Jul 30, 2014 8:00 AM
On
“With the spin-off completed, we will now focus our attention on pursuing long-term growth opportunities, expanding our specialty chemical business, and increasing shareholder value,” said Paul G. Boynton, Chairman, President and CEO.
Financial Summary
The following table summarizes the second quarter and year-to-date results for 2014 and 2013, respectively:
(millions of dollars, except earnings per share) | 2Q14 | 2Q13 | 2Q14 YTD | 2Q13 YTD | ||||||||||||||||||||||||||||
$ | Per Diluted Share | $ | Per Diluted Share | $ | Per Diluted Share | $ | Per Diluted Share | |||||||||||||||||||||||||
Net income | $ | 5 | $ | 0.11 | $ | 49 | $ | 1.16 | $ | 36 | $ | 0.84 | $ | 129 | $ | 3.06 | ||||||||||||||||
One time separation & legal costs, net | 25 | 0.59 | 2 | 0.05 | 27 | 0.64 | 2 | 0.05 | ||||||||||||||||||||||||
Reversal of reserve related to the taxability of the CBPC | (5 | ) | (0.11 | ) | — | — | (5 | ) | (0.11 | ) | — | — | ||||||||||||||||||||
Tax benefit due to exchange of AFMC for CBPC | — | — | — | — | — | — | (19 | ) | (0.45 | ) | ||||||||||||||||||||||
Pro forma net income | $ | 25 | $ | 0.59 | $ | 51 | $ | 1.21 | $ | 58 | $ | 1.37 | $ | 112 | $ | 2.66 | ||||||||||||||||
EBITDA | $ | 24 | $ | 85 | $ | 88 | $ | 188 | ||||||||||||||||||||||||
One time separation & legal costs | 36 | 3 | 39 | 3 | ||||||||||||||||||||||||||||
Pro forma EBITDA | $ | 60 | $ | 88 | $ | 127 | $ | 191 |
Second quarter and year-to-date 2014 sales of
Capital Structure
On
Outlook
Committed cellulose specialties sales volumes for 2014 remain consistent with 2013, despite the previously announced loss of volume from a 2013 customer. The Company continues to seek the previously targeted 30,000 tons of incremental cellulose specialties volumes, but intends to feather this into the market only as it is ready to be absorbed. Additionally, through the first half of 2014, costs have exceeded budgeted projections and will likely remain somewhat elevated through the remainder of the year. The higher costs and continued inability to place the incremental tons will cause the Company to be approximately 25 percent below 2013 segment EBITDA, or 10 percentage points below the previous guidance.
"As the market remains in transition, we will continue to focus on operational excellence and build stronger partnerships with our customers. Going forward, as the market grows, our newly converted line positions us well to grow with future demand and diversify without additional investment," stated Boynton.
Note Regarding Use of Non-GAAP Financial Measures
In this earnings release, the Company presents certain non-GAAP financial information, including pro forma net income, pro forma operating income, pro forma diluted net income per share, EBITDA and pro forma EBITDA. Because these amounts are not in accordance with GAAP, reconciliations to amounts in accordance with GAAP are included in schedules at the end of this earnings release. The Company presents these non-GAAP amounts because management believes they assist investors and analysts in comparing the Company’s performance across reporting periods on a consistent basis by excluding items that the Company does not believe are indicative of its core operating performance.
Further Information
A conference call will be held on
About
Forward-Looking Statements
Certain statements in this document regarding anticipated financial,
legal or other outcomes including business and market conditions,
outlook and other similar statements relating to Rayonier Advanced
Material’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,”
"anticipate" 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 that 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 that 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. Such risks and uncertainties include, but are not
limited to, competitive pressures in the markets in which we operate;
risks associated with customer concentration, raw material and energy
prices; risks associated with international operations; changes in
global economic conditions; the Chinese dumping duties imposed on
commodity viscose; litigation with the Altamaha Riverkeeper relating to
our permitted
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
CONDENSED STATEMENTS OF CONSOLIDATED INCOME June 28, 2014 (unaudited) (millions of dollars, except per share information) |
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Three Months Ended | Six Months Ended | |||||||||||||||||||||
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2014 | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||||
NET SALES | ||||||||||||||||||||||
Cellulose specialties | 200.7 | 206.4 | 233.1 | 407.1 | 480.0 | |||||||||||||||||
Absorbent materials | 0.2 | 10.2 | 19.9 | 10.4 | 57.2 | |||||||||||||||||
Commodity viscose and other | 11.6 | 26.9 | 1.2 | 38.5 | 2.2 | |||||||||||||||||
Total net sales | $ | 212.5 | $ | 243.5 | $ | 254.2 | $ | 456.0 | $ | 539.4 | ||||||||||||
COST OF SALES | 160.2 | 188.7 | 169.8 | 348.9 | 357.7 | |||||||||||||||||
GROSS MARGIN | 52.3 | 54.8 | 84.4 | 107.1 | 181.7 | |||||||||||||||||
Selling and general expenses | 9.0 | 8.2 | 9.1 | 17.2 | 18.7 | |||||||||||||||||
Other operating expense (a) | 37.1 | 3.2 | 3.7 | 40.3 | 4.0 | |||||||||||||||||
OPERATING INCOME | 6.2 | 43.4 | 71.6 | 49.6 | 159.0 | |||||||||||||||||
Interest expense | (3.2 | ) | — | — | (3.3 | ) | — | |||||||||||||||
INCOME BEFORE INCOME TAXES | 3.0 | 43.4 | 71.6 | 46.3 | 159.0 | |||||||||||||||||
Income tax benefit (expense) (b) | 1.6 | (12.4 | ) | (22.6 | ) | (10.8 | ) | (30.0 | ) | |||||||||||||
NET INCOME | 4.6 | 31.0 | 49.0 | 35.5 | 129.0 | |||||||||||||||||
EARNINGS PER COMMON SHARE | ||||||||||||||||||||||
BASIC EARNINGS PER SHARE | $ | 0.11 | $ | 0.73 | $ | 1.16 | $ | 0.84 | $ | 3.06 | ||||||||||||
DILUTED EARNINGS PER SHARE | $ | 0.11 | $ | 0.73 | $ | 1.16 | $ | 0.84 | $ | 3.06 | ||||||||||||
Pro forma net income per share (c) | $ | 0.59 | $ | 0.78 | $ | 1.21 | $ | 1.37 | $ | 2.66 | ||||||||||||
Weighted Average Common | ||||||||||||||||||||||
Shares used for determining (d) | ||||||||||||||||||||||
Basic EPS | 42,176,565 | 42,176,565 | 42,176,565 | 42,176,565 | 42,176,565 | |||||||||||||||||
Diluted EPS | 42,178,462 | 42,176,565 | 42,176,565 | 42,177,503 | 42,176,565 | |||||||||||||||||
(a) |
Other expenses primarily consist of one-time separation and legal costs. |
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(b) |
Income tax expense for the three and six months ended |
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(c) |
Pro forma net income per share is a non-GAAP measure. See Schedule C for a reconciliation to the nearest GAAP measure. |
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(d) |
On |
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A |
CONDENSED CONSOLIDATED BALANCE SHEETS June 28, 2014 (unaudited) (millions of dollars) |
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2014 | 2013 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 19.6 | $ | — | |||
Other current assets | 245.3 | 246.1 | |||||
Property, plant and equipment, net | 857.6 | 846.3 | |||||
Other assets | 102.5 | 27.9 | |||||
$ | 1,225.0 | $ | 1,120.3 | ||||
Liabilities and Stockholders' (Deficit) Equity | |||||||
Current maturities of long-term debt | $ | 8.4 | $ | — | |||
Other current liabilities | 120.2 | 79.8 | |||||
Long-term debt | 940.5 | — | |||||
Non-current liabilities for disposed operations | 84.9 | — | |||||
Other non-current liabilities | 109.8 | 72.2 | |||||
Total stockholders' (deficit) equity | (38.8 | ) | 968.3 | ||||
$ | 1,225.0 | $ | 1,120.3 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS June 28, 2014 (unaudited) (millions of dollars) |
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Six Months Ended | ||||||||
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Cash provided by operating activities: | ||||||||
Net income | $ | 35.5 | $ | 129.0 | ||||
Depreciation and amortization | 38.2 | 28.8 | ||||||
Other items to reconcile net income to cash provided by operating activities | 30.4 | (46.5 | ) | |||||
Changes in working capital and other assets and liabilities | (1.1 | ) | 4.9 | |||||
103.0 | 116.2 | |||||||
Cash used for investing activities: | ||||||||
Capital expenditures | (50.7 | ) | (70.2 | ) | ||||
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— | (100.2 | ) | |||||
Other | (13.2 | ) | 18.9 | |||||
(63.9 | ) | (151.5 | ) | |||||
Cash (used for) provided by financing activities: | ||||||||
Changes in debt, net of issuance costs | 937.1 | — | ||||||
Net payments from (to) Parent | (956.6 | ) | 35.3 | |||||
(19.5 | ) | 35.3 | ||||||
Cash and cash equivalents: | ||||||||
Change in cash and cash equivalents | 19.6 | — | ||||||
Balance, beginning of year | — | — | ||||||
Balance, end of period | $ | 19.6 | $ | — | ||||
B |
RECONCILIATION OF NON-GAAP MEASURES June 28, 2014 (unaudited) (millions of dollars except per share information) |
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EBITDA (a): | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
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Net income | $ | 4.6 | $ | 49.0 | $ | 35.5 | $ | 129.0 | |||||||
Depreciation and amortization | 17.5 | 13.7 | 38.2 | 28.8 | |||||||||||
Interest, net | 3.2 | — | 3.3 | — | |||||||||||
Income tax (benefit) expense | (1.6 | ) | 22.6 | 10.8 | 30.0 | ||||||||||
EBITDA | $ | 23.7 | $ | 85.3 | $ | 87.8 | $ | 187.8 | |||||||
One-time separation and legal costs | 36.3 | 3.0 | 39.1 | 3.0 | |||||||||||
Pro forma EBITDA | $ | 60.0 | $ | 88.3 | $ | 126.9 | $ | 190.8 |
ADJUSTED FREE CASH FLOW (b): | ||||||||
Six Months Ended | ||||||||
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Cash provided by operating activities | $ | 103.0 | $ | 116.2 | ||||
Capital expenditures (c) | (50.7 | ) | (70.2 | ) | ||||
Tax benefit due to exchange of AFMC for CBPC | — | (19.0 | ) | |||||
Adjusted Free Cash Flow | $ | 52.3 | $ | 27.0 |
PRO FORMA OPERATING INCOME AND NET INCOME (d): | |||||||||||||||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||||||||
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$ | Per Diluted Share | $ | Per Diluted Share | $ | Per Diluted Share | $ | Per Diluted Share | $ | Per Diluted Share | ||||||||||||||||||||||||||||||||
Operating income | $ | 6.2 | $ | 43.4 | $ | 71.6 | $ | 49.6 | $ | 159.0 | |||||||||||||||||||||||||||||||
One-time separation and legal costs | 36.3 | 2.8 | 3.0 | 39.1 | 3.0 | ||||||||||||||||||||||||||||||||||||
Pro forma operating income | $ | 42.5 | $ | 46.2 | $ | 74.6 | $ | 88.7 | $ | 162.0 | |||||||||||||||||||||||||||||||
Net income | $ | 4.6 | $ | 0.11 | $ | 31.0 | $ | 0.73 | $ | 49.0 | $ | 1.16 | $ | 35.5 | $ | 0.84 | $ | 129.0 | $ | 3.06 | |||||||||||||||||||||
One-time separation and legal costs, net of tax | 25.0 | 0.59 | 2.0 | 0.05 | 1.9 | 0.05 | 27.0 | 0.64 | 1.9 | 0.05 | |||||||||||||||||||||||||||||||
Reversal of reserve related to the taxability of the CBPC | (4.8 | ) | (0.11 | ) | — | — | — | — | (4.8 | ) | (0.11 | ) | — | — | |||||||||||||||||||||||||||
Tax benefit due to exchange of AFMC for CBPC | — | — | — | — | — | — | — | — | (19.0 | ) | (0.45 | ) | |||||||||||||||||||||||||||||
Pro forma net income | $ | 24.8 | $ | 0.59 | $ | 33.0 | $ | 0.78 | $ | 50.9 | $ | 1.21 | $ | 57.7 | $ | 1.37 | $ | 111.9 | $ | 2.66 | |||||||||||||||||||||
(a) |
Earnings before Interest, Taxes, Depreciation and Amortization
("EBITDA") is defined by the |
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(b) |
Adjusted Free Cash Flow is defined as cash provided by operating activities adjusted for capital expenditures excluding strategic capital and subsequent tax benefits to exchange the AFMC for the CBPC. Adjusted Free Cash Flow is a non-GAAP measure of cash generated during a period that is available for dividend distribution, repurchase of the Company's common stock, debt reduction and strategic acquisitions. Adjusted Free Cash Flow is not necessarily indicative of the Adjusted Free Cash Flow that may be generated in future periods. |
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(c) |
Capital expenditures exclude strategic capital. For the six months
ended June 28, 2014, strategic capital totaled |
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(d) |
Pro Forma Operating Income is defined as operating income adjusted for one-time separation and legal costs. Pro Forma Net Income is defined as net income adjusted for one-time separation and legal costs, net of tax, and for tax benefits from the reversal of reserve related to the taxability of the CBPC and the subsequent tax benefits to exchange the AFMC for the CBPC. |
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C |
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