~~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~~30, 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.~~November 6, 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~~			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			2018
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
2G			Second generation
ABL Credit Facility			5-year senior secured asset-based revolving credit facility due December 2025
AOCI			Accumulated other comprehensive income (loss)
CAD			Canadian dollar
CEWS			Canada Emergency Wage Subsidy
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.
LTF			LignoTech Florida LLC
MT			Metric ton
OPEB			Other post-employment benefits
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
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				Nine Months Ended
	September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
Net sales	$	368,670	$	466,346	$	1,220,844	$	1,217,282
Cost of sales	(359,938)		(419,804)		(1,160,044)		(1,138,118)
Gross margin	8,732		46,542		60,800		79,164
Selling, general and administrative expense	(21,162)		(19,905)		(58,653)		(68,041)
Foreign exchange gain (loss)	624		3,025		(1,510)		4,480
Other operating expense, net	(2,634)		(1,133)		(4,939)		(5,764)
Operating income (loss)	(14,440)		28,529		(4,302)		9,839
Interest expense	(21,015)		(16,433)		(51,949)		(49,318)
Other components of pension and OPEB, excluding service costs (Note 14)	501		1,009		(834)		1,910
Gain on GreenFirst equity securities (Note 2)	—		—		—		5,197

Other income, net	3,281		4,117		6,894		6,760
Income (loss) from continuing operations before income taxes	(31,673)		17,222		(50,191)		(25,612)
Income tax (expense) benefit (Note 15)	5,392		1,824		11,227		(3,230)
Equity in loss of equity method investment	(259)		(691)		(1,591)		(2,127)
Income (loss) from continuing operations	(26,540)		18,355		(40,555)		(30,969)
Income from discontinued operations, net of taxes (Note 2)	1,440		11,252		312		12,458
Net income (loss)	$	(25,100)	$	29,607	$	(40,243)	$	(18,511)

Basic earnings per common share (Note 12)
Income (loss) from continuing operations	$	(0.41)	$	0.29	$	(0.62)	$	(0.48)
Income from discontinued operations	0.02		0.18		—		0.20
Net income (loss) per common share-basic	$	(0.39)	$	0.47	$	(0.62)	$	(0.28)

Diluted earnings per common share (Note 12)
Income (loss) from continuing operations	$	(0.41)	$	0.28	$	(0.62)	$	(0.48)
Income from discontinued operations	0.02		0.17		—		0.20
Net income (loss) per common share-diluted	$	(0.39)	$	0.45	$	(0.62)	$	(0.28)

See Notes to Consolidated Financial Statements.

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Rayonier Advanced Materials Inc.

Consolidated Statements of Comprehensive Income (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				Nine Months Ended
	September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
Net income (loss)	$	(25,100)	$	29,607	$	(40,243)	$	(18,511)
Other comprehensive loss, net of tax (Note 10)
Foreign currency translation adjustment	(5,212)		(14,697)		(1,109)		(30,561)
Unrealized gain on derivative instruments	47		67		150		224
Net gain (loss) on employee benefit plans	(65)		1,948		(2,432)		5,844
Total other comprehensive loss	(5,230)		(12,682)		(3,391)		(24,493)
Comprehensive income (loss)	$	(30,330)	$	16,925	$	(43,634)	$	(43,004)

See Notes to Consolidated Financial Statements.

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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


	September 30, 2023		December 31, 2022
Assets
Current assets
Cash and cash equivalents	$	27,127	$	151,803
Accounts receivable, net (Note 3)	175,814		211,526
Inventory (Note 4)	242,691		265,334

Prepaid and other current assets	72,696		60,867
Total current assets	518,328		689,530

Property, plant and equipment (net of accumulated depreciation of $1,792,607 and $1,721,898, respectively)	1,132,469		1,151,268
Deferred tax assets	329,084		322,164
Intangible assets, net	19,166		24,423
Other assets	176,619		160,143
Total assets	$	2,175,666	$	2,347,528

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	171,333	$	163,962
Accrued and other current liabilities (Note 6)	133,716		164,369
Debt due within one year (Note 7)	18,621		14,617
Current environmental liabilities (Note 8)	10,740		10,732
Total current liabilities	334,410		353,680

Long-term debt (Note 7)	730,453		838,508
Non-current environmental liabilities (Note 8)	158,854		159,949
Pension and other postretirement benefits (Note 14)	119,737		119,571
Deferred tax liabilities	14,972		17,021
Other liabilities	31,563		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	418,032		418,048
Retained earnings	434,180		474,423
Accumulated other comprehensive loss (Note 10)	(67,189)		(63,798)
Total stockholders’ equity	785,677		829,313
Total liabilities and stockholders’ equity	$	2,175,666	$	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 September 30, 2023
Balance at July 1, 2023	65,343,418	$	654	$	416,042	$	459,280	$	(61,959)	$	814,017
Net loss	—	—		—		(25,100)		—		(25,100)
Other comprehensive loss, net of tax	—	—		—		—		(5,230)		(5,230)

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

Balance at September 30, 2023	65,343,418	$	654	$	418,032	$	434,180	$	(67,189)	$	785,677

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 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 30, 2023
Balance at December 31, 2022	64,020,761	$	640	$	418,048	$	474,423	$	(63,798)	$	829,313
Net loss		—		—		(40,243)		—		(40,243)
Other comprehensive loss, net of tax		—		—		—		(3,391)		(3,391)
Issuance of common stock under incentive stock plans	1,966,815	20		(20)		—		—		—
Stock-based compensation	—	—		5,361		—		—		5,361
Repurchase of common stock(a)	(644,158)	(6)		(5,357)		—		—		(5,363)
Balance at September 30, 2023	65,343,418	$	654	$	418,032	$	434,180	$	(67,189)	$	785,677

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 stock(a)	(62,179)	(1)		(302)		—		—		(303)
Balance at September 24, 2022	63,971,166	$	639	$	417,216	$	470,831	$	(108,963)	$	779,723

(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)


	Nine Months Ended
	September 30, 2023		September 24, 2022
Operating activities
Net loss	$	(40,243)	$	(18,511)
Adjustments to reconcile net loss to cash provided by operating activities:
Income from discontinued operations	(312)		(12,458)
Depreciation and amortization	104,073		96,294
Stock-based compensation expense	5,361		8,687

Deferred income tax expense (benefit)	(8,130)		372

Gain on GreenFirst equity securities	—		(5,197)

Net periodic benefit cost of pension and other postretirement plans	3,060		4,489
Unrealized (gain) loss on foreign currency	564		(6,853)
(Gain) loss on disposal of property, plant and equipment	(1,085)		2,917

Other	6,133		5,389
Changes in operating assets and liabilities:
Accounts receivable	42,865		(41,599)

Inventories	22,301		(41,504)
Accounts payable	5,545		(2,393)
Accrued liabilities	(31,732)		23,620
Other	(17,493)		(338)
Contributions to pension and other postretirement plans	(8,768)		(5,467)



Cash provided by operating activities	82,139		7,448

Investing activities
Capital expenditures, net	(95,203)		(114,159)
Investment in equity method investment	(415)		—
Cash used in investing activities-continuing operations	(95,618)		(114,159)
Cash provided by investing activities-discontinued operations	—		44,428
Cash used in investing activities	(95,618)		(69,731)

Financing activities

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

Repayments of long-term debt	(397,087)		(51,410)
Short-term financing, net	(2,457)		(4,990)
Debt issuance costs	(10,082)		—

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

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

Net decrease in cash and cash equivalents	(125,251)		(113,265)
Net effect of foreign exchange on cash and cash equivalents	575		(8,369)
Balance, beginning of period	151,803		253,307
Balance, end of period	$	27,127	$	131,673

Supplemental cash flow information:
Interest paid	$	(50,306)	$	(48,384)
Income taxes refunded (paid), net	(7,215)		16,484
Capital assets purchased on account	31,706		16,316

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,~~The Company recently began plans towards a realignment of its High Purity Cellulose assets to optimize production mix, including a consolidation of its commodity products production into the Temiscaming plant. The Company ~~repaid a Canadian dollar (“CAD”) fixed interest rate term loan in~~is currently evaluating the ~~amount~~potential impact of ~~CAD $12 million (U.S. dollar (“USD”) $9 million).~~this realignment on its consolidated financial statements and disclosures.

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~~until December 2023.

As part of the ~~next 18 months.~~

~~The cash consideration received at~~sale of the lumber assets, the Company retained all rights and obligations to softwood duties generated or incurred through the closing ~~was preliminary~~date of the sale. In total, the Company paid $112 million in softwood lumber duties from 2017 through August 2021, and ~~remains subject~~expects to receive all or the vast majority of these duties upon final ~~purchase price~~resolution of the dispute between the USDOC and ~~other sale-related adjustments.~~Canada. During the ~~first~~third quarter of 2023, the USDOC completed its fourth administrative review of duties applied to Canada softwood lumber exports to the U.S. during 2021 and reduced rates applicable to the Company to a combined 8.05 percent. In connection with this development, the Company recorded a pre-tax gain of $2 million in “income from discontinued operations, net of taxes” and increased the long-term receivable related to USDOC administrative reviews to $40 million. During the third quarter of 2022, the USDOC completed its third administrative review of duties applied to Canada softwood lumber exports during 2020 and reduced applicable rates to a combined 8.6 percent, for which the Company ~~trued up certain sale-related items with GreenFirst for~~recorded a ~~total net cash outflow~~pre-tax gain of $3$16 million.

During the nine months ended September 30, 2023, the Company incurred a $2 million ~~as expected and previously disclosed. No adjustments have been made in 2022~~loss related to the ~~gain on sale recorded during the year ended December 31, 2021. Pursuant~~settlement of a claim pursuant to the ~~terms of~~representations and warranties in 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.agreement.

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Rayonier Advanced Materials Inc.

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

During the third quarter of 2022, the U.S. Department of Commerce (the “USDOC”) completed its third administrative review of duties applied to Canadian softwood lumber exports to the U.S. during 2020 and reduced rates applicable to the Company to a combined 8.6 percent. In connection with this development, the Company recorded a $16 million gain, pre-tax, (in the results of discontinued operations within selling, general and administrative expenses and other, and increased the long-term receivable related to the USDOC administrative reviews to $38 million. See Note 18 — ~~Commitments and Contingencies~~ ~~for further information relating to this dispute.~~thousands unless otherwise stated)

Income 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

~~——————————————~~

~~(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


	Three Months Ended				Nine Months Ended
	September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022

Cost of sales	$	—	$	—	$	—	$	155
Gross margin	—		—		—		155
Selling, general and administrative expense and other operating income, net	1,957		15,313		424		16,808
Operating income	1,957		15,313		424		16,963
Non-operating expense	—		(4)		—		(13)
Income from discontinued operations before income taxes	1,957		15,309		424		16,950
Income tax expense	(517)		(4,057)		(112)		(4,492)
Income from discontinued operations, net of taxes	$	1,440	$	11,252	$	312	$	12,458

3. Accounts Receivable, Net

~~The Company’s accounts receivables~~Accounts receivable, net included the following:


		September 24, 2022		December 31, 2021			September 30, 2023		December 31, 2022
Accounts receivable, trade	Accounts receivable, trade	$	180,492	$	131,371	Accounts receivable, trade	$	141,998	$	171,144
Accounts receivable, other (a)	Accounts receivable, other (a)	38,158		51,007		Accounts receivable, other(a)	34,501		41,446

Allowance for expected credit losses		(1,292)		(774)
Allowance for credit loss						Allowance for credit loss	(685)		(1,064)
Accounts receivable, net	Accounts receivable, net	$	217,358	$	181,604	Accounts receivable, net	$	175,814	$	211,526

~~——————————————~~

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

~~Rayonier Advanced Materials Inc.~~

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

4. Inventory

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


		September 24, 2022		December 31, 2021			September 30, 2023		December 31, 2022
Finished goods	Finished goods	$	202,576	$	175,832	Finished goods	$	182,209	$	198,931
Work-in-progress	Work-in-progress	6,903		6,533		Work-in-progress	5,816		5,230
Raw materials	Raw materials	53,527		41,974		Raw materials	47,421		52,967
Manufacturing and maintenance supplies	Manufacturing and maintenance supplies	6,520		6,352		Manufacturing and maintenance supplies	7,245		8,206
Inventory	Inventory	$	269,526	$	230,691	Inventory	$	242,691	$	265,334

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,~~30, 2023, the Company’s leases ~~had~~have remaining lease terms of 1less than one year to ~~14.1~~13.1 years with standard renewal and termination options available at the Company’s discretion. Certain equipment leases have purchase options at the end of the term of the lease, which are not included in the ~~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 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:~~

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

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. Finance lease cash flows were immaterial during the nine months ended September 24, 2022 and September 25, 2021.

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

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Rayonier Advanced Materials Inc.

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

(in thousands unless otherwise stated)

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


	Three Months Ended				Nine Months Ended
	September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
Operating lease cost	$	1,858	$	1,973	$	5,464	$	5,821

Finance lease cost
Amortization of ROU assets	102		95		301		281
Interest	26		34		85		106
Total lease cost	$	1,986	$	2,102	$	5,850	$	6,208


	Balance Sheet Classification	September 30, 2023		December 31, 2022
Operating leases
ROU assets	Other assets	$	17,600	$	15,623
Lease liabilities, current	Accrued and other current liabilities	4,235		4,741
Lease liabilities, non-current	Other liabilities	14,220		11,399

Finance leases
ROU assets	Property, plant and equipment, net	1,171		1,448
Lease liabilities	Long-term debt	1,459		1,760


	Nine Months Ended
	September 30, 2023		September 24, 2022
Operating cash flows - cash paid for amounts included in the measurement of operating lease liabilities	$	5,182	$	1,770
Operating lease ROU assets obtained in exchange for lease liabilities	5,650		2,975

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

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 30, 2023		December 31, 2022
Operating leases
Weighted average remaining lease term (in years)	5.7		5.8
Weighted average discount rate	8.4	%	8.9	%

Finance leases
Weighted average remaining lease term (in years)	3.1		3.8
Weighted average discount rate	7.0	%	7.0	%

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Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements (Unaudited)

(in thousands unless otherwise stated)

6. Accrued and Other Current Liabilities

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


		September 24, 2022		December 31, 2021			September 30, 2023		December 31, 2022
Accrued customer incentives	Accrued customer incentives	$	29,546	$	26,726	Accrued customer incentives	$	22,815	$	28,702
Accrued payroll and benefits	Accrued payroll and benefits	18,533		13,363		Accrued payroll and benefits	14,974		13,763
Accrued interest	Accrued interest	15,290		19,153		Accrued interest	14,012		18,877
Accrued income taxes	Accrued income taxes	7,639		9,210		Accrued income taxes	2,854		9,321
Accrued property and other taxes	Accrued property and other taxes	9,341		4,074		Accrued property and other taxes	8,111		3,065
Deferred revenue (a)	Deferred revenue (a)	20,796		22,518		Deferred revenue(a)	20,459		21,645
Other current liabilities(b)	Other current liabilities(b)	52,421		41,080		Other current liabilities(b)	50,491		68,996
Accrued and other current liabilities	Accrued and other current liabilities	$	153,566	$	136,124	Accrued and other current liabilities	$	133,716	$	164,369

~~——————————————~~

(a)~~Includes~~Included at both September 30, 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 September 30, 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


	September 30, 2023		December 31, 2022
ABL Credit Facility due 2025: $112 million available, bearing interest of 7.42% (5.42% adjusted SOFR plus 2.00% margin) at September 30, 2023	$	—	$	—
Term Loan due 2027: bearing interest of 13.33% (5.33% three-month Term SOFR plus 8.00% margin) at September 30, 2023	250,000		—
7.625% Senior Secured Notes due 2026	464,640		475,000
5.50% Senior Unsecured Notes due 2024	—		322,675
5.50% CAD-based term loan due 2028	31,776		36,585
Other loans(a)	20,507		19,598
Short-term factoring facility-France	1,292		3,773
Finance lease obligations	1,459		1,760
Total principal payments due	769,674		859,391
Less: unamortized debt premium, discount and issuance costs	(20,600)		(6,266)
Total debt	749,074		853,125
Less: debt due within one year	(18,621)		(14,617)
Long-term debt	$	730,453	$	838,508

~~——————————————~~

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

Term Loan

In July 2023, the Company secured term loan financing of $250 million in aggregate principal amount and received net proceeds of $243 million after original issue discount. In addition, the Company incurred issuance costs of $10 million, which, together with the original issue discount, were recorded in “long-term debt” in the consolidated balance sheets and will be amortized to “interest expense” in the consolidated statements of operations over the term of the loan. The net proceeds, together with cash on hand, were used to redeem the 2024 Notes and pay transaction costs.

The 2027 Term Loan matures in July 2027, bears interest at an annual rate equal to three-month Term SOFR (or, if greater, 3.00 percent) plus 8.00 percent and requires quarterly principal payments of $1.25 million. The Company may voluntarily make prepayments at any time, subject to customary breakage costs and, if within the first three anniversaries of closing, an additional make-whole premium.

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Rayonier Advanced Materials Inc.

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

(in thousands unless otherwise stated)

~~During~~The agreement governing the ~~third quarter~~2027 Term Loan contains various customary covenants that limit the ability of ~~2022,~~ the Company ~~repaid a Canadian dollar fixed interest rate~~and its restricted subsidiaries, as defined by the term loan agreement and in particular the ~~amount~~Company’s French subsidiaries, to take certain specified actions, subject to stated exceptions, including: incurring debt or liens, making investments, entering into mergers, consolidations, and acquisitions, paying dividends and making other restricted payments. The Company will be required to maintain a consolidated secured net leverage ratio, based on covenant EBITDA, of ~~CAD $12 million (USD $9 million).~~no greater than 4.50 to 1.00. 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.

~~During the second and third quarters of 2022,~~Senior Notes

2026 Notes

In April 2023, the Company repurchased ~~$20~~$10 million ~~and $15 million, respectively,~~ of its ~~5.5% unsecured senior notes due 2024 (the “Unsecured Notes”)~~2026 Notes through open-market transactions and retired the notes for cash of ~~approximately $20 million and $15 million, respectively.~~$9 million. A ~~net~~ gain on extinguishment of ~~less than~~ $1 million onfor the ~~repurchases~~repurchase was recorded to ~~“gain on debt extinguishment”~~“other income, net” in the consolidated statements of ~~operations during the nine months ended September 24, 2022.~~operations.

~~During the three and nine months ended September 25, 2021,~~2024 Notes

In August 2023, the Company redeemed the $318 million principal balance and accrued interest of $4 million of the 2024 Notes. A loss on extinguishment of $1 million related to the redemption was recorded ~~a $2~~to “other income, net” in the consolidated statements of operations.

Prior to the full redemption of its 2024 Notes, in March 2023, the Company repurchased $5 million of the 2024 Notes through open-market transactions and retired the notes for cash of $5 million. An immaterial gain on extinguishment onfor the repurchase was recorded to “other income, net” in the consolidated statements of ~~$127 million of Unsecured Notes.~~operations.

As of September ~~24, 2022,~~30, 2023, the Company’s debt principal payments, excluding finance lease obligations, were due as follows:


Remainder of 2022		$	14,515
2023		9,995
Remainder of 2023				Remainder of 2023	$	5,597
2024	2024	344,890		2024	16,345
2025	2025	10,594		2025	16,392
2026	2026	485,028		2026	480,320
2027				2027	243,071
Thereafter	Thereafter	12,556		Thereafter	6,490
Total debt principal payments, excluding finance lease obligation		$	877,578
Total debt principal payments				Total debt principal payments	$	768,215

8. Environmental Liabilities

The Company’s environmental liabilities balance changed as follows during the nine months ended September ~~24, 2022:~~30, 2023:



Balance at December 31, ~~2021~~2022	$	~~171,222~~170,681
Increase in liabilities	~~2,803~~2,462
Payments	~~(3,071)~~(3,634)
Foreign currency adjustments	~~(654)~~85
Balance at September ~~24, 2022~~30, 2023	~~170,300~~169,594
Less: ~~Current~~current portion	~~(11,273)~~(10,740)
~~Long-term~~Non-current environmental liabilities	$	~~159,027~~158,854

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Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements (Unaudited)

(in thousands unless otherwise stated)

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,~~30, 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.

~~Rayonier Advanced Materials Inc.~~

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

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

In December 2020, the Company terminated all outstanding derivative instruments, which had been previously designated as hedging instruments and had various maturity dates through 2028. Accumulated gains and losses associated with these instruments were deferred as a component of accumulated other comprehensive income (loss) 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.~~ 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


	September 30, 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	$	17,484	$	17,484	$	—	$	127,288	$	127,288	$	—
Money market and similar funds	9,643		9,643		—		24,515		24,515		—

Liabilities
Fixed-rate long-term debt(a)	$	513,004	$	—	$	439,787	$	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 %

Table of Contents

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 30, 2023		September 24, 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	(531)		7,466
Amortization of prior service cost	259		24
Income tax on reclassifications	70		(1,646)
Net comprehensive gain (loss) on employee benefit plans, net of tax	(2,432)		5,844
Balance, end of period	(46,126)		(71,005)

Unrealized gain (loss) on derivative instruments, net of tax
Balance, beginning of period	(567)		(847)
Reclassifications to earnings - foreign currency exchange contracts(b)	173		258
Income tax on reclassifications	(23)		(34)
Net comprehensive gain on derivative instruments, net of tax	150		224
Balance, end of period	(417)		(623)

Foreign currency translation
Balance, beginning of period	(19,537)		(6,774)
Foreign currency translation adjustment, net of tax(c)	(1,109)		(30,561)
Balance, end of period	(20,646)		(37,335)

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

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)

~~——————————————~~

(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~~ ~~for further information.~~

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

~~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					Three Months Ended				Nine Months Ended
		September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021			September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
Income (loss) from continuing operations	Income (loss) from continuing operations	$	18,355	$	(13,394)	$	(30,969)	$	(21,308)	Income (loss) from continuing operations	$	(26,540)	$	18,355	$	(40,555)	$	(30,969)

Income from discontinued operations	Income from discontinued operations	11,252		8,636		12,458		111,751		Income from discontinued operations	1,440		11,252		312		12,458
Net income (loss) available for common stockholders	Net income (loss) available for common stockholders	$	29,607	$	(4,758)	$	(18,511)	$	90,443	Net income (loss) available for common stockholders	$	(25,100)	$	29,607	$	(40,243)	$	(18,511)

Shares used for determining basic earnings per share of common stock	Shares used for determining basic earnings per share of common stock	63,971,166		63,737,355		63,882,920		63,610,710		Shares used for determining basic earnings per share of common stock	65,343,418		63,971,166		65,024,654		63,882,920
Dilutive effect of:	Dilutive effect of:									Dilutive effect of:
Stock options		—		—		—		—

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

Shares used for determining diluted earnings per share of common stock	Shares used for determining diluted earnings per share of common stock	65,520,107		63,737,355		63,882,920		63,610,710		Shares used for determining diluted earnings per share of common stock	65,343,418		65,520,107		65,024,654		63,882,920

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

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		Nine Months Ended
		September 24, 2022	September 25, 2021	September 24, 2022	September 25, 2021		September 30, 2023	September 24, 2022	September 30, 2023	September 24, 2022
Stock options	Stock options	78,660	115,973	78,660	115,973	Stock options	46,798	78,660	46,798	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	1,517,135	3,302,332	3,726,090
Total anti-dilutive instruments	Total anti-dilutive instruments	1,595,795	2,506,126	3,804,750	2,506,126	Total anti-dilutive instruments	3,349,130	1,595,795	3,349,130	3,804,750

~~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				Nine Months Ended
	September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
Stock-based compensation expense	$	1,990	$	1,959	$	5,361	$	8,687

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	(30,969)	43.32		—	—		—	—
Outstanding at September 24, 2022		78,660	$	39.98	1,769,171	$	6.18	1,956,919	$	6.79
Outstanding at September 30, 2023												Outstanding at September 30, 2023	46,798	$	37.77	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 Company settled certain Canadian pension liabilities through the purchase of annuity contracts with an insurance company. The settlement resulted in the recognition of a $1 million loss during the nine months ended September ~~25, 2021~~24, 2022, the Company recorded a $1 million loss related to the final asset surplus distribution to the plan participants of certain wound-up Canadian pension plans. During the nine months ended September 30, 2023, the Company recorded a $2 million loss related to the final asset surplus distribution to the plan participants of certain other wound-up Canadian pension plans. The settlements were recognized in “other components of pension and OPEB, excluding service costs” in the Company’s consolidated statements of operations. The Company recorded an additional $1 million loss in “other 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.

~~Rayonier Advanced Materials Inc.~~

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

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


		Pension				Postretirement					Pension				Postretirement
		Three Months Ended				Three Months Ended					Three Months Ended				Three Months Ended
		September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021			September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
Service cost	Service cost	$	2,150	$	2,619	$	352	$	358	Service cost	$	1,223	$	2,150	$	293	$	352
Interest cost	Interest cost	4,561		4,287		215		179		Interest cost	7,204		4,561		352		215
Expected return on plan assets	Expected return on plan assets	(8,258)		(9,586)		—		—		Expected return on plan assets	(7,967)		(8,258)		—		—
Amortization of prior service cost		38		176		(31)		(38)
Amortization of losses		2,473		4,084		17		5
Amortization of prior service cost (credit)										Amortization of prior service cost (credit)	111		38		(24)		(31)
Amortization of (gain) loss										Amortization of (gain) loss	(123)		2,473		(54)		17
Pension settlement loss	Pension settlement loss	(25)		90		—		—		Pension settlement loss	—		(25)		—		—
Total net periodic benefit cost		$	939	$	1,670	$	553	$	504
Net periodic benefit cost										Net periodic benefit cost	$	448	$	939	$	567	$	553

		Pension				Postretirement					Pension				Postretirement
		Nine Months Ended				Nine Months Ended					Nine Months Ended				Nine Months Ended
		September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021			September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
Service cost	Service cost	$	6,497	$	7,800	$	1,057	$	1,083	Service cost	$	3,664	$	6,497	$	879	$	1,057
Interest cost	Interest cost	13,764		13,138		646		530		Interest cost	21,586		13,764		1,057		646
Expected return on plan assets	Expected return on plan assets	(24,965)		(28,865)		—		—		Expected return on plan assets	(23,854)		(24,965)		—		—
Amortization of prior service cost		116		527		(92)		(115)
Amortization of losses		7,419		12,247		47		11
Amortization of prior service cost (credit)										Amortization of prior service cost (credit)	332		116		(73)		(92)
Amortization of (gain) loss										Amortization of (gain) loss	(369)		7,419		(162)		47
Pension settlement loss	Pension settlement loss	1,154		980		—		—		Pension settlement loss	2,317		1,154		—		—
Total net periodic benefit cost		$	3,985	$	5,828	$	1,658	$	1,510
Net periodic benefit cost										Net periodic benefit cost	$	3,676	$	3,985	$	1,701	$	1,658

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Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements (Unaudited)

(in thousands unless otherwise stated)

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 (credit) 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 effective tax ~~rate on its income from continuing operations for the three months ended September 24, 2022 was a benefit of 11 percent.~~ rates were as follows:


	Three Months Ended						Nine Months Ended
	September 30, 2023			September 24, 2022			September 30, 2023			September 24, 2022
Income (loss) from continuing operations	$	(26,540)		$	18,355		$	(40,555)		$	(30,969)
Effective tax rate	17.0		%	(10.6)		%	22.4		%	(12.6)		%

The ~~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~~2023 effective tax rates differed from the federal statutory rate of 21 percent primarily due to disallowed interest deductions in the U.S. and nondeductible executive compensation, offset by U.S. tax credits, return-to-accrual adjustments related to previously filed tax returns, changes in the valuation allowance on ~~its loss~~disallowed interest deductionsand interest received on overpayments of tax from ~~continuing operations~~prior years. The effective tax rate for the ~~three and nine months ended September 25, 2021 were benefits of 24 percent and 59 percent, respectively.~~nine-month period was also impacted by an excess tax benefit on vested stock compensation.

The effective tax ~~benefit~~ rate for the three months ended September 24, 2022 differed from the federal statutory rate of 21 percent primarily due to changes in the valuation allowance on disallowed interest deductions in the U.S. and interest received on overpayments of tax from prior years, partially offset by unfavorable tax return-to-accrual adjustments. The effective tax ~~expense~~ rate for the nine months ended September 24, 2022 differed from the federal statutory rate primarily due to changes in the valuation allowance on disallowed interest deductions in the U.S. and nondeductible executive compensation, partially offset by interest received on overpayments of tax from prior years, U.S. tax credits and favorable tax return-to-accrual adjustments.

~~The effective tax benefit rate for the nine months ended~~Deferred Taxes

As of both September ~~25, 2021 differed from the federal statutory rate of 21 percent primarily due to a tax benefit recognized by remeasuring~~30, 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 lumber 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~~net DTA included $17 million of disallowed U.S. interest deductions that the Company does not believe it will be ~~able to realize. This asset was reduced by $1 million recognized as tax expense and increased by a net tax benefit of $5 million in the three and nine months ended September 24, 2022, respectively.~~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.

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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				Nine Months Ended
		September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021			September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
High Purity Cellulose	High Purity Cellulose									High Purity Cellulose
Cellulose Specialties	Cellulose Specialties	$	243,175	$	186,029	$	645,169	$	521,442	Cellulose Specialties	$	164,654	$	243,175	$	570,584	$	645,169
Commodity Products	Commodity Products	92,638		74,577		223,151		195,894		Commodity Products	98,834		92,638		321,548		223,151
Other sales (a)	Other sales (a)	33,080		26,902		84,059		74,532		Other sales(a)	28,528		33,080		73,447		84,059
Total High Purity Cellulose	Total High Purity Cellulose	368,893		287,508		952,379		791,868		Total High Purity Cellulose	292,016		368,893		965,579		952,379
Paperboard	Paperboard	65,039		52,188		182,512		156,799		Paperboard	57,212		65,039		164,300		182,512
High-Yield Pulp	High-Yield Pulp	39,564		41,877		101,992		106,207		High-Yield Pulp	25,393		39,564		111,397		101,992

Eliminations	Eliminations	(7,150)		(7,559)		(19,601)		(21,163)		Eliminations	(5,951)		(7,150)		(20,432)		(19,601)
Net sales	Net sales	$	466,346	$	374,014	$	1,217,282	$	1,033,712	Net sales	$	368,670	$	466,346	$	1,220,844	$	1,217,282

~~——————————————~~

(a)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				Nine Months Ended
	September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
High Purity Cellulose	$	(5,547)	$	22,536	$	6,965	$	21,221
Paperboard	13,088		11,293		28,680		27,579
High-Yield Pulp	(6,062)		5,646		2,030		3,910
Corporate	(15,919)		(10,946)		(41,977)		(42,871)
Operating income (loss)	$	(14,440)	$	28,529	$	(4,302)	$	9,839

Identifiable assets by segment were as follows:


		September 24, 2022		December 31, 2021			September 30, 2023		December 31, 2022
High Purity Cellulose	High Purity Cellulose	$	1,638,666	$	1,579,300	High Purity Cellulose	$	1,544,041	$	1,654,214

Paperboard	Paperboard	114,990		114,391		Paperboard	115,851		112,757
High-Yield Pulp	High-Yield Pulp	49,742		38,147		High-Yield Pulp	36,276		50,947
Corporate and other		533,023		713,186

Total identifiable assets		$	2,336,421	$	2,445,024
Corporate						Corporate	479,498		529,610
Total assets						Total assets	$	2,175,666	$	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 months ended September ~~24, 2022.~~30, 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 and finance 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 the sale of its lumber assets, the Company retained all rights and obligations to softwood duties generated or incurred through the closing date of the sale. As of September ~~24, 2022,~~30, 2023, the Company had a ~~$38~~$40 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, 2020 and ~~2020~~2021 periods. This amount does not include interest, which will be due on any amounts refunded. The Company estimates interest earned on the total amount of softwood lumber duties paid to be approximately $6 million.

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,~~30, 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~~$90 million as of September ~~24, 2022,~~30, 2023, primarily to comply with financial assurance requirements relating to environmental remediation and post closure care, to provide collateral for the Company’s workers’ compensation program and to guarantee taxes and duties for products shipped internationally. These surety bonds expire at various dates and are expected to be renewed annually as required.

~~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~~$29 million at September ~~24, 2022.~~

~~Rayonier Advanced Materials Inc.~~

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

30, 2023.

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

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

As of December 31, 2022, a collective bargaining agreement covering approximately 575 unionized employees was expired. The employees continued to work under the terms of the expired contract until negotiations concluded in the second quarter of 2023 and final agreement with the union was reached. As of September ~~24, 2022,~~30, 2023, all of the Company’s collective bargaining agreements covering its unionized employees were current.

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

~~Supplemental disclosure 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

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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 were used, together with cash on hand, to redeem the $318 million ~~(USD $9 million).~~principal balance of the 2024 Notes in August 2023.

•~~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.~~

•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

In October 2023, we announced that we engaged a financial advisor to explore the potential sale of our Paperboard and High-Yield Pulp assets located at our Temiscaming site. This strategic move is aligned with our commitment to enhancing our operational and financial performance, optimizing our portfolio to align with our long-term growth strategy and providing flexibility to pay down debt and reduce leverage.

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The following market assessment represents our best current estimate of our business segments’ future performance.

~~We have updated our Adjusted EBITDA guidance~~High Purity Cellulose

Average sales prices for cellulose specialties in 2023 are expected to ~~exceed $175 million~~be in the high single-digit percent higher than average 2022 sales prices, while sales volumes are expected to decrease from prior year due to softness in sales orders driven principally by significant customer destocking and market-driven demand declines. Market demand 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 ofcommodity products remains resilient with fluff and viscose prices bottoming in 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~~a slight uptick expected in the ~~near future.~~

~~High Purity Cellulose~~

~~Demand for cellulose specialties and commodity products remains strong albeit somewhat tempered as global economic growth slows. As such, average~~fourth quarter. Commodity sales ~~prices~~volumes are expected to ~~be down modestly in~~continue to increase through the ~~fourth quarter driven by a greater mix~~end of ~~commodity sales volumes as production and logistics constraints improve. Key raw material inflation is~~2023. The prices for certain inputs have come off the 2022 highs but are expected to remain ~~elevated. Adjusted EBITDA for~~significantly elevated versus pre-COVID pandemic levels. We expect to take downtime at our Tartas facility at the ~~segment is expected~~end of 2023 due to ~~be down slightly compared~~market conditions and to improve working capital.

We recently began plans towards a realignment of our High Purity Cellulose assets to optimize production mix, including a consolidation of our commodity products production into the ~~third quarter but higher for~~Temiscaming plant. We are currently evaluating the ~~full year 2022 compared to 2021.~~

potential impact of this realignment on our consolidated financial statements and disclosures.

Paperboard

Paperboard prices are expected to ~~remain elevated~~rebound slightly in the fourth quarter, ~~driven by strong demand in both the commercial printing and packaging end-use markets. Sales~~remaining elevated from 2022 levels, while sales volumes ~~and raw material costs~~ are expected to ~~remain steady.As a result, Paperboard is anticipated~~improve in the second half of the year as customer inventories return 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~~more normal levels. Raw material prices are ~~still~~ expected to increase slightly as purchased pulp prices are forecast to increase in the fourth quarter. ~~Sales volumes are anticipated~~We expect to ~~increase significantly as production and logistics constraints improve.As such, Adjusted EBITDA for High-Yield Pulp is anticipated to improve~~take downtime in the coming ~~quarter.~~quarter due to market conditions and to improve working capital.

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, in line with industry forecasts for the global paper pulp market. We expect to take downtime in the coming quarter due to market conditions and to improve working capital.

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 salesOur portfolio is aligned with sustainability drivers in the ~~High Purity Cellulose segment were $84 million primarily related~~European Green Deal for the Renewable Energy Directive II and the 2G bio-fuel that is noncompetitive to ~~sales of bioelectricity and lignosulfonates. We expect to grow these sales and increase overall margins over time.~~

~~Our investment into a~~human food supply. The 2G bioethanol facility at our Tartas, France ~~facility~~plant is near completion and is anticipated to be operational in ~~2024, subject~~the first quarter of 2024. The total estimated cost of the project is approximately $40 million, with $22 million to be spent in 2023. We plan to utilize $28 million of low-cost green loans to help fund the ~~approval~~project, including $10 million already borrowed, 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, depending 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						Nine Months Ended
(in millions, except percentages)	September 30, 2023			September 24, 2022			September 30, 2023			September 24, 2022
Net sales	$	369		$	466		$	1,221		$	1,217
Cost of sales	(360)			(419)			(1,160)			(1,138)
Gross margin	9			47			61			79
Selling, general and administrative expense	(22)			(20)			(59)			(68)
Foreign exchange gain (loss)	1			3			(1)			4
Other operating expense, net	(2)			(1)			(5)			(5)
Operating income (loss)	(14)			29			(4)			10
Interest expense	(21)			(16)			(52)			(49)
Other components of pension and OPEB, excluding service costs	—			1			(1)			2
Gain on GreenFirst equity securities	—			—			—			5

Other income, net	4			3			7			6
Income (loss) from continuing operations before income taxes	(31)			17			(50)			(26)
Income tax (expense) benefit	5			2			11			(3)
Equity in loss of equity method investment	(1)			(1)			(2)			(2)
Income (loss) from continuing operations	(27)			18			(41)			(31)
Income from discontinued operations, net of taxes	2			12			1			12
Net income (loss)	$	(25)		$	30		$	(40)		$	(19)

Gross margin %	2.4		%	10.1		%	5.0		%	6.5		%
Operating margin %	(3.8)		%	6.2		%	(0.3)		%	0.8		%
Effective tax rate	17.0		%	(10.6)		%	22.4		%	(12.6)		%

Net Sales


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
(in millions)	(in millions)	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021		(in millions)	September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
High Purity Cellulose	High Purity Cellulose	$	369	$	288	$	952	$	792	High Purity Cellulose	$	292	$	369	$	966	$	952
Paperboard	Paperboard	66		52		183		157		Paperboard	57		66		164		183
High-Yield Pulp	High-Yield Pulp	40		42		102		106		High-Yield Pulp	25		40		111		102

Eliminations	Eliminations	(9)		(8)		(20)		(21)		Eliminations	(5)		(9)		(20)		(20)
Net Sales		$	466	$	374	$	1,217	$	1,034
Net sales										Net sales	$	369	$	466	$	1,221	$	1,217

Net sales ~~increased by $92 million and $183 million, respectively, during~~for the ~~three and nine months~~quarter ended September ~~24, 2022 when~~30, 2023 decreased $97 million, or 21 percent, compared to the same prior year ~~periods,~~quarter, driven ~~primarily~~by lower sales prices in commodity products, lower sales volumes in cellulose specialties and lower sales prices and sales volumes across our Paperboard and High-Yield Pulp segments, partially offset by higher sales prices ~~across all segments.~~in cellulose specialties and higher sales volumes in commodity products.

Net sales for the nine months ended September 30, 2023 increased $4 million, less than 1 percent, compared to the same prior year period, driven by higher sales prices in cellulose specialties and our Paperboard and High-Yield Pulp segments and higher sales volumes in commodity products and our High-Yield Pulp segment, offset by lower sales prices in commodity products and lower sales volumes in cellulose specialties and our Paperboard segment. See Operating Results by Segment below for further discussion.

2420

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Operating Income (Loss)


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
(in millions)	(in millions)	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021		(in millions)	September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
High Purity Cellulose	High Purity Cellulose	$	22	$	2	$	21	$	19	High Purity Cellulose	$	(6)	$	22	$	7	$	21
Paperboard	Paperboard	12		2		28		10		Paperboard	13		12		29		28
High-Yield Pulp	High-Yield Pulp	6		8		4		8		High-Yield Pulp	(6)		6		2		4
Corporate	Corporate	(11)		(9)		(43)		(33)		Corporate	(15)		(11)		(42)		(43)
Operating Income		$	29	$	3	$	10	$	4
Operating income (loss)										Operating income (loss)	$	(14)	$	29	$	(4)	$	10

Operating ~~income~~results for the ~~three~~quarter ended September 30, 2023 declined $43 million, or 148 percent, compared to the same prior year quarter, driven by the decrease in net sales across all segments and an increase in Corporate expense items, partially offset by lower input, logistics and maintenance costs. Operating results for the nine months ended September 30, 2023 declined $14 million, or 140 percent, compared to the same prior year period, driven by lower net sales in our Paperboard segment, higher labor costs and the impact of an extended maintenance outage in the prior year, partially offset by the increase in net sales in our High Purity Cellulose and High-Yield Pulp segments, lower input and logistics costs and the recognition of a $3 million benefit from payroll tax credit carryforwards in the current period. See Operating Results by Segment below for further discussion.

Non-Operating Income & Expense

Interest expense increased $5 million and $3 million during the quarter and nine months ended September ~~24, 2022 increased $26 million and $6 million,~~30, 2023, respectively, ~~when~~ compared to the same prior year periods, primarily due to ~~higher sales prices across all segments,~~an increase in the average interest rate on debt, partially offset by a decrease in the average outstanding balance of debt. Debt principal outstanding decreased $109 million from September 24, 2022 to September 30, 2023.

Interest income increased ~~costs resulting from inflation on key inputs, including chemicals, wood fiber~~$2 million and ~~energy costs, lower sales volumes~~$3 million during the quarter and nine months ended September 30, 2023, respectively, compared to the same prior year periods, primarily due to ~~supply chain constraints~~the timing of the receipt of the 2027 Term Loan proceeds and ~~lower productivity when comparing~~their subsequent use in the repayment of the 2024 Notes.

Also included in non-operating other income in the quarter ended September 30, 2023 was a $1 million net loss on debt extinguishment. Included in the current nine-month ~~periods.~~period was a $2 million gain on a passive land sale and a pension settlement loss of $2 million.

~~Non-Operating Expenses~~

Included in non-operating ~~expenses for~~other income in the nine months ended September 24, 2022 was a $5 million net gain 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~~loss from continuing operations for the quarter ~~2022~~and nine months ended September 30, 2023 was a benefit of 17 percent and 22 percent, respectively. The 2023 effective tax rates differed from the federal statutory rate of 21 percent primarily due to disallowed interest deductions in the U.S. and nondeductible executive compensation, offset by U.S. tax credits, return-to-accrual adjustments related to previously filed tax returns, changes in the valuation allowance on disallowed interest deductions and interest received on overpayments of tax from prior years. The effective tax rate for the nine-month period was also impacted by an excess tax benefit on vested stock compensation.

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

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

~~The effective tax rate for~~Table of Contents

Discontinued Operations

During the third quarter of 2023, the USDOC completed its fourth administrative review of duties applied to Canada softwood lumber exports to the U.S. during 2021 and reduced applicable rates to a combined 8.05 percent. In connection with this development, we recorded a pre-tax gain of $2 million. During the nine months ended September ~~25, 2021 differs from the statutory rate of 21 percent primarily due to~~30, 2023, we also incurred 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 nondeductible interest expense in the U.S. and lower 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 and newsprint facilities and certain~~$2 million loss related assets was completed in August 2021. The cash received at closing was preliminary and remains subject to final purchase price and other sale-related adjustments. During the first quarter of 2022, we trued-up certain sale-related items with GreenFirst for a total net cash outflow of $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~~settlement of a claim pursuant to the ~~terms of~~representations and warranties in the asset purchase ~~agreement, we and GreenFirst continue efforts to finalize the closing inventory valuation adjustment.~~agreement.

During the third quarter of 2022, the ~~U.S. Department of Commerce (the “USDOC”)~~USDOC completed ~~the~~its third administrative review of duties applied ~~to Canadian softwood lumber exports to the U.S.~~during 2020 and reduced ~~rates~~ applicable ~~to us~~rates to a combined 8.6 ~~percent. We~~percent, for which we recorded a pre-tax gain of $16 ~~million gain, pre-tax, in connection with this development and increased the~~million. Cumulative through September 30, 2023, we have recorded total ~~long-term receivable~~gains of $40 million related to the ~~USDOC’s~~USDOC administrative reviews, ~~to $38 million.~~ ~~Cash is not expected to return to us until final resolution of the softwood lumber dispute.~~

which are included as a long-term receivable within “other assets” in our consolidated balance sheets.

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				Nine Months Ended
(in millions, except where otherwise stated)	September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
Net sales	$	292	$	369	$	966	$	952
Operating income (loss)	$	(6)	$	22	$	7	$	21
Average sales prices ($ per MT)	$	1,215	$	1,402	$	1,282	$	1,329
Sales volumes (thousands of MTs)	217		240		696		653

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 September 24, 2022		Changes Attributable to:				Three Months Ended September 30, 2023
(in millions)			Price		Volume/Mix/Other
Cellulose specialties	$	243	$	9	$	(87)	$	165
Commodity products	93		(23)		29		99
Other sales(a)	33		—		(5)		28
Net sales	$	369	$	(14)	$	(63)	$	292

~~——————————————~~

(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~~30, 2023 decreased $77 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 $28 million and ~~sales volumes rose 13 percent and 9 percent, respectively, driven by higher demand. Included within net sales for the period was~~ $33 million, respectively, of other sales primarily from bio-based energy and lignosulfonates. Sales prices decreased 13 percent during the current quarter, driven by a 22 percent decrease in commodity products prices, partially offset by a 6 percent increase in cellulose specialties prices. Total sales volumes decreased 10 percent during the current quarter, driven by a 36 percent decrease in cellulose specialties volumes, partially offset by a 37 percent increase in commodity products volumes. Sales volumes for cellulose specialties were negatively impacted by significant customer destocking and market-driven demand declines, particularly in construction markets.

Net Sales —- Nine Months Ended

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


	Nine Months Ended September 24, 2022		Changes Attributable to:				Nine Months Ended September 30, 2023
(in millions)			Price		Volume/Mix/Other
Cellulose specialties	$	645	$	59	$	(133)	$	571
Commodity products	223		(21)		120		322
Other sales(a)	84		—		(11)		73
Net sales	$	952	$	38	$	(24)	$	966

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

Table of Contents

Net sales of our High Purity Cellulose segment for the nine months ended September ~~24, 2022~~30, 2023 increased ~~$160~~$14 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 $73 million and ~~lower commodities volumes in favor of higher specialties volumes. Included within net sales for the period was~~ $84 million, respectively, of other sales primarily from bio-based energy and lignosulfonates.

Sales prices decreased 4 percent during the current period, driven by an 8 percent decrease in commodity products prices, partially offset by a 12 percent increase in cellulose specialties prices. Total sales volumes increased 7 percent during the current period, driven by a 57 percent increase in commodity products volumes, partially offset by a 21 percent decrease in cellulose specialties volumes. Sales volumes for cellulose specialties were negatively impacted by significant customer destocking and market-driven demand declines, particularly in construction markets.

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/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 September 24, 2022			Gross Margin Changes Attributable to:												Three Months Ended September 30, 2023
(in millions, except percentages)				Sales Price			Sales Volume/Mix/Other(a)			Cost			SG&A and other
Operating income (loss)	$	22		$	(14)		$	(32)		$	19		$	(1)		$	(6)
Operating margin %	6.0		%	(3.7)		%	(10.5)		%	6.5		%	(0.4)		%	(2.1)		%

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

Operating results of our High Purity Cellulose segment for the quarter ended September 30, 2023 declined $28 million compared to the same prior year quarter, driven by the lower cellulose specialties sales volumes and commodity products sales prices, partially offset by the higher cellulose specialties sales prices and commodity products sales volumes and decreased input, logistics and maintenance costs.

Operating Income - Nine Months Ended


	Nine Months Ended September 24, 2022			Gross Margin Changes Attributable to:												Nine Months Ended September 30, 2023
(in millions, except percentages)				Sales Price			Sales Volume/Mix/Other(a)			Cost			SG&A and other
Operating income	$	21		$	38		$	(16)		$	(39)		$	3		$	7
Operating margin %	2.2		%	3.7		%	(1.5)		%	(4.0)		%	0.3		%	0.7		%

(a)Computed based on contribution margin.

Operating income of our High Purity Cellulose segment ~~increased $20 million during~~for the ~~three~~nine months ended September ~~24, 2022 to $22~~30, 2023 decreased $14 million ~~when~~ compared to the same prior year quarter. Sales prices for the segment increased 21 percent during the current quarter, driven by a 25 percent increase, inclusive 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.~~

~~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/Other (a)
Cost SG&A and other
Operating Income $ 19 $ 140 $ 19 $ (154) $ (3) $ 21
Operating Margin % 2.4 % 14.7 % 1.6 % (16.2) % (0.3) % 2.2 %
~~——————————————~~

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

Operating income of our High Purity Cellulose segment increased $2 million during the nine months ended September 24, 2022 to $21 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 cellulose specialties, inclusive of the $146/MT cost surcharge, and commodity prices. Total volumes increased 1 percent, driven by a 4 percent increase inlower cellulose specialties sales volumes ~~that was almost entirely offset by a 4 percent decrease~~and commodity products sales prices, higher labor costs due to inflation and the impact of the extended maintenance outage 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~~cellulose specialties sales prices and commodity products sales volumes, decreased input and logistics costs inand the ~~current period were $12~~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				Nine Months Ended
(in millions, except where otherwise stated)	September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
Net sales	$	57	$	66	$	164	$	183
Operating income	$	13	$	12	$	29	$	28
Average sales prices ($ per MT)	$	1,459	$	1,587	$	1,508	$	1,450
Sales volumes (thousands of MTs)	39		41		109		126

Net Sales —- Three Months Ended


		Three Months Ended September 25, 2021		Changes Attributable to:				Three Months Ended September 24, 2022			Three Months Ended September 24, 2022		Changes Attributable to:				Three Months Ended September 30, 2023
(in millions)	(in millions)			Price		Volume/Mix				(in millions)			Price		Volume/Mix
Net Sales		$	52	$	17	$	(3)	$	66
Net sales										Net sales	$	66	$	(6)	$	(3)	$	57

Table of Contents

Net sales of our Paperboard segment for the ~~three months~~quarter ended September ~~24, 2022 increased $14~~30, 2023 decreased $9 million compared to the same prior year ~~period due to a 34~~quarter driven by 8 percent ~~increase~~and 5 percent decreases in sales prices, ~~driven by strong demand, partially offset by a 7 percent decrease in~~due to product mix, and sales volumes, due to ~~lower productivity.~~

market-driven demand declines, respectively.

Net Sales —- Nine Months Ended


		Nine Months Ended September 25, 2021		Changes Attributable to:				Nine Months Ended September 24, 2022			Nine Months Ended September 24, 2022		Changes Attributable to:				Nine Months Ended September 30, 2023
(in millions)	(in millions)			Price		Volume/Mix				(in millions)			Price		Volume/Mix
Net Sales		$	157	$	38	$	(12)	$	183
Net sales										Net sales	$	183	$	6	$	(25)	$	164

Net sales of our Paperboard segment for the nine months ended September ~~24, 2022 increased $26~~30, 2023 decreased $19 million compared to the same prior year period driven by a 13 percent decrease in sales volumes due to customer destocking in the first half of 2023, partially offset by a 264 percent increase in sales prices, driven by ~~strong~~continued demand ~~partially offset by an 8 percent decrease in sales volumes due to lower productivity.~~for sustainable packaging.

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 %
~~——————————————~~


	Three Months Ended September 24, 2022			Gross Margin Changes Attributable to:												Three Months Ended September 30, 2023
(in millions, except percentages)				Sales Price			Sales Volume/Mix(a)			Cost			SG&A and other
Operating income	$	12		$	(6)		$	(1)		$	8		$	—		$	13
Operating margin %	18.2		%	(8.2)		%	(1.2)		%	14.0		%	—		%	22.8		%

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

Operating income of our Paperboard segment for the ~~three months~~quarter ended September ~~24, 2022~~30, 2023 increased ~~$10~~$1 million ~~when~~ compared to the same prior year ~~period due to higher~~quarter, driven by lower purchased pulp costs that were largely offset by the lower 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 %
~~——————————————~~


	Nine Months Ended September 24, 2022			Gross Margin Changes Attributable to:												Nine Months Ended September 30, 2023
(in millions, except percentages)				Sales Price			Sales Volume/Mix(a)			Cost			SG&A and other
Operating income	$	28		$	6		$	(10)		$	5		$	—		$	29
Operating margin %	15.3		%	2.7		%	(3.3)		%	3.0		%	—		%	17.7		%

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

Operating income of our Paperboard segment for the nine months ended September ~~24, 2022~~30, 2023 increased ~~$18~~$1 million ~~when~~ compared to the same prior year period, ~~due to~~driven by the higher sales prices ~~partially~~and lower purchased pulp and maintenance costs that were largely offset by ~~higher raw material pulp, chemicals and logistics costs as well as~~the 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
~~——————————————~~


	Three Months Ended				Nine Months Ended
(in millions, except where otherwise stated)	September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
Net sales	$	25	$	40	$	111	$	102
Operating income (loss)	$	(6)	$	6	$	2	$	4
Average sales prices ($ per MT)(a)	$	489	$	712	$	635	$	630
Sales volumes (thousands of MTs)(a)	39		45		142		130

(a)External sales only. ~~For~~During the three months ended September ~~24, 2022~~30, 2023 and September ~~25, 2021,~~24, 2022, the High-Yield Pulp segment sold 17,000 MTs and 16,000 ~~metric tons and 17,000 metric tons~~MTs of high-yield pulp ~~for $7 million and $8 million, respectively,~~ to the Paperboard ~~segment. For~~segment for $6 million and $7 million, respectively. During the nine months ended September ~~24, 2022~~30, 2023 and September ~~25, 2021,~~24, 2022, the High-Yield Pulp segment sold 49,000 MTs and 47,000 ~~metric tons and 51,000 metric tons~~MTs of high-yield pulp ~~for $20 million and $22 million, respectively,~~ to the Paperboard ~~segment.~~segment for $21 million and $20 million, respectively.

2824

Table of Contents

Net Sales —- Three Months Ended


		Three Months Ended September 25, 2021		Changes Attributable to:				Three Months Ended September 24, 2022			Three Months Ended September 24, 2022		Changes Attributable to:				Three Months Ended September 30, 2023
(in millions)	(in millions)			Price		Volume/Mix				(in millions)			Price		Volume/Mix
Net Sales		$	42	$	4	$	(6)	$	40

Net sales										Net sales	$	40	$	(11)	$	(4)	$	25

Net sales of our High-Yield Pulp segment for the ~~three months~~quarter ended September ~~24, 2022~~30, 2023 decreased $2$15 million compared to the same prior year ~~period~~quarter, driven by 31 percent and 13 percent decreases in sales prices and sales volumes, respectively, due to ~~an 18 percent decrease~~lower demand and opportunistic downtime taken in ~~sales volumes, partially offset by a 15 percent increase in sales prices.~~response to market conditions.

Net Sales —- Nine Months Ended


		Nine Months Ended September 25, 2021		Changes Attributable to:				Nine Months Ended September 24, 2022			Nine Months Ended September 24, 2022		Changes Attributable to:				Nine Months Ended September 30, 2023
(in millions)	(in millions)			Price		Volume/Mix				(in millions)			Price		Volume/Mix
Net Sales		$	106	$	10	$	(14)	$	102

Net sales										Net sales	$	102	$	1	$	8	$	111

Net sales of our High-Yield Pulp segment for the nine months ended September ~~24, 2022 decreased $4~~30, 2023 increased $9 million compared to the same prior year period, driven by 1 percent and 9 percent increases in sales prices and sales volumes, respectively, due to ~~a 16 percent decrease in sales volumes,partially offset by a 15 percent increase in sales prices.~~stronger demand and easing logistics constraints.

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 September 24, 2022			Gross Margin Changes Attributable to:												Three Months Ended September 30, 2023
(in millions, except percentages)				Sales Price			Sales Volume/Mix(a)			Cost			SG&A and other
Operating income (loss)	$	6		$	(11)		$	(2)		$	1		$	—		$	(6)
Operating margin %	15.0		%	(32.2)		%	(10.8)		%	4.0		%	—		%	(24.0)		%

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

Operating ~~income~~results of our High-Yield Pulp segment for the ~~three months~~quarter ended September ~~24, 2022 decreased $2~~30, 2023 declined $12 million ~~when~~ compared to the same prior year ~~period, as higher~~quarter, driven by the lower sales prices ~~were more than offset by lower~~and sales ~~volumes due to lower productivity, logistics constraints and higher input and supply chain costs.~~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 $ 8 $ 10 $ (6) $ (8) $ — $ 4
Operating Margin % 7.5 % 8.0 % (3.8) % (7.8) % — % 3.9 %
~~——————————————~~


	Nine Months Ended September 24, 2022			Gross Margin Changes Attributable to:												Nine Months Ended September 30, 2023
(in millions, except percentages)				Sales Price			Sales Volume/Mix(a)			Cost			SG&A and other
Operating income	$	4		$	1		$	3		$	(6)		$	—		$	2
Operating margin %	3.9		%	0.9		%	2.4		%	(5.4)		%	—		%	1.8		%

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

Operating income of our High-Yield Pulp segment for the nine months ended September ~~24, 2022~~30, 2023 decreased $4$2 million ~~when~~ compared to the same prior year period, as the higher sales prices and sales volumes were more than offset by ~~lower sales volumes~~increased wood costs and higher labor costs due to ~~lower productivity, logistics constraints and higher input and supply chain costs.~~inflation.

Corporate


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
(in millions)	(in millions)	September 24, 2022		September 25, 2021		September 24, 2022		September 25, 2021		(in millions)	September 30, 2023		September 24, 2022		September 30, 2023		September 24, 2022
Operating Loss		$	(11)	$	(9)	$	(43)	$	(33)
Operating loss										Operating loss	$	(15)	$	(11)	$	(42)	$	(43)

Table of Contents

The Corporate operating loss ~~of our Corporate segment~~ for the ~~three months~~quarter ended September ~~24, 2022~~30, 2023 increased $2$4 million ~~when~~ compared to the same prior year quarter, driven ~~primarily~~ by ~~higher variable stock-based compensation costs.~~

less favorable foreign exchange rates in the current quarter compared to the prior year quarter. The Corporate operating loss ~~of our Corporate segment~~ for the nine months ended September ~~24, 2022 increased $10~~30, 2023 decreased $1 million ~~when~~ compared to the same prior year period, driven ~~primarily~~ by ~~an increase in~~lower stock compensation and severance ~~and variable stock-based compensation~~ costs ~~partially~~that were largely offset by ~~favorable~~unfavorable foreign exchange ~~impacts.~~rates in the current year as compared to favorable rates in the prior year.

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 months ended September ~~24, 2022~~30, 2023 and September ~~25, 2021,~~24, 2022, and do not expect to utilize any authorization in the ~~near~~ future.

As of September ~~24, 2022,~~30, 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~~$444 million, liabilities of ~~$234~~$373 million, year-to-date revenue of ~~$187~~$119 million and a trailing twelve month ABL Credit Facility and Term Loan covenant EBITDA for continuing operations of ~~$34~~$29 million as of September ~~24, 2022.~~30, 2023.

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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)	September 30, 2023			December 31, 2022
Cash and cash equivalents(a)	$	27		$	152
Availability under the ABL Credit Facility(b)	112			130
Total debt(c)	749			853
Stockholders’ equity	786			829
Total capitalization (total debt plus stockholders’ equity)	1,535			1,682
Debt to capital ratio	49		%	51		%

(a) ~~Consists~~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,~~30, 2023, we had ~~$166~~$146 million of gross availability and net available borrowings of ~~$128~~$112 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~~$8 million available under anour accounts receivable factoring line of credit in France.

(c)See Note ~~7 —~~7—Debt and Finance Leases to our ~~Consolidated~~ Financial Statements for further information.

~~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 months ended September ~~24, 2022.~~30, 2023. See Note 17—Commitments and Contingenciesto our Financial Statements for further information.

~~Senior Notes~~Debt

~~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 was used, together with cash on hand of $89 million, to redeem the ~~amount~~remaining $318 million in aggregate principal balance and accrued interest of ~~CAD $12~~$4 million ~~(USD $9 million). In October 2022, we repaid~~of the 2024 Notes and pay fees and expenses related to the transaction. The 2027 Term Loan matures in July 2027, bears interest at an ~~additional term loan in the amount~~annual rate equal to three-month Term SOFR (or, if greater, 3.00 percent) plus 8.00 percent and requires quarterly principal payments of ~~CAD $12 million (USD $9 million).~~$1.25 million.

Cash Flows

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


		Nine Months Ended					Nine Months Ended
(in millions)	(in millions)	September 24, 2022		September 25, 2021		(in millions)	September 30, 2023		September 24, 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	$	82	$	7

Investing activities-continuing operations	Investing activities-continuing operations	(114)		(65)		Investing activities-continuing operations	(95)		(114)
Investing activities-discontinued operations	Investing activities-discontinued operations	44		183		Investing activities-discontinued operations	—		44
Financing activities	Financing activities	(51)		(138)		Financing activities	(112)		(51)

Cash ~~flows~~ provided by operating activities ~~of continuing operations decreased $38~~increased $75 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 payments on deferred energy liabilities associated with our Tartas facility operations and the receipt in 2022 of a $23 million U.S. federal tax refund.

Cash ~~flows~~ used in investing activities of continuing operations ~~increased $49~~decreased $19 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.

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Cash ~~flows~~ provided by investing activities of discontinued operations ~~decreased $139 million during the nine months ended September 24, 2022, to~~of $44 million ~~when compared~~in 2022 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 $61 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~~the redemption of the 2024 Notes and repayment of borrowings under the ABL Credit Facility and other long-term ~~debt.~~debt, the payment of issuance costs related to our 2027 Term Loan and higher repurchases of common stock to satisfy tax withholding requirements related to the issuance of stock under our incentive stock plans. These outflows were partially offset by the net proceeds received from the 2027 Term Loan issuance and borrowings under the ABL Credit Facility.

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		Total
Three Months Ended September 30, 2023
Income (loss) from continuing operations	$	(5)	$	14	$	(6)	$	(30)	$	(27)
Depreciation and amortization	32		3		1		—		36
Interest expense, net	—		—		—		19		19
Income tax benefit	—		—		—		(5)		(5)
EBITDA-continuing operations	27		17		(5)		(16)		23
Loss on debt extinguishment	—		—		—		1		1


Adjusted EBITDA-continuing operations	$	27	$	17	$	(5)	$	(15)	$	24

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-continuing operations	$	53	$	15	$	6	$	(6)	$	68



Nine Months Ended September 30, 2023
Income (loss) from continuing operations	$	8	$	30	$	2	$	(81)	$	(41)
Depreciation and amortization	91		10		2		1		104
Interest expense, net	—		—		—		48		48
Income tax benefit	—		—		—		(11)		(11)
EBITDA-continuing operations	99		40		4		(43)		100
Pension settlement loss	—		—		—		2		2

Adjusted EBITDA-continuing operations	$	99	$	40	$	4	$	(41)	$	102

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-continuing operations	105		39		6		(33)		117
Pension settlement loss	—		—		—		1		1
Severance	—		—		—		4		4
Adjusted EBITDA-continuing operations	$	105	$	39	$	6	$	(28)	$	122

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EBITDA from continuing operations for the quarter ended September 30, 2023 decreased $45 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 lower input, logistics and maintenance costs. EBITDA from continuing operations for the nine months ended September 30, 2023 decreased $17 million compared to the same prior year period, driven by lower net sales in our Paperboard segment, higher ~~key~~labor costs and the impact of an extended maintenance outage in the prior year, partially offset by the increase in net sales in our High Purity Cellulose and High-Yield Pulp segments and lower input and logistics ~~costs due to inflation, lower volumes due to supply chain constraints and lower productivity when comparing the nine-month periods. For a full discussion of changes to operating income, see~~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)
~~——————————————~~


	Nine Months Ended
(in millions)	September 30, 2023		September 24, 2022
Cash provided by operating activities-continuing operations	$	82	$	7
Capital expenditures, net(a)	(55)		(92)
Adjusted free cash flows-continuing operations	$	27	$	(85)

(a)Net of proceeds from the sale of assets and excluding strategic capital expenditures. Strategic capital expenditures for the nine months ended September 30, 2023 and September 24, 2022 ~~and 2021~~ were ~~approximately $22~~$40 million and ~~$10~~$22 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 September 30, 2023, we had $251 million of variable rate debt subject to interest rate risk. In the third quarter of 2023 we issued variable rate term loan financing of $250 million, which was used with cash on hand to redeem the $318 million outstanding principal balance of our fixed rate 2024 Notes. At this borrowing level, a hypothetical one percent change in interest rates would have resulted in a $2 million annual change in interest expense. At December 31, 2022, we had $4 million of variable rate debt subject to interest rate risk, for which a hypothetical one percent change in rates would have resulted in an immaterial change in interest expense for the period.

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 September 30, 2023 and December 31, 2022 was $440 million and $839 million, respectively, compared to its respective $517 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.~~30, 2023.

~~During~~Internal Control over Financial Reporting

For the quarter ended September ~~24, 2022,~~30, 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:~~30, 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	~~Approximate~~ Dollar Value of Shares ~~that~~That May Yet Bebe Purchased Under the Publicly Announced Plans or Programs(b)
~~June 26 to~~ July 30	—	$	—	—	$	~~60,294,000~~
~~July 31~~2 to August 275	—	$	—	—	$	60,294,000
August 286 to September 242	—	$	—	—	$	60,294,000
September 3 to September 30	—	$	—	—	$	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~~30, 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~~

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

~~Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed on March 21, 2022~~

~~4.1~~

Rights Agreement dated as of March 21, 2022, between Rayonier Advanced Materials Inc. and Computershare Trust Company, N.A., which includes the form of Certificate of Designations as Exhibit A, the form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C

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

~~10.1~~

~~Seventh Amendment to Retirement Plan for Salaried Employees of Rayonier Advanced Materials Inc., effective December 31, 2022~~

~~Filed herewith~~

~~10.2~~

~~First Amendment to Rayonier Advanced Materials Inc. Excess Benefit Plan, effective December 31, 2022~~

~~Filed herewith~~

31.1

Chief Executive Officer’s Certification Pursuant to Rule 13a-14(a)/15d-14(a) and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed herewith

31.2

Chief Financial Officer’s Certification Pursuant to Rule 13a-14(a)/15d-14(a) and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed herewith

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

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Table of Contents

~~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: November 8, 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


	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	%