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| EX-99.1 - RAYONIER ADVANCED MATERIALS INC. | pressrelease.htm |
| 8-K - RAYONIER ADVANCED MATERIALS INC. | body.htm |
Fourth Quarter 2017Financial Presentation Materials Exhibit 99.2
Safe Harbor 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 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.Our operations are subject to a number of risks and uncertainties including, but not limited to, those listed below. When considering an investment in our securities, you should carefully read and consider these risks, together with all other information in our Annual Report on Form 10-K and our other filings and submissions to the SEC, which provide much more information and detail on the risks described below. If any of the events described in the following risk factors actually occur, our business, financial condition or operating results, as well as the market price of our securities, could be materially adversely affected. These risks and events include, without limitation: Our businesses we operate are highly competitive and many of them are cyclical, which may result in fluctuations in pricing and volume that can adversely impact our business, financial condition and results of operations; Our ten largest customers represent approximately 38% of our pro forma 2017 revenue, and the loss of all or a substantial portion of our revenue from these large customers could have a material adverse effect on us; A material disruption at one of our major manufacturing facilities could prevent us from meeting customer demand, reduce our sales and profitability, increase our cost of production and capital needs, or otherwise adversely affect our business, financial condition and results of operation; Changes in raw material and energy availability and prices could affect our results of operations and financial condition; The availability of, and prices for, wood fiber may significantly impact our business, results of operations and financial condition; We are subject to risks associated with manufacturing and selling products and otherwise doing business outside of the United States; Our operations require substantial capital for ongoing maintenance, repair and replacement of existing facilities and equipment; Currency fluctuations may have a negative impact on our business, financial condition and results of operations; Restrictions on trade through tariffs, countervailing and anti-dumping duties, quotas and other trade barriers, in the United States and internationally, could adversely affect our ability to access certain markets; We depend on third parties for transportation services and increases in costs and the availability of transportation could adversely affect our business; Our business is subject to extensive environmental laws, regulations and permits that may restrict or adversely affect our ability to conduct our business; The impacts of climate-related initiatives remain uncertain at this time; Our failure to maintain satisfactory labor relations could have a material adverse effect on our business; We are dependent upon attracting and retaining key personnel, the loss of whom could adversely affect our business; Failure to develop new products or discover new applications for our existing products, or our inability to protect the intellectual property underlying such new products or applications, could have a negative impact on our business; Risk of loss of the Company’s intellectual property and sensitive business information, or disruption of its manufacturing operations, in each case due to cyberattacks or cyber security breaches, could adversely impact the Company; We may need to make significant additional cash contributions to our retirement benefit plans if investment returns on pension assets are lower than expected or interest rates decline, and/or due to changes to regulatory, accounting and actuarial requirements; We have significant debt obligations that could adversely affect our business and our ability to meet our obligations; Challenges in the commercial and credit environments may materially adversely affect our future access to capital; We may need additional financing in the future to meet our capital needs or to make acquisitions, and such financing may not be available on favorable terms, if at all, and may be dilutive to existing stockholders; The inability to effectively integrate the Tembec acquisition, and any future acquisitions we may make, may affect our results; and, we may not achieve the benefits anticipated from our previously-announced transformation plan. 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 and Quarterly Reports on Form 10-Q. Rayonier Advanced Materials assumes no obligation to update these statements except as is required by law. 2
Non-GAAP Financial Measures These presentation materials contain certain non-GAAP financial measures, including EBITDA, adjusted free cash flows, adjusted operating income, adjusted net income and adjusted net debt. These non-GAAP measures are reconciled to each of their respective most directly comparable GAAP financial measures in the appendix of these presentation materials.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. 3
Granite Considerations---Granite Overview A Global Leader of Cellulose-Based Technologies Acquisition of Tembec completed on November 17, 2017 creates:Stronger, more balanced business with greater scale to drive growthProduct and geographic diversification creates a more balanced CS portfolioStrategic Pillars provide framework to achieve an incremental ~$155 million of EBITDA opportunities by 2020 before inflation and changes in commodity pricesCost Transformation of $100 million, including $75 million from synergiesMarket Optimization of $15 millionNew Products of $15 millionInvestments/Acquisitions of $25 million, primarily from capital projectsStrong free cash flow generation provides catalyst to maximize shareholder value through disciplined and balanced capital allocation strategy focused on risk-adjusted returnsInvestment opportunities in high-return capital projects, share buybacks and attractive external growth opportunities Well Positioned to Drive EBITDA Growth 4
Granite Considerations---Granite Overview 5 Rayonier Advanced Materials at a Glance Global leader in high purity Cellulose Specialties; #1 or #2 in all product segmentsPro Forma 2017 Revenue: $2.1 billion* Pro Forma Adjusted 2017 EBITDA: $369 million*Three business segments – High Purity Cellulose, Forest Products, and Pulp & PaperModerate pro forma leverage of 3.1x, target leverage ~2.5x Combination of Two Best-in-Class Organizations with Complementary Products EBITDA by Segment* Revenue by Products* * Annualized based on pro forma Nine Months ended September 2017 Revenue by Geography* Commodity & Other Other CS Pulp Ethers Pulp High Purity Cellulose Pulp & Paper Forest Products Acetate Pulp High-Yield Newsprint Paperboard Forest Products
Global Footprint Rayonier Advanced Materials Global Headquarters Facilities Capacity Forest Products* Bearn, QC 110,000 MBF Chapleau, ON 135,000 MBF Cochrane, ON 160,000 MBF Hearst, ON 110,000 MBF Huntsville, ON 15,000 MBF Kapuskasing, ON 105,000 MBF La Sarre, QC 135,000 MBF Facilities Capacity High Purity Cellulose Jesup, GA 575,000 MT Fernandina Beach, FL 155,000 MT Tartas, France 140,000 MT Temiscaming, QC 150,000 MT Pulp & Paper Temboard, QC 180,000 MT Temcell, QC 300,000 MT Matane, QC 270,000 MT Kapuskasing, ON 205,000 MT Barnesville, GA Eastman, GA Quitman, GA Offerman, GA Collins, GA Jacksonville, FL Jesup, GA Fernandina Beach, FL Temiscaming, QC Matane, QC Kapuskasing, ON Bearn, QC Chapleau, ON Cochrane, ON Hearst, ON Huntsville, ON La Sarre, QC Fiber Facility Sales/Research & Development Montreal, QC Forest Products Facility Pulp & Paper Products Facility High Purity Cellulose Plant Tartas, France London, UK Canadian Headquarters Shanghai, China Tokyo, Japan 6 * Facilities run at ~85% of capacity due to economic conditions, wood supply limitation and downtime Resin Facility Longueuil, QC Toledo, OH
High Purity Cellulose – Segment Overview 7 Core Products End Markets Acetate Pulp Tow, High Impact Plastics, Optical Screens Ethers Pulp Construction Material, Food Thickeners, Pharma Other Cellulose Specialties Pulp Filtration, Tirecord, Sausage Casings, Nitrocellulose Viscose Textiles Absorbent Materials Diapers, Incontinence, Feminine Hygiene Four facilities with six manufacturing lines span an international footprint (US/Canada/France)Cellulose Specialties capacity of 775,000 MT with additional 245,000 MT of Commodity capacity+Ranks as the #1 or #2 manufacturer of acetates, ethers, MCC, tirecord, casings and nitrocellulose pulp Sales by Geography* + 2017 Actual production of ~650,000 MT of Cellulose Specialties and ~260,000 MT of Commodity Products* Annualized based on pro forma Nine Months ended September 2017** Based on Company estimates Jesup, GA Fernandina Beach, FL Temiscaming, QC Tartas, France Cellulose Specialties Commodities Demand Outlook** 0-(1)% 3-5% 2-3% 5-7% 3-4%
Sales by Geography* Forest Products – Segment Overview 8 Core Products End Markets Studs Random Length Lumber Specialty Hardwood Residual Chips for Pulp Seven facilities with Total capacity of 770,000 MBFProduces a range of commodity forest products used primarily for residential and commercial constructionIntegrated facilities provide chip capacity to supply raw material fiber needs to Canadian pulp assets Construction/Building RYAM Pulp Assets Kapuskasing, ON Bearn, QC Chapleau, ON Cochrane, ON Huntsville, ON La Sarre, QC Hearst, ON Demand Outlook** In line with U.S. Housing Market * Annualized based on pro forma Nine Months ended September 2017** Based on Company estimates
Pulp & Paper – Segment Overview 9 Core Products End Markets Paperboard Lightweight board, Packaging and Cardstock High-Yield Pulp Writing Materials, Packaging Newsprint Newpapers Footprint comprised of four facilities located in CanadaTotal capacity is 180,000 MT of paperboard, 570,000 MT of high-yield pulp, and 205,000 MT of newsprintPaperboard focus on coated printing bristols for graphical end-uses in the Northeast, Midwest and Canada Sales by Geography* Integrated High-Yield Pulp in Temiscaming supplies its products to Paperboard in Temiscaming as a raw material~1/3 of raw material sourced from integrated business 9 Temiscaming, QC Matane, QC Kapuskasing, ON * Annualized based on pro forma Nine Months ended September 2017** Based on Company estimates Demand Outlook** 3-4% ~2% ~(10)%
Financial Highlights Quarter Ended Quarter Ended Twelve Months Ended Twelve Months Ended 4Q 2017 4Q 2017 4Q 2016 4Q 2016 4Q 2017 4Q 2017 4Q 2016 4Q 2016 Sales $ 349 $ 231 $ 961 $ 869 Operating Income — 26 57 138 Adjusted Operating Income1 44 26 114 138 Net Income 295 11 325 73 Adjusted Net Income1 29 11 57 67 EBITDA1 342 50 480 235 Adjusted EBITDA1 77 50 212 226 Diluted Earnings per Share $ 5.01 $ 0.18 $ 5.81 $ 1.55 Adjusted Net Income per Share1 $ 0.50 $ 0.18 $ 0.97 $ 1.43 1 Non-GAAP measures (see Appendix for definitions and reconciliations). 10 ($ Millions)
Operating Income - Variance Analysis 11 291Pro Forma Adjustments 13 Operating Income 39Operating Income Operating Income 8 million Pro Forma Adjustments Adjustments1 Adjustments1 1 3 (12) (21) (17) 1 See Appendix for non-GAAP adjustments detail and reconciliations. Price variance is calculated for all products. Volume variance is calculated on a contribution margin basis. (15) 3 26 No Change 26 44 44 114 ($ Millions)
Capital Resources & Liquidity Twelve Months Ended Twelve Months Ended December 31, 2017 December 31, 2017 December 31, 2016 December 31, 2016 Cash Provided by Operating Activities $ 130 $ 232 Cash Used for Investing Activities (277 ) (87 ) Cash Used for Financing Activities (84 ) 80 Adjusted Free Cash Flows* 91 147 Debt Principal Payments $ 1,246 $ 792 Cash 96 326 Adjusted Net Debt* 1,150 466 Available Liquidity* 312 555 * Non-GAAP measures (see Appendix for definitions and reconciliations). 12 ($ Millions)
Granite Considerations---Granite Overview Efficient Tax Structure U.S. Tax reform expected to provide significant benefitsCanadian NOLs generated by Tembec from integrated business model maintained through acquisitionEfficient tax structure supports increased cash flow generationUltimate tax rate to be determined by profitability in various jurisdictions 13 Anticipated tax rate of 25-30% with cash taxes of ~10% over the next three years
Cellulose Specialties – Expect pricing down 4-5% with flat volumeDriven by pricing declines in acetate, partially offset by gains in ethers and other CS2018 acetate pricing now consistent with competitionTotal impact of ~$40 millionCommodities– Expect pricing flat over full year; volume up from improved productivityForest Products prices remain at record levels and volumes steady despite U.S. import duties impacting EBITDA by ~$25 million, which historically have been recovered upon final settlementPaperboard expects stable revenues with decreased profitability due to higher raw materials costsHigh-Yield pricing at peak levels due to Chinese demand, not expected to continue the full year Newsprint prices benefiting from reduced supply, but U.S. duties and declining demand could weaken price 3 to 4% raw material inflation, driven by chemicals and energy; partially offset by improvements from Cost Transformation Capital expenditures of approximately $150 million 2018 Outlook 14 High Purity Forest Products Pulp & Paper Costs & CapEx
3-Year Outlook 15 *Cost improvements before inflation and changes in commodity prices ~$155 million EBITDA* opportunity by end of 2020including $50 million target in 2018 $25 Legacy $75 Synergy Investments/ Acquisitions
Granite Considerations---Granite Overview 16 Significant Synergy Opportunity SG&A/Public Company CostsGeneral corporate cost reductionsConsolidation of duplicate systems and spending Supply Chain & ProcurementLeverage combined spendingReduce transportation costs Operational/ManufacturingApply continuous improvement across a larger combined companyIncrease production yields 2:1 Ratio of Savings to Costs to Achieve1:1 Ratio in 2018 *Full run-rate synergies expected to be realized over a 3 year period. Sales & Marketing OptimizationOptimize sales channel distributionRegional customer alignment $75 million* Increased target to $75 million from $50 million
Total Cost Transformation with Synergies Expect Legacy Cost Transformation Benefits of $25 million in 2018Targeting Acquisition Synergies of $75 million by 2020Total Incremental Cost Transformation of $100 million by 2020 17 *Cost Transformation improvements before inflation and changes in commodity prices
Market Optimization Position production to maximize value within our markets Ability to Capture Value Market Attractiveness Cellulose Specialty End MarketsAcetate FilmPlasticsAcetate TowYarnCasingsCMCFiltrationMCCNitro.Tire Cord CommodityEnd MarketsFluffViscoseFilament Drive towards higher value Optimize production at lowest cost line for each grade Cost to Produce Grade Acetate Charts are Illustrative Only Ethers Viscose Lower cost of production 18
New Products - Pipeline 19 Stage 1Idea development Stage 2Proof of concept Stage 3Lab Stage 4Pilot/Mill Trials Stage 5Industrial Stage 6Commercial 1 2 3 4 5 Priority 1 Priority 2 Priority 3-4 OptiSilk Sapphire Stage OIdeas Biofloc XV20 19
Disciplined & Balanced Capital Allocation Maintain Assets $100-110 million of annual capex Adjusted Free Cash Flow Return of Capital to Shareholders Stock buybacks and dividends to maximize long-term shareholder returns External Strategic Investments Acquisitions and other investments to complement core business Investment in the Company High-return projects designed to enhance competitive position and drive EBITDA growth 20 Reduce Leverage Target 2.5x Net Leverage Value Driven Approach Focused on Risk Adjusted Returns on Invested Capital Cash Flow From Operations
Strategic Capital Projects Under Review Sizable Opportunity for Attractive Re-Investment ~$90 million of High Return Capital Projects currently under considerationFocused on strongest returns, primarily in core markets 21
Granite Considerations---Granite Overview Return of Capital to Shareholders RYAM currently pays a $0.07 quarterly dividend per share of common stock On January 29, 2018, the Board of Directors authorized a $100 million share buybackCompany is committed to growing and maximizing long-term shareholder value including prudent return of capital to shareholders Dividend Policy and Share Buyback Authorization 22
Appendix
24 Key Production & Pricing * Annualized based on 9 months ended September 2017; paperboard inventories reduced in 2017 ** Indices provide directional relationship between products and pricing; contractual arrangements and mix will determine actual pricing*** Alterative Index includes Bleached Chemi-Thermo Mechanical Pulp (BCTMP), which more closely reflects production capabilities**** Cellulose Specialties pricing reflects average blended price for RYAM and Tembec for the 9 month period, using CAD/USD exchange rate of 0.77***** Index is based on price per short ton; sales are measured on metric ton Product 2017 Annualized Sales* Annual Capacity Index** Average YTD Sep 2017 Index Price Dec 2017 Index Price Cellulose Specialties 652k MT 775k MT None $1,381**** N/A High Purity Commodity 292k MT 245k MT Bleached Kraft FluffViscose Pulp delivered to China $1,085$896 $1,190$910 Forest Products 665k mbf 770k mbf 2x4 Random Lengths Grade 2 & Better Great Lakes2x4 8’ Stud Great Lakes $465$444 $534$409 Paperboard 191k MT 180k MT Solid Bleached Sulfate 16 point $1,023***** $1,025***** High-Yield Pulp 568k MT 570k MT Bleached Eucalyptus Kraft*** $644 $795 Newsprint 200k MT 205k MT 48.8 gram US East $575 $620
EBITDA is defined as earnings before interest, taxes, depreciation and amortization. EBITDA is a non-GAAP measure used by our Chief Operating Decision Maker, existing stockholders and potential stockholders to measure how the Company is performing relative to the assets under management. Adjusted EBITDA is defined as EBITDA before acquisition related costs, inventory fair value adjustment, gain on bargain purchase, loss (gain) on derivative instrument, and gain on debt extinguishment.Adjusted Free Cash Flows is defined as cash provided by operating activities adjusted for capital expenditures excluding strategic capital and acquisition related costs, net of tax. 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. Adjusted Net Debt is defined as the amount of debt after the consideration of the original issue discount, premiums, 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.Adjusted Operating Income is defined as operating income adjusted for acquisition related costs and fair market valuation of inventory.Adjusted Net Income is defined as net income adjusted net of tax for gain on debt extinguishment, gain on bargain purchase, acquisition related costs, fair market valuation of inventory, and loss (gain) on derivative.Available Liquidity is defined as the funds available under the revolving credit facility and term loans, adjusted for cash on hand and outstanding letters of credit. Definitions of Non-GAAP Measures 25
Reconciliation of Non-GAAP Measures Twelve Months Ended Twelve Months Ended December 31, December 31, 2017 2017 2016 2016 EBITDA Reconciliation Net Income $ 325 $ 73 Depreciation and amortization 97 88 Interest expense, net 38 35 Income tax expense 20 39 EBITDA $ 480 $ 235 Acquisition related costs 34 — Inventory write-up to fair value 23 — Gain on bargain purchase (317 ) — Loss (Gain) on derivative instrument (8 ) — Gain on debt extinguishment — (9 ) Adjusted EBITDA $ 212 $ 226 Adjusted Free Cash Flows Reconciliation Cash provided by operating activities $ 130 $ 232 Capital expenditures* (65 ) (85 ) Transaction costs, net of tax 26 — Adjusted Free Cash Flows $ 91 $ 147 * Capital expenditures exclude strategic capital. 26 ($ Millions)
Reconciliation of Non-GAAP Measures December 31, 2017 December 31, 2017 December 31, 2016 December 31, 2016 Adjusted Net Debt Reconciliation Current maturities of long-term debt $ 9 $ 9 Long-term debt & capital lease obligation 1,232 774 Total debt $ 1,241 $ 783 Original issue discount, premiums and debt issuance costs 5 9 Cash and cash equivalents (96 ) (326 ) Adjusted Net Debt $ 1,150 $ 466 27 ($ Millions)
Reconciliation of Reported to Adjusted Earnings 28 Three Months Ended Three Months Ended Twelve Months Ended Twelve Months Ended December 31, 2017 December 31, 2017 September 23, 2017 September 23, 2017 December 31, 2016 December 31, 2016 December 31, 2017 December 31, 2017 December 31, 2016 December 31, 2016 Adjusted Operating and Net Income (a): $ $ Per Diluted Share Per Diluted Share $ $ Per Diluted Share Per Diluted Share $ $ Per Diluted Share Per Diluted Share $ $ Per Diluted Share Per Diluted Share $ $ Per Diluted Share Per Diluted Share Operating Income $ — $ 18 $ 26 $ 57 $ 138 Acquisition related costs 21 5 — 34 — Inventory write-up to fair value 23 — — 23 — Adjusted Operating Income $ 44 $ 23 $ 26 $ 114 $ 138 Net Income $ 295 $ 5.01 $ 16 $ 0.28 $ 11 $ 0.18 $ 325 $ 5.81 $ 73 $ 1.55 Gain on debt extinguishment — — — — — — — — (9 ) (0.19 ) Gain on bargain purchase (317 ) (5.37 ) — — — — (317 ) (5.66 ) — — Acquisition related costs 21 0.36 5 0.09 — — 34 0.61 — — Inventory write-up to fair value 23 0.39 — — — — 23 0.41 — — Loss (Gain) on derivative instrument 8 0.14 (14 ) (0.25 ) — — (8 ) (0.14 ) — — U.S. tax reform impact 11 0.19 — — — — 11 0.20 — — Tax effects of adjustments (12 ) (0.22 ) 3 0.06 — — (11 ) (0.21 ) 3 0.07 Dilutive impact of Preferred Stock — — — (0.03 ) — — — (0.05 ) — — Adjusted Net Income $ 29 $ 0.50 $ 10 $ 0.15 $ 11 $ 0.18 $ 57 $ 0.97 $ 67 $ 1.43 (a) Adjusted operating income and adjusted net income are not necessarily indicative of results that may be generated in future periods. ($ Millions, except per share amounts)