Rayonier Advanced Materials Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed March 1, 2023. Although the request references 2022 Q4, this filing reports annual results. It does not provide a clear standalone fourth-quarter income statement or cash-flow summary.
Business context
RYAM produces high-purity cellulose, paperboard and high-yield pulp at facilities in the U.S., Canada and France. Lumber and newsprint operations sold in 2021 are reported as discontinued operations. High Purity Cellulose is the largest segment and primary profit driver.
Financial performance
| Metric | FY2022 | FY2021 |
|---|---|---|
| Net sales | $1,717 million | $1,408 million |
| Gross margin | $123 million; 7.2% | $75 million; 5.3% |
| Operating income (loss) | $26 million; 1.5% margin | $(10) million; (0.7)% margin |
| Continuing-operations net income (loss) | $(27) million | $(50) million |
| Net income (loss), including discontinued operations | $(15) million | $66 million |
| Operating cash flow from continuing operations | $69 million | $74 million |
| Adjusted EBITDA from continuing operations (non-GAAP) | $177 million | $127 million |
| Adjusted free cash flow from continuing operations (non-GAAP) | $(35) million | $(2) million |
Revenue rose 22%, primarily on higher prices across all segments. Segment operating income was $31 million for High Purity Cellulose (up from $20 million), $37 million for Paperboard (up from $13 million), and $16 million for High-Yield Pulp (up from $7 million). Higher prices and volumes helped offset inflation in wood, chemicals, energy and logistics. Continuing-operations results remained loss-making; the prior-year net profit was substantially supported by discontinued-operations income.
Liquidity, debt and capital
- Cash and cash equivalents were $152 million at year-end, versus $253 million in 2021. Net available ABL borrowing capacity was $130 million, after $36 million of letters of credit; a French factoring line provided a further $19 million of availability.
- Total debt on the balance sheet was $853 million, down from $929 million; principal debt payments were $859 million. The debt-to-capital ratio was 51%, versus 53%.
- Cash from continuing operations was below capital expenditures: continuing-operations capital expenditures, net, were $138 million. Adjusted free cash flow excludes certain strategic capital spending and was negative $35 million.
- RYAM repaid $47 million principal of its 5.50% Senior Notes and CAD $24 million (about $18 million) of term loans during 2022. Approximately $323 million principal remained on the Senior Notes due 2024; the company identified June 2024 as its next significant maturity. It withdrew a contemplated secured-notes offering because terms were unattractive.
- The company reported compliance with debt covenants at year-end and said it believed cash flows, ABL availability and potential capital-market access would meet anticipated needs. No dividend has been declared since its suspension in 2019.
Outlook, commentary and notable items
- Management expected 2023 cellulose-specialties average selling prices to be high single-digit percentages above the 2022 average. Commodity prices were expected to decline, with volumes potentially improving as production and logistics constraints ease.
- Paperboard prices were expected to rise further, with slightly higher volumes and lower pulp input prices. High-yield pulp pricing had weakened amid slower global demand; management expected volumes to improve slightly. These are market expectations, not formal consolidated earnings guidance.
- A $146-per-metric-ton cellulose-specialties surcharge, introduced in April 2022 in response to input-cost inflation, was phased out in early 2023 during contract negotiations.
- The Tartas, France second-generation bioethanol project was expected to begin operating in 2024. Estimated project cost was approximately $39 million, including $29 million planned for 2023; funding plans included $28 million of green loans and $4 million of grants. Management estimated incremental annual EBITDA of $9–$11 million beginning in 2024.
- The company recorded a $38 million long-term receivable related to Canadian softwood-lumber duties paid before the 2021 asset sale. Collection depends on final resolution of the dispute and administrative reviews; timing and recovery are uncertain.
- Environmental liabilities were approximately $171 million. The company estimated reasonably possible additional exposure of up to approximately $85 million, subject to significant estimation uncertainty.
Key investor risks and facts to verify
- Verify the timing and terms of refinancing or repayment of the 2024 Senior Notes, including the debt instruments’ springing-maturity provisions and their interaction with the 2026 secured notes.
- Assess cash generation against ongoing and strategic capital spending, working-capital needs, and elevated input and logistics costs.
- Track the $38 million lumber-duty receivable, related appeals and reviews, and the timing and amount of any cash recovery.
- Review environmental remediation estimates and potential exposure above recorded liabilities; the filing identifies this as a critical audit matter.
- Evaluate 2023 market assumptions, including expected cellulose-specialties pricing, commodity-price declines, demand and execution of planned production improvements.
- Monitor bioethanol project spending, financing, construction and startup schedule, and whether projected EBITDA is achieved.
- Consider customer concentration (the ten largest customers represented about 40% of 2022 revenue), international exposure (67% of sales), input-cost volatility, facility reliability, and labor negotiations. Approximately 71% of the workforce was unionized, and one agreement covering about 660 employees had expired while negotiations continued.