Jan 30, 2017 5:29 PM
Fourth quarter 2016 net income of
“Our employees’ execution against our 2016 objectives delivered
impressive financial and operational results,” said
Fourth Quarter and Year-to-Date Operating Results
Full year 2016 sales were
Net sales of
Full year 2016 operating income was
During 2016, the Company realized approximately
Interest and Other Expense, Net
Interest expense, net of interest income and other expense, was
Income Tax Expense
The year-to-date effective tax rate was 34.9%, compared to 33.3% during the prior year period. The prior year period reflects the increased impact of the benefit of domestic manufacturing tax deduction and state tax credits as a result of lower pre-tax income.
Cash Flows and Liquidity
The Company generated operating cash flows of
Outlook
Cellulose specialties markets are mixed as demand for acetate products
remains suppressed. Ethers and other cellulose specialties markets are
improving providing opportunities for volume growth. Overall, cellulose
specialties markets continue to be impacted by foreign competitors
benefiting from weak global currencies relative to the U. S. dollar.
Given these market conditions, we have expanded our presence in
non-acetate products, although at lower prices than acetate. We expect
2017 cellulose specialties prices to decline 3 to 4 percent reflecting a
shift in our cellulose specialties mix as well as previously disclosed
lower acetate prices. Cellulose specialties sales volumes are expected
to be relatively flat compared to 2016. We expect
“We remain focused on transforming our business to materially improve our competitive position and profitability to drive long-term stockholder value,” Boynton concluded. “Our strategy going forward centers on four key initiatives: lowering our cost position through the Cost Transformation initiative, maximizing the value of our product offerings through Market Optimization, producing innovative New Products and pursuing value-enhancing Acquisitions.”
Conference Call Information
About
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 Rayonier Advanced Materials’ 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 that 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.
Such risks and uncertainties include, but are not limited to: competitive pressures in the markets in which we operate, especially with respect to increases in supply and pressures on demand for our products, which impact pricing; our ability to complete our announced cost and debt reduction initiatives and objectives within the planned parameters and achieve the anticipated benefits; our customer concentration, especially with our three largest customers; changes in global economic conditions, including currency; the Chinese dumping duties currently in effect for commodity viscose pulps; potential legal, regulatory and similar challenges relating to our permitted air emissions and waste water discharges from our facilities by non-governmental groups and individuals; the effect of current and future environmental laws and regulations as well as changes in circumstances on the cost and estimated future cost of required environmental expenditures; the potential impact of future tobacco-related restrictions; potential for additional pension contributions; labor relations with the unions representing our hourly employees; the effect of weather and other natural conditions; changes in transportation-related costs and availability; the failure to attract and retain key personnel; the failure to innovate to maintain our competitiveness, grow our business and protect our intellectual property; uncertainties related to the availability of additional financing to us in the future and the terms of such financing; our inability to make or effectively integrate future acquisitions and engage in certain other corporate transactions; any failure to realize expected benefits from our separation from Rayonier Inc.; financial and other obligations under agreements relating to our debt; and uncertainties relating to general economic, political, and regulatory conditions.
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 our filings with the
Non-GAAP Financial Measures
This earnings release and the accompanying schedules contain certain non-GAAP financial measures, including EBITDA, adjusted free cash flows, pro forma operating income, pro forma net income, pro forma EBITDA and adjusted net debt. These non-GAAP measures are reconciled to each of their respective most directly comparable GAAP financial measures on Schedules C - E of this earnings release.
We believe these non-GAAP measures provide useful information to our board of directors, management and investors regarding certain trends relating to our financial condition and results of operations. Our management uses these non-GAAP measures to compare our performance to that of prior periods for trend analyses, purposes of determining management incentive compensation and budgeting, forecasting and planning purposes.
We do not consider these non-GAAP measures an alternative to financial measures determined in accordance with GAAP. The principal limitations of these non-GAAP financial measures are that they may exclude significant expenses 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 expenses and income items are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, management provides reconciliations of the non-GAAP financial measures we use to their most directly comparable GAAP measures. Non-GAAP financial measures should not be relied upon, in whole or part, in evaluating the financial condition, results of operations or future prospects of the Company.
Condensed Consolidated Statements of Income
(millions of dollars, except per share information) |
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Three Months Ended | Twelve Months Ended | ||||||||||||||||||||
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2016 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||
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Cellulose specialties | $ | 182 | $ | 173 | $ | 190 | $ | 695 | $ | 767 | |||||||||||
Commodity products and other | 49 | 34 | 52 | 174 | 174 | ||||||||||||||||
Total |
231 | 207 | 242 | 869 | 941 | ||||||||||||||||
Cost of Sales | (189 | ) | (156 | ) | (192 | ) | (687 | ) | (739 | ) | |||||||||||
Gross Margin | 42 | 51 | 50 | 182 | 202 | ||||||||||||||||
Selling, general & administrative expenses | (12 | ) | (10 | ) | (14 | ) | (38 | ) | (48 | ) | |||||||||||
Other operating expense, net | (4 | ) | — | (7 | ) | (6 | ) | (34 | ) | (a) | |||||||||||
Operating Income | 26 | 41 | 29 | 138 | 120 | ||||||||||||||||
Interest and other expense, net | (9 | ) | (8 | ) | (9 | ) | (35 | ) | (37 | ) | |||||||||||
Gain on debt extinguishment | — | — | — | 9 | — |
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Income Before Income Taxes | 17 | 33 | 20 | 112 | 83 | ||||||||||||||||
Income tax expense | (6 | ) | (11 | ) | (7 | ) | (39 | ) | (28 | ) | |||||||||||
Net Income | $ | 11 | $ | 22 | $ | 13 | $ | 73 | $ | 55 | |||||||||||
Earnings Per Share of Common Stock | |||||||||||||||||||||
Basic earnings per share | $ | 0.19 | $ | 0.46 | $ | 0.30 | $ | 1.61 | $ | 1.31 | |||||||||||
Diluted earnings per share | $ | 0.18 | $ | 0.44 | $ | 0.30 | $ | 1.55 | $ | 1.30 | |||||||||||
Pro forma net income per share (b) | $ | 0.18 | $ | 0.44 | $ | 0.32 | $ | 1.43 | $ | 1.74 | |||||||||||
Shares Used for Determining | |||||||||||||||||||||
Basic EPS | 42,337,729 | 42,360,326 | 42,201,778 | 42,279,811 | 42,194,891 | ||||||||||||||||
Diluted EPS | 43,012,003 | 49,336,106 | 42,273,621 | 47,145,821 | 42,222,859 | ||||||||||||||||
(a) Other operating expense, net for the twelve months ended
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pre-tax, non-cash impairment charge associated with the Company’s strategic asset realignment at its | |||||||||||||||||||||
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(b) Pro forma net income per share is a non-GAAP measure. See Schedule D for a reconciliation to the nearest GAAP measure. |
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A |
Condensed Consolidated Balance Sheets
(millions of dollars) |
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2016 | 2015 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 326 | $ | 101 | ||||
Other current assets | 193 | 227 | ||||||
Property, plant and equipment, net | 801 | 804 | ||||||
Other assets | 102 | 147 | ||||||
$ | 1,422 | $ | 1,279 | |||||
Liabilities and Stockholders’ Equity | ||||||||
Current maturities of long-term debt | $ | 9 | $ | 8 | ||||
Other current liabilities | 117 | 124 | ||||||
Long-term debt and capital lease obligations | 774 | 850 | ||||||
Non-current liabilities for disposed operations | 139 | 145 | ||||||
Other non-current liabilities | 171 | 169 | ||||||
Total stockholders’ equity (deficit) | 212 | (17 | ) | |||||
$ | 1,422 | $ | 1,279 |
Condensed Consolidated Statements of Cash Flows
(millions of dollars) |
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Twelve Months Ended | ||||||||
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2016 | 2015 | |||||||
Cash Provided by Operating Activities: | ||||||||
Net income | $ | 73 | $ | 55 | ||||
Depreciation and amortization | 88 | 89 | ||||||
Increase in liabilities for disposed operations | 5 | 7 | ||||||
Non-cash impairment charge | — | 28 | ||||||
Other items to reconcile net income to cash provided by operating activities | 57 | 20 | ||||||
Changes in working capital and other assets and liabilities | 9 | 3 | ||||||
232 | 202 | |||||||
Cash Used for Investing Activities: | ||||||||
Capital expenditures | (89 | ) | (78 | ) | ||||
Other | 2 | — | ||||||
(87 | ) | (78 | ) | |||||
Cash Provided by (Used for) Financing Activities: | ||||||||
Issuance of mandatory convertible preferred stock, net | 167 | — | ||||||
Changes in debt | (71 | ) | (77 | ) | ||||
Dividends paid - common stock | (12 | ) | (12 | ) | ||||
Dividends paid - preferred stock | (4 | ) | — | |||||
80 | (89 | ) | ||||||
Cash and Cash Equivalents: | ||||||||
Change in cash and cash equivalents | 225 | 35 | ||||||
Balance, beginning of year | 101 | 66 | ||||||
Balance, end of period | $ | 326 | $ | 101 | ||||
B |
Reconciliation of Non-GAAP Measures
(millions of dollars) |
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Three Months Ended | Twelve Months Ended | |||||||||||||||
EBITDA (a): |
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2016 | 2015 | 2016 | 2015 | |||||||||||||
Net Income | $ | 11 | $ | 13 | $ | 73 | $ | 55 | ||||||||
Depreciation and amortization | 24 | 24 | 88 | 89 | ||||||||||||
Interest expense, net | 9 | 9 | 35 | 37 | ||||||||||||
Income tax expense | 6 | 7 | 39 | 28 | ||||||||||||
EBITDA | $ | 50 | $ | 53 | $ | 235 | $ | 209 | ||||||||
Non-cash impairment charge | — | — | — | 28 | ||||||||||||
One-time separation and legal costs | — | 1 | — | 2 | ||||||||||||
Insurance recovery | — | — | — | (1 | ) | |||||||||||
Gain on debt extinguishment | — | — | (9 | ) | — | |||||||||||
Pro Forma EBITDA | $ | 50 | $ | 54 | $ | 226 | $ | 238 | ||||||||
(a) Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) is defined by the | ||||||||||||||||
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one-time separation and legal costs, insurance recovery and gain on debt extinguishment. EBITDA and | ||||||||||||||||
pro forma EBITDA are not necessarily indicative of results that may be generated in future periods. |
Twelve Months Ended | ||||||||
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Adjusted Free Cash Flows (b): | 2016 | 2015 | ||||||
Cash provided by operating activities | $ | 232 | $ | 202 | ||||
Capital expenditures | (89 | ) | (78 | ) | ||||
Adjusted Free Cash Flows | $ | 143 | $ | 124 | ||||
(b) We define adjusted free cash flows as cash provided by operating activities adjusted for capital | ||||||||
expenditures 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 our common stock. Adjusted free cash flows is not necessarily | ||||||||
indicative of the adjusted free cash flows that may be generated in future periods. |
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Adjusted Net Debt (c): | 2016 | 2015 | ||||
Current maturities of long-term debt | 9 | 8 | ||||
Long-term debt & capital lease obligation | 774 | 850 | ||||
Total debt | 783 | 858 | ||||
Original issue discount and debt issuance costs | 9 | 11 | ||||
Cash and cash equivalents | (326 | ) | (101 | ) | ||
Adjusted net debt | 466 | 768 | ||||
(c) We define adjusted net debt as the amount of debt after the consideration of the original issue | ||||||
discount and debt issuance costs, less cash. Adjusted net debt is a non-GAAP measure of debt and | ||||||
is not necessarily indicative of the adjusted net debt that may occur in future periods. | ||||||
C |
Reconciliation of Non-GAAP Measures (Continued)
(millions of dollars, except per share information) |
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Three Months Ended | Twelve Months Ended | ||||||||||||||||||||||||||||||||||||||
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2016 | 2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||||||||||||||||
Pro Forma Operating Income and Net Income (a): | $ |
Per |
$ |
Per |
$ |
Per |
$ |
Per |
$ |
Per |
|||||||||||||||||||||||||||||
Operating Income | $ | 26 | $ | 41 | $ | 29 | $ | 138 | $ | 120 | |||||||||||||||||||||||||||||
Non-cash impairment charge | — | — | — | — | 28 | ||||||||||||||||||||||||||||||||||
One-time separation and legal costs | — | — | 1 | — | 2 | ||||||||||||||||||||||||||||||||||
Insurance recovery | — | — | — | — | (1 | ) | |||||||||||||||||||||||||||||||||
Pro Forma Operating | |||||||||||||||||||||||||||||||||||||||
Income | $ | 26 | $ | 41 | $ | 30 | $ | 138 | $ | 149 | |||||||||||||||||||||||||||||
Net Income | $ | 11 | $ | 0.18 | $ | 22 | $ | 0.44 | $ | 13 | $ | 0.30 | $ | 73 | $ | 1.55 | $ | 55 | $ | 1.30 | |||||||||||||||||||
Non-cash impairment charge | — | — |
|
— | — | — | — | — | — | 28 | 0.67 | ||||||||||||||||||||||||||||
One-time separation and legal costs | — | — | — | — | 1 |
0.02 |
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|
— | — | 2 | 0.04 | |||||||||||||||||||||||||||
Insurance recovery | — | — | — | — | — | — | — | — | (1 | ) | (0.02 |
) |
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Gain on debt extinguishment | — | — |
|
— | — | — |
— |
|
|
(9 |
) | (0.19 | ) |
|
— | — | |||||||||||||||||||||||
Tax effects of Pro Forma | |||||||||||||||||||||||||||||||||||||||
adjustments | — | — |
|
— | — |
— |
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|
3 |
0.07 | (11 | ) | (0.25 |
) |
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Pro Forma Net Income | $ | 11 | $ | 0.18 |
|
$ | 22 | $ | 0.44 |
|
$ | 14 | $ | 0.32 | $ | 67 | $ | 1.43 |
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$ | 73 | $ | 1.74 | ||||||||||||||||
(a) Pro forma operating income is defined as operating income adjusted for non-cash impairment, one-time | |||||||||||||||||||||||||||||||||||||||
separation and legal costs and insurance recovery. Pro forma net income is defined as net income adjusted | |||||||||||||||||||||||||||||||||||||||
net of tax for non-cash impairment, one-time separation and legal costs, insurance recovery and gain on | |||||||||||||||||||||||||||||||||||||||
debt extinguishment. Pro forma operating income and pro forma net income are not necessarily indicative of | |||||||||||||||||||||||||||||||||||||||
results that may be generated in future periods. |
Selected Financial and Operating Information
|
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Three Months Ended | Twelve Months Ended | ||||||||||||||
2016 |
2015 |
2016 |
2015 |
||||||||||||
Sales Volume, thousands of metric tons | |||||||||||||||
Cellulose specialties | 121 | 116 | 456 | 467 | |||||||||||
Commodity products | 70 | 73 | 249 | 247 | |||||||||||
Total | 191 | 189 | 705 | 714 | |||||||||||
Average Sales Price, $ per metric ton | |||||||||||||||
Cellulose specialties | $ | 1,505 | $ | 1,638 | $ | 1,525 | $ | 1,641 | |||||||
Commodity products | $ | 672 | $ | 670 | $ | 668 | $ | 671 | |||||||
D |
Reconciliation of Guided Non-GAAP Measures
(millions of dollars, except per share information)
The following schedules include non-GAAP measures related to management’s performance expectations for the future. While we believe these forward-looking statements are reasonable when made, they 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.
Our management uses these non-GAAP measures to compare our performance to that of prior periods for trend analyses, purposes of determining management incentive compensation and budgeting, forecasting and planning purposes; however, we do not consider these non-GAAP measures an alternative to financial measures determined in accordance with GAAP. As such, we provide reconciliations of the non-GAAP financial measures we use to their most directly comparable GAAP measures. Non-GAAP financial measures should not be relied upon, in whole or part, in evaluating the financial condition, results of operations or future prospects of the Company.
Minimum | Maximum | ||||||
2017 Net Income Guidance | $ | 41 | $ | 48 | |||
Income tax expense (a) | 27 | 30 | |||||
Interest expense, net | 37 | 37 | |||||
Depreciation and amortization | 85 | 85 | |||||
2017 EBITDA Guidance | 190 | 200 | |||||
(a) Income tax expense for the full year 2017 is based on an expected effective tax rate of approximately 35.5 percent.
Minimum | Maximum | |||||||
2017 Operating Cash Flows Guidance | $ | 140 | $ | 150 | ||||
Capital expenditures | (60 | ) | (60 | ) | ||||
2017 Adjusted Free Cash Flows Guidance | 80 | 90 | ||||||
E |
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