,399

Finance leases
ROU assets	Property, plant and equipment, net	1,263		1,448
Lease liabilities	Long-term debt	1,561		1,760


	Six Months Ended
	July 1, 2023		June 25, 2022
Operating cash flows - cash paid for amounts included in the measurement of operating lease liabilities	$	1,701	$	1,879
Operating lease ROU assets obtained in exchange for lease liabilities	1,946		59

Finance lease cash flows were immaterial during each of the ~~nine~~three and six months ended ~~September 24, 2022~~July 1, 2023 and ~~September~~June 25, ~~2021.~~2022.

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

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

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


	July 1, 2023		December 31, 2022
Operating leases
Weighted average remaining lease term (in years)	5.8		5.8
Weighted average discount rate	8.7	%	8.9	%

Finance leases
Weighted average remaining lease term (in years)	3.3		3.8
Weighted average discount rate	7.0	%	7.0	%

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Rayonier Advanced Materials Inc.

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

~~Operating lease maturities as of September 24, 2022 were as follows:~~(in thousands unless otherwise stated)

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~~Accrued and other current liabilities included the following:


		September 24, 2022		December 31, 2021			July 1, 2023		December 31, 2022
Accrued customer incentives	Accrued customer incentives	$	29,546	$	26,726	Accrued customer incentives	$	26,063	$	28,702
Accrued payroll and benefits	Accrued payroll and benefits	18,533		13,363		Accrued payroll and benefits	14,898		13,763
Accrued interest	Accrued interest	15,290		19,153		Accrued interest	17,294		18,877
Accrued income taxes	Accrued income taxes	7,639		9,210		Accrued income taxes	2,914		9,321
Accrued property and other taxes	Accrued property and other taxes	9,341		4,074		Accrued property and other taxes	6,561		3,065
Deferred revenue (a)	Deferred revenue (a)	20,796		22,518		Deferred revenue(a)	21,080		21,645
Other current liabilities(b)	Other current liabilities(b)	52,421		41,080		Other current liabilities(b)	49,763		68,996
Accrued and other current liabilities	Accrued and other current liabilities	$	153,566	$	136,124	Accrued and other current liabilities	$	138,573	$	164,369

——————————————

(a)~~Includes~~ Included at both July 1, 2023 and December 31, 2022 was CAD $25 million ~~(approximately USD $20~~(USD $19 million) associated with funds received in 2021 for ~~the Canada Emergency Wage Subsidy (“CEWS”).~~CEWS. 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.

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

7. Debt and Finance Leases

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

September 24, 2022 December 31, 2021
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% 475,000 475,000
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 5.50% 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)
19,048 18,280
Short-term factoring facility-France 2,127 7,118
Finance lease obligation 1,857 2,138
Total debt principal payments due 879,435 937,172
Less: Debt premium, original issue discount and issuance costs, net (6,875) (8,461)
Total debt 872,560 928,711
Less: Debt due within one year (21,554) (37,680)
Long-term debt $ 851,006 $ 891,031


	July 1, 2023		December 31, 2022
ABL Credit Facility due 2025: $109 million available, bearing interest of 7.42% (5.17% adjusted SOFR plus 2.25% margin) at July 1, 2023	$	—	$	—
7.625% Senior Secured Notes due 2026	464,640		475,000
5.50% Senior Unsecured Notes due 2024	317,675		322,675
5.50% CAD-based term loan due 2028	33,315		36,585
Other loans(a)	19,732		19,598
Short-term factoring facility-France	2,337		3,773
Finance lease obligations	1,561		1,760
Total principal payments due	839,260		859,391
Less: unamortized debt premium, discount and issuance costs	(4,931)		(6,266)
Total debt	834,329		853,125
Less: debt due within one year	(81,525)		(14,617)
Long-term debt	$	752,804	$	838,508

——————————————

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

In April 2023, the Company repurchased $10 million of its 2026 Notes through open-market transactions and retired the notes for cash of $9 million. A gain on extinguishment of $1 million for the repurchase was recorded to “other income, net” in the consolidated statements of operations.

In March 2023, the Company repurchased $5 million of its 2024 Notes through open-market transactions and retired the notes for cash of $5 million. An immaterial gain on extinguishment for the repurchase was recorded to “other income, net” in the consolidated statements of operations.

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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).~~thousands unless otherwise stated)

During the second and third quarters of 2022, the Company repurchased $20 million and $15 million, respectively, of its 5.5% unsecured senior notes due 2024 (the “Unsecured Notes”) through open-market transactions and retired the notes for cash of approximately $20 million and $15 million, respectively. A net gain of less than $1 million on the repurchases was recorded to “gain on debt extinguishment” in the consolidated statements of operations during the nine months ended September 24, 2022.

~~During the three and nine months ended September 25, 2021, the Company recorded a $2 million gain on extinguishment on the repurchase of $127 million of Unsecured Notes.~~

As of ~~September 24, 2022,~~July 1, 2023, the Company’s debt principal payments, excluding finance lease obligations, 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


Remainder of 2023(a)	$	75,059
2024(b)	261,438
2025	11,424
2026	475,432
2027	8,645
Thereafter	5,701
Total debt principal payments	$	837,699

——————————————

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

(b) Includes the remaining $250 million principal balance of the 2024 Notes, which will be redeemed with the proceeds of the 2027 Term Loan in the third quarter of 2023. The 2027 Term Loan will mature in 2027. See Note 1—Basis of Presentation for further information on the refinancing of the 2024 Notes.

8. Environmental Liabilities

The Company’s environmental liabilities balance changed as follows during the ~~nine~~six months ended ~~September 24, 2022:~~July 1, 2023:



Balance at December 31, ~~2021~~2022	$	~~171,222~~170,681
Increase in liabilities	~~2,803~~1,664
Payments	~~(3,071)~~(2,645)
Foreign currency adjustments	~~(654)~~157
Balance at ~~September 24, 2022~~July 1, 2023	~~170,300~~169,857
Less: ~~Current~~current portion	~~(11,273)~~(10,754)
~~Long-term~~Non-current environmental liabilities	$	~~159,027~~159,103

In addition to ~~the~~these estimated liabilities, the Company is subject to the risk of reasonably possible additional liabilities in excess of the established reserves due to potential changes in circumstances and future events, including, without limitation, changes to current laws and regulations; 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~~or non-governmental parties; and changes in accounting rules or interpretations. Based on information available as of ~~September 24, 2022,~~July 1, 2023, the Company estimates this exposure could range up to approximately ~~$84~~$85 million, although no assurances can be given that this amount will not be exceeded given the factors described above. These potential additional costs are attributable to several sites and other applicable liabilities. ~~Further, this~~This estimate excludes liabilities that would otherwise be considered reasonably possible ~~liabilities which~~but for the fact that they are not currently estimable, primarily due to the factors discussed above.

Subject to the previous paragraph, the Company believes ~~established~~its estimates of liabilities are sufficient for probable costs expected to be incurred over the next 20 years with respect to its environmental liabilities. However, no assurances are given ~~they~~that these estimates will be sufficient for the reasons described above and additional liabilities could have a material adverse effect on the Company’s financial position, results of operations and cash flows.

~~9. Derivative Instruments~~

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

910

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Rayonier Advanced Materials Inc.

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

(in thousands unless otherwise stated)

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) to be recognized in earnings as the underlying hedged transactions occur and affect earnings.

~~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 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 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 for the three and nine months ended September 25, 2021 were as follows:

~~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 unrealized gain (loss) in AOCI related to hedge derivatives is presented below:~~

September 24, 2022 December 31, 2021
Foreign exchange cash flow hedges, net of tax $ (623) $ (847)

~~Rayonier Advanced Materials Inc.~~

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

~~10.~~9. 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 24, 2022 December 31, 2021
Carrying
Amount
Fair Value (b)
Carrying
Amount
Fair Value (b)
Assets: Level 1 Level 2 Level 1 Level 2
Cash and cash equivalents
Cash $ 97,771 $ 97,771 $ — $ 253,307 $ 253,307 $ —
Money market and similar funds 33,902 33,902 — — — —
Investment in GreenFirst equity securities — — — 38,510 — 38,510
Liabilities: (a)
Fixed-rate long-term debt $ 868,576 $ — $ 823,481 $ 919,455 $ — $ 964,308


	July 1, 2023						December 31, 2022
	Carrying Amount		Fair Value				Carrying Amount		Fair Value
			Level 1		Level 2				Level 1		Level 2
Assets
Cash and cash equivalents
Cash	$	86,891	$	86,891	$	—	$	127,288	$	127,288	$	—
Money market and similar funds	69,969		69,969		—		24,515		24,515		—

Liabilities
Fixed-rate long-term debt(a)	$	830,431	$	—	$	769,672	$	847,591	$	—	$	838,502

——————————————

(a)~~Liabilities exclude~~ Excludes finance lease ~~obligation.~~

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

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

Cash and cash equivalents— 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. The Company ~~had $34 million of~~measures its investments in money market and similar funds ~~as of September 24, 2022, measured~~ using level 1 inputs. ~~The Company did not invest in any such funds as of 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~~Variable rate debt adjusts with changes in the market rate ~~therefore the~~and so 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 %

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Rayonier Advanced Materials Inc.

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

(in thousands unless otherwise stated)

~~11.~~10. Accumulated Other Comprehensive ~~Income (Loss)~~Loss

~~The components of AOCI include:~~

Nine Months Ended
September 24, 2022 September 25, 2021
Unrecognized components of employee benefit plans, net of tax:
Balance, beginning of year $ (76,849) $ (146,614)
Other comprehensive gain (loss) before reclassifications — (236)
Income tax on other comprehensive loss — 61
Reclassifications to earnings: (a)
Pension settlement loss — 226
Amortization of losses 7,466 12,258
Amortization of prior service costs 24 413
Income tax on reclassifications (1,646) (2,853)
Plans included in sale of assets to GreenFirst — 4,012
Income Tax on plans included in sale of assets to GreenFirst — (1,039)
Net comprehensive gain on employee benefit plans, net of tax 5,844 12,842
Balance, end of period (71,005) (133,772)
Unrealized gain (loss) on derivative instruments, net of tax:
Balance, beginning of year (847) 1,834
Reclassifications to earnings: (b)
Foreign exchange contracts 258 (3,787)
Income tax on reclassifications (34) 1,020
Net comprehensive gain (loss) on derivative instruments, net of tax 224 (2,767)
Balance, end of period (623) (933)
Foreign currency translation adjustments:
Balance, beginning of year (6,774) 11,145
Foreign currency translation adjustment, net of tax of $0 and $0 (30,561) (10,558)
Balance, end of period (37,335) 587
Accumulated other comprehensive loss, end of period $ (108,963) $ (134,118)


	Six Months Ended
	July 1, 2023		June 25, 2022
Unrecognized components of employee benefit plans, net of tax
Balance, beginning of period	$	(43,694)	$	(76,849)
Other comprehensive loss before reclassifications	(3,034)		—
Income tax on other comprehensive loss	804		—
Reclassifications to earnings(a)

Amortization of (gain) loss	(354)		4,976
Amortization of prior service cost	172		17
Income tax on reclassifications	45		(1,097)
Net comprehensive gain (loss) on employee benefit plans, net of tax	(2,367)		3,896
Balance, end of period	(46,061)		(72,953)

Unrealized gain (loss) on derivative instruments, net of tax
Balance, beginning of period	(567)		(847)
Reclassifications to earnings - foreign currency exchange contracts(b)	119		181
Income tax on reclassifications	(16)		(24)
Net comprehensive gain on derivative instruments, net of tax	103		157
Balance, end of period	(464)		(690)

Foreign currency translation
Balance, beginning of period	(19,537)		(6,774)
Foreign currency translation adjustment, net of tax(c)	4,103		(15,864)
Balance, end of period	(15,434)		(22,638)

Accumulated other comprehensive loss, end of period	$	(61,959)	$	(96,281)

——————————————

(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 —~~ 14—Employee Benefit Plans for further information.

(b) Reclassifications of foreign currency exchange contracts are recorded in ~~cost~~“cost of sales, ~~other~~” “other operating expense, net” or “other income, ~~or non-operating income~~net,” as appropriate. ~~See Note 9 —~~

~~Derivative Instruments~~(c) Foreign currency translation is net of tax effects of $0 for ~~further information.~~all periods presented, as the French operations are taxed on the foreign functional currency, not the translated reporting currency.

~~Rayonier Advanced Materials Inc.~~

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

~~12.~~11. 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
Shares Par Value
Nine Months Ended September 24, 2022
Balance at December 31, 2021 63,738,409 $ 637 $ 408,834 $ 489,342 $ (84,470) $ 814,343
Net loss — — — (18,511) — (18,511)
Other comprehensive loss, net of tax — — — — (24,493) (24,493)
Issuance of common stock under incentive stock plans 294,936 3 (3) — — —
Stock-based compensation — — 8,687 — — 8,687
Repurchase of common shares (a)
(62,179) (1) (302) — — (303)
Balance at September 24, 2022 63,971,166 $ 639 $ 417,216 $ 470,831 $ (108,963) $ 779,723
Three Months Ended September 24, 2022
Balance at June 25, 2022 63,971,166 $ 639 $ 415,257 $ 441,224 $ (96,281) $ 760,839
Net income — — — 29,607 — 29,607
Other comprehensive income (loss), net of tax — — — — (12,682) (12,682)
Stock-based compensation — — 1,959 — — 1,959
Balance at September 24, 2022 63,971,166 $ 639 $ 417,216 $ 470,831 $ (108,963) $ 779,723
Nine Months Ended September 25, 2021
Balance at December 31, 2020 63,359,839 $ 633 $ 405,161 $ 422,928 $ (133,635) $ 695,087
Net income — — — 90,443 — 90,443
Other comprehensive loss, net of tax — — — — (483) (483)
Issuance of common stock under incentive stock plans 509,713 5 (5) — — —
Stock-based compensation — — 1,619 — — 1,619
Repurchase of common shares (a)
(132,196) (1) (1,421) — — (1,422)
Balance at September 25, 2021 63,737,356 $ 637 $ 405,354 $ 513,371 $ (134,118) $ 785,244
Three Months Ended September 25, 2021
Balance at June 26, 2021 63,737,356 $ 637 $ 404,120 $ 518,129 $ (136,045) $ 786,841
Net loss — — — (4,758) — (4,758)
Other comprehensive income, net of tax — — — — 1,927 1,927
Stock-based compensation — — 1,234 — — 1,234
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.~~

~~Common Stock Buyback~~

In January 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 24, 2022 and September 25, 2021 the Company did not repurchase any common shares under this buyback program. As of September 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~~Stockholder Rights Plan

In March 2022, the Company adopted a ~~shareholder~~stockholder 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~~Directors. On the same date, the Board of Directors declared a dividend of one preferred share ~~purchase right (a “Right”)~~Purchase 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.On March 20, 2023, the Purchase Rights expired.

1312

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Rayonier Advanced Materials Inc.

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

(in thousands unless otherwise stated)

~~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.~~12. Earnings Per Common Share

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

Three Months Ended Nine Months Ended
September 24, 2022 September 25, 2021 September 24, 2022 September 25, 2021
Income (loss) from continuing operations $ 18,355 $ (13,394) $ (30,969) $ (21,308)
Income from discontinued operations 11,252 8,636 12,458 111,751
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 63,971,166 63,737,355 63,882,920 63,610,710
Dilutive effect of:
Stock options — — — —
Performance and restricted stock 1,548,941 — — —
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
Income (loss) from continuing operations $ 0.29 $ (0.21) $ (0.48) $ (0.33)
Income from discontinued operations 0.18 0.14 0.20 1.76
Net income (loss) $ 0.47 $ (0.07) $ (0.28) $ 1.43
Diluted per share amounts
Income (loss) from continuing operations $ 0.28 $ (0.21) $ (0.48) $ (0.33)
Income from discontinued operations 0.17 0.14 0.20 1.76
Net income (loss) $ 0.45 $ (0.07) $ (0.28) $ 1.43


	Three Months Ended				Six Months Ended
	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
Loss from continuing operations	$	(15,622)	$	(24,943)	$	(14,015)	$	(49,323)
Income (loss) from discontinued operations	(1,128)		1,676		(1,128)		1,205
Net loss available for common stockholders	$	(16,750)	$	(23,267)	$	(15,143)	$	(48,118)

Shares used for determining basic earnings per share of common stock	65,226,344		63,898,761		64,865,272		63,837,292
Dilutive effect of:
Stock options	—		—		—		—
Performance and restricted stock	—		—		—		—
Shares used for determining diluted earnings per share of common stock	65,226,344		63,898,761		64,865,272		63,837,292

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


		Three Months Ended		Nine Months Ended			Three Months Ended		Six Months Ended
		September 24, 2022	September 25, 2021	September 24, 2022	September 25, 2021		July 1, 2023	June 25, 2022	July 1, 2023	June 25, 2022
Stock options	Stock options	78,660	115,973	78,660	115,973	Stock options	46,882	78,660	46,882	78,660
Performance and restricted stock	Performance and restricted stock	1,517,135	2,390,153	3,726,090	2,390,153	Performance and restricted stock	3,302,332	3,372,498	3,302,332	3,372,498
Total anti-dilutive instruments	Total anti-dilutive instruments	1,595,795	2,506,126	3,804,750	2,506,126	Total anti-dilutive instruments	3,349,214	3,451,158	3,349,214	3,451,158

~~14.~~13. Incentive Stock Plans

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

~~Rayonier Advanced Materials Inc.~~

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


	Three Months Ended				Six Months Ended
	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
Stock-based compensation expense	$	1,893	$	4,470	$	3,371	$	6,728

The Company made new grants of restricted stock units, ~~and~~ performance-based stock units ~~to certain employees~~and performance-based cash awards during the first ~~nine months~~and second quarters of ~~2022.~~2023. The ~~2022~~2023 restricted stock unit awards cliff vest after three years. The ~~2022~~2023 performance-based ~~stock unit~~ awards ~~measure total shareholder return~~cliff vest after three years and are based equally on ~~an absolute basis and~~TSR relative to ~~peers.~~peers and three-year cumulative adjusted EBITDA. Participants can earn between 0 and ~~250~~200 percent of the target award. Performance below ~~established thresholds~~the threshold for the TSR would result in a zero ~~payout. There~~payout for the TSR metric. The performance-based cash award is ~~a performance-based stock award and cash unit stock award that will be~~ measured using the same objectives as the performance-based stock unit award but is paid and accounted for separately. ~~The portion of the award to be settled in~~Performance-based cash isawards are classified as a liability and remeasured to fair value at the end of each reporting period until settlement.

In March ~~2022,~~2023, the performance-based ~~share~~stock units granted in ~~2019 vested without meeting~~2020 were settled with the issuance of 1,257,015 shares of common stock, including incremental shares of 370,366, based on performance ~~thresholds, resulting~~ results.

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Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements (Unaudited)

(in ~~no stock units being awarded.~~thousands unless otherwise stated)

The following table summarizes the 2023 activity of the Company’s incentive stock ~~award activity during the nine months ended September 24, 2022:~~awards:


		Stock Options			Restricted Stock Units			Performance-Based Stock Units			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				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
Outstanding at December 31, 2022												Outstanding at December 31, 2022	77,767	$	39.98	1,697,587	$	6.21	1,956,919	$	6.79
Granted	Granted	—	—		1,328,931	5.50		1,661,452	6.97			Granted	—	—		972,307	5.32		305,764	9.09
Forfeited	Forfeited	—	—		(180,103)	5.83		(1,164,249)	6.70			Forfeited	—	—		(28,363)	5.95		(5,433)	4.73
Exercised or settled	Exercised or settled	—	—		(307,213)	11.08		—	—			Exercised or settled	—	—		(709,800)	5.49		(886,649)	5.95
Expired or cancelled	Expired or cancelled	(32,464)	38.24		—	—		—	—			Expired or cancelled	(30,885)	43.35		—	—		—	—
Outstanding at September 24, 2022		78,660	$	39.98	1,769,171	$	6.18	1,956,919	$	6.79
Outstanding at July 1, 2023												Outstanding at July 1, 2023	46,882	$	37.76	1,931,731	$	6.03	1,370,601	$	7.83

~~15.~~14. Employee Benefit Plans

Defined Benefit Plans

The Company has defined benefit pension and other long-term and postretirement benefit plans covering certain union and non-union employees, primarily in the U.S. and Canada. The defined benefit pension plans are closed to new participants. The liabilities for these plans are calculated using actuarial estimates and management assumptions. These estimates are based on historical information ~~along with~~and certain assumptions about future events.

During ~~2019,~~the three and six months ended June 25, 2022, the Company ~~settled certain Canadian pension liabilities through the purchase of annuity contracts with an insurance company. The settlement resulted in the recognition of~~recorded a $1 million loss ~~during~~related to the ~~nine~~final asset surplus distribution to the plan participants of certain wound-up Canadian pension plans. During the six months ended ~~September 25, 2021~~July 1, 2023, the Company recorded a $2 million loss related to the final asset surplus distribution to the plan participants of certain other wound-up Canadian pension plans. The settlements were recognized in “other components of pension and OPEB, excluding service costs” in the Company’s consolidated statements of operations.

The ~~Company recorded an additional $1 million loss in “other~~following table presents the components of ~~pension and OPEB, excluding service costs” during the nine months ended September 24, 2022, related to the final asset surplus distribution to the plans’ participants.~~net periodic benefit costs of these plans:


	Pension				Postretirement
	Three Months Ended				Three Months Ended
	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
Service cost	$	1,224	$	2,171	$	299	$	352
Interest cost	7,237		4,597		348		215
Expected return on plan assets	(7,965)		(8,379)		—		—
Amortization of prior service cost	184		39		(25)		(30)
Amortization of (gain) loss	(124)		2,473		(54)		15
Pension settlement loss	—		1,179		—		—
Net periodic benefit cost	$	556	$	2,080	$	568	$	552

	Pension				Postretirement
	Six Months Ended				Six Months Ended
	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
Service cost	$	2,441	$	4,347	$	586	$	705
Interest cost	14,382		9,203		705		431
Expected return on plan assets	(15,887)		(16,707)		—		—
Amortization of prior service cost	221		78		(49)		(61)
Amortization of (gain) loss	(246)		4,946		(108)		30
Pension settlement loss	2,317		1,179		—		—
Net periodic benefit cost	$	3,228	$	3,046	$	1,134	$	1,105

1514

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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:~~(in thousands unless otherwise stated)

Pension Postretirement
Three Months Ended Three Months Ended
September 24, 2022 September 25, 2021 September 24, 2022 September 25, 2021
Service cost $ 2,150 $ 2,619 $ 352 $ 358
Interest cost 4,561 4,287 215 179
Expected return on plan assets (8,258) (9,586) — —
Amortization of prior service cost 38 176 (31) (38)
Amortization of losses 2,473 4,084 17 5
Pension settlement loss (25) 90 — —
Total net periodic benefit cost $ 939 $ 1,670 $ 553 $ 504
Pension Postretirement
Nine Months Ended Nine Months Ended
September 24, 2022 September 25, 2021 September 24, 2022 September 25, 2021
Service cost $ 6,497 $ 7,800 $ 1,057 $ 1,083
Interest cost 13,764 13,138 646 530
Expected return on plan assets (24,965) (28,865) — —
Amortization of prior service cost 116 527 (92) (115)
Amortization of losses 7,419 12,247 47 11
Pension settlement loss 1,154 980 — —
Total net periodic benefit cost $ 3,985 $ 5,828 $ 1,658 $ 1,510

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

~~16.~~15. Income Taxes

Effective Tax Rate

The ~~Company’s~~Company utilized the discrete effective ~~tax~~ rate ~~on its income from continuing operations~~method for the ~~three~~six months ended ~~September 24, 2022~~July 1, 2023, as allowed by ASC 740-270-30-18 Income Tax—Interim Reporting. The discrete method is applied when the application of the estimated AETR is impractical because it is not possible to reliably estimate the AETR. The discrete method treats the year-to-date period as if it was the annual period and calculates the income tax expense or benefit on a ~~benefit~~discrete basis, rather than forecasting the full year AETR and applying it against current period book earnings. The Company believes the use of ~~11 percent.~~ the discrete method represents the best estimate of its AETR in the current period.

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~~six months ended ~~September 25, 2021 were benefits~~July 1, 2023 was a benefit of 2418 percent and 5932 percent, respectively.

The 2023 effective tax ~~benefit rate for the three months ended September 24, 2022~~rates 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~~nondeductible executive compensation, offset by ~~unfavorable~~U.S. tax credits, return-to-accrual ~~adjustments.~~ adjustments related to previously filed tax returns and an excess tax benefit on vested stock compensation.

The effective tax ~~expense~~ rate on the loss from continuing operations for the ~~nine~~three and six months ended ~~September 24,~~June 25, 2022 was an expense of 18 percent and 12 percent, respectively. The 2022 effective tax rates differed from the federal statutory rate of 21 percent primarily due to ~~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 effective tax benefit rate for the nine months ended September 25, 2021 differed from the federal statutory rate~~Deferred Taxes

As of ~~21 percent primarily due to a tax benefit recognized by remeasuring~~July 1, 2023 and December 31, 2022, the Company’s Canadian deferred tax assets at a higher Canadian blended statutory tax rate. The Canadian statutory rate is higher as a result of changing the allocation of income between the Canadian provinces after the sale of the Company’s lumbernet DTA included $18 million and newsprint assets. Other factors impacting the effective benefit rate 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.

~~Rayonier Advanced Materials Inc.~~

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

~~Deferred Taxes~~

~~The Company’s deferred tax assets include approximately~~ $17 million, respectively, 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.~~realized. In ~~December 2019,~~strict compliance with the American Institute of Certified Public ~~Accountants (“AICPA”) issued~~Accountants’ 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,~~allowance, the Company has not recognized a valuation allowance on athis portion of the ~~deferred tax assets~~net DTA 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~~16. Segments

The Company operates in the following business segments: High Purity Cellulose, Paperboard and High-Yield ~~Pulp and Corporate. The~~Pulp. Corporate ~~operations consist~~consists primarily of senior management, accounting, information systems, human resources, treasury, tax and legal administrative functions that provide support services to the operating business units. The Company allocates a portion of the cost of maintaining these support functions to its operating units.

The Company evaluates the performance of its segments based on operating ~~income.~~income (loss). Intersegment sales consist primarily of High-Yield Pulp sales to Paperboard. Intersegment sales prices are at rates that approximate market for the respective operating area.

Table of Contents

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements (Unaudited)

(in thousands unless otherwise stated)

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


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
		September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021			July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
High Purity Cellulose	High Purity Cellulose									High Purity Cellulose
Cellulose Specialties	Cellulose Specialties	$	243,175	$	186,029	$	645,169	$	521,442	Cellulose Specialties	$	179,265	$	218,440	$	405,930	$	401,994
Commodity Products	Commodity Products	92,638		74,577		223,151		195,894		Commodity Products	98,674		59,758		222,714		130,513
Other sales (a)	Other sales (a)	33,080		26,902		84,059		74,532		Other sales(a)	21,430		24,343		44,919		50,979
Total High Purity Cellulose	Total High Purity Cellulose	368,893		287,508		952,379		791,868		Total High Purity Cellulose	299,369		302,541		673,563		583,486
Paperboard	Paperboard	65,039		52,188		182,512		156,799		Paperboard	48,094		63,236		107,088		117,473
High-Yield Pulp	High-Yield Pulp	39,564		41,877		101,992		106,207		High-Yield Pulp	44,144		40,287		86,004		62,428

Eliminations	Eliminations	(7,150)		(7,559)		(19,601)		(21,163)		Eliminations	(6,194)		(6,844)		(14,481)		(12,451)
Net sales	Net sales	$	466,346	$	374,014	$	1,217,282	$	1,033,712	Net sales	$	385,413	$	399,220	$	852,174	$	750,936

——————————————

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

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

Three Months Ended Nine Months Ended
September 24, 2022 September 25, 2021 September 24, 2022 September 25, 2021
High Purity Cellulose $ 22,536 $ 1,852 $ 21,221 $ 18,903
Paperboard 11,293 1,978 27,579 10,174
High-Yield Pulp 5,646 7,612 3,910 8,150
Corporate (10,946) (8,616) (42,871) (33,498)
Operating income (loss) $ 28,529 $ 2,826 $ 9,839 $ 3,729

~~Rayonier Advanced Materials Inc.~~

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


	Three Months Ended				Six Months Ended
	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
High Purity Cellulose	$	(422)	$	6,489	$	12,512	$	(1,315)
Paperboard	5,858		10,447		15,592		16,286
High-Yield Pulp	836		(1,365)		8,092		(1,736)
Corporate	(12,728)		(18,468)		(26,058)		(31,925)
Operating income (loss)	$	(6,456)	$	(2,897)	$	10,138	$	(18,690)

Identifiable assets by segment were as follows:


		September 24, 2022		December 31, 2021			July 1, 2023		December 31, 2022
High Purity Cellulose	High Purity Cellulose	$	1,638,666	$	1,579,300	High Purity Cellulose	$	1,570,974	$	1,654,214

Paperboard	Paperboard	114,990		114,391		Paperboard	111,554		112,757
High-Yield Pulp	High-Yield Pulp	49,742		38,147		High-Yield Pulp	42,103		50,947
Corporate and other		533,023		713,186

Total identifiable assets		$	2,336,421	$	2,445,024
Corporate						Corporate	581,371		529,610
Total assets						Total assets	$	2,306,002	$	2,347,528

~~18.~~17. Commitments and Contingencies

Commitments

The Company ~~has~~had no material changes to the purchase obligations presented in ~~Note 21 —~~ ~~Commitments and Contingencies~~ ~~in the Company’s 2021~~its 2022 Form 10-K that ~~are~~were outside the normal course of business ~~for~~during the ~~nine~~six months ended ~~September 24, 2022.~~July 1, 2023. The Company’s purchase obligations continue to primarily consist of commitments for the purchase of natural gas, steam energy and wood ~~chips, and electricity contracts entered into within the normal course of business.~~chips.

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

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Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements (Unaudited)

(in thousands unless otherwise stated)

Litigation and Contingencies

Duties on Canadian ~~softwood lumber sold~~Softwood Lumber Sold to the U.S.

The Company previously operated six softwood lumber mills in Ontario and Quebec, Canada, and exported softwood lumber into the ~~United States~~U.S. from ~~Canada.~~Canada. In connection with these exports, the Company paid approximately $112 million infor softwood lumber duties ~~through~~between 2017 and August 28, 2021, including $1 million of ancillary fees, which were recorded as expense in the periods incurred. As part of ~~September 24, 2022,~~the sale of its lumber assets, the Company retained all rights and obligations to softwood duties generated or incurred through the closing date of the transaction. As of July 1, 2023, the Company had a ~~$38~~$38 million long-term receivable associated with the USDOC’s ~~December 2020, December 2021 and August 2022~~ determinations of the revised rates for the 2017, 2018, 2019 and 2020 periods. This amount does not include interest, which will be due on any amounts refunded. The Company estimates interest earned on the total amount of softwood lumber duties paid to be approximately $6 million.

On July 26, 2023, the USDOC completed its fourth administrative review of duties applied to Canadian softwood lumber exports to the U.S. during 2021 and reduced rates applicable to the Company to a combined 8.0 percent. In connection with this development, in the third quarter the Company will record a pre-tax gain of approximately $2 million in “income (loss) from discontinued operations, net of taxes” and increase the long-term receivable related to the USDOC administrative reviews to approximately $40 million.

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 administrative review processes covering periods after December 31, 2020. As part of the sale of its lumber assets, the Company retained all~~ ~~rights and obligations to softwood lumber duties, generated or incurred through the closing date of the transaction.~~challenges.

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, business interruption and general liability. These other lawsuits and claims, either individually ~~and~~or in the aggregate, are not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Guarantees and Other

The Company provides financial guarantees as required by creditors, insurance programs and various governmental agencies. As of ~~September 24, 2022,~~July 1, 2023, the Company had net exposure of $3834 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~~liability; the Company would only be liable upon its default on the related payment obligations. The standby letters of credit have various expiration dates and ~~will~~are expected to be renewed as required.

The Company had surety bonds of ~~$88~~$86 million as of ~~September 24, 2022,~~July 1, 2023, primarily to comply with financial assurance requirements relating to environmental remediation and post closure care, to provide collateral for the Company’s workers’ compensation program and to guarantee taxes and duties for products shipped internationally. These surety bonds expire at various dates and are expected to be renewed annually as required.

~~LignoTech Florida (“LTF”)~~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 $31 million at ~~September 24, 2022.~~

~~Rayonier Advanced Materials Inc.~~

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

July 1, 2023.

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

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

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Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements (Unaudited)

(in thousands unless otherwise stated)

As of ~~September 24,~~December 31, 2022, ~~all~~a collective bargaining agreement covering approximately 575 unionized employees was expired. The employees continued to work under the terms of the expired contract until negotiations concluded in the second quarter of 2023 and final agreement with the union was reached. All other of the Company’s collective bargaining agreements covering its unionized employees were ~~current.~~

~~19. Supplemental Disclosure~~current as of ~~Cash Flows Information~~

~~Supplemental disclosure~~the date of ~~cash flows information follows:~~

Nine Months Ended
September 24, 2022 September 25, 2021
Interest paid $ 48,384 $ 34,852
Income taxes received (16,484) (27,268)
Capital assets purchased on account 16,316 9,609
this filing.

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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 Consolidated Financial StatementsThe following analysis of ~~Rayonier Advanced Materials Inc. included in Item 1 of this Quarterly Report on Form 10-Q (the “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 with a narrative from the perspective of management on our financial condition and results of operations ~~liquidity and certain other factors which may affect future results. This MD&A~~ should be read in conjunction with our ~~Annual~~Financial Statements and the notes thereto included in this Quarterly Report on Form ~~10-K for the year ended December 31, 2021 (the “2021~~10-Q and with our 2022 Form ~~10-K”)~~10-K and information contained in ~~our~~ subsequent Forms 8-K and other reports tofiled with the ~~U.S. Securities and Exchange Commission (the “SEC”).~~SEC.

~~Amounts contained in this Report may not always add due to rounding.~~

Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q regarding anticipated financial, business, legal or other outcomes, including business and market conditions, outlook and other similar statements relating to 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,” “could,” “expect,” “estimate,” “believe,” “intend,” “plan,” “forecast,” “anticipate,” “project,” “guidance” and other similar language. However, the absence of these or similar words or expressions does not mean that a statement is not 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 that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties. The ~~following~~ risk factors ~~and those~~ contained in Item ~~1A —~~ 1A—Risk Factors inof our ~~2021~~2022 Form 10-K, among others, could cause actual results or events to differ materially from ~~the Company’s~~our historical experience and those expressed in forward-looking statements made in this ~~document.~~report.

Forward-looking statements are only as of the date ~~they are made,~~of the filing of this Quarterly Report on Form 10-Q and ~~the Company undertakes~~we undertake no duty to update its forward-looking statements except as required by law. You are advised to review any further disclosures that we have made or may make in our filings and other submissions to the SEC, including those on Forms 10-K, 10-Q, ~~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 2021 Form 10-K 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:

~~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, 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 Operational Risks~~Overview

•Our ten largest customers represented approximately 40 percent of our 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.

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

~~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.

~~Details on the above risk factors are more specifically described in Item 1A —~~ ~~Risk Factors~~ ~~in our 2021 Form 10-K and in Item 1A —~~ ~~Risk Factors~~ ~~of this Report.~~

~~Business~~

We are a global leader of ~~cellulose-based technologies, which comprise~~specialty cellulose materials with a broad offering of high purity cellulose specialties, a natural polymer ~~commonly~~ used in the production of a variety of specialty ~~chemicals and polymers for use in producing~~chemical products, including liquid crystal displays, filters, textiles and performance additives for pharmaceutical, food and other industrial applications. ~~Starting from a tree and building~~Building upon more than 95 years of experience in cellulose chemistry, we provide ~~high~~some of the highest quality ~~high-purity~~high-purity cellulose ~~materials~~pulp products that make up the essential building blocks for our customers’ products while providing exceptional service and value. We also produce a unique, lightweight multi-ply paperboard product and a bulky, high-yield pulp product. Our paperboard is used for ~~use~~production in ~~consumer products.~~the commercial printing, lottery ticket and high-end packaging sectors. Our high-yield pulp is used by paperboard producers, as well as in traditional printing, writing and specialty paper manufacturing.

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

As a result of the sale of the lumber and newsprint facilities and certain related assets completed in August 2021, the lumber and newsprint 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 — ~~Discontinued Operations~~ ~~to our Consolidated Financial Statements for further information on the sale.~~Pulp.

Recent Business Developments

•In ~~October 2022,~~July 2023, we ~~repaid a Canadian dollar fixed interest rate~~secured term loan financing of $250 million in aggregate principal amount, the ~~amount~~proceeds of ~~CAD $12~~which will be used, together with cash on hand, to redeem the remaining $318 million ~~(USD $9 million).~~in aggregate principal balance of the 2024 Notes.

•~~During the third quarter of 2022,~~In April 2023, we repurchased ~~$15~~$10 million of our ~~5.50% senior notes due 2024 (the “Unsecured Notes”) through open-market transactions and retired 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~~2026 Notes through open-market transactions and retired the notes for ~~approximately $20 million in cash.~~cash of $9 million.

•~~During the second quarter of 2022,~~In March 2023, we ~~sold the 28.7~~repurchased $5 million ~~shares of GreenFirst common stock we received in connection with the August 2021 sale~~ of our ~~lumber~~2024 Notes through open-market transactions and ~~newsprint assets~~retired the notes for ~~$43~~cash of $5 million. ~~The shares sale agreement contains a purchase price protection clause whereby we are entitled to participate in further stock price appreciation under certain circumstances over the next 18 months.~~

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•Our business has experienced a significant increase in the costs for wood, chemicals, energy and supply chain. In response, we announced a $146 per metric ton (“MT”) cost surcharge applicable to 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 12 — ~~Stockholders’ Equityto our Consolidated Financial Statementsfor further information.~~

Market Assessment

This market assessment represents our best current estimate of 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 the near future.

High Purity Cellulose

~~Demand~~Average sales prices for cellulose specialties ~~and commodity products remains strong albeit somewhat tempered as global economic growth slows. As such, average sales prices~~in 2023 are expected to be ~~down modestly~~ in the ~~fourth quarter driven by a greater mix of commodity~~high single-digit percent higher than average 2022 sales prices, while sales volumes ~~as production and logistics constraints improve. Key raw material inflation is~~are expected to decrease from prior year due to softness in sales orders driven principally by significant customer destocking. Market demand for commodity products remains resilient but at lower prices than the first half of the year, in line with industry forecasts. Commodity sales volumes are expected to continue to increase through the end of 2023. The prices for certain inputs have come off the 2022 highs but are expected to remain ~~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.~~

significantly elevated versus pre-COVID pandemic levels.

Paperboard

Paperboard prices are expected to moderate over the balance of the year but remain elevated from 2022 levels, while sales volumes are expected to improve in the second half of the year. Raw material prices are expected to moderate further as pulp markets decline.

High-Yield Pulp

High-yield pulp prices have declined due to soft demand and new paper pulp capacity ramping up. Prices are expected to decline overall in 2023 despite an expected uptick in the fourth quarter, ~~driven by strong demand~~ in ~~both~~line with industry forecasts for the ~~commercial printing and packaging end-use markets.~~global paper pulp market. Sales volumes ~~and raw material costs~~ are expected to ~~remain steady.As a result, Paperboard is anticipated to deliver another solid quarter of Adjusted EBITDA.~~

~~High-Yield Pulp~~

High-yield pulp markets appear to be peaking as global economic demand slows. However, due to the sales lag experienced in 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 High-Yield Pulp is anticipated to improve~~decline in the coming ~~quarter.~~quarter as we take downtime in the third quarter due to market conditions.

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 High Purity Cellulose segment were $84 million primarily related to sales of bioelectricity~~offering and ~~lignosulfonates. We~~ expect to grow ~~these~~our biomaterials sales and increase overall margins over time.

~~Our investment into a~~ The bioethanol facility at our Tartas, France ~~facility~~plant is under construction and is anticipated to be operational in ~~2024, subject~~early 2024. The total estimated cost of the project is approximately $41 million, with $26 million to be spent in 2023. We plan to utilize $28 million of low-cost green loans to help fund the ~~approval~~project, including $8 million already raised, and $4 million in grants. The project is expected to provide $8 million to $10 million of ~~certain permits.Further updates will be provided as the schedule is finalized.~~annual incremental EBITDA, based on current exchange rates, beginning in 2025.

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Results of Operations

Three Months Ended Nine Months Ended
(in millions, except percentages) September 24, 2022 September 25, 2021 %
Change September 24, 2022 September 25, 2021 %
Change
Net Sales $ 466 $ 374 25% $ 1,217 $ 1,034 18%
Cost of Sales (419) (355) (1,138) (972)
Gross Margin 47 19 147% 79 62 27%
Selling, general and administrative expenses (20) (17) (68) (52)
Foreign exchange gains 3 3 4 1
Other operating expense, net (1) (2) (5) (7)
Operating Income 29 3 867% 10 4 150%
Interest expense (16) (17) (49) (49)
Interest income and other, net 3 2 6 —
Other components of pension and OPEB, excluding service costs 1 1 2 2
Gain (loss) on GreenFirst equity securities — (8) 5 (8)
Gain on debt extinguishment — 2 — 2
Income (Loss) From Continuing Operations Before Income Taxes 17 (17) 200% (26) (49) 47%
Income tax (expense) benefit 2 4 (3) 29
Equity in loss of equity method investment (1) — (2) (1)
Income (Loss) from Continuing Operations 18 (13) 238% (31) (21) (48)%
Income from discontinued operations, net of taxes 12 9 12 112
Net Income (Loss) $ 30 $ (5) $ (19) $ 90
Gross Margin % 10 % 5 % 7 % 6 %
Operating Margin % 6 % 1 % 1 % — %
Effective Tax Rate % (11) % 24 % (13) % 59 %


	Three Months Ended						Six Months Ended
(in millions, except percentages)	July 1, 2023			June 25, 2022			July 1, 2023			June 25, 2022
Net sales	$	385		$	399		$	852		$	751
Cost of sales	(370)			(372)			(800)			(718)
Gross margin	15			27			52			33
Selling, general and administrative expense	(18)			(28)			(37)			(48)
Foreign exchange gain (loss)	(2)			2			(2)			1
Other operating expense, net	(2)			(4)			(3)			(5)
Operating income (loss)	(7)			(3)			10			(19)
Interest expense	(16)			(16)			(31)			(33)
Other components of pension and OPEB, excluding service costs	1			—			(1)			1
Gain (loss) on GreenFirst equity securities	—			(4)			—			5

Other income, net	3			3			3			3
Loss from continuing operations before income taxes	(19)			(20)			(19)			(43)
Income tax (expense) benefit	3			(4)			6			(5)
Equity in loss of equity method investment	—			(1)			(1)			(1)
Loss from continuing operations	(16)			(25)			(14)			(49)
Income (loss) from discontinued operations, net of taxes	(1)			2			(1)			1
Net loss	$	(17)		$	(23)		$	(15)		$	(48)

Gross margin %	3.9		%	6.8		%	6.1		%	4.4		%
Operating margin %	(1.8)		%	(0.8)		%	1.2		%	(2.5)		%
Effective tax rate	17.9		%	(18.1)		%	31.5		%	(11.8)		%

Net Sales


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
(in millions)	(in millions)	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021		(in millions)	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
High Purity Cellulose	High Purity Cellulose	$	369	$	288	$	952	$	792	High Purity Cellulose	$	300	$	302	$	674	$	583
Paperboard	Paperboard	66		52		183		157		Paperboard	48		63		107		117
High-Yield Pulp	High-Yield Pulp	40		42		102		106		High-Yield Pulp	44		40		86		62

Eliminations	Eliminations	(9)		(8)		(20)		(21)		Eliminations	(7)		(6)		(15)		(11)
Net Sales		$	466	$	374	$	1,217	$	1,034
Net sales										Net sales	$	385	$	399	$	852	$	751

Net sales ~~increased by $92~~for the quarter ended July 1, 2023 decreased $14 million, ~~and $183 million, respectively, during the three and nine months ended September 24, 2022 when~~or 4 percent, compared to the same prior year ~~periods,~~quarter, driven by lower commodity products sales prices in our High Purity Cellulose segment and lower sales volumes in cellulose specialties and our Paperboard segment, partially offset by higher sales prices in cellulose specialties, Paperboard and High-Yield Pulp and higher sales volumes in commodity products and High-Yield Pulp.

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

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Operating Income (Loss)


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
(in millions)	(in millions)	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021		(in millions)	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
High Purity Cellulose	High Purity Cellulose	$	22	$	2	$	21	$	19	High Purity Cellulose	$	—	$	7	$	13	$	(1)
Paperboard	Paperboard	12		2		28		10		Paperboard	6		10		16		16
High-Yield Pulp	High-Yield Pulp	6		8		4		8		High-Yield Pulp	1		(2)		8		(2)
Corporate	Corporate	(11)		(9)		(43)		(33)		Corporate	(14)		(18)		(27)		(32)
Operating Income		$	29	$	3	$	10	$	4
Operating income (loss)										Operating income (loss)	$	(7)	$	(3)	$	10	$	(19)

Operating ~~income~~loss for the ~~three and nine months~~quarter ended ~~September 24, 2022~~July 1, 2023 increased ~~$26~~$4 million, ~~and $6 million, respectively, when~~or 133 percent, compared to the same prior year ~~periods due~~quarter, driven by the decrease in net sales and increased labor, maintenance, input and logistics costs, partially offset by a decrease in Corporate expense items. Operating results for the six months ended July 1, 2023 improved $29 million, or 153 percent, compared to ~~higher~~the same prior year period, driven by the increase in net sales ~~prices across all segments,~~and a decrease in Corporate expense items, partially offset by increased ~~costs resulting~~labor, maintenance, input and logistics costs. Included in operating results in the current three- and six-month periods was the recognition of a $3 million benefit from ~~inflation on key inputs, including chemicals, wood fiber and energy costs, lower sales volumes due to supply chain constraints and lower productivity when comparing the nine-month periods.~~payroll tax credit carryforwards. See Operating Results by Segment below for further discussion.

Non-Operating ~~Expenses~~Income & Expense

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

Included in non-operating ~~expenses for~~in the ~~nine~~three and six months ended ~~September 24,~~June 25, 2022 was a $4 million loss and a $5 million gain, respectively, associated with the GreenFirst common shares received in connection with the sale of our lumber and newsprint assets. ~~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~~ ~~to our Consolidated Financial Statements for further information.~~

Income ~~Tax (Expense) Benefit~~Taxes

The effective tax rate on the third quarter 2022 income from continuing operations was a benefit of 11 percent, compared to a benefit of 24 percent on the loss from continuing operations in the same quarter of 2021. The effective tax rate on the loss from continuing operations for the ~~nine~~three and six months ended ~~September 24, 2022~~July 1, 2023 was ~~an expense of 13 percent, compared to~~ a benefit of 5918 percent ~~for the comparable prior year period.~~

and 32 percent, respectively. The ~~2022~~2023 effective tax rates ~~differ~~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 nondeductible executive compensation, ~~interest received on overpayments of tax from prior years,~~offset by U.S. tax credits, return-to-accrual adjustments related to previously filed tax returns and an excess tax ~~return-to-accrual adjustments.~~benefit on vested stock compensation.

The effective tax rate on the loss from continuing operations for the ~~nine~~three and six months ended ~~September~~June 25, ~~2021 differs~~2022 was an expense of 18 percent and 12 percent, respectively. The 2022 effective tax rates differed from the federal statutory rate of 21 percent primarily due to a tax benefit recognized by remeasuring our 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 after the sale of our lumber and newsprint assets. Other factors impacting the effective benefit rate were return-to-accrual adjustments and tax credits, partially offset by nondeductibledisallowed interest ~~expense~~deductions in the U.S. and ~~lower~~nondeductible executive compensation, partially offset by U.S. tax ~~deductions on vested stock compensation. See Note 16 —~~ ~~Income Taxes~~ ~~to our Consolidated Financial Statements for further information~~.

~~Discontinued Operations~~

~~The sale of our lumber~~credits 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~~tax return-to-accrual adjustments. During the first quarter of 2022, we trued-up certain sale-related items with GreenFirst for a total net cash outflow of $3 million, as expected and previously disclosed. No adjustments have been made in 2022 to the gain on sale recorded during the year ended 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 gain, pre-tax, in connection with this development and increased the 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 dispute.~~

Operating Results by Segment

High Purity Cellulose

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


	Three Months Ended				Six Months Ended
(in millions, except where otherwise stated)	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
Net sales	$	300	$	302	$	674	$	583
Operating income (loss)	$	—	$	7	$	13	$	(1)
Average sales prices ($ per MT)	$	1,301	$	1,355	$	1,313	$	1,288
Sales volumes (thousands of MTs)	214		206		479		414

Table of Contents

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


	Three Months Ended June 25, 2022		Changes Attributable to:				Three Months Ended July 1, 2023
(in millions)			Price		Volume/Mix/Other
Cellulose specialties	$	218	$	20	$	(59)	$	179
Commodity products	60		(4)		43		99
Other sales(a)	24		—		(2)		22
Net sales	$	302	$	16	$	(18)	$	300

——————————————

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

Net sales of our High Purity Cellulose segment for the ~~three months~~quarter ended ~~September 24, 2022 increased $81~~July 1, 2023 decreased $2 million ~~when~~ compared to the same prior year quarter. ~~Cellulose specialties sales prices increased 25 percent, inclusive of~~Included in the ~~$146/MT cost surcharge effective April 2022,~~current and ~~sales volumes increased 5 percent due to the impact of contract negotiations. Commodity product sales prices~~prior year quarters were $22 million and ~~sales volumes rose 13 percent and 9 percent,~~$24 million, 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. Sales prices decreased 4 percent during the current quarter, driven by a 4 percent decrease in commodity products prices, partially offset by a 13 percent increase in cellulose specialties prices. Total sales volumes increased 4 percent during the current quarter, driven by a 72 percent increase in commodity products volumes, partially offset by a 27 percent decrease in cellulose specialties volumes. Sales volumes for cellulose specialties were negatively impacted by market-driven demand declines primarily due to significant customer destocking, particularly those customers associated with construction markets.

Net Sales ~~— Nine~~- Six 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


	Six Months Ended June 25, 2022		Changes Attributable to:				Six Months Ended July 1, 2023
(in millions)			Price		Volume/Mix/Other
Cellulose specialties	$	402	$	52	$	(48)	$	406
Commodity products	130		4		89		223
Other sales(a)	51		—		(6)		45
Net sales	$	583	$	56	$	35	$	674

——————————————

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

Net sales of our High Purity Cellulose segment for the ~~nine~~six months ended ~~September 24, 2022~~July 1, 2023 increased ~~$160~~$91 million ~~when~~ compared to the same prior year period. ~~Cellulose specialties sales prices increased 19 percent, inclusive of~~Included in the ~~$146/MT cost surcharge effective April 2022,~~current and sales volumes increased 4 percent due to the impact of contract negotiations. Commodity product sales prices rose 19 percent, driven by higher demand, while commodity product sales volumes decreased 4 percent due to lower production, supply chain constraintsprior year periods were $45 million and ~~lower commodities volumes in favor of higher specialties volumes. Included within net sales for the period was $84~~$51 million, respectively, of other sales primarily from bio-based energy and lignosulfonates.

Sales prices increased 2 percent during the current period, driven by increases in cellulose specialties and commodity products prices of 15 percent and 1 percent, respectively. Total sales volumes increased 16 percent during the current period, driven by a 69 percent increase in commodity products volumes, partially offset by a 12 percent decrease in cellulose specialties volumes. Sales volumes for cellulose specialties were negatively impacted by market-driven demand declines primarily due to significant customer destocking, particularly in construction markets.

Operating Income —- Three Months Ended

Three Months Ended
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 %


	Three Months Ended June 25, 2022			Gross Margin Changes Attributable to:												Three Months Ended July 1, 2023
(in millions, except percentages)				Sales Price			Sales Volume/Mix/Other(a)			Cost			SG&A and other
Operating income	$	7		$	16		$	(10)		$	(16)		$	3		$	—
Operating margin %	2.3		%	4.9		%	(2.9)		%	(5.3)		%	1.0		%	—		%

——————————————

(a)~~Sales volume computed~~ Computed based on contribution margin.

Operating income of our High Purity Cellulose segment ~~increased $20~~for the quarter ended July 1, 2023 decreased $7 million ~~during the three months ended September 24, 2022 to $22 million when~~ compared to the same prior year ~~quarter. Sales~~quarter, driven by the lower cellulose specialties sales volumes and commodity products sales prices ~~for the segment~~and increased ~~21 percent during~~labor and maintenance costs due to inflation, partially offset by higher cellulose specialties sales prices and commodity products sales volumes and decreased costs of certain inputs. Included in operating income in the current quarter ~~driven by~~was the recognition of a ~~25 percent increase, inclusive~~$3 million benefit from payroll tax credit carryforwards.

Table of the $146/MT cost surcharge, for cellulose specialties and a 13 percent increase for commodity prices. Total volumes increased 7 percent when compared to the prior year quarter due to 5 percent and 9 percent increases in cellulose specialties and commodity volumes, respectively. Costs increased compared to the prior year period driven by inflation on key inputs, including chemicals, wood fiber and energy costs, as well as higher supply chain expenses. Offsetting higher energy costs in the current period were $2 million of excess emission allowances sales associated with the operations in Tartas, France.Contents

Operating Income ~~— Nine~~(Loss) - Six 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 %


	Six Months Ended June 25, 2022			Gross Margin Changes Attributable to:												Six Months Ended July 1, 2023
(in millions, except percentages)				Sales Price			Sales Volume/Mix/Other(a)			Cost			SG&A and other
Operating income (loss)	$	(1)		$	56		$	16		$	(62)		$	4		$	13
Operating margin %	(0.2)		%	8.8		%	1.9		%	(9.2)		%	0.6		%	1.9		%

——————————————

(a)~~Sales volume computed~~ Computed based on contribution margin.

~~Operating income~~The operating results of our High Purity Cellulose segment ~~increased $2 million during~~for the ~~nine~~six months ended ~~September 24, 2022 to $21~~July 1, 2023 improved $14 million ~~when~~ compared to the same prior year ~~period. Sales prices for the segment increased 19 percent during the current~~ period, driven by ~~19 percent increases in both~~the higher cellulose specialties ~~inclusive of the $146/MT cost surcharge,~~ and commodity ~~prices. Total~~products sales prices and commodity products sales volumes ~~increased 1 percent, driven~~and decreased costs of certain inputs, partially offset by ~~a 4 percent increase~~the decrease in cellulose specialties sales volumes ~~that was almost entirely offset by a 4 percent decrease~~and higher labor and maintenance costs due to inflation. Included 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 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 costsoperating income in the current period ~~were $12~~was the recognition of a $3 million ~~of excess emission allowances sales associated with the operations in Tartas, France.~~benefit from payroll tax credit carryforwards.

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


	Three Months Ended				Six Months Ended
(in millions, except where otherwise stated)	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
Net sales	$	48	$	63	$	107	$	117
Operating income	$	6	$	10	$	16	$	16
Average sales prices ($ per MT)	$	1,498	$	1,439	$	1,536	$	1,384
Sales volumes (thousands of MTs)	32		44		70		85

Net Sales —- Three Months Ended


		Three Months Ended September 25, 2021		Changes Attributable to:				Three Months Ended September 24, 2022			Three Months Ended June 25, 2022		Changes Attributable to:				Three Months Ended July 1, 2023
(in millions)	(in millions)			Price		Volume/Mix				(in millions)			Price		Volume/Mix
Net Sales		$	52	$	17	$	(3)	$	66
Net sales										Net sales	$	63	$	2	$	(17)	$	48

Net sales of our Paperboard segment for the ~~three months~~quarter ended ~~September 24, 2022 increased $14~~July 1, 2023 decreased $15 million compared to the same prior year ~~period~~quarter due to a 3427 percent decrease in sales volumes, driven by lower productivity and customer destocking, partially offset by a 4 percent increase in sales prices, driven by ~~strong~~continued demand ~~partially offset by a 7 percent decrease in sales volumes due to lower productivity.~~

for sustainable packaging.

Net Sales ~~— Nine~~- Six Months Ended


		Nine Months Ended September 25, 2021		Changes Attributable to:				Nine Months Ended September 24, 2022			Six Months Ended June 25, 2022		Changes Attributable to:				Six Months Ended July 1, 2023
(in millions)	(in millions)			Price		Volume/Mix				(in millions)			Price		Volume/Mix
Net Sales		$	157	$	38	$	(12)	$	183
Net sales										Net sales	$	117	$	11	$	(21)	$	107

Net sales of our Paperboard segment for the ~~nine~~six 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 strong demand, partially offset by an 8 percent decrease in sales volumes due to 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 our Paperboard segment for the three months ended September 24, 2022 increased~~July 1, 2023 decreased $10 ~~million when compared to the same prior year period due to higher sales prices, partially offset by higher raw material pulp, chemicals and logistics costs as well as lower sales 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.~~

Operating income of our Paperboard segment for the nine months ended September 24, 2022 increased $18 million when compared to the same prior year period due to higher sales prices, partially offset by higher raw material pulp, chemicals and logistics costs as well as lower sales volumes.

~~High-Yield Pulp~~

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, driven by lower productivity and customer destocking, partially offset by ~~a 15~~an 11 percent increase in sales prices, driven by continued demand for sustainable packaging.

Operating Income - Three Months Ended


	Three Months Ended June 25, 2022			Gross Margin Changes Attributable to:												Three Months Ended July 1, 2023
(in millions, except percentages)				Sales Price			Sales Volume/Mix(a)			Cost			SG&A and other
Operating income	$	10		$	2		$	(6)		$	—		$	—		$	6
Operating margin %	15.9		%	2.6		%	(6.0)		%	—		%	—		%	12.5		%

——————————————

(a) Computed based on contribution margin.

Table of Contents

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

Operating Income - Six Months Ended


	Six Months Ended June 25, 2022			Gross Margin Changes Attributable to:												Six Months Ended July 1, 2023
(in millions, except percentages)				Sales Price			Sales Volume/Mix(a)			Cost			SG&A and other
Operating income	$	16		$	11		$	(8)		$	(3)		$	—		$	16
Operating margin %	13.7		%	7.4		%	(3.3)		%	(2.8)		%	—		%	15.0		%

——————————————

(a) Computed based on contribution margin.

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

High-Yield Pulp


	Three Months Ended				Six Months Ended
(in millions, except where otherwise stated)	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
Net sales	$	44	$	40	$	86	$	62
Operating income (loss)	$	1	$	(2)	$	8	$	(2)
Average sales prices ($ per MT)(a)	$	633	$	603	$	691	$	586
Sales volumes (thousands of MTs)(a)	60		55		103		85

——————————————

(a) External sales only. For the three months ended July 1, 2023 and June 25, 2022, the High-Yield Pulp segment sold 14,000 MTs and 17,000 MTs of high-yield pulp to the Paperboard segment for $6 million and $7 million, respectively. For the six months ended July 1, 2023 and June 25, 2022, the High-Yield Pulp segment sold 32,000 MTs and 31,000 MTs of high-yield pulp to the Paperboard segment for $15 million and $13 million, respectively.

Net Sales ~~— Nine~~- Three Months Ended


		Nine Months Ended September 25, 2021		Changes Attributable to:				Nine Months Ended September 24, 2022			Three Months Ended June 25, 2022		Changes Attributable to:				Three Months Ended July 1, 2023
(in millions)	(in millions)			Price		Volume/Mix				(in millions)			Price		Volume/Mix
Net Sales		$	106	$	10	$	(14)	$	102

Net sales										Net sales	$	40	$	2	$	2	$	44

Net sales of our High-Yield Pulp segment for the ~~nine months~~quarter ended ~~September 24, 2022 decreased~~July 1, 2023 increased $4 million compared to the same prior year ~~period due to a 16~~quarter, driven by 5 percent ~~decrease~~and 9 percent increases in sales prices and sales volumes,~~partially offset~~ respectively, driven by ~~a 15~~stronger demand, increased productivity and easing logistics constraints.

Net Sales - Six Months Ended


	Six Months Ended June 25, 2022		Changes Attributable to:				Six Months Ended July 1, 2023
(in millions)	Six Months Ended June 25, 2022		Price		Volume/Mix		Six Months Ended July 1, 2023
Net sales	$	62	$	13	$	11	$	86

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

Table of Contents

Operating Income —(Loss) - 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 %


	Three Months Ended June 25, 2022			Gross Margin Changes Attributable to:												Three Months Ended July 1, 2023
(in millions, except percentages)				Sales Price			Sales Volume/Mix(a)			Cost			SG&A and other
Operating income (loss)	$	(2)		$	2		$	1		$	—		$	—		$	1
Operating margin %	(5.0)		%	5.0		%	2.3		%	—		%	—		%	2.3		%

——————————————

(a)~~Sales volume computed~~ Computed based on contribution margin.

~~Operating income~~The operating results of our High-Yield Pulp segment for the ~~three months~~quarter ended ~~September 24, 2022 decreased $2~~July 1, 2023 improved $3 million when compared to the same prior year period, as higher sales prices were more than offset by lower sales volumes due to lower productivity, logistics constraints and higher input and supply chain costs.

~~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 $ 8 $ 10 $ (6) $ (8) $ — $ 4
Operating Margin % 7.5 % 8.0 % (3.8) % (7.8) % — % 3.9 %
~~——————————————~~

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

Operating income of our High-Yield Pulp segment for the nine months ended September 24, 2022 decreased $4 million when compared to the same prior year period, as higher sales prices were more than offset by lower sales volumes due to 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 three months ended September 24, 2022 increased $2 million when~~ compared to the same prior year quarter, driven ~~primarily~~ by the higher ~~variable stock-based compensation costs.~~sales prices and sales volumes.

Operating Income (Loss) - Six Months Ended


	Six Months Ended June 25, 2022			Gross Margin Changes Attributable to:												Six Months Ended July 1, 2023
(in millions, except percentages)				Sales Price			Sales Volume/Mix(a)			Cost			SG&A and other
Operating income (loss)	$	(2)		$	13		$	4		$	(7)		$	—		$	8
Operating margin %	(3.2)		%	17.9		%	2.8		%	(8.2)		%	—		%	9.3		%

29——————————————

(a)

Computed based on contribution margin.

The operating ~~loss~~results of our ~~Corporate~~High-Yield Pulp segment for the ~~nine~~six months ended ~~September 24, 2022 increased~~July 1, 2023 improved $10 million ~~when~~ compared to the same prior year period, driven ~~primarily~~ by ~~an increase in severance~~the higher sales prices and sales volumes, partially offset by increased wood and logistics costs and higher labor and maintenance costs due to inflation.

Corporate


	Three Months Ended				Six Months Ended
(in millions)	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
Operating loss	$	(14)	$	(18)	$	(27)	$	(32)

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

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

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~~our 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~~deems 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~~six months ended ~~September 24,~~July 1, 2023 and June 25, 2022, ~~and September 25, 2021,~~ and do not expect to utilize any authorization in the ~~near~~ future.

Table of Contents

As of ~~September 24, 2022,~~July 1, 2023, we were in compliance with all financial and other customary ~~covenants.~~covenants under our credit arrangements. We believe our future cash flows from operations, ~~and~~ availability under our ABL Credit Facility ~~as well as~~and our ability to access the capital markets, if necessary or desirable, will be adequate to fund our operations and anticipated long-term funding requirements, including capital expenditures, defined benefit plan contributions and repayment of debt maturities.

Our non-guarantor subsidiaries had assets of ~~$799~~$466 million, liabilities of ~~$234~~$139 million, year-to-date revenue of ~~$187~~$79 million and a trailing twelve month ABL Credit Facility covenant EBITDA for continuing operations of $34 million as of ~~September 24, 2022.~~July 1, 2023.

Our liquidity and capital resources are summarized below:

(in millions, except ratios) September 24, 2022 December 31, 2021
Cash and cash equivalents (a)
$ 132 $ 253
Availability under the ABL Credit Facility (b)
128 103
Total debt (c)
873 929
Stockholders’ equity 780 814
Total capitalization (total debt plus stockholders’ equity) 1,653 1,743
Debt to capital ratio 53 % 53 %


(in millions, except ratios)	July 1, 2023			December 31, 2022
Cash and cash equivalents(a)	$	157		$	152
Availability under the ABL Credit Facility(b)	109			130
Total debt(c)	834			853
Stockholders’ equity	814			829
Total capitalization (total debt plus stockholders’ equity)	1,648			1,682
Debt to capital ratio	51		%	51		%

——————————————

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

(b) Amounts available under the ABL Credit Facility fluctuate based on eligible accounts receivable and inventory levels. At ~~September 24, 2022,~~July 1, 2023, we had ~~$166~~$143 million of gross availability and net available borrowings of ~~$128~~$109 million after taking into account standby letters of credit of ~~$38~~$34 million. In addition to the availability under the ABL Credit Facility, we have ~~$23~~$6 million available under anour 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 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~~obligation payments relate to natural gas, steam energy and wood chips purchase contracts. There have been no material changes to our contractual commitments outside the ordinary course of business during the ~~nine~~six months ended ~~September 24, 2022.~~July 1, 2023. See Note 17—Commitments and Contingenciesto our Financial Statements for further information.

Senior Notes and Term Loan

~~During the nine months ended September 24, 2022,~~In March 2023, we repurchased ~~$35~~$5 million of our ~~Unsecured~~2024 Notes through ~~open market~~open-market transactions and retired the notes for cash of ~~approximately $35~~$5 million.

~~With our next significant debt maturity in mid-2024,~~In April 2023, 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 portionrepurchased $10 million of our 2026 Notes through open-market transactions and retired the notes for cash ~~balances to opportunistically repay debt or assist in a holistic refinancing~~ of ~~our capital structure.~~$9 million.

~~Canadian Dollar Term Loans~~

~~During the nine months ended September 24, 2022,~~In July 2023, we ~~repaid a Canadian dollar fixed interest rate~~secured term loan financing of $250 million in aggregate principal amount and received net proceeds of $243 million after original issue discount, which will be used, together with cash on hand, to redeem the ~~amount~~remaining $318 million in aggregate principal balance of ~~CAD $12 million (USD $9 million). In October 2022, we repaid~~the 2024 Notes and pay fees and expenses related to the transaction. The 2027 Term Loan matures in July 2027, bears interest at an ~~additional term loan in~~annual rate equal to three-month Term SOFR (or, if greater, 3.00 percent) plus 8.00 percent and requires quarterly principal payments of 0.50 percent of the ~~amount~~initial principal amount.

Table of ~~CAD $12 million (USD $9 million).~~Contents

Cash Flows

~~The following table summarizes our cash flows:~~


		Nine Months Ended					Six Months Ended
(in millions)	(in millions)	September 24, 2022		September 25, 2021		(in millions)	July 1, 2023		June 25, 2022
Cash flows provided by (used in):	Cash flows provided by (used in):					Cash flows provided by (used in):
Operating activities-continuing operations		$	7	$	45
Operating activities-discontinued operations		—		162
Operating activities						Operating activities	$	84	$	(36)

Investing activities-continuing operations	Investing activities-continuing operations	(114)		(65)		Investing activities-continuing operations	(54)		(87)
Investing activities-discontinued operations	Investing activities-discontinued operations	44		183		Investing activities-discontinued operations	—		43
Financing activities	Financing activities	(51)		(138)		Financing activities	(26)		(22)

Cash ~~flows~~ provided by operating activities ~~of continuing operations decreased $38~~increased $120 million ~~during the nine months ended September 24, 2022, to $7 million, when compared to the same prior year period~~primarily due to ~~changes in~~increased cash inflows from working capital, ~~and other items, which were influenced by the impact of the extensive planned maintenance outages through the second quarter of 2022,~~ partially offset by ~~the receipt of a $23 million U.S. federal tax refund.~~payments on deferred energy liabilities associated with our Tartas facility operations.

Cash ~~flows~~ used in investing activities of continuing operations ~~increased $49~~decreased $33 million ~~during the nine months ended September 24, 2022 when compared to the same prior year period primarily~~ due to ~~increased~~lower capital ~~spending related to the planned maintenance outages in the current year.~~spending.

Cash ~~flows~~ provided by investing activities of discontinued operations ~~decreased $139~~of $43 million ~~during the nine months ended September 24,~~in 2022 ~~to $44 million, when compared~~related to the ~~same prior year period. The cash inflow in 2022 was the result of~~proceeds from the 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 consisted of the net cash received in connection with the sale of the lumber and newsprint assets.

equity securities.

Cash ~~flows~~ used in financing activities ~~decreased $87~~increased $4 million ~~during the nine months ended September 24, 2022, to $51 million, when compared to the same prior year period,~~ primarily due to ~~a decrease in repayment~~higher repurchases of common stock to satisfy tax withholding requirements related to the issuance of stock under our incentive stock plans and decreased borrowings of long-term debt, partially offset by lower repayments of long-term debt.

Performance and Liquidity Indicators

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 non-GAAP financial measures of EBITDA, adjusted EBITDA and adjusted free cash flows. These measures are not defined by GAAP and our discussion of them is not intended to conflict with or change any of our GAAP disclosures provided in this ~~Report.~~report.

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

We do not consider non-GAAP financial 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 financial measures are provided below. Non-GAAP financial measures are not necessarily indicative of results that may be generated in future periods and should not be relied upon, in whole or part, in evaluating ~~the~~our financial condition, results of operations or future ~~prospects of the Company.~~prospects.

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EBITDA and Adjusted EBITDA

EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is ~~not necessarily indicative~~defined as EBITDA adjusted for the settlement of ~~results that may be generated in future periods.~~certain pension plans and other items.

~~Below are reconciliations~~Reconciliations of income (loss) from continuing operations to EBITDA ~~from continuing operations, by segment:~~

(in millions) High Purity Cellulose Paperboard High-Yield Pulp Corporate & Other Total
Three Months Ended September 24, 2022
Income (loss) from continuing operations $ 23 $ 12 $ 6 $ (23) $ 18
Depreciation and amortization 30 3 — 2 35
Interest expense, net — — — 17 17
Income tax benefit — — — (2) (2)
EBITDA and Adjusted EBITDA from continuing operations $ 53 $ 15 $ 6 $ (6) $ 68
Three Months Ended September 25, 2021
Income (loss) from continuing operations $ 2 $ 2 $ 8 $ (25) $ (13)
Depreciation and amortization 30 4 1 — 35
Interest expense, net — — — 17 17
Income tax benefit — — — (4) (4)
EBITDA from continuing operations 32 6 9 (12) 35
Gain on debt extinguishment — — — (2) (2)
Adjusted EBITDA from continuing operations $ 32 $ 6 $ 9 $ (14) $ 33
Nine Months Ended September 24, 2022
Income (loss) from continuing operations $ 22 $ 29 $ 5 $ (87) $ (31)
Depreciation and amortization 83 10 1 2 96
Interest expense, net — — — 49 49
Income tax expense — — — 3 3
EBITDA from continuing operations 105 39 6 (33) 117
Pension settlement loss — — — 1 1
Severance — — — 4 4
Adjusted EBITDA from continuing operations $ 105 $ 39 $ 6 $ (28) $ 122
Nine Months Ended September 25, 2021
Income (loss) from continuing operations $ 20 $ 11 $ 9 $ (61) $ (21)
Depreciation and amortization 85 11 2 3 101
Interest expense, net — — — 49 49
Income tax benefit — — — (29) (29)
EBITDA from continuing operations 105 22 11 (38) 100
Pension settlement loss — — — 1 1
Gain on debt extinguishment — — — (2) (2)
Adjusted EBITDA from continuing operations $ 105 $ 22 $ 11 $ (39) $ 99

~~For the three and nine months ended September 24, 2022, EBITDA from continuing operations increased $33 million and $17 million, respectively,~~ and Adjusted EBITDA from continuing operations, ~~increased $35~~by segment, follow:


(in millions)	High Purity Cellulose		Paperboard		High-Yield Pulp		Corporate & Other		Total
Three Months Ended July 1, 2023
Income (loss) from continuing operations	$	—	$	6	$	1	$	(23)	$	(16)
Depreciation and amortization	28		4		—		1		33
Interest expense, net	—		—		—		14		14
Income tax benefit	—		—		—		(3)		(3)
EBITDA-continuing operations	28		10		1		(11)		28
Gain on debt extinguishment	—		—		—		(1)		(1)


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

Three Months Ended June 25, 2022
Income (loss) from continuing operations	$	6	$	11	$	(1)	$	(41)	$	(25)
Depreciation and amortization	30		3		1		—		34
Interest expense, net	—		—		—		16		16
Income tax expense	—		—		—		4		4
EBITDA-continuing operations	36		14		—		(21)		29
Pension settlement loss	—		—		—		1		1
Severance	—		—		—		4		4

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



Six Months Ended July 1, 2023
Income (loss) from continuing operations	$	13	$	16	$	8	$	(51)	$	(14)
Depreciation and amortization	59		7		1		1		68
Interest expense, net	—		—		—		29		29
Income tax benefit	—		—		—		(6)		(6)
EBITDA-continuing operations	72		23		9		(27)		77
Pension settlement loss	—		—		—		2		2
Gain on debt extinguishment	—		—		—		(1)		(1)
Adjusted EBITDA-continuing operations	$	72	$	23	$	9	$	(26)	$	78

Six Months Ended June 25, 2022
Income (loss) from continuing operations	$	(1)	$	17	$	(1)	$	(64)	$	(49)
Depreciation and amortization	53		7		1		—		61
Interest expense, net	—		—		—		32		32
Income tax expense	—		—		—		5		5
EBITDA-continuing operations	52		24		—		(27)		49
Pension settlement loss	—		—		—		1		1
Severance	—		—		—		4		4
Adjusted EBITDA-continuing operations	$	52	$	24	$	—	$	(22)	$	54

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EBITDA from continuing operations for the quarter ended July 1, 2023 decreased $1 million ~~and $23 million, respectively, when~~ compared to the same prior year ~~periods. These increases were primarily~~quarter, driven by ~~higher~~the decrease in net sales ~~prices across all segments, partially offset by higher key~~and increased labor, maintenance, input and logistics costs, ~~due~~offset by a decrease in Corporate expense items and the recognition of a $3 million benefit from payroll tax credit carryforwards. EBITDA from continuing operations for the six months ended July 1, 2023 increased $28 million compared to ~~inflation, lower volumes due to supply chain constraints~~the same prior year period, driven by the increase in net sales, a decrease in Corporate expense items and ~~lower productivity when comparing~~ the ~~nine-month periods. For a full discussion of changes to operating~~ income ~~see~~recognized on the payroll tax credit carryforwards, partially offset by increased labor, maintenance, input and logistics costs. See Results of Operations ~~above.~~above for additional discussion of the changes in our operating results.

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 deemed discretionary by management. Adjusted free cash flows ~~as defined by us,~~ is a non-GAAP financial measure of cash generated during a period, which is available for debt reduction, strategic capital expenditures, ~~and~~ acquisitions and ~~repurchase~~repurchases of 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~~Cash flows of ~~cash flows from operations~~operating activities of continuing operations is reconciled to adjusted free cash flows ~~- continuing operations for the respective periods:~~as follows:

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)


	Six Months Ended
(in millions)	July 1, 2023		June 25, 2022
Cash provided by (used in) operating activities-continuing operations	$	84	$	(36)
Capital expenditures, net(a)	(32)		(71)
Adjusted free cash flows-continuing operations	$	52	$	(107)

——————————————

(a) Net of proceeds from the sale of assets and excluding strategic capital expenditures. Strategic capital expenditures for the ~~nine~~six months ended July 1, 2023 and June 25, 2022 ~~and 2021~~ were ~~approximately~~ $22 million and ~~$10~~$16 million, respectively.

Adjusted free cash flows of continuing operations ~~declined~~increased primarily due to changes in working capital and ~~other items as well as higher~~lower capital expenditures. ~~For a full discussion of operating cash flows, see~~See Cash Flows ~~above.~~above for additional discussion of our operating cash flows.

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~~Finance & Strategic Planning 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 further information.~~

Foreign Currency

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,~~also use 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.

Prices

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 these~~These products have ~~few~~less distinguishing qualities from producer to producer and competition is based primarily on price, which is determined by market 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’ actions which can lead to an impact in prices for cellulose specialties products. In addition, slightly over half of our cellulose specialties contracted volumes are under multi-year contracts that expire between 2022 and 2024.

As of September 24, 2022, we had $2 million of variable rate debt which is subject to interest rate risk. At this borrowing level, a hypothetical 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~~Certain key input costs, such as wood fiber, chemicals and energy, may experience significant price fluctuations, also impacted by 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 24, 2022 was $823 million compared to the $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 fallshifts, fluctuations in capacity and ~~decrease as interest rates rise.~~

other demand and supply dynamics. 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 that are derivative instruments are reported in ~~the~~our consolidated balance sheets at their fair values, unless they qualify for the normal purchase normal sale ~~(“NPNS”)~~ exception and such exception has been ~~elected. If the NPNS exception is~~ elected, in which case, the fair values of such contracts are not recognized onin the balance sheet.

Variable Interest Rates

As of July 1, 2023 and December 31, 2022, we had $2 million and $4 million, respectively, of variable rate debt subject to interest rate risk. At these borrowing levels, a hypothetical one percent change in interest rates would have resulted in an immaterial change in interest expense for the respective periods.

In July 2023, we secured variable-rate term loan financing of $250 million in aggregate principal amount, the proceeds of which will be used toward the redemption of the remaining $318 million in aggregate principal amount of our fixed-rate 5.50 percent 2024 Notes. The 2027 Term Loan bears interest at a per annum rate equal to three-month Term SOFR (or, if greater, 3.00 percent) plus 8.00 percent. For this new debt, a hypothetical one percent change in current interest rates would result in a $2 million annual change in interest expense.

The fair market value of our long-term fixed interest rate debt is also subject to interest rate risk when the debt becomes due or if we do not hold the debt until maturity. The estimated fair value of our fixed-rate debt at July 1, 2023 and December 31, 2022 was $770 million and $839 million, respectively, compared to its respective $835 million and $854 million principal amounts. 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.

Item 4. Controls and Procedures

Management’s Evaluation of 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”)),~~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~~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~~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 24, 2022.~~July 1, 2023.

~~During~~Internal Control over Financial Reporting

For the quarter ended ~~September 24, 2022,~~July 1, 2023, based upon the evaluation required by ~~paragraph (d) of~~ SEC Rule ~~13a-15,~~13a-15(d), 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. Other Information

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~~outcomes of these actions, either individually or in the aggregate, isare not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Item 1A. Risk Factors

~~In addition~~There have been no material changes or updates to the risk factors previously disclosed in our ~~2021 Annual Report on~~2022 Form ~~10-K, the following risk factor is hereby added:~~

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.

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 ongoing conflict could heighten many of our known risks described in this Item 1A — ~~Risk Factors~~ ~~of our 2021 Annual Report on Form~~ 10-K.

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

Issuer Purchases of Equity Securities

The following table ~~provides information regarding~~summarizes our purchases of ~~Rayonier Advanced Materials~~RYAM common stock during the quarter ended ~~September 24, 2022:~~July 1, 2023:


	Total Number of Shares Purchased(a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Dollar Value of Shares That May Yet be Purchased Under the Publicly Announced Plans or Programs(b)
April 2 to May 6	11,442	$	8.40	—	$	60,294,000
May 7 to June 3	17,809	$	4.30	—	$	60,294,000
June 4 to July 1	—	$	—	—	$	60,294,000
Total	29,251			—

~~Total Number of Shares Purchased~~ ~~(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~~ ~~(b)~~

~~June 26 to July 30~~

—

~~60,294,000~~

~~July 31 to August 27~~

—

~~60,294,000~~

~~August 28 to September 24~~

—

~~60,294,000~~

~~Total~~

—

——————————————

(a) ~~Repurchased~~Represents shares repurchased to satisfy ~~the~~ tax withholding requirements related to the issuance of stock under ~~the Rayonier Advanced Materials Incentive Stock Plan.~~our stock incentive plans.

(b) As of ~~September 24, 2022, approximately~~July 1, 2023, $60 million of share repurchase authorization remains under the authorization declared by ~~the~~our Board of ~~Directors on January 29, 2018.~~

Directors.

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Item 6. Exhibits

Exhibit No.

Description

Location

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

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

3.4

Amended and Restated Bylaws of Rayonier Advanced Materials Inc., effective October 19, 2022

Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed on October 19, 2022

~~3.4~~10.1*

~~Certificate of Designations of Series A Junior Participating Preferred~~

Rayonier Advanced Materials Inc. 2023 Incentive Stock Plan, effective May 17, 2023

Incorporated herein by reference to Exhibit ~~3.1~~D to the ~~Registrant’s Form 8-K~~Registrant's Definitive Proxy Statement on Schedule 14A filed on March ~~21, 2022~~31, 2023

~~4.1~~10.2

~~Rights~~

Term Loan Credit Agreement, dated as of ~~March 21, 2022, between~~July 20, 2023, by and among RYAM Lux SARL, Rayonier Advanced Materials Inc., the other subsidiaries of Rayonier Advanced Materials Inc. party thereto, the lenders party thereto, Oaktree Fund Administration, LLC, as administrative agent, 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~~collateral agent

Incorporated herein by reference to Exhibit ~~4.1~~10.1 to the Registrant’s Form 8-K filed on ~~March 21, 2022~~July 20, 2023

~~10.1~~10.3

~~Seventh Amendment to Retirement Plan for Salaried Employees~~Loan Agreement, dated as of July 20, 2023, by and among RYAM Lux SARL, Rayonier Advanced Materials Inc. and the other subsidiaries of Rayonier Advanced Materials Inc.~~, effective December 31, 2022~~ party thereto

~~Filed herewith~~Incorporated herein by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on July 20, 2023

~~10.2~~10.4

~~First~~ Amendment No. 2 to Revolving Credit Agreement, dated as of July 20, 2023, among Rayonier Advanced Materials Inc. ~~Excess Benefit Plan, effective December 31, 2022~~, Rayonier A.M. Products Inc., the lenders and issuing banks party thereto and Bank of America, N.A. as administrative agent and collateral agent

~~Filed herewith~~Incorporated herein by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed on July 20, 2023

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

Certification of Periodic Financial Reports Under Section 906 of the Sarbanes-Oxley Act of 2002

Furnished herewith

101

Interactive data files (formatted in Inline XBRL) pursuant to Rule 405 of Regulation S-T

Filed herewith

104

Cover page interactive data file (formatted in Inline XBRL and contained in Exhibit 101) pursuant to Rule 406 of Regulation S-T

Filed herewith

* Management contract or compensatory plan

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~~Signature~~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.

			By:			/s/ MARCUS J. MOELTNER
						Marcus J. Moeltner Chief Financial Officer and Senior Vice President, Finance (~~Duly Authorized Officer and~~ Principal Financial Officer)
						Date: August 9, 2023

~~Date: November 2, 2022~~

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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


	September 24, 2022		December 31, 2021
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%	475,000		475,000
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 5.50% 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)	19,048		18,280
Short-term factoring facility-France	2,127		7,118
Finance lease obligation	1,857		2,138
Total debt principal payments due	879,435		937,172
Less: Debt premium, original issue discount and issuance costs, net	(6,875)		(8,461)
Total debt	872,560		928,711
Less: Debt due within one year	(21,554)		(37,680)
Long-term debt	$	851,006	$	891,031


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


	September 24, 2022		December 31, 2021

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


	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	%