RYAM Announces First Quarter 2023 Results
May 09, 2023 4:30 PM
Reaffirms 2023 EBITDA and Raises Free Cash Flow Guidance
-
Net sales for the first quarter of
$467 million , up$115 million , or 33 percent, from prior year quarter
-
Income from continuing operations for the first quarter of
$2 million , up$26 million , or 108 percent, from prior year quarter
-
Adjusted EBITDA from continuing operations for the first quarter of
$51 million , up$31 million , or 155 percent, from prior year quarter
-
Cash provided by operating activities of
$51 million ; total debt of$846 million
-
Adjusted Free Cash Flow generation of
$36 million ; Net Debt reduced to$683 million
-
Reaffirm 2023 Adjusted EBITDA guidance of
$200 million to$215 million
-
Increase 2023 Adjusted Free Cash Flow guidance to
$40 million to$65 million
“First quarter results were in line with expectations and keep us on track to deliver upon our full year guidance of
First Quarter 2023 Operating Results from Continuing Operations
The Company operates in the following business segments: High Purity Cellulose, Paperboard and High-Yield Pulp.
Net sales was comprised of the following for the periods presented:
|
Three Months Ended |
||||||||||
(in millions) |
|
|
|
|
|
||||||
High Purity Cellulose |
$ |
374 |
|
|
$ |
384 |
|
|
$ |
281 |
|
Paperboard |
|
59 |
|
|
|
67 |
|
|
|
54 |
|
High-Yield Pulp |
|
42 |
|
|
|
58 |
|
|
|
22 |
|
Eliminations |
|
(8 |
) |
|
|
(9 |
) |
|
|
(5 |
) |
Net sales |
$ |
467 |
|
|
$ |
500 |
|
|
$ |
352 |
|
Operating results were comprised of the following for the periods presented:
|
Three Months Ended |
||||||||||
(in millions) |
|
|
|
|
|
||||||
High Purity Cellulose |
$ |
13 |
|
|
$ |
10 |
|
|
$ |
(8 |
) |
Paperboard |
|
10 |
|
|
|
9 |
|
|
|
6 |
|
High-Yield Pulp |
|
7 |
|
|
|
12 |
|
|
|
— |
|
Corporate |
|
(13 |
) |
|
|
(15 |
) |
|
|
(14 |
) |
Operating income (loss) |
$ |
17 |
|
|
$ |
16 |
|
|
$ |
(16 |
) |
High Purity Cellulose
Net sales for the quarter increased
Operating income for the quarter increased
Compared to the fourth quarter of 2022, operating income increased
Paperboard
Net sales for the quarter increased
Operating income for the quarter increased
Compared to the fourth quarter of 2022, operating income increased
High-Yield Pulp
Net sales for the quarter increased
Operating income for the quarter increased
Operating income decreased
Corporate
Compared to the first quarter of 2022, the operating loss decreased
Non-Operating Expenses
Included in non-operating expenses in the first quarter of 2023 was a
Included in non-operating expenses in the first quarter of 2022 was a
Income Taxes
The effective tax rate for the first quarter of 2023 is not meaningful due to near break-even pretax income for the period, which results in any discrete tax adjustments significantly impacting the rate. The largest adjustments creating a difference between the effective tax rate and the statutory rate of 21 percent were an excess tax benefit on vested stock compensation and return-to-accrual adjustments related to previously filed tax returns.
The effective tax rate on the loss from continuing operations for the first quarter of 2022 was an expense of 6 percent. The 2022 effective tax rate differed from the federal statutory rate of 21 percent primarily due to disallowed interest deductions in the
Cash Flows & Liquidity
For the three months ended
For the three months ended
For the three months ended
The Company ended the quarter with
The next significant debt maturity for the Company is in
Market Assessment
This market assessment represents the Company’s best current estimate of its business segments’ future performance.
High Purity Cellulose
Demand for cellulose specialties remains mixed. Strength in acetate and certain other cellulose specialty end markets is offsetting softness in construction and food-related end markets. Average sales prices for cellulose specialties in 2023 are expected to be high single digit percent higher than average 2022 sales prices, while sales volumes are expected to decrease due to the softness in demand. Market demand for commodity products remains resilient but at lower prices than first quarter levels. Fluff sales prices are expected to decline versus 2022 levels, in line with industry forecasts. Viscose pulp sales prices have stabilized and are expected to increase slightly in the second half of the year. Commodity sales volumes are expected to increase as production and logistics constraints improve. Additional benefits from prior strategic capital investments are expected throughout the year. Certain raw material and energy prices have come off the 2022 highs, but are expected to remain significantly elevated versus pre-COVID pandemic levels. The Company experienced a slower than anticipated return to production after the annual maintenance outage of its Tartas facility, which has been completed but is expected to impact the second quarter, but overall production is anticipated to be made up in the balance of the year. Additionally in the second quarter, annual maintenance outages will be executed at the Company’s two largest facilities in Jesup and Temiscaming.
Paperboard
Paperboard prices are expected to moderate slightly over the balance of the year but remain elevated from 2022 levels, while sales volumes are expected to remain steady. Raw material prices are expected to reduce as pulp markets decline.
High-Yield Pulp
High-yield pulp markets have declined as global economic demand slows and new capacity ramps up, impacting sales price. Prices are expected to decline in 2023, in line with industry forecasts for the global paper pulp market. Sales volumes are expected to improve slightly in 2023, primarily due to improved logistics and production reliability.
2023 Guidance
Overall, income (loss) from continuing operations is expected to be between
A Sustainable Future
The Company continues to focus on growing its bio-based product offering and expects to grow its sales of bioelectricity and lignosulfonates and increase overall margins over time.
The Company’s bioethanol facility at its Tartas,
“RYAM is well positioned to meet the demands of a more sustainable world. We have the right team and assets in place to develop innovative solutions that meet our customers' needs while running our operations in a safe and reliable way. Our improved operations and strengthened balance sheet position the Company to make disciplined strategic capital allocation decisions that create value for our shareholders,” concluded
Conference Call Information
RYAM will host a conference call and live webcast at
Investors may listen to the conference call by dialing 877-407-8293, no passcode required. For international parties, dial 201-689-8349. A replay of the teleconference will be available one hour after the call ends until
About RYAM
RYAM is a global leader of cellulose-based technologies, including high purity cellulose specialties, a natural polymer commonly used in the production of filters, food, pharmaceuticals and other industrial applications. The Company also manufactures products for paper and packaging markets. With manufacturing operations in the
Forward-Looking Statements
Certain statements in this document regarding anticipated financial, business, legal or other outcomes including business and market conditions, outlook and other similar statements relating to RYAM’s future events, developments, or financial or operational performance or results, are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are identified by the use of words such as “may,” “will,” “should,” “expect,” “estimate,” “believe,” “intend,” “forecast,” “anticipate,” “guidance,” and other similar language. However, the absence of these or similar words or expressions does not mean a statement is not forward-looking. While we believe these forward-looking statements are reasonable when made, forward-looking 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 these expectations will be attained and it is possible actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties. All statements made in this earnings release are made only as of the date set forth at the beginning of this release. The Company undertakes no obligation to update the information made in this release in the event facts or circumstances subsequently change after the date of this release. The Company has not filed its Form 10-Q for the quarter ended
The Company’s operations are subject to a number of risks and uncertainties including, but not limited to, those listed below. When considering an investment in the Company’s securities, you should carefully read and consider these risks, together with all other information in the Company’s Annual Report on Form 10-K and other filings and submissions to the
Other important factors that could cause actual results or events to differ materially from those expressed in forward-looking statements that may have been made in this document are described or will be described in the Company’s filings with the
Non-GAAP Financial Measures
This earnings release and the accompanying schedules contain certain non-GAAP financial measures, including EBITDA, adjusted EBITDA, adjusted free cash flows, adjusted income from continuing operations and adjusted net debt. The Company believes these non-GAAP financial measures provide useful information to its Board of Directors, management and investors regarding its financial condition and results of operations. Management uses these non-GAAP financial measures to compare its performance to that of prior periods for trend analyses, to determine management incentive compensation and for budgeting, forecasting and planning purposes.
The Company does not consider these 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 the consolidated financial statements. In addition, they reflect the exercise of management’s judgment about which expense and income items are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, reconciliations of the non-GAAP financial measures to their most directly comparable GAAP 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 financial condition, results of operations or future prospects of the Company.
Condensed Consolidated Statements of Operations (Unaudited) (in millions, except share and per share information)
|
|||||||||||
|
Three Months Ended |
||||||||||
|
|
|
|
|
|
||||||
Net sales |
$ |
467 |
|
|
$ |
500 |
|
|
$ |
352 |
|
Cost of sales |
|
(430 |
) |
|
|
(456 |
) |
|
|
(346 |
) |
Gross margin |
|
37 |
|
|
|
44 |
|
|
|
6 |
|
Selling, general and administrative expenses |
|
(19 |
) |
|
|
(23 |
) |
|
|
(20 |
) |
Other operating expense, net |
|
(1 |
) |
|
|
(5 |
) |
|
|
(2 |
) |
Operating income (loss) |
|
17 |
|
|
|
16 |
|
|
|
(16 |
) |
Interest expense |
|
(15 |
) |
|
|
(17 |
) |
|
|
(16 |
) |
Unrealized gain on GreenFirst equity securities |
|
— |
|
|
|
— |
|
|
|
9 |
|
Other income (expense), net |
|
(2 |
) |
|
|
3 |
|
|
|
— |
|
Income (loss) from continuing operations before income taxes |
|
— |
|
|
|
2 |
|
|
|
(23 |
) |
Income tax (expense) benefit |
|
3 |
|
|
|
2 |
|
|
|
(1 |
) |
Equity in loss of equity method investment |
|
(1 |
) |
|
|
— |
|
|
|
— |
|
Income (loss) from continuing operations |
|
2 |
|
|
|
4 |
|
|
|
(24 |
) |
Loss from discontinued operations, net of taxes |
|
— |
|
|
|
— |
|
|
|
(1 |
) |
Net income (loss) |
$ |
2 |
|
|
$ |
4 |
|
|
$ |
(25 |
) |
|
|
|
|
|
|
||||||
Basic earnings per common share |
|
|
|
|
|||||||
Income (loss) from continuing operations |
$ |
0.02 |
|
|
$ |
0.06 |
|
|
$ |
(0.38 |
) |
Loss from discontinued operations |
|
— |
|
|
|
— |
|
|
|
(0.01 |
) |
Net income (loss) per common share-basic |
$ |
0.02 |
|
|
$ |
0.06 |
|
|
$ |
(0.39 |
) |
|
|
|
|
|
|
||||||
Diluted earnings per common share |
|
|
|
|
|||||||
Income (loss) from continuing operations |
$ |
0.02 |
|
|
$ |
0.05 |
|
|
$ |
(0.38 |
) |
Loss from discontinued operations |
|
— |
|
|
|
— |
|
|
|
(0.01 |
) |
Net income (loss) per common share-diluted |
$ |
0.02 |
|
|
$ |
0.05 |
|
|
$ |
(0.39 |
) |
|
|
|
|
|
|
||||||
Shares used in determining EPS |
|
|
|
|
|
||||||
Basic EPS |
|
64,504,200 |
|
|
|
63,983,818 |
|
|
|
63,771,484 |
|
Diluted EPS |
|
66,596,653 |
|
|
|
66,213,467 |
|
|
|
63,771,484 |
|
Condensed Consolidated Balance Sheets (Unaudited) (in millions)
|
|||||||
|
|
|
|
||||
Assets |
|
|
|
||||
Cash and cash equivalents |
$ |
169 |
|
$ |
152 |
||
Other current assets |
|
493 |
|
|
|
538 |
|
Property, plant and equipment, net |
|
1,144 |
|
|
|
1,151 |
|
Other assets |
|
504 |
|
|
|
507 |
|
Total assets |
$ |
2,310 |
|
|
$ |
2,348 |
|
|
|
|
|
||||
Liabilities and Stockholders’ Equity |
|
|
|
||||
Debt due within one year |
$ |
14 |
|
|
$ |
14 |
|
Other current liabilities |
|
307 |
|
|
|
340 |
|
Long-term debt |
|
832 |
|
|
|
839 |
|
Non-current environmental liabilities |
|
159 |
|
|
|
160 |
|
Other liabilities |
|
167 |
|
|
|
166 |
|
Total stockholders’ equity |
|
831 |
|
|
|
829 |
|
Total liabilities and stockholders’ equity |
$ |
2,310 |
|
|
$ |
2,348 |
|
Condensed Consolidated Statements of Cash Flows (Unaudited) (in millions)
|
|||||||
|
Three Months Ended |
||||||
|
|
|
|
||||
Operating Activities |
|
|
|
||||
Net income (loss) |
$ |
2 |
|
|
$ |
(25 |
) |
Adjustments to reconcile net income (loss) to cash provided by operating activities: |
|
|
|
||||
Depreciation and amortization |
|
35 |
|
|
|
27 |
|
Other |
|
5 |
|
|
|
(1 |
) |
Changes in working capital and other assets and liabilities |
|
9 |
|
|
|
(24 |
) |
Cash provided by (used in) operating activities-continuing operations |
|
51 |
|
|
|
(23 |
) |
Cash used in operating activities-discontinued operations |
|
— |
|
|
|
(1 |
) |
Cash provided by (used in) operating activities |
|
51 |
|
|
|
(24 |
) |
|
|
|
|
||||
Investing Activities |
|
|
|
||||
Capital expenditures, net |
|
(21 |
) |
|
|
(45 |
) |
Cash used in investing activities |
|
(21 |
) |
|
|
(45 |
) |
|
|
|
|
||||
Financing Activities |
|
|
|
||||
Changes in debt |
|
(9 |
) |
|
|
(4 |
) |
Other |
|
(5 |
) |
|
|
— |
|
Cash used in financing activities |
|
(14 |
) |
|
|
(4 |
) |
|
|
|
|
||||
Change in cash and cash equivalents |
|
16 |
|
|
|
(73 |
) |
Net effect of foreign exchange on cash and cash equivalents |
|
1 |
|
|
|
(1 |
) |
Balance, beginning of period |
|
152 |
|
|
|
253 |
|
Balance, end of period |
$ |
169 |
|
|
$ |
179 |
|
Sales Volumes and Average Prices (Unaudited)
|
|||||||||||
|
Three Months Ended |
||||||||||
|
|
|
|
|
|
||||||
Average Sales Prices ($ per metric ton) |
|||||||||||
High Purity Cellulose |
$ |
1,322 |
|
$ |
1,331 |
|
$ |
1,222 |
|||
Paperboard |
$ |
1,568 |
|
|
$ |
1,557 |
|
|
$ |
1,326 |
|
High-Yield Pulp (external sales) |
$ |
769 |
|
|
$ |
802 |
|
|
$ |
555 |
|
|
|
|
|
|
|
||||||
Sales Volumes (thousands of metric tons) |
|||||||||||
High Purity Cellulose |
|
265 |
|
|
|
265 |
|
|
|
208 |
|
Paperboard |
|
38 |
|
|
|
43 |
|
|
|
41 |
|
High-Yield Pulp (external sales) |
|
43 |
|
|
|
61 |
|
|
|
30 |
|
Reconciliation of Non-GAAP Measures (Unaudited) (in millions)
EBITDA and Adjusted EBITDA by Segment(a)
|
|||||||||||||||||||
|
Three Months Ended |
||||||||||||||||||
High Purity
|
|
Paperboard |
|
High-Yield
|
|
Corporate |
|
Total |
|||||||||||
Income (loss) from continuing operations |
$ |
13 |
|
|
$ |
10 |
|
$ |
7 |
|
$ |
(28 |
) |
|
$ |
2 |
|
||
Depreciation and amortization |
|
31 |
|
|
|
3 |
|
|
|
1 |
|
|
|
— |
|
|
|
35 |
|
Interest expense, net |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15 |
|
|
|
15 |
|
Income tax benefit |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3 |
) |
|
|
(3 |
) |
EBITDA-continuing operations |
|
44 |
|
|
|
13 |
|
|
|
8 |
|
|
|
(16 |
) |
|
|
49 |
|
Pension settlement loss |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
2 |
|
Adjusted EBITDA-continuing operations |
$ |
44 |
|
|
$ |
13 |
|
|
$ |
8 |
|
|
$ |
(14 |
) |
|
$ |
51 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Three Months Ended |
||||||||||||||||||
|
High Purity
|
|
Paperboard |
|
High-Yield
|
|
Corporate |
|
Total |
||||||||||
Income (loss) from continuing operations |
$ |
11 |
|
|
$ |
10 |
|
|
$ |
12 |
|
|
$ |
(29 |
) |
|
$ |
4 |
|
Depreciation and amortization |
|
34 |
|
|
|
4 |
|
|
|
1 |
|
|
|
— |
|
|
|
39 |
|
Interest expense, net |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15 |
|
|
|
15 |
|
Income tax benefit |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2 |
) |
|
|
(2 |
) |
EBITDA-continuing operations |
|
45 |
|
|
|
14 |
|
|
|
13 |
|
|
|
(16 |
) |
|
|
56 |
|
Gain on debt extinguishment |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
(1 |
) |
Adjusted EBITDA-continuing operations |
$ |
45 |
|
|
$ |
14 |
|
|
$ |
13 |
|
|
$ |
(17 |
) |
|
$ |
55 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Three Months Ended |
||||||||||||||||||
|
High Purity
|
|
Paperboard |
|
High-Yield
|
|
Corporate |
|
Total |
||||||||||
Income (loss) from continuing operations |
$ |
(7 |
) |
|
$ |
6 |
|
|
$ |
— |
|
|
$ |
(23 |
) |
|
$ |
(24 |
) |
Depreciation and amortization |
|
23 |
|
|
|
4 |
|
|
|
— |
|
|
|
— |
|
|
|
27 |
|
Interest expense, net |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
16 |
|
|
|
16 |
|
Income tax expense |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
1 |
|
EBITDA and Adjusted EBITDA-continuing operations |
$ |
16 |
|
|
$ |
10 |
|
|
$ |
— |
|
|
$ |
(6 |
) |
|
$ |
20 |
|
|
|
|
|
|
|
|
|
|
|
___________________________________ | |
(a) |
EBITDA-continuing operations is defined as income (loss) from continuing operations before interest, taxes, depreciation and amortization. Adjusted EBITDA-continuing operations is defined as EBITDA-continuing operations adjusted for the settlement of certain pension plans and other items. EBITDA and Adjusted EBITDA are non-GAAP measures used by Management, existing stockholders and potential stockholders to measure how the Company is performing relative to the assets under management. |
|
Annual |
||||||
|
2023 |
||||||
|
Low |
|
High |
||||
Income (loss) from continuing operations |
$ |
(8 |
) |
|
$ |
12 |
|
Depreciation and amortization |
|
135 |
|
|
|
135 |
|
Interest expense, net(a) |
|
70 |
|
|
|
65 |
|
Income tax expense(b) |
|
3 |
|
|
|
3 |
|
EBITDA and Adjusted EBITDA-continuing operations |
$ |
200 |
|
|
$ |
215 |
|
___________________________________ | |
(a) |
Dependent on timing and cost of refinancing. |
(b) |
Estimated using the statutory rates of each jurisdiction and ignoring all permanent book-to-tax differences. |
Reconciliation of Non-GAAP Measures (Continued) (Unaudited) (in millions, except per share information)
Adjusted Free Cash Flows - Continuing Operations(a)
|
|||||||
|
Three Months Ended |
||||||
|
|
|
|
||||
Cash provided by (used in) operating activities-continuing operations |
$ |
51 |
|
|
$ |
(23 |
) |
Capital expenditures, net |
|
(15 |
) |
|
|
(36 |
) |
Adjusted free cash flows-continuing operations |
$ |
36 |
|
|
$ |
(59 |
) |
|
Annual |
||||||
|
2023 |
||||||
|
Low |
|
High |
||||
Cash provided by operating activities-continuing operations |
$ |
145 |
|
|
$ |
165 |
|
Capital expenditures, net |
|
(105 |
) |
|
|
(100 |
) |
Adjusted free cash flows-continuing operations |
$ |
40 |
|
|
$ |
65 |
|
___________________________________ | |
(a) |
Adjusted free cash flows-continuing operations is defined as cash provided by (used in) operating activities-continuing operations adjusted for capital expenditures, net of proceeds from the sale of assets and excluding strategic capital. Adjusted free cash flows is a non-GAAP measure of cash generated during a period which is available for dividend distribution, debt reduction, strategic acquisitions and repurchase of the Company’s common stock. |
Reconciliation of Non-GAAP Measures (Continued) (Unaudited) (in millions, except per share information)
Adjusted Net Debt(a)
|
|||||||
|
|
|
|
||||
Debt due within one year |
$ |
14 |
|
|
$ |
14 |
|
Long-term debt |
|
832 |
|
|
|
839 |
|
Total debt |
|
846 |
|
|
|
853 |
|
Unamortized debt premium, discount and issuance costs |
|
6 |
|
|
|
6 |
|
Cash and cash equivalents |
|
(169 |
) |
|
|
(152 |
) |
Adjusted net debt |
$ |
683 |
|
|
$ |
707 |
|
___________________________________ | |
(a) |
Adjusted net debt is defined as the amount of debt after the consideration of debt premium, discount and issuance costs, less cash. |
Adjusted Income (Loss) from Continuing Operations(a)
|
|||||||||||||||||||||||
|
Three Months Ended |
||||||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||||
|
$ |
|
Per
|
|
$ |
|
Per
|
|
$ |
|
Per
|
||||||||||||
Income (loss) from continuing operations |
$ |
2 |
|
$ |
0.02 |
|
$ |
4 |
|
|
$ |
0.05 |
|
|
$ |
(24 |
) |
|
$ |
(0.38 |
) |
||
Pension settlement loss |
|
2 |
|
|
|
0.03 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Gain on debt extinguishment |
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
(0.01 |
) |
|
|
— |
|
|
|
— |
|
Tax effect of adjustments |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Adjusted income (loss) from continuing operations |
$ |
4 |
|
|
$ |
0.05 |
|
|
$ |
3 |
|
|
$ |
0.04 |
|
|
$ |
(24 |
) |
|
$ |
(0.38 |
) |
___________________________________ | |
(a) |
Adjusted income (loss) from continuing operations is defined as income (loss) from continuing operations adjusted net of tax for the settlement of certain pension plans, gain on debt extinguishment and other items. |
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