May 02, 2016 4:30 PM
"Our solid first quarter results are a testament to the great effort of
our employees to reduce costs, drive cash flow and invest wisely in our
business," said
First Quarter Operating Results
First quarter 2016 net sales were
For the first quarter of 2016, pro forma operating income was
Interest and Other Expense, Net
Interest expense, net of interest income and other expense, was
The Company recorded a pre-tax gain on the extinguishment of debt of
approximately
Income Tax Expense
The first quarter 2016 effective tax rate was 34.9 percent, compared to 28.2 percent the same period the prior year. 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 Flow and Liquidity
The Company generated
Outlook
Over the last seven months, the Company renegotiated cellulose specialties contracts with its three largest customers through 2018 and 2019. For 2016, the Company expects cellulose specialties prices to decline 6 to 7 percent and cellulose specialties sales volumes to decline 4 to 5 percent compared to 2015. Based on contractual commitments for the majority of the Company’s acetate volume, 2017 acetate pricing is expected to be approximately 2 percent below 2016.
Cellulose specialties markets continue to face a combination of industry
oversupply and weaker end-market demand which could impact the Company’s
prices and volumes in the future. In response to these market pressures,
the Company began a three-year transformation initiative to
significantly improve its cost structure and enhance cash flows. The
transformation initiative is targeting cost savings of
As a result of solid traction on its 2016 transformation cost savings
and benign inflationary pressure, the Company is raising its 2016
guidance for pro forma EBITDA by
"We remain steadfast in our strategy to permanently reduce our costs, invest in our assets and accelerate our innovation platform to drive value to shareholders. Our progress to date is encouraging and we are pleased to improve our full-year guidance," stated Boynton.
Conference Call Information
A conference call will be held on
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," "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, 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
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Condensed Consolidated Statements of Income | |||||||||||
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(millions of dollars, except per share information) | |||||||||||
Three Months Ended | |||||||||||
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2016 | 2015 | 2015 | |||||||||
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Cellulose specialties | $ | 165 | $ | 190 | $ | 179 | |||||
Commodity products and other | 53 | 52 | 42 | ||||||||
Total |
218 | 242 | 221 | ||||||||
Cost of Sales | 178 | 192 | 184 | ||||||||
Gross Margin | 40 | 50 | 37 | ||||||||
Selling, general and administrative expenses | 7 | 14 | 12 | ||||||||
Other operating expense, net | 1 | 7 | 1 | ||||||||
Operating Income | 32 | 29 | 24 | ||||||||
Interest and other expense, net | 9 | 9 | 9 | ||||||||
Gain on debt extinguishment | 9 | — | — | ||||||||
Income Before Income Taxes | 32 | 20 | 15 | ||||||||
Income tax expense | 11 | 7 | 4 | ||||||||
Net Income | $ | 21 | $ | 13 | $ | 11 | |||||
Earnings Per Share of Common Stock | |||||||||||
Basic earnings per share | $ | 0.50 | $ | 0.30 | $ | 0.25 | |||||
Diluted earnings per share | $ | 0.49 | $ | 0.30 | $ | 0.25 | |||||
Pro forma net income per share (a) | $ | 0.36 | $ | 0.32 | $ | 0.25 | |||||
Shares Used for Determining | |||||||||||
Basic EPS | 42,205,767 | 42,201,778 | 42,186,130 | ||||||||
Diluted EPS | 42,272,536 | 42,273,621 | 42,204,774 | ||||||||
(a) 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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Condensed Consolidated Balance Sheets | ||||||||
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(millions of dollars) | ||||||||
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2016 | 2015 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 110 | $ | 101 | ||||
Other current assets | 195 | 227 | ||||||
Property, plant and equipment, net | 795 | 804 | ||||||
Other assets | 134 | 147 | ||||||
$ | 1,234 | $ | 1,279 | |||||
Liabilities and Stockholders’ Equity | ||||||||
Current maturities of long-term debt | $ | 8 | $ | 8 | ||||
Other current liabilities | 115 | 124 | ||||||
Long-term debt | 797 | 850 | ||||||
Non-current liabilities for disposed operations | 143 | 145 | ||||||
Other non-current liabilities | 168 | 169 | ||||||
Total stockholders’ equity (deficit) | 3 | (17 | ) | |||||
$ | 1,234 | $ | 1,279 |
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Condensed Consolidated Statements of Cash Flows | ||||||||
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(millions of dollars) | ||||||||
Three Months Ended | ||||||||
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2016 | 2015 | |||||||
Cash Provided by Operating Activities: | ||||||||
Net income | $ | 21 | $ | 11 | ||||
Depreciation and amortization | 22 | 22 | ||||||
Increase in liabilities for disposed operations | 2 | — | ||||||
Other items to reconcile net income to cash provided by operating activities | 4 | 2 | ||||||
Changes in working capital and other assets and liabilities | 25 | 21 | ||||||
74 | 56 | |||||||
Cash Used for Investing Activities: | ||||||||
Capital expenditures | (20 | ) | (24 | ) | ||||
(20 | ) | (24 | ) | |||||
Cash Used for Financing Activities: | ||||||||
Changes in debt | (45 | ) | (20 | ) | ||||
(45 | ) | (20 | ) | |||||
Cash and Cash Equivalents: | ||||||||
Change in cash and cash equivalents | 9 | 12 | ||||||
Balance, beginning of year | 101 | 66 | ||||||
Balance, end of period | $ | 110 | $ | 78 |
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Reconciliation of Non-GAAP Measures | |||||||
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(millions of dollars) | |||||||
Three Months Ended | |||||||
EBITDA (a): |
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2016 | 2015 | ||||||
Net Income | $ | 21 | $ | 11 | |||
Depreciation and amortization | 22 | 22 | |||||
Interest expense, net | 9 | 9 | |||||
Income tax expense | 11 | 4 | |||||
EBITDA | $ | 63 | $ | 46 | |||
Gain on debt extinguishment | (9 | ) | — | ||||
Pro Forma EBITDA | $ | 54 | $ | 46 |
Three Months Ended | ||||||||
Adjusted Free Cash Flow (b): |
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2016 | 2015 | |||||||
Cash provided by operating activities | $ | 74 | $ | 56 | ||||
Capital expenditures | (20 | ) | (24 | ) | ||||
Adjusted Free Cash Flow | $ | 54 | $ | 32 |
(a) Earnings Before Interest, Taxes, Depreciation and Amortization
(“EBITDA”) is defined by the
(b) Adjusted free cash flow is defined by us as cash provided by operating activities adjusted for capital expenditures excluding strategic capital. Adjusted free cash flow 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. Adjusted free cash flow is not necessarily indicative of the adjusted free cash flow that may be generated in future periods.
Three Months Ended | ||||||
Adjusted Net Debt (a): |
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2016 | 2015 | |||||
Current maturities of long-term debt | 8 | 8 | ||||
Long-term debt | 797 | 850 | ||||
Total debt | 805 | 858 | ||||
Original issue discount and debt issuance costs | 10 | 11 | ||||
Cash and cash equivalents | (110 | ) | (101 | ) | ||
Adjusted net debt | 705 | 768 |
(a) Adjusted net debt is defined by us 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.
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Reconciliation of Non-GAAP Measures (Continued) | |||||||||||||||||||||||
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(millions of dollars, except per share information) | |||||||||||||||||||||||
Three Months Ended | |||||||||||||||||||||||
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2016 | 2015 | 2015 | |||||||||||||||||||||
Per | Per | Per | |||||||||||||||||||||
Diluted | Diluted | Diluted | |||||||||||||||||||||
Pro Forma Operating Income and Net Income (a): | $ | Share | $ | Share | $ | Share | |||||||||||||||||
Operating Income | $ | 32 | $ | 29 | $ | 24 | |||||||||||||||||
One-time separation and legal costs | — | 1 | — | ||||||||||||||||||||
Pro Forma Operating Income | $ | 32 | $ | 30 | $ | 24 | |||||||||||||||||
Net Income | $ | 21 | $ | 0.49 | $ | 13 | $ | 0.30 | $ | 11 | $ | 0.25 | |||||||||||
One-time separation and legal costs, net of tax | — | — | 1 | 0.02 | — | — | |||||||||||||||||
Gain on debt extinguishment, net of tax | (6 | ) | (0.13 | ) | — | — | — | — | |||||||||||||||
Pro Forma Net Income | $ | 15 | $ | 0.36 | $ | 14 | $ | 0.32 | $ | 11 | $ | 0.25 |
(a) 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 net of tax for one-time separation and legal costs 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.
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Selected Financial and Operating Information | |||||||
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Three Months Ended | |||||||
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2016 | 2015 | ||||||
Sales Volume, thousands of metric tons | |||||||
Cellulose specialties | 106 | 107 | |||||
Commodity products | 75 | 58 | |||||
Total | 181 | 165 | |||||
Average Sales Price, $ per metric ton | |||||||
Cellulose specialties | $ | 1,555 | $ | 1,667 | |||
Commodity products | $ | 680 | $ | 686 |
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