Market Overview

Rayonier Advanced Materials Reports Second Quarter 2018 Results

Share:
  • Second quarter 2018 net income of $54 million and adjusted EBITDA of
    $106 million
  • Year to date diluted earnings per share of $1.22 and adjusted net
    income per share of $0.99; 281 percent increase in adjusted earnings
    per share from prior year
  • Strong performance in Pulp and Forest Products segments combined with
    improved productivity in High Purity Cellulose drove increased
    adjusted EBITDA
  • Solid execution on Cost Transformation with $18 million of savings
    achieved year to date; on track to exceed 2018 target
  • Returned capital of $29 million to stockholders through dividends and
    share repurchases year to date

Rayonier Advanced Materials Inc. (the "Company") (NYSE:RYAM) today
reported second quarter 2018 net income of $54 million, or $0.83 per
diluted common share compared to $5 million, or $0.03 per diluted common
share in the second quarter of 2017. Second quarter 2018 adjusted net
income was $39 million, or $0.60 per diluted common share, compared
to $9 million, or $0.11 per diluted common share in the second quarter
of 2017. Second quarter 2018 adjusted net income and diluted earnings
per share are adjusted for a gain on bargain purchase associated with
the acquisition of Tembec Inc. ("Tembec"). Adjusted net income and
diluted earnings per common share amounts for second quarter 2017 are
adjusted for transaction costs and an unrealized gain on a derivative
instrument both associated with the acquisition of Tembec.

Year to date 2018 net income was $78 million, or $1.22 per diluted
common share compared to $14 million, or $0.18 per diluted common share
for the first half of 2017. Earnings increased in the current year due
to the November 2017 acquisition of Tembec. Year to date adjusted net
income was $63 million, or $0.99 per diluted common share, compared
to $18 million, or $0.26 per diluted common share in 2017. Year to date
2018 adjusted net income and diluted earnings per share are adjusted for
a gain on bargain purchase associated with the acquisition of Tembec.
Adjusted net income and diluted earnings per common share amounts
for the first half of 2017 are adjusted for transaction costs and an
unrealized gain on a derivative instrument both associated with the
acquisition of Tembec.

"With strong demand in our pulp and forest products segments and
improved performance in our manufacturing operations, we delivered solid
earnings for the quarter, underscoring the earnings potential of the new
portfolio," said Paul Boynton, Chairman, President and Chief Executive
Officer. "We remain committed to a disciplined and balanced capital
allocation program as evidenced by our investment of $23 million in
strategic capital projects, debt reduction of $12 million and $29
million of capital returned to shareholders through dividends and common
stock repurchases through the first half of the year."

Second Quarter and Year to Date Operating Results

In the following tables, the Company's net sales and operating results
for the second quarter and first half of 2018 are compared against the
prior year comparable period results which preceded the acquisition of
Tembec. In addition, the 2018 net sales and operating results are
compared against the combined net sales and operating results which
assume that the Company's prior year comparable period had been combined
with Tembec's.

       

Net sales comprised the following for the periods presented:

 
Three Months Ended Six Months Ended
Net sales (in millions)

June 30,
2018

   

June 24,
2017

   

Combined1
June 24, 2017

June 30,
2018

   

June 24,
2017

   

Combined1
June 24, 2017

High Purity Cellulose $ 285 $ 201 $ 303 $ 568 $ 403 $ 604
Forest Products 97 84 196 167
Pulp 91 73 176 137
Paper 84 76 160 148
Eliminations (15 )   (15 ) (36 )   (33 )
Total net sales $ 542   $ 201   $ 521   $ 1,064   $ 403   $ 1,023  
 
       

Operating income comprised the following for the periods presented:

 
Three Months Ended Six Months Ended
Operating income (loss) (in millions)

June 30,
2018

   

June 24,
2017

   

Combined1
June 24, 2017

June 30,
2018

   

June 24,
2017

   

Combined1
June 24, 2017

High Purity Cellulose $ 28 $ 31 $ 43 $ 49 $ 66 $ 93
Forest Products 17 10 27 16
Pulp 26 10 49 15
Paper 7 12 10 23
Corporate (12 ) (17 ) (21 ) (23 ) (25 ) (35 )
Total operating income $ 66   $ 14   $ 54   $ 112   $ 41   $ 112  
 
1 Combined net sales and operating income (loss)
represents the combination of Tembec's net sales and operating
earnings as of June 24, 2017, adjusted to reflect the estimated
conversion from International Financial Reporting Standards to U.S.
Generally Accepted Accounting Principles for certain material
amounts and translated at the historical quarterly average exchange
rate for the periods presented, with the Company's net sales and
operating income for the comparable periods. The adjustments
represent the Company's best estimates and are subject to change
should additional information become available. The combined net
sales and operating results of the Company and Tembec are presented
for illustrative purposes only and do not necessarily reflect the
net sales or operating results that would have resulted had the
acquisition occurred for the period, nor project the results of
operations for any future date or period.
 

High Purity Cellulose

Operating income for the three and six month periods ended June 30, 2018
decreased over the comparable 2017 periods by $3 million and $17
million, respectively. These decreases were primarily driven by lower
cellulose specialties prices and volumes from the Company's historical
operations partially offset by the operating income from the Tembec
acquisition.

On a combined basis, operating income for the three and six month
periods ended June 30, 2018 decreased over the comparable 2017 periods
by $15 million and $44 million, respectively. These decreases were
primarily driven by the expected decrease in cellulose specialties sales
prices and volumes combined with higher chemical and energy costs. The
increased chemical and energy costs were partially offset by increased
productivity as well as transformation and synergy savings during the
periods.

Forest Products

Operating income for the three and six month periods ended June 30, 2018
increased over the comparable 2017 periods by $17 million and $27
million, respectively, driven by the Tembec acquisition.

On a combined basis, operating income for the three and six month
periods ended June 30, 2018 increased $7 million and $11 million,
respectively, primarily due to an increase in lumber prices of 31 and 30
percent, respectively, partially offset by lower sales volumes, duties
imposed on shipments to the U.S. and higher costs for wood and
transportation.

Pulp

Operating income for the three and six month periods ended June 30, 2018
increased over the comparable 2017 periods by $26 million and $49
million, respectively, driven by the Tembec acquisition.

On a combined basis, operating income for the three and six month
periods ended June 30, 2018 increased $16 million and $34 million,
respectively, primarily due to improved high-yield pulp prices of 29 and
32 percent, respectively.

Paper

Operating income for the three and six month periods ended June 30, 2018
increased over the comparable 2017 periods by $7 million and $10
million, respectively, driven by the Tembec acquisition.

On a combined basis, operating income for the three and six month
periods ended June 30, 2018 decreased $5 million and $13 million,
respectively, primarily due to higher pulp costs in paperboard, which
benefits our Pulp segment, duties imposed on U.S. shipments of newsprint
and increased amortization and depreciation related to the purchase
accounting associated with the acquisition of Tembec. These benefits
were offset in part by higher newsprint sales prices and volumes and
higher paperboard sales prices.

Transformation and Synergy Savings

During the first half of 2018, the Company achieved approximately $18
million of its $40 million cost transformation target for 2018,
excluding one-time costs. Approximately $11 million of the savings were
related to the synergy activities and are associated with reduced
corporate expenses and enhanced procurement practices. Synergy savings
required approximately $1 million in one-time costs to achieve these
results. The Company now expects to exceed its Cost Transformation
target for 2018.

Non-Operating Expenses

Interest expense was $15 million for the second quarter of 2018 and $30
million for the first half of the year. The increases of $6 million and
$12 million over the prior year three and six month periods,
respectively, were due to higher debt balances and interest rates
associated with the debt used to finance the acquisition of Tembec.
Interest income and other expenses, net, increased in the current year
primarily due to the favorable impact of Tembec's pension plans on other
components of net periodic pension costs.

Non-operating expenses also includes a $15 million adjustment to the
gain on bargain purchase associated with the acquisition of Tembec in
the fourth quarter of 2017. The adjustment was recorded in the second
quarter of 2018.

Income Tax Expense

The year to date effective tax rate was 27 percent for 2018, compared to
42 percent in the prior year period. The current year to date effective
rate differs from the current federal statutory rate of 21 percent
primarily due to different statutory tax rates of foreign operations and
certain additional U.S. taxes on foreign derived income implemented as
part of the Tax Cut and Jobs Act enacted in December 2017, partially
offset by a nontaxable bargain purchase adjustment included in pretax
income. The prior year to date effective tax rate differed from the then
enacted federal statutory rate of 35 percent primarily due to the
unfavorable tax impact of the accounting for the 2014 employee incentive
stock program which did not pay out as a result of not meeting the
required performance criteria.

Cash Flows and Liquidity

Year to date, the Company generated operating cash flows of $89 million
and adjusted free cash flows of $48 million. Working capital used $67
million of cash as a result of higher inventories, increases in deferred
costs related to the annual maintenance outages at all four high purity
plants, and the timing of customer incentive and prepayments. Working
capital is expected to improve during the second half of the year. Year
to date, the Company invested $64 million in capital expenditures which
included approximately $23 million of strategic capital.

The Company paid down $12 million of debt year to date and ended the
quarter with adjusted net debt of $1,149 million and $297 million of
total liquidity, including $80 million of cash and $217 million
available under the revolving credit facility after taking into account
outstanding letters of credit. The Company also returned $29 million of
capital to shareholders through dividends and stock repurchases.

Outlook

High Purity Cellulose

On a combined basis, cellulose specialties prices are anticipated to
decline approximately 4 percent in 2018, reflecting an improved mix, and
sales volumes are expected to decline approximately 2 percent, dependent
on revenue recognition timing. Commodity volumes are expected to be
comparable to the prior year. Profitability is expected to improve in
the second half of 2018 as the annual maintenance outages have been
completed at all four facilities and synergy benefits continue to
favorably impact results. Results in the second half of the year are
expected to represent approximately 55 percent of the annual EBITDA.

Forest Products

Lumber prices are expected to decline from the recent historical high
prices, but profitability is anticipated to remain favorable as solid
demand from the U.S. housing market is expected to continue. Duties on
lumber sales into the U.S. are anticipated to affect approximately 50
percent of the Company's sales in this segment and reduce EBITDA by
approximately $30 million during 2018.

Pulp

High-yield pulp prices are expected to remain near historically high
levels in the near-term and moderate by year end. Strong demand for
pulp, reduced recycled fiber imports to China, and supply side issues in
the global pulp industry continue to support pulp prices. With no
significant new capacity expected in the pulp markets in the near
future, supply-demand dynamics indicate continued strong market
conditions.

Paper

Paperboard markets are expected to remain stable, though peak pulp
prices which benefit the Company's Pulp segment will negatively impact
margins. In newsprint, reduced industry production capacity and duties
have led to higher prices which have effectively offset the impact of
the duties. Profitability is expected to remain stable in the near-term.
Additional supply or a more rapid decline in demand due to the duties
could negatively impact newsprint results.

Capital Allocation and Investment

The Company anticipates that it will spend approximately $100 to $110
million in maintenance capital expenditures across its businesses in
2018. In addition, the Company anticipates spending approximately $45
million on high-return strategic projects in 2018. These strategic
opportunities are predominantly focused in the High Purity Cellulose and
Forest Products segments with an average pay-back of less than 2 years.

"With elevated commodity prices, the completion of planned maintenance
outages at all four high purity facilities, accelerating synergies and
the weighting of EBITDA toward the second half of the year for the high
purity business, we expect to deliver solid results for the remainder of
2018," Boynton stated. "We will continue to allocate capital to
high-return investments, debt reduction and stock repurchases."

Conference Call Information

Rayonier Advanced Materials Inc. (NYSE:RYAM) will host a conference call
and live webcast at 10:00 a.m. ET on August 3 to discuss these results.
Supplemental materials and access to the live audio webcast will be
available at www.rayonieram.com.
A replay of this webcast will be archived on the company's website
shortly after the call. Investors may listen to the conference call by
dialing 877-407-8293, no passcode required. For international parties,
dial 201-689-8349. A replay of the teleconference will be available one
hour after the call ends until 6:00 p.m. ET on Friday, August 17, 2018.
The replay dial-in number within the U.S. is 877-660-6853, international
is 201-612-7415, Conference ID: 13681816.

About Rayonier Advanced Materials

Rayonier Advanced Materials is a global leader of cellulose-based
technologies, including high purity cellulose specialties, a natural
polymer commonly found in cell phones, computer screens, filters and
pharmaceuticals.
The Company also manufactures products for
lumber, paper and packaging markets.
With manufacturing
operations in the U.S., Canada and France, Rayonier Advanced Materials
employs approximately 4,200 people and generates approximately US$2
billion of pro forma revenues. 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,"
"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, especially in commodity markets, 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.

Non-GAAP Financial Measures

This earnings release and the accompanying schedules 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 on Schedules D - F of this
earnings release. 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.

       

Rayonier Advanced Materials Inc.

Condensed Consolidated Statements of Income

June 30, 2018 (Unaudited)

(millions of dollars, except per share information)

 
Three Months Ended Six Months Ended
June 30,     March 31,     June 24, June 30,     June 24,
2018 2018 2017 2018 2017
Net Sales $ 542 $ 522 $ 201 $ 1,064 $ 403
Cost of Sales (440 ) (442 ) (167 ) (882 ) (331 )
Gross Margin 102 80 34 182 72
Selling, general & administrative expenses (25 ) (23 ) (18 ) (48 ) (28 )
Duties (12 ) (8 ) (20 )
Other operating income (expense), net 1   (3 ) (2 ) (2 ) (3 )
Operating Income 66 46 14 112 41
Interest expense (15 ) (15 ) (9 ) (30 ) (18 )
Interest income and other expenses, net 7 3 10 (1 )
Gain on bargain purchase 15 15
Gain on derivative instrument     2     2  
Income Before Income Taxes 73 34 7 107 24
Income tax expense (19 ) (10 ) (2 ) (29 ) (10 )
Net Income Attributable to Rayonier Advanced Materials Inc. $ 54   $ 24   $ 5   $ 78   $ 14  
Mandatory convertible stock dividends (4 ) (3 ) (4 ) (7 ) (7 )
Net Income Available to Rayonier Advanced Materials Inc. Common
Stockholders
$ 50   $ 21   $ 1   $ 71   $ 7  
 
Earnings Per Share of Common Stock
Basic earnings per share $ 0.97   $ 0.41   $ 0.03   $ 1.38   $ 0.18  
Diluted earnings per share $ 0.83   $ 0.38   $ 0.03   $ 1.22   $ 0.18  
 
Adjusted net income per share (a) $ 0.60   $ 0.38   $ 0.11   $ 0.99   $ 0.26  
 
Shares Used for Determining
Basic EPS 51,448,438   51,127,726   42,387,578   51,288,982   42,368,652  
Diluted EPS 64,025,456   63,977,952   43,223,599   63,965,404   43,155,283  
 
(a)   Adjusted net income per share is a non-GAAP measure. See Schedule F
for a reconciliation to the nearest GAAP measure.
 
       

Rayonier Advanced Materials Inc.

Condensed Consolidated Balance Sheets

June 30, 2018 (Unaudited)

(millions of dollars)

 

June 30,
2018

December 31,
2017

Assets
Cash and cash equivalents $ 80 $ 96
Other current assets 617 550
Property, plant and equipment, net 1,398 1,408
Other assets 575   589
$ 2,670   $ 2,643
Liabilities and Stockholders' Equity
Current maturities of long-term debt $ 10 $ 9
Other current liabilities 312 298
Long-term debt and capital lease obligations 1,214 1,232
Non-current liabilities for disposed operations 148 151
Other non-current liabilities 247 259
Total stockholders' equity 739   694
$ 2,670   $ 2,643
 
   

Rayonier Advanced Materials Inc.

Condensed Consolidated Statements of Cash Flows

June 30, 2018 (Unaudited)

(millions of dollars)

 
Six Months Ended

June 30,
2018

   

June 24,
2017

Cash Provided by Operating Activities:
Net income $ 78 $ 14
Gain on bargain purchase (13 )
Depreciation and amortization 70 42
Other items to reconcile net income to cash provided by operating
activities
31 18
Changes in working capital and other assets and liabilities (77 ) 13  
89   87  
Cash Used for Investing Activities:
Capital expenditures (64 ) (32 )
(64 ) (32 )
Cash Used for Financing Activities:
Changes in debt (12 ) (2 )
Dividends paid (14 ) (10 )
Common stock repurchased (15 )  
(41 ) (12 )
Cash and Cash Equivalents:
Change in cash and cash equivalents (15 ) 43
Net effect of foreign exchange on cash and cash equivalents (1 )
Balance, beginning of year 96   326  
Balance, end of period $ 80   $ 369  
 
       

Rayonier Advanced Materials Inc.

Sales Volumes and Average Prices

June 30, 2018 (Unaudited)

 
Three Months Ended Six Months Ended

June 30,
2018

   

June 24,
2017

   

Combined1
June 24,
2017

June 30,
2018

   

June 24,
2017

   

Combined1
June 24,
2017

Average Sales Prices:
High Purity Cellulose ($ per metric ton):
Cellulose Specialties $ 1,324 $ 1,434 $ 1,366 $ 1,350 $ 1,453 $ 1,369
Commodity Products 828 764 814 816 740 796
Forest Products ($ per thousand board feet):
Lumber 534 408 506 388
Pulp ($ per metric ton):
High-Yield pulp 674 523 664 503
Paper ($ per metric ton):
Paperboard 1,136 1,124 1,145 1,110
Newsprint 611 454 572 455
 
Sales Volumes:
High Purity Cellulose (thousands of metric tons):
Cellulose Specialties 150 110 158 303 217 316
Commodity Products 65 54 70 119 113 145
Forest Products (millions of board feet):
Lumber 153 165 316 328
Pulp (thousands of metric tons):
High-Yield pulp 125 130 245 251
Paper (thousands of metric tons):
Paperboard 45 46 86 94
Newsprint 55 51 107 94
 
1 Combined net sales and operating income (loss)
represents the combination of Tembec's net sales and operating
earnings as of June 24, 2017, adjusted to reflect the estimated
conversion from International Financial Reporting Standards to U.S.
Generally Accepted Accounting Principles for certain material
amounts and translated at the historical quarterly average exchange
rate for the periods presented, with the Company's net sales and
operating income for the comparable periods. The adjustments
represent the Company's best estimates and are subject to change
should additional information become available. The combined net
sales and operating results of the Company and Tembec are presented
for illustrative purposes only and do not necessarily reflect the
net sales or operating results that would have resulted had the
acquisition occurred for the period, nor project the results of
operations for any future date or period.
   

Rayonier Advanced Materials Inc.

Reconciliation of Non-GAAP Measures

June 30, 2018 (Unaudited)

(millions of dollars)

 
EBITDA by Segment: Three Months Ended June 30, 2018

Forest
Products

    Pulp     Paper    

High Purity
Cellulose

   

Corporate
& Other

    Total
Net Income $ 16 $ 26 $ 9 $ 33 $ (30 ) $ 54
Depreciation and amortization 2 1 4 26 33
Interest expense, net 15 15
Income tax expense         19   19  
EBITDA 18 27 13 59 4 121
Gain on bargain purchase       (3 ) (12 ) (15 )
Adjusted EBITDA $ 18   $ 27   $ 13   $ 56   $ (8 ) $ 106  
 
Three Months Ended June 24, 2017

Forest
Products

Pulp Paper

High Purity
Cellulose

Corporate
& Other

Total
Net Income $ $ $ $ 31 $ (26 ) $ 5
Depreciation and amortization 20 20
Interest expense, net 9 9
Income tax expense         2   2  
EBITDA 51 (15 ) 36
Acquisition related costs 8 8
Gain on derivative instrument         (2 ) (2 )
Adjusted EBITDA $   $   $   $ 51   $ (9 ) $ 42  
 
EBITDA by Segment:     Six Months Ended June 30, 2018

Forest
Products

    Pulp     Paper    

High Purity
Cellulose

   

Corporate
& Other

    Total
Net Income $ 27 $ 49 $ 14 $ 57 $ (69 ) $ 78
Depreciation and amortization 3 2 9 56 70
Interest expense, net 30 30
Income tax expense         29   29  
EBITDA 30 51 23 113 (10 ) 207
Gain on bargain purchase       (3 ) (12 ) (15 )
Adjusted EBITDA $ 30   $ 51   $ 23   $ 110   $ (22 ) $ 192  
 
Six Months Ended June 24, 2017

Forest
Products

Pulp Paper

High Purity
Cellulose

Corporate
& Other

Total
Net Income $ $ $ $ 64 $ (50 ) $ 14
Depreciation and amortization 43 43
Interest expense, net 17 17
Income tax expense         10   10  
EBITDA 107 (23 ) 84
Acquisition related costs 8 8
Gain on derivative instrument         (2 ) (2 )
Adjusted EBITDA $   $   $   $ 107   $ (17 ) $ 90  
 
   

Rayonier Advanced Materials Inc.

Reconciliation of Non-GAAP Measures (Continued)

June 30, 2018 (Unaudited)

(millions of dollars, except per share information)

 
Six Months Ended
Adjusted Free Cash Flows (a): June 30,
2018
    June 24,
2017
Cash provided by operating activities $ 89 $ 87
Capital expenditures (41 ) (31 )
Adjusted Free Cash Flows $ 48   $ 56  
(a)   We define adjusted free cash flows as cash provided by operating
activities adjusted for capital expenditures excluding strategic
capital. 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 (a): June 30,
2018

December 31,
2017

Current maturities of long-term debt $ 10 $ 9
Long-term debt & capital lease obligation 1,214   1,232  
Total debt 1,224 1,241
Original issue discount, premiums and debt issuance costs 5 5
Cash and cash equivalents (80 ) (96 )
Adjusted Net Debt $ 1,149   $ 1,150  
(a)   We define adjusted net debt 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.
 
       

Rayonier Advanced Materials Inc.

Reconciliation of Non-GAAP Measures (Continued)

June 30, 2018 (Unaudited)

(millions of dollars, except per share information)

 
Three Months Ended Six Months Ended

June 30,
2018

   

March 31,
2018

   

June 24,
2017

June 30,
2018

   

June 24,
2017

Adjusted Operating Income and Adjusted Net Income (a): $    

Per
Diluted
Share

$    

Per
Diluted
Share

$    

Per
Diluted
Share

$    

Per
Diluted
Share

$    

Per
Diluted
Share

Operating Income $ 66 $ 46 $ 14 $ 112 $ 41
Acquisition related costs     8     8  
Adjusted Operating Income $ 66   $ 46   $ 22   $ 112   $ 49  
 
Net Income $ 54 $ 0.83 $ 24 $ 0.38 $ 5 $ 0.03 $ 78 $ 1.22 $ 14 $ 0.18
Gain on bargain purchase (15 ) (0.23 ) (15 ) (0.23 )
Acquisition related costs 8 0.18 8 0.18
Loss (gain) on derivative instrument (2 ) (0.05 ) (2 ) (0.05 )
Tax effects of adjustments         (2 ) (0.05 )     (2 ) (0.05 )
Adjusted Net Income $ 39   $ 0.60   $ 24   $ 0.38   $ 9   $ 0.11   $ 63   $ 0.99   $ 18   $ 0.26  
(a)   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 bargain purchase, acquisition related costs, fair
market valuation of inventory, and loss (gain) on derivative.
Adjusted operating income and adjusted net income are not
necessarily indicative of results that may be generated in future
periods.
 

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