Oct 28, 2015 4:30 PM
Pro forma net income for the third quarter 2015 was
“Our year-to-date results reflect the significant progress we have made
on our initiatives to reduce cost and improve operational efficiency.
Our execution in these areas over the last nine months has positively
impacted our operating performance and allows us to raise 2015 pro forma
EBITDA guidance to approximately
Third Quarter and Year-to-Date Results
Sales of
Pro forma operating income was
During the quarter, the Company continued to make progress on its
Interest Expense, Net
Interest expense, net of interest income, was
Income Tax Expense
The 2015 year-to-date effective tax rate was 33 percent, compared to 30 percent for the same period in the prior year. The prior year period reflects the reversal of a tax reserve. The full year effective tax rate is expected to be between 33 and 34 percent.
The year-to-date effective tax rate was below the federal rate of 35 percent primarily due to the benefit of the domestic manufacturing tax deduction and state tax credits, partially offset by an adjustment to the state deferred tax rate. The impact of the manufacturing deduction on the effective tax rate is greater in periods that include expenses that reduce pre-tax income but are not currently deductible for income tax purposes.
Cash Flow and Liquidity
Year-to-date, the Company generated
Outlook
“The persistent imbalance of supply and demand, coupled with other global economic headwinds, including a strong U.S. dollar, requires us to stay focused on streamlining operations, maximizing cash flow and reducing debt,” said 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; our ability to
complete our recently announced operational realignment at 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 our filings with the
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Condensed Consolidated Statements of Income | ||||||||||||||||||||||||
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(millions of dollars, except per share information) |
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Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
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2015 | 2015 | 2014 | 2015 | 2014 | ||||||||||||||||||||
Net Sales | ||||||||||||||||||||||||
Cellulose specialties | $ | 215 | $ | 183 | $ | 223 | $ | 577 | $ | 630 | ||||||||||||||
Commodity products and other | 42 | 38 | 31 | 123 | 80 | |||||||||||||||||||
Total Net Sales | $ | 257 | $ | 221 | $ | 254 | $ | 700 | $ | 710 | ||||||||||||||
Cost of Sales | 187 | 176 | 198 | 548 | 547 | |||||||||||||||||||
Gross Margin | 70 | 45 | 56 | 152 | 163 | |||||||||||||||||||
Selling and general expenses | 11 | 10 | 9 | 34 | 27 | |||||||||||||||||||
Other operating expense, net (a) | 1 | 27 | 5 | 28 | 45 | |||||||||||||||||||
Operating Income | 58 | 8 | 42 | 90 | 91 | |||||||||||||||||||
Interest and other expense, net | 9 | 9 | 10 | 27 | 13 | |||||||||||||||||||
Income Before Income Taxes | 49 | (1 | ) | 32 | 63 | 78 | ||||||||||||||||||
Income tax expense (benefit) | 17 | (1 | ) | 13 | 21 | 23 | ||||||||||||||||||
Net Income | $ | 32 | $ | — | $ | 19 | $ | 42 | $ | 55 | ||||||||||||||
Earnings Per Share of Common Stock | ||||||||||||||||||||||||
Basic earnings per share | $ | 0.77 | $ | (0.01 | ) | $ | 0.46 | $ | 1.01 | $ | 1.30 | |||||||||||||
Diluted earnings per share | $ | 0.76 | $ | (0.01 | ) | $ | 0.46 | $ | 1.00 | $ | 1.30 | |||||||||||||
Pro forma net income per share (b) | $ | 0.78 | $ | 0.39 | $ | 0.53 | $ | 1.42 | $ | 1.90 | ||||||||||||||
Shares Used for Determining |
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Basic EPS | 42,199,659 | 42,192,913 | 42,167,014 | 42,192,956 | 42,160,559 | |||||||||||||||||||
Diluted EPS | 42,321,022 | 42,192,913 | 42,247,970 | 42,313,335 | 42,240,448 |
(a) | Other expenses primarily consist of non-cash impairment charges, environmental and one-time separation and legal costs. | |
(b) | Pro forma net income per share is a non-GAAP measure. See Schedule D for a reconciliation to the nearest GAAP measure. | |
A |
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Condensed Consolidated Balance Sheets | ||||||||||
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(millions of dollars) |
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Assets | ||||||||||
Cash and cash equivalents | $ | 100 | $ | 66 | ||||||
Other current assets | 238 | 254 | ||||||||
Property, plant and equipment, net | 804 | 843 | ||||||||
Other assets | 145 | 141 | ||||||||
$ | 1,287 | $ | 1,304 | |||||||
Liabilities and Stockholders’ Deficit | ||||||||||
Current maturities of long-term debt | $ | 8 | $ | 8 | ||||||
Other current liabilities | 122 | 123 | ||||||||
Long-term debt | 885 | 936 | ||||||||
Non-current liabilities for disposed operations | 143 | 149 | ||||||||
Other non-current liabilities | 146 | 150 | ||||||||
Total stockholders’ deficit | (17 | ) | (62 | ) | ||||||
$ | 1,287 | $ | 1,304 |
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Condensed Consolidated Statements of Cash Flows | ||||||||||
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(millions of dollars) |
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Nine Months Ended | ||||||||||
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2015 | 2014 | |||||||||
Cash Provided by Operating Activities: |
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Net income | $ | 42 | $ | 55 | ||||||
Depreciation and amortization | 65 | 62 | ||||||||
Non-cash impairment charge | 28 | — | ||||||||
Other items to reconcile net income to cash provided by operating activities | 8 | 34 | ||||||||
Changes in working capital and other assets and liabilities | 9 | (23 | ) | |||||||
152 | 128 | |||||||||
Cash Used for Investing Activities: |
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Capital expenditures | (60 | ) | (60 | ) | ||||||
Other | — | (16 | ) | |||||||
(60 | ) | (76 | ) | |||||||
Cash Used for Financing Activities: |
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Changes in debt, net of issuance costs | (52 | ) | 932 | |||||||
Dividends paid | (6 | ) | — | |||||||
Net payments to Parent | — | (956 | ) | |||||||
(58 | ) | (24 | ) | |||||||
Cash and Cash Equivalents: |
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Change in cash and cash equivalents | 34 | 28 | ||||||||
Balance, beginning of year | 66 | — | ||||||||
Balance, end of period | $ | 100 | $ | 28 | ||||||
B |
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Reconciliation of Non-GAAP Measures | ||||||||||||||||||||||
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(millions of dollars) |
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Three Months Ended | Nine Months Ended | |||||||||||||||||||||
EBITDA (a): |
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2015 | 2014 | 2015 | 2014 | |||||||||||||||||||
Net Income |
$ | 32 | $ | 19 | $ | 42 | $ | 55 | ||||||||||||||
Depreciation and amortization | 23 | 24 | 65 | 62 | ||||||||||||||||||
Interest expense, net | 9 | 10 | 27 | 13 | ||||||||||||||||||
Income tax expense | 17 | 13 | 21 | 23 | ||||||||||||||||||
EBITDA | $ | 81 | $ | 66 | $ | 155 | $ | 153 | ||||||||||||||
Non-cash impairment charge | — | — | 28 | — | ||||||||||||||||||
Environmental reserve adjustments | — | 2 | — | 20 | ||||||||||||||||||
One-time separation and legal costs | 2 | 3 | 1 | 24 | ||||||||||||||||||
Insurance settlement | — | — | (1 | ) | — | |||||||||||||||||
Pro Forma EBITDA | $ | 83 | $ | 71 | $ | 183 | $ | 197 | ||||||||||||||
Nine Months Ended | ||||||||||||||||||||||
Adjusted Free Cash Flow (b): |
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2015 | 2014 | |||||||||||||||||||||
Cash provided by operating activities | $ | 152 | $ | 128 | ||||||||||||||||||
Capital expenditures | (60 | ) | (60 | ) | ||||||||||||||||||
Adjusted Free Cash Flow | $ | 92 | $ | 68 |
(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. Adjusted Free Cash Flow, as defined by the Company, 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. | |
C |
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Reconciliation of Non-GAAP Measures (Continued) | |||||||||||||||||||||||||||||||||||||||||
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(millions of dollars, except per share information) |
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Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||||||||||||
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2015 | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||||||||||||||||||||||
Pro Forma Operating Income and Net Income (a): | $ |
Per Diluted Share |
$ |
Per Diluted Share |
$ |
Per Diluted Share |
$ |
Per Diluted Share |
$ |
Per Diluted Share |
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Operating Income |
$ | 58 | $ | 8 | $ | 42 | $ | 90 | $ | 91 |
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Non-cash impairment charge | — | 28 | — | 28 | — | ||||||||||||||||||||||||||||||||||||
One-time separation and legal costs | 2 | (1 | ) | 3 | 1 | 24 | |||||||||||||||||||||||||||||||||||
Insurance recovery | — | (1 | ) | — | (1 | ) | — | ||||||||||||||||||||||||||||||||||
Environmental reserve adjustments | — | — | 2 | — | 20 | ||||||||||||||||||||||||||||||||||||
Pro Forma Operating Income |
$ | 60 | $ | 34 | $ | 47 | $ | 118 | $ | 135 | |||||||||||||||||||||||||||||||
Net Income |
$ | 32 | $ | 0.76 | $ | — | $ | (0.01 | ) | $ | 19 | $ | 0.46 | $ | 42 | $ | 1.00 | $ | 55 | $ | 1.30 | ||||||||||||||||||||
Non-cash impairment charge, net of tax | — | — | 18 | 0.43 | — | — | 18 | 0.43 | — | — | |||||||||||||||||||||||||||||||
One-time separation and legal costs, net of tax | 1 | 0.02 | (1 | ) | (0.01 | ) | 2 | 0.04 | 1 | 0.01 | 17 | 0.41 | |||||||||||||||||||||||||||||
Insurance recovery, net of tax | — | — | (1 | ) | (0.02 | ) | — | — | (1 | ) | (0.02 | ) | — | — | |||||||||||||||||||||||||||
Environmental reserve adjustments, net of tax | — | — | — | — | 1 | 0.03 | — | — | 13 | 0.30 | |||||||||||||||||||||||||||||||
Reversal of reserve related to the taxability of the CBPC | — | — | — | — | — | — | — | — | (5 | ) | (0.11 | ) | |||||||||||||||||||||||||||||
Pro Forma Net Income |
$ | 33 | $ | 0.78 | $ | 16 | $ | 0.39 | $ | 22 | $ | 0.53 | $ | 60 | $ | 1.42 | $ | 80 | $ | 1.90 | |||||||||||||||||||||
(a) |
Pro forma operating income is defined as operating income adjusted for non-cash impairment charges, one-time separation and legal costs, insurance recovery and environmental reserve adjustments. Pro forma net income is defined as net income adjusted net of tax for non-cash impairment charges, one-time separation and legal costs, insurance recovery, environmental reserve adjustments and for tax benefits from the reversal of reserve related to the taxability of the CBPC. |
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D |
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