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NEWS RELEASE
Sylvamo Releases Fourth-Quarter Results
with Robust Earnings and Cash Flow
MEMPHIS, Tenn. – Feb. 11, 2022 – Sylvamo (NYSE: SLVM), the world’s paper company, released fourth-quarter 2021 earnings.
Message from the Chairman and Chief Executive Officer
“During our first quarter as a stand-alone company, we delivered strong earnings and generated significant cash,” said Jean-Michel Ribiéras. “Our fourth-quarter adjusted EBITDA was $170 million, reflecting strong commercial and operational performances globally. We generated $162 million of free cash flow, which we used to pay down debt by $124 million and increase cash on hand by $48 million. We also achieved a gross debt-to-adjusted EBITDA ratio of 2.4x, strengthening our balance sheet and increasing our flexibility to increase shareowner value.
“Momentum is strong heading into 2022 despite input cost, labor and supply chain challenges. We are well positioned to increase our earnings and generate strong cash flow in 2022. We project first-quarter adjusted EBITDA of $180 to $190 million and adjusted operating earnings per share of $1.70 to $1.90. We remain focused on generating strong free cash flow, further reducing debt and creating long-term stakeholder value.”
Fourth-Quarter Highlights
•Net income of $62 million ($1.41 per diluted share) compared with $92 million ($2.09 per pro forma share1) in the third quarter of 2021
•Adjusted operating earnings2 (non-GAAP) of $75 million ($1.71 per diluted share) compared with $100 million ($2.27 per pro forma share) in the third quarter of 2021
•Adjusted EBITDA3 (non-GAAP) of $170 million (17.5% margin) compared with $177 million (19.5% margin) in the third quarter of 2021
•Free cash flow4 (non-GAAP) of $162 million compared with $135 million in the third quarter of 2021
Fourth-Quarter Commercial and Operational Highlights
•Price and mix improved by $41 million versus the prior quarter and volume improved by $14 million, reflecting solid industry fundamentals and continued commercial excellence performance by our teams
•Operations improved by $2 million and total planned maintenance outage expenses increased by $24 million versus the prior quarter
•Input costs increased by $39 million versus the prior quarter, reflecting higher costs for wood, energy, chemicals, packaging and distribution
•Adjusted EBITDA margins for Europe, Latin America and North America were 9%, 35% and 13%, respectively, with Europe and North America margins being impacted by maintenance outages in those regions
•Repaid $124 million of debt, achieving a gross debt-to-adjusted EBITDA ratio of 2.4x at year-end
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First-Quarter Outlook
•Price and mix are expected to improve by $35 to $40 million compared to the fourth quarter, reflecting continued realization of prior price increases in all regions
•Volume is expected to be down by $13 to $18 million, reflecting seasonally weaker demand in Latin America and Eastern Europe
•Operations and costs are expected to increase by $18 to $20 million, reflecting the non-repeat of $7 million favorable overhead benefits and environmental credits in Europe and a $10 million favorable North America LIFO adjustment, both in the fourth quarter
•Input and transportation costs are projected to increase by $18 to $23 million due to higher fiber, chemicals and transportation costs
•Total maintenance outage expenses are projected to decrease by $31 million, reflecting fewer outages during the winter months in the northern hemisphere
•We also project $8 million in costs related to transition service agreements in the quarter and $15 million of one-time costs (transition service agreements cost are not included in adjusted EBITDA and one-time costs are not included in adjusted EBITDA and adjusted operating earnings)
Management Summary
Global industry demand continued to recover and we expect this to continue in 2022 as more white-collar workers return to their offices. We expect our first-quarter volume to be down with seasonally weaker demand in Latin America.
Throughout the fourth quarter, we continued to realize prior price increases. In the first quarter, we expect price and mix to further improve, reflecting continued realization of prior price increases in all three regions and our focus on commercial excellence. Our improved price and mix allowed us to offset significant cost increases for wood, chemicals, energy and freight. We expect incremental input and transportation cost inflation in the first quarter.
Our mills ran well and we executed extensive maintenance outages in our Eastover and Saillat mills safely, efficiently and on budget. We expect higher first-quarter operating expenses, reflecting the absence of the fourth-quarter benefits described in the first-quarter outlook. Maintenance outage expenses will decline significantly in the first quarter since we tend to avoid maintenance outages in the northern hemisphere during the coldest months.
Reflecting our commitment to financial discipline, we repaid $124 million of debt and increased our cash balance by $48 million in the fourth quarter. Our strong fourth-quarter cash generation included an approximate $65 million benefit because we were not required to pay International Paper for Georgetown and Riverdale distribution center inventories until 2022. We will make $77 million in required inventory payments in monthly installments over the first six months of this year. We also intend to continue to reduce debt.
Most importantly, we appreciate the contributions of our more than 7,500 colleagues, who worked safely and continued to operate through the significant challenges posed by the global pandemic and supply chain bottlenecks. We are also grateful for our customers and their patience as we navigate the challenging supply chain conditions.
1 At the date of distribution of Sylvamo common shares by International Paper to its shareholders on Oct. 1, 2021, Sylvamo had 43,949,277 total common shares outstanding. The calculation of pro forma earnings per share for each period presented utilizes the common shares at the date of distribution as the basis for the calculation of weighted average common shares outstanding for periods prior to the spinoff because, at that time, Sylvamo did not operate as a separate, stand-alone entity, and no shares or equity-based awards were outstanding prior to the date of distribution. This share count reflects a change from the prior period to reflect an immaterial adjustment to the number of outstanding shares held by International Paper on the spin-off record date.
2 Adjusted Operating Earnings (non-GAAP) are net earnings (GAAP) excluding net special items. Management uses this measure to focus on ongoing operations and believes it is useful to investors because it enables them to perform meaningful comparisons of past and present combined operating results. For more information regarding net special items, see the information under the heading Effects of Special Items and the Condensed Combined Statement of Operations and related notes included later in this release.
3 Adjusted EBITDA (non-GAAP) is net income (loss) (GAAP) excluding the sum of income taxes, net interest (income) expense, depreciation, amortization and cost of timber harvested, transition service agreement expense, stock-based compensation, and, when applicable for the periods reported, special items. Management believes that Adjusted EBITDA and Adjusted EBITDA Margin provide investors and analysts meaningful insights into our operating performance and Adjusted EBITDA is a relevant metric for the third-party debt. For more information regarding net special items, see the information under the heading Effects of Special Items and the Condensed Combined Statement of Operations and related notes included later in this release.
4 Free cash flow is a non-GAAP measure and the most directly comparable GAAP measure is cash provided by operations. Management believes that free cash flow is useful to investors as a liquidity measure because it measures the amount of cash generated that is available, after reinvesting in the business, to maintain a strong balance sheet and service debt, and return cash to shareowners in the future. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. By adjusting for certain items that are not indicative of the Company’s ongoing performance, free cash flow also enables investors to perform meaningful comparisons between past and present periods.
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Select Financial Measures
| (In millions) | Fourth Quarter 2021 | Third Quarter 2021 | Fourth Quarter 2020 | Full-Year 2021 | Full-Year 2020 | ||||||||||||||||||||||||
| Net Sales | $ | 972 | $ | 908 | $ | 796 | $ | 3,502 | $ | 3,009 | |||||||||||||||||||
| Net Income (Loss) | 62 | 92 | 65 | 331 | 170 | ||||||||||||||||||||||||
| Business Segment Operating Profit | 123 | 137 | 71 | 429 | 204 | ||||||||||||||||||||||||
| Adjusted Operating Earnings | 75 | 100 | 69 | 305 | 178 | ||||||||||||||||||||||||
| Adjusted EBITDA | 170 | 177 | 112 | 594 | 373 | ||||||||||||||||||||||||
| Cash Provided By (Used For) Operating Activities | 184 | 157 | 134 | 549 | 359 | ||||||||||||||||||||||||
Free Cash Flow (1) | 162 | 135 | 118 | 473 | 284 | ||||||||||||||||||||||||
(1) Free cash flow is a non-GAAP financial measure. A reconciliation of free cash flow to the most comparable GAAP measure, cash provided by (used for) operating activities, and disclosure regarding why we believe that free cash flow provides useful information to investors, is included later in this release.
Segment Information
Sylvamo uses business segment operating profits to measure the earnings performance of its businesses and is calculated as set forth in footnote (g) under the "Sales and Earnings by Business Segment" table (page 8). Full-year and fourth-quarter 2021 net sales by business segment and operating profit (loss) by business segment compared with full-year 2020, the third quarter of 2021 and the fourth quarter of 2020 are as follows:
Business Segment Results
| (In millions) | Fourth Quarter 2021 | Third Quarter 2021 | Fourth Quarter 2020 | Full-Year 2021 | Full-Year 2020 | ||||||||||||||||||||||||
| Net Sales by Business Segment | |||||||||||||||||||||||||||||
| Europe | $ | 297 | $ | 262 | $ | 239 | $ | 1,040 | $ | 921 | |||||||||||||||||||
| Latin America | 229 | 200 | 198 | 786 | 632 | ||||||||||||||||||||||||
| North America | 463 | 447 | 376 | 1,718 | 1,490 | ||||||||||||||||||||||||
| Corporate and Inter-segment Sales | (17) | (1) | (17) | (42) | (34) | ||||||||||||||||||||||||
| Net Sales | $ | 972 | $ | 908 | $ | 796 | $ | 3,502 | $ | 3,009 | |||||||||||||||||||
| Operating Profit (Loss) by Business Segment | |||||||||||||||||||||||||||||
| Europe | $ | 16 | $ | 40 | $ | 15 | $ | 98 | $ | 77 | |||||||||||||||||||
| Latin America | 64 | 44 | 38 | 195 | 84 | ||||||||||||||||||||||||
| North America | 43 | 53 | 18 | 136 | 43 | ||||||||||||||||||||||||
| Total Business Segment Operating Profit | $ | 123 | $ | 137 | $ | 71 | $ | 429 | $ | 204 | |||||||||||||||||||
Operating profits in the fourth quarter of 2021:
Europe - $16 million compared with $40 million in the third quarter of 2021. Earnings were lower as higher average sales prices were more than offset by higher planned maintenance outage expenses and higher input costs.
Latin America - $64 million compared with $44 million in the third quarter of 2021. Earnings were higher as higher average sales prices and volumes more than offset higher input costs.
North America - $43 million compared with $53 million in the third quarter of 2021. Earnings were lower as higher average sales prices were offset by higher planned maintenance outage expenses and higher input costs.
Earnings Webcast
The company will host an audio webcast at 10 a.m. EST / 9 a.m. CST. All interested parties are invited to listen at investors.sylvamo.com.
Parties who wish to participate should call +1-855-982-8078 (U.S.) or +1-469-886-1931 (international). The conference ID number is 7459224. Participants should call in no later than 9:45 a.m. EST / 8:45 a.m. CST.
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Replays are available at investors.sylvamo.com for one year and by phone for 90 days, approximately two hours after the call. To listen to the replay by phone, call +1-855-859-2056 and use conference ID number 7459224.
Investor Contact: Hans Bjorkman, 901-419-3525, hans.bjorkman@sylvamo.com
Media Contact: Adam Ghassemi, 901-419-4436, adam.ghassemi@sylvamo.com
About Sylvamo
Sylvamo Corporation (NYSE: SLVM) is the world’s paper company with mills in Europe, Latin America and North America. Our vision is to be the employer, supplier and investment of choice. We transform renewable resources into papers that people depend on for education, communication and entertainment. Headquartered in Memphis, Tennessee, we employ more than 7,500 colleagues. Net sales for 2021 were $3.5 billion. For more information, please visit Sylvamo.com.
Effective Tax Rate
The reported effective tax rate for the fourth quarter of 2021 was 38%, compared to 24% for the third quarter of 2021. The higher rate for the fourth quarter was due to a $9 million expense resulting from a valuation allowance on French deferred tax assets.
Excluding special items, the operational effective tax rate for the fourth quarter of 2021 was 29%, compared with 26% for the third quarter of 2021. The higher operational effective tax rate in the fourth quarter is primarily due to $2 million of withholding taxes on Russian dividends during the quarter.
Effects of Special Items
Net special items in the fourth quarter of 2021 amount to a net after-tax charge of $13 million ($0.30 per diluted share) compared with net after-tax charge of $8 million ($0.18 per pro forma share) in the third quarter of 2021. For more information see the information under the Consolidated and Combined Statement of Operations and related notes included later in this release.
Forward-Looking Statements
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including our projected adjusted EBITDA and adjusted operating earnings per share for the first quarter, the information under the heading “First-Quarter Outlook” and expectations stated under the heading “Management Summary.” Any or all forward-looking statements may turn out to be incorrect, and our actual actions and results could differ materially from what they express or imply, because they involve known and unknown risks, uncertainties and other factors, many of which are beyond our control. These risks, uncertainties, and other factors include those disclosed in the heading “Risk Factors” in our Registration Statement on Form 10 filed with the U.S. Securities and Exchange Commission (SEC) and in our subsequent filings with the SEC, available on our website, Sylvamo.com. These forward-looking statements reflect our current expectations, and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
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SYLVAMO CORPORATION
Consolidated and Combined Statement of Operations
Preliminary and Unaudited
(In millions)
Three Months Ended December 31, | Three Months Ended September 30, 2021 | Twelve Months Ended December 31, | ||||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||
| Net Sales | $ | 972 | $ | 796 | $ | 908 | $ | 3,502 | $ | 3,009 | ||||||||||||||||||||||
| Costs and Expenses | ||||||||||||||||||||||||||||||||
| Cost of products sold | 678 | 539 | (h) | 587 | (e) | 2,315 | (c) | 2,101 | (h) | |||||||||||||||||||||||
| Selling and administrative expenses | 67 | (a) | 59 | 47 | 213 | (a) | 209 | |||||||||||||||||||||||||
| Depreciation, amortization and cost of timber harvested | 35 | 37 | 37 | 143 | 154 | |||||||||||||||||||||||||||
| Distribution expenses | 70 | 86 | 98 | 346 | 321 | |||||||||||||||||||||||||||
| Taxes other than payroll and income taxes | 5 | 8 | 9 | 27 | 30 | |||||||||||||||||||||||||||
| Interest (income) expense, net | 17 | (1) | 10 | (f) | (2) | (d) | (4) | (i) | ||||||||||||||||||||||||
| Income (Loss) Before Income Taxes | 100 | 68 | 120 | 460 | 198 | |||||||||||||||||||||||||||
| Income tax provision (benefit) | 38 | (b) | 3 | 28 | (g) | 129 | (b) | 28 | ||||||||||||||||||||||||
| Net Income (Loss) | $ | 62 | $ | 65 | $ | 92 | $ | 331 | $ | 170 | ||||||||||||||||||||||
| Earnings Per Share - Basic and Diluted | $ | 1.41 | $ | 1.48 | $ | 2.09 | $ | 7.53 | $ | 3.87 | ||||||||||||||||||||||
| Average Shares of Common Stock Outstanding - Diluted | 44 | 44 | 44 | 44 | 44 | |||||||||||||||||||||||||||
The accompanying notes are an integral part of this consolidated and combined statement of operations.
Three Months and Twelve Months Ended December 31, 2021
(a)Includes net pre-tax loss of $6 million ($4 million after taxes) for the three months and twelve months ended December 31, 2021, for one-time costs associated with the spin-off.
(b)Includes $9 million of tax expense related to establishing a valuation allowance on France deferred tax assets for the three months ended December 31, 2021, which was offset for the twelve months ended December 31, 2021 by a net $2 million tax benefit associated with a favorable Brazil court ruling that certain interest income is nontaxable.
(c)Includes net pre-tax income of $35 million ($23 million after taxes) for the twelve months ended December 31, 2021, for the accrual of a foreign value-added tax refund in Brazil.
(d)Includes net pre-tax income of $20 million ($14 million after taxes) for the twelve months ended December 31, 2021, for interest income associated with the accrual of a foreign value-added tax refund in Brazil.
Three Months Ended September 30, 2021
(e)Includes pre-tax loss of $7 million ($5 million after taxes) for the three months ended September 30, 2021, to adjust the accrual of a foreign value-added tax refund in Brazil.
(f)Includes pre-tax loss of $8 million ($5 million after taxes) for the three months ended September 30, 2021, to adjust interest income associated with the accrual of a foreign value-added tax refund in Brazil.
(g)Includes a net $2 million tax benefit for three months ended September 30, 2021 associated with a favorable Brazil court ruling that certain interest income is nontaxable.
Three Months and Twelve Months Ended December 31, 2020
(h)Includes net pre-tax loss of $4 million ($4 million after taxes) for the three months ended December 31, 2020, and net pre-tax loss of $10 million ($9 million after taxes) for the twelve months ended December 31, 2020, for the accrual of a foreign value-added tax expense in Brazil and an environmental reserve adjustment in Russia.
(i)Includes net pre-tax income of $2 million ($1 million after taxes) for the twelve months ended December 31, 2020, for interest income associated with the accrual of a foreign value-added tax refund in Brazil.
5
SYLVAMO CORPORATION
Reconciliation of Net Income (Loss) to Adjusted Operating Earnings
Preliminary and Unaudited
(In millions, except per share amounts)
Three Months Ended December 31, | Three Months Ended September 30, 2021 | Twelve Months Ended December 31, | |||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||
| Net Income (Loss) | $ | 62 | $ | 65 | $ | 92 | $ | 331 | $ | 170 | |||||||||||||||||||
| Add back: Net Special items expense (income) | 13 | 4 | 8 | (26) | 8 | ||||||||||||||||||||||||
| Adjusted Operating Earnings | $ | 75 | $ | 69 | $ | 100 | $ | 305 | $ | 178 | |||||||||||||||||||
Three Months Ended December 31, | Three Months Ended September 30, 2021 | Twelve Months Ended December 31, | |||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||
| Diluted Earnings per Common Share as Reported | $ | 1.41 | $ | 1.48 | $ | 2.09 | $ | 7.53 | $ | 3.87 | |||||||||||||||||||
| Add back: Net Special items expense (income) | 0.30 | 0.09 | 0.18 | (0.59) | 0.18 | ||||||||||||||||||||||||
| Adjusted Operating Earnings per Share | $ | 1.71 | $ | 1.57 | $ | 2.27 | $ | 6.94 | $ | 4.05 | |||||||||||||||||||
The Company calculates Adjusted Operating Earnings (non-GAAP) by excluding the effect of items considered by management to be unusual (net special items) as reflected in the Consolidated and Combined Statement of Operations and related notes included in this release from the earnings reported under GAAP. Management uses this measure to focus on on-going operations, and believes that it is useful to investors because it enables them to perform meaningful comparisons of past and present consolidated and combined operating results. The Company believes that using this information, along with net income, provides for a more complete analysis of the results of operations by quarter. Net income (loss) is the most directly comparable GAAP measure.
Since earnings per share are computed independently for each period, twelve-month per share amounts may not equal the sum of the respective quarters.
6
Reconciliation of Net Income (Loss) to Adjusted EBITDA and Adjusted EBITDA Margin
Preliminary and Unaudited
(In millions)
Three Months Ended December 31, | Three Months Ended September 30, 2021 | Twelve Months Ended December 31, | |||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||
| Net Income (Loss) | $ | 62 | $ | 65 | $ | 92 | $ | 331 | $ | 170 | |||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||
| Income tax provision (benefit) | 38 | 3 | 28 | 129 | 28 | ||||||||||||||||||||||||
| Interest (income) expense, net | 17 | (1) | 10 | (2) | (4) | ||||||||||||||||||||||||
| Depreciation, amortization and cost of timber harvested | 35 | 37 | 37 | 143 | 154 | ||||||||||||||||||||||||
| Stock-based compensation | 4 | 4 | 3 | 14 | 15 | ||||||||||||||||||||||||
| Transition service agreement expense | 8 | — | — | 8 | — | ||||||||||||||||||||||||
| Net Special items expense (income) | 6 | 4 | 7 | (29) | 10 | ||||||||||||||||||||||||
| Adjusted EBITDA | $ | 170 | $ | 112 | $ | 177 | $ | 594 | $ | 373 | |||||||||||||||||||
| Net Sales | $ | 972 | $ | 796 | $ | 908 | $ | 3,502 | $ | 3,009 | |||||||||||||||||||
| Adjusted EBITDA Margin | 17.5% | 14.1% | 19.5% | 17.0% | 12.4% | ||||||||||||||||||||||||
Adjusted EBITDA and Adjusted EBITDA Margin by Business Segment
Three Months Ended December 31, | Three Months Ended September 30, 2021 | ||||||||||||||||
| 2021 | 2020 | ||||||||||||||||
| Adjusted EBITDA | $ | 170 | $ | 112 | $ | 177 | |||||||||||
| Europe | 27 | 24 | 49 | ||||||||||||||
| Latin America | 81 | 54 | 59 | ||||||||||||||
| North America | 62 | 34 | 69 | ||||||||||||||
| Total Business Segment Adjusted EBITDA | $ | 170 | $ | 112 | $ | 177 | |||||||||||
| Net Sales (excluding Corporate and Inter-segment Sales) | $ | 989 | $ | 813 | $ | 909 | |||||||||||
| Europe | 297 | 239 | 262 | ||||||||||||||
| Latin America | 229 | 198 | 200 | ||||||||||||||
| North America | 463 | 376 | 447 | ||||||||||||||
| Total Business Segment Net Sales | $ | 989 | $ | 813 | $ | 909 | |||||||||||
| Adjusted EBITDA Margin | |||||||||||||||||
| Europe | 9% | 10% | 19% | ||||||||||||||
| Latin America | 35% | 27% | 30% | ||||||||||||||
| North America | 13% | 9% | 15% | ||||||||||||||
The Company calculates Adjusted EBITDA (non-GAAP) by excluding the sum of income taxes, net interest (income) expense, depreciation, amortization and cost of timber harvested, transition services agreements expense, stock-based compensation, as well as the after-tax effect of items considered by management to be unusual (net special items) as reflected in the Consolidated and Combined Statement of Operations and related notes included in this release from the earnings reported under GAAP. Management believes that Adjusted EBITDA and Adjusted EBITDA Margin provide investors and analysts meaningful insights into our operating performance and Adjusted EBITDA is a relevant metric for the third-party debt. The Company believes that using this information, along with net income, provides for a more complete analysis of the results of its operations. Net income (loss) is the most directly comparable GAAP measure.
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SYLVAMO CORPORATION
Sales and Earnings by Business Segment
Preliminary and Unaudited
(In millions)
Net Sales by Business Segment
Three Months Ended December 31, | Three Months Ended September 30, 2021 | Twelve Months Ended December 31, | ||||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||
| Europe | $ | 297 | $ | 239 | $ | 262 | $ | 1,040 | $ | 921 | ||||||||||||||||||||||
| Latin America | 229 | 198 | 200 | 786 | 632 | |||||||||||||||||||||||||||
| North America | 463 | 376 | 447 | 1,718 | 1,490 | |||||||||||||||||||||||||||
| Corporate and Inter-segment Sales | (17) | (17) | (1) | (42) | (34) | |||||||||||||||||||||||||||
| Net Sales | $ | 972 | $ | 796 | $ | 908 | $ | 3,502 | $ | 3,009 | ||||||||||||||||||||||
Operating Profit (Loss) by Business Segment
Three Months Ended December 31, | Three Months Ended September 30, 2021 | Twelve Months Ended December 31, | ||||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||
| Europe | $ | 16 | $ | 15 | $ | 40 | $ | 98 | $ | 77 | ||||||||||||||||||||||
| Latin America | 64 | 38 | 44 | 195 | 84 | |||||||||||||||||||||||||||
| North America | 43 | 18 | 53 | 136 | 43 | |||||||||||||||||||||||||||
| Total Business Segment Operating Profit | $ | 123 | $ | 71 | $ | 137 | $ | 429 | $ | 204 | ||||||||||||||||||||||
| Income (Loss) Before Income Taxes | $ | 100 | $ | 68 | $ | 120 | $ | 460 | $ | 198 | ||||||||||||||||||||||
| Interest (income) expense, net | 17 | (1) | 10 | (c) | (2) | (b) | (4) | (e) | ||||||||||||||||||||||||
| Other special items, net | 6 | (a) | 4 | (f) | 7 | (d) | (29) | (a) | 10 | (f) | ||||||||||||||||||||||
| Business Segment Operating Profit (g) | $ | 123 | $ | 71 | $ | 137 | $ | 429 | $ | 204 | ||||||||||||||||||||||
Three Months and Twelve Months Ended December 31, 2021
(a)Includes net pre-tax loss of $6 million ($4 million after taxes) for the three months and twelve months ended December 31, 2021, for one-time costs associated with the spin-off, offset by net pre-tax income of $35 million ($23 million after taxes) for the twelve months ended December 31, 2021, for the accrual of a foreign value-added tax refund in Brazil.
(b)Includes net pre-tax income of $20 million ($14 million after taxes) for the twelve months ended December 31, 2021, for interest income associated with the accrual of a foreign value-added tax refund in Brazil.
Three Months Ended September 30, 2021
(c)Includes net pre-tax loss of $8 million ($5 million after taxes) for the three months ended September 30, 2021, to adjust interest income associated with the accrual of a foreign value-added tax refund in Brazil.
(d)Includes net pre-tax loss of $7 million ($5 million after taxes) for the three months ended September 30, 2021, to adjust the accrual of a foreign value-added tax refund in Brazil.
Three Months and Twelve Months Ended December 31, 2020
(e)Includes net pre-tax income of $2 million ($1 million after taxes) for the twelve months ended December 31, 2020, for interest income associated with the accrual of a foreign value-added tax refund in Brazil.
(f)Includes net pre-tax loss of $4 million ($4 million after taxes) for the three months ended December 31, 2020, and net pre-tax loss of $10 million ($9 million after taxes) for the twelve months ended December 31, 2020, for the accrual of a foreign value-added tax expense in Brazil and an environmental reserve adjustment in Russia.
(g)As set forth in the chart above, business segment operating profit is defined as income (loss) before income taxes, but excluding net interest (income) expense and other special items, net. Business segment operating profit is a measure reported to our management for purposes of making decisions about allocating resources to our business segments and assessing the performance of our business segments and is presented in our financial statement footnotes in accordance with ASC 280.
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SYLVAMO CORPORATION
Consolidated and Combined Balance Sheet
Preliminary and Unaudited
(In millions)
| December 31, 2021 | December 31, 2020 | ||||||||||
| Assets | |||||||||||
| Current Assets | |||||||||||
| Cash and Temporary Investments | $ | 180 | $ | 95 | |||||||
| Accounts and Notes Receivable, Net | 490 | 621 | |||||||||
| Contract Assets | 29 | 24 | |||||||||
| Inventories | 342 | 342 | |||||||||
| Other current assets | 67 | 37 | |||||||||
| Total Current Assets | 1,108 | 1,119 | |||||||||
| Plants, Properties and Equipment, Net | 885 | 974 | |||||||||
| Forestlands | 278 | 293 | |||||||||
| Goodwill | 132 | 143 | |||||||||
| Right of Use Assets | 41 | 46 | |||||||||
| Deferred Charges and Other Assets | 153 | 336 | |||||||||
| Total Assets | $ | 2,597 | $ | 2,911 | |||||||
| Liabilities and Equity | |||||||||||
| Current Liabilities | |||||||||||
| Accounts Payable | $ | 511 | $ | 284 | |||||||
| Notes Payable and Current Maturities of Long-Term Debt | 42 | 4 | |||||||||
| Accrued Payroll and Benefits | 51 | 68 | |||||||||
| Other Current Liabilities | 154 | 134 | |||||||||
| Total Current Liabilities | 758 | 490 | |||||||||
| Long-Term Debt | 1,358 | 22 | |||||||||
| Deferred Income Taxes | 169 | 170 | |||||||||
| Other Liabilities | 130 | 117 | |||||||||
| Equity | |||||||||||
| Parent Company Investment | — | 3,592 | |||||||||
| Common Stock | 44 | — | |||||||||
| Paid-In Capital | 4 | — | |||||||||
| Retained Earnings | 1,935 | — | |||||||||
| Accumulated Other Comprehensive Loss | (1,801) | (1,480) | |||||||||
| Total Equity | 182 | 2,112 | |||||||||
| Total Liabilities and Equity | $ | 2,597 | $ | 2,911 | |||||||
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SYLVAMO CORPORATION
Consolidated and Combined Statement of Cash Flows
Preliminary and Unaudited
(In millions)
| Twelve Months Ended December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Operating Activities | |||||||||||
| Net income (loss) | $ | 331 | $ | 170 | |||||||
| Depreciation, amortization and cost of timber harvested | 143 | 154 | |||||||||
| Deferred income tax provision (benefit), net | (6) | (49) | |||||||||
| Stock-based compensation | 14 | 15 | |||||||||
| Changes in operating assets and liabilities and other | |||||||||||
| Accounts and notes receivable | (118) | 60 | |||||||||
| Inventories | 19 | 71 | |||||||||
| Accounts payable and accrued liabilities | 214 | (46) | |||||||||
| Other | (48) | (16) | |||||||||
| Cash Provided By (Used For) Operating Activities | 549 | 359 | |||||||||
| Investment Activities | |||||||||||
| Invested in capital projects | (76) | (75) | |||||||||
| Cash pool arrangements with Parent | 202 | (5) | |||||||||
| Other | 1 | 1 | |||||||||
| Cash Provided By (Used For) Investment Activities | 127 | (79) | |||||||||
| Financing Activities | |||||||||||
| Net transfers (to) from Parent | (456) | (340) | |||||||||
| Special payment to Parent | (1,520) | — | |||||||||
| Issuance of debt | 1,501 | — | |||||||||
| Reduction of debt | (130) | (10) | |||||||||
| Other | 16 | — | |||||||||
| Cash Provided By (Used for) Financing Activities | (589) | (350) | |||||||||
| Effect of Exchange Rate Changes on Cash | (2) | 30 | |||||||||
| Change in Cash and Temporary Investments | 85 | (40) | |||||||||
| Cash and Temporary Investments | |||||||||||
| Beginning of the period | 95 | 135 | |||||||||
| End of the period | $ | 180 | $ | 95 | |||||||
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SYLVAMO CORPORATION
Reconciliation of Cash Provided by Operations to Free Cash Flow
Preliminary and Unaudited
(In millions)
Three Months Ended December 31, | Three Months Ended September 30, 2021 | Twelve Months Ended December 31, | |||||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||
| Cash Provided By (Used For) Operating Activities | $ | 184 | $ | 134 | $ | 157 | $ | 549 | $ | 359 | |||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||
| Cash invested in capital projects | (22) | (16) | (22) | (76) | (75) | ||||||||||||||||||||||||
| Free Cash Flow | $ | 162 | $ | 118 | $ | 135 | $ | 473 | $ | 284 | |||||||||||||||||||
Free cash flow is a non-GAAP measure and the most directly comparable GAAP measure is cash provided by operations. Management believes that free cash flow is useful to investors as a liquidity measure because it measures the amount of cash generated that is available, after reinvesting in the business, to maintain a strong balance sheet and service debt, and return cash to shareowners in the future. It should not be inferred that the entire free cash flow amount is available for discretionary expenditures. By adjusting for certain items that are not indicative of the Company’s ongoing performance, free cash flow also enables investors to perform meaningful comparisons between past and present periods.
Reconciliation of Net Income (Loss) to Adjusted EBITDA - 2022 Outlook
Estimates
(In millions)
Three Months Ended March 31, 2022 | |||||
| Net Income (Loss) | $65 - $73 | ||||
| Adjustments: | |||||
| Income tax provision (benefit) | 33 - 35 | ||||
| Interest (income) expense, net | 18 | ||||
| Depreciation, amortization and cost of timber harvested | 37 | ||||
| Stock-based compensation | 4 | ||||
| Transition service agreement expense | 8 | ||||
| Net Special items expense (income) | 15 | ||||
| Adjusted EBITDA | $180 - $190 | ||||
Reconciliation of Net Income (Loss) to Adjusted Operating Earnings - 2022 Outlook
Estimates
(In millions, except per share amounts)
Three Months Ended March 31, 2022 | |||||
| Net Income (Loss) | $65 - $73 | ||||
| Add back: Net Special items expense (income) | 10 | ||||
| Adjusted Operating Earnings | $75 - $83 | ||||
Three Months Ended March 31, 2022 | |||||
| Diluted Earnings per Common Share | $1.48 - $1.66 | ||||
| Add back: Net Special items expense (income) | 0.23 | ||||
| Adjusted Operating Earnings per Share | $1.70 - $1.90 | ||||
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The non-GAAP financial measures presented in this release have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of our results calculated in accordance with GAAP. In addition, because not all companies use identical calculations, the Company’s presentation of non-GAAP measures in this release may not be comparable to similarly titled measures disclosed by other companies, including companies in the same industry as Sylvamo.
Management believes certain non-U.S. GAAP financial measures, when used in conjunction with information presented in accordance with U.S. GAAP, can facilitate a better understanding of the impact of various factors and trends on the Company’s financial condition and results of operations. Management also uses these non-U.S. GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company’s performance.
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