- Reiterates 2015 pro forma EBITDA
guidance of $210 to $225 million
- Substantial progress on 2015 net debt
and cost-reduction initiatives
- Announces strategic repositioning
Rayonier Advanced Materials Inc. (NYSE:RYAM) (the “Company”)
today reported a net loss for the second quarter 2015 of $(0.3)
million, or $(0.01) per share, compared to net income of $5
million, or $0.11 per share for the same period in 2014.
Pro forma net income for the second quarter 2015 was $16
million, or $0.39 per share compared to $25 million or $0.59 per
share for the prior year period. Year-to-date pro forma net income
was $26 million, or $0.64 per share, compared to $58 million, or
$1.37 per share, for the prior year period. Pro forma adjustments
for the quarter and year-to-date periods exclude one-time
separation and legal costs. The 2015 periods also exclude a $28
million pre-tax asset impairment charge and a $1 million pre-tax
insurance recovery. The impairment charge relates to the strategic
asset realignment of the Jesup, Georgia plant announced separately
this morning.
“Our second quarter results were in line with expectations.
Based on our performance to date and the progress we have made on
our cost-savings initiatives, we are confident we will achieve
results in the upper half of our full year pro forma EBITDA
guidance,” said Paul Boynton, Chairman, President and Chief
Executive Officer.
Second Quarter and Year-to-Date Results
Sales for the quarter were $221 million, 4 percent above second
quarter 2014. Sales for the six months ended 2015 were $442
million, 3 percent below the prior year period. As expected,
cellulose specialties prices were down 8 percent from the prior
year periods reflecting the results of the 2015 price negotiations.
Cellulose specialties sales volumes for the three and six months
ended 2015 were slightly lower than prior year periods, while
commodity product sales volumes increased significantly reflecting
improved production efficiencies and more operating days in
2015.
Pro forma operating income was $34 million and $59 million for
second quarter and year-to-date, down 19 percent and 34 percent,
from the prior year periods, respectively, as lower sales were
partially offset by improved costs. Costs for the quarter and
year-to-date periods declined as a result of cost reduction
activities and favorable wood, chemical and energy prices which
more than offset higher costs from labor, depreciation and selling
and general expenses. The 2014 periods reflect carve-out accounting
treatment. As such, the selling and general expenses are not
comparable to the stand-alone company’s costs.
During the quarter, the Company continued to make progress on
its $40 million annualized cost-savings initiative. Year-to-date
savings of roughly $14 million have been achieved. Approximately $9
million is reflected in operating results with $5 million
capitalized in inventory as of quarter end. The Company is
currently targeting at least $30 million in permanent cost savings
to be realized in 2015 operating results with an annualized
run-rate approaching $40 million.
Interest Expense, Net
Interest expense, net of interest income, was $19 million for
the year-to-date period ending June 27, 2015 reflecting the debt
issued to effect the separation.
Income Tax Expense
The 2015 year-to-date effective tax rate was 27.0 percent
compared to 23.4 percent for the same period in the prior year. The
prior year period reflects the reversal of a tax reserve. The
year-to-date effective tax rate was below the federal rate of 35
percent primarily due to the benefit of domestic manufacturing tax
deduction and state tax credits. The full year effective tax rate
is expected to be between 33 and 34 percent.
Cash Flow and Liquidity
Year-to-date, the Company generated $101 million of pro forma
EBITDA and $47 million of adjusted free cash flow; as a result, net
debt was reduced by $45 million. Since the separation from its
parent twelve months ago, the Company has reduced net debt by $94
million. As of June 27, the Company had $308 million of liquidity
including $235 million available under its revolving credit
facility after taking into account outstanding letters of
credit.
Outlook
“We continue to focus on our 2015 initiatives to reduce costs,
optimize our assets and grow our business,” said Boynton. “To that
end, this morning we announced a strategic repositioning to better
align our assets to current market conditions. Additionally,
earlier in the quarter, we entered into a non-binding letter of
intent to form a joint venture with Borregaard ASA that would
process lignin produced at our Fernandina plant, currently used for
energy, into higher-value products. These actions, combined with
our cost-savings initiatives, will further our ability to compete
effectively and position ourselves for near and long-term
success.”
Conference Call Information
A conference call will be held on Thursday, July 30, 2015 at 2
p.m. EDT to discuss these results. Presentation materials and
access to the live webcast will be available at www.rayonieram.com. Investors may also choose to
access the conference call by dialing (800) 857-7003, password:
Rayonier Advanced Materials. A replay of this webcast will be
available on the Company’s website shortly after the call.
About Rayonier Advanced Materials
Rayonier Advanced Materials is the leading global supplier of
high-purity, cellulose specialties natural polymers for the
chemical industry. Working closely with its customers, the Company
engineers natural polymeric chemical chains to create dozens of
customized high-purity performance fibers at its plants in Florida
and Georgia. Rayonier Advanced Materials’ intellectual property and
manufacturing processes have been developed over 85 years,
resulting in unique properties and very high quality and
consistency. The Company’s facilities can currently produce up to
675,000 metric tons of cellulose specialties products annually for
use in a wide range of industrial and consumer products such as
filters, cosmetics and pharmaceuticals. Upon completion of the
strategic realignment of assets in Jesup, the Company's facilities
will have the capacity to produce approximately 485,000 tons of
cellulose specialties and approximately 245,000 tons of commodity
products. Rayonier Advanced Materials is consistently ranked among
the nation’s top 50 exporters and delivers products to 79 ports
around the world, serving customers in 20 countries across five
continents. More information is available at www.rayonieram.com.
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 Jesup plant within the planned cost and timing parameters
and achieve the anticipated benefits; customer concentration;
changes in cellulose specialties and commodity product supply,
demand and prices; changes in raw material and energy prices;
international operations; 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 develop new ideas 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, business,
industry, regulatory and market 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 U.S. Securities and
Exchange Commission, including our Annual Report on Form 10-K.
Rayonier Advanced Materials assumes no obligation to update these
statements except as is required by law.
Rayonier Advanced Materials Inc. Condensed Consolidated
Statements of Income June 27, 2015 (Unaudited)
(millions of dollars, except per share information)
Three Months Ended Six Months Ended June
27, March 28, June 28, June
27, June 28, 2015 2015 2014
2015 2014 Net Sales Cellulose specialties $
183 $ 179 $ 201 $ 362 $ 407 Commodity products and other 38
42 12 80 49
Total Net Sales $ 221 $ 221
$ 213 $ 442 $ 456
Cost of Sales 176 184 161
360 349
Gross Margin 45 37 52 82 107 Selling
and general expenses 10 12 9 22 17 Other operating expense, net (a)
27 1 37 27 40
Operating Income 8
24 6 33 50 Interest and other expense, net 9 9 3
19 3
Income Before Income Taxes (1 ) 15 3 14
47 Income tax expense (benefit) (1 ) 4 (2 ) 4 11
Net Income $ — $ 11 $ 5 $ 10 $
36
Earnings Per Share of Common Stock Basic earnings per
share $ (0.01 ) $ 0.25 $ 0.11 $ 0.24 $ 0.84
Diluted earnings per share $ (0.01 ) $ 0.25 $ 0.11 $
0.24 $ 0.84 Pro forma net income per share (b) $ 0.39
$ 0.25 $ 0.59 $ 0.64 $ 1.37
Shares used for determining Basic EPS 42,192,913
42,186,130 42,176,565 42,189,598 42,176,565
Diluted EPS 42,192,913 42,204,774 42,178,462
42,301,122 42,177,503
(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.
Rayonier Advanced Materials Inc. Condensed Consolidated
Balance Sheets June 27, 2015 (Unaudited) (millions of
dollars) June 27, 2015 December 31,
2014 Assets Cash and cash equivalents $ 73 $ 66 Other
current assets 236 254 Property, plant and equipment, net 813 843
Other assets 139 141 $ 1,261 $ 1,304
Liabilities and Stockholders’ Deficit Current maturities of
long-term debt $ 8 $ 8 Other current liabilities 112 123 Long-term
debt 900 936 Non-current liabilities for disposed operations 145
149 Other non-current liabilities 147 150 Total stockholders’
deficit (51 ) (62 ) $ 1,261 $ 1,304
Condensed Consolidated Statements of Cash Flows June 27,
2015 (Unaudited) (millions of dollars) Six
Months Ended June 27, 2015 June 28, 2014
Cash provided by operating activities: Net income $ 10 $ 36
Depreciation and amortization 42 38 Non-cash impairment charge 28 —
Other items to reconcile net income to cash provided by operating
activities 9 30 Changes in working capital and other assets and
liabilities (1 ) (1 ) 88 103
Cash used for
investing activities: Capital expenditures (41 ) (51 ) Other —
(13 ) (41 ) (64 )
Cash used for financing activities:
Changes in debt, net of issuance costs (37 ) 937 Dividends paid (3
) — Net payments to Parent — (956 ) (40 ) (19 )
Cash and
cash equivalents: Change in cash and cash equivalents 7 20
Balance, beginning of year 66 — Balance, end of
period $ 73 $ 20
Rayonier Advanced Materials Inc. Reconciliation of
Non-GAAP Measures June 27, 2015 (Unaudited) (millions
of dollars) Three Months Ended Six
Months Ended EBITDA (a): June 27, 2015
June 28, 2014 June 27, 2015 June 28,
2014 Net income $ — $ 5 $ 10 $ 36 Depreciation and
amortization 21 18 42 38 Interest expense, net 9 3 19 3 Income tax
expense (benefit) (1 ) (2 ) 4 11
EBITDA $ 29 $
24 $ 75 $ 88 Non-cash impairment charge 28 —
28 — One-time separation and legal costs (1 ) 18 (1 ) 21 Insurance
recovery (1 ) — (1 ) — Environmental reserve adjustments —
18 — 18
Pro forma EBITDA $ 55 $ 60
$ 101 $ 127
Six Months Ended Adjusted Free
Cash Flow (b): June 27, 2015 June 28, 2014
Cash provided by operating activities $ 88 $ 103 Capital
expenditures (41 ) (51 )
Adjusted Free Cash Flow $ 47
$ 52
(a) Earnings before Interest, Taxes, Depreciation and
Amortization (“EBITDA”) is defined by the Securities and Exchange
Commission. Pro Forma EBITDA is defined by the Company as EBITDA
before non-cash impairment charges, one-time separation and legal
costs, insurance recovery and environmental reserve adjustments.
EBITDA and Pro Forma EBITDA are not necessarily indicative of
results that may be generated in future periods.
(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.
Rayonier Advanced Materials Inc. Reconciliation of
Non-GAAP Measures (Continued) June 27, 2015 (Unaudited)
(millions of dollars, except per share information)
Three Months Ended Six Months Ended June
27, 2015 June 28, 2014 June 27, 2015
June 28, 2014 Pro Forma Operating Income and Net
Income (a): $ Per Diluted Share $
Per Diluted Share $ Per Diluted
Share $ Per Diluted Share Operating
income $ 8 $ 6 $ 33 $ 50 Non-cash impairment charge 28 — 28 —
One-time separation and legal costs (1 ) 18 (1 ) 21 Insurance
recovery (1 ) — (1 ) — Environmental reserve adjustments —
18 — 18
Pro forma operating income $ 34
$ 42 $ 59 $ 89
Net income
$ — $ (0.01 ) $ 5 $ 0.11 $ 10 $ 0.24 $ 36 $ 0.84 Non-cash
impairment charge, net of tax 18 0.43 — — 18 0.43 — — One-time
separation and legal costs, net of tax (1 ) (0.01 ) 13 0.31 (1 )
(0.01 ) 15 0.36 Insurance recovery, net of tax (1 ) (0.02 ) — — (1
) (0.02 ) — — Environmental reserve adjustments, net of tax — — 12
0.28 — — 12 0.28 Reversal of reserve related to the taxability of
the CBPC — — (5 ) (0.11 ) — — (5 )
(0.11 )
Pro forma net income $ 16 $ 0.39 $ 25
$ 0.59 $ 26 $ 0.64 $ 58 $ 1.37
(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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Rayonier Advanced Materials Inc.MediaRussell Schweiss,
904-357-9158orInvestorsBeth Johnson, 904-357-9136
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