# Rayonier Advanced Materials Inc.: Form 10-K for the period ended Dec 31, 2023 - Company: [Rayonier Advanced Materials Inc.](/companies/ryam.md) (CIK 1597672) - Form: 10-K - Filed: 2024-02-29 - Accepted by EDGAR: Feb 29, 2024, 16:06 ET - Period: 2023-12-31 - Accession: 0001597672-24-000006 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/1597672/000159767224000006/ryam-20231231.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1597672/000159767224000006/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2023-12-31. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Revenue | 12 months, 2023-01-01 to 2023-12-31 | $1.64bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax | | Cost of revenue | 12 months, 2023-01-01 to 2023-12-31 | $1.56bn | us-gaap:CostOfGoodsAndServicesSold | | Gross profit | 12 months, 2023-01-01 to 2023-12-31 | $88.2m | us-gaap:GrossProfit | | Research and development | 12 months, 2023-01-01 to 2023-12-31 | $6.0m | us-gaap:ResearchAndDevelopmentExpense | | Selling, general and administrative | 12 months, 2023-01-01 to 2023-12-31 | $75.7m | us-gaap:SellingGeneralAndAdministrativeExpense | | Operating income | 12 months, 2023-01-01 to 2023-12-31 | −$65.3m | us-gaap:OperatingIncomeLoss | | Interest expense | 12 months, 2023-01-01 to 2023-12-31 | $73.8m | us-gaap:InterestExpense | | Income tax | 12 months, 2023-01-01 to 2023-12-31 | −$32.3m | us-gaap:IncomeTaxExpenseBenefit | | Net income | 12 months, 2023-01-01 to 2023-12-31 | −$101.8m | us-gaap:NetIncomeLoss | | Diluted EPS | 12 months, 2023-01-01 to 2023-12-31 | −$1.57 | us-gaap:EarningsPerShareDiluted | | Basic EPS | 12 months, 2023-01-01 to 2023-12-31 | −$1.57 | us-gaap:EarningsPerShareBasic | | Diluted shares (weighted) | 12 months, 2023-01-01 to 2023-12-31 | 65,108,397 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Operating cash flow | 12 months, 2023-01-01 to 2023-12-31 | $136.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Cash and equivalents | at 2023-12-31 | $75.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue | | Current assets | at 2023-12-31 | $575.1m | us-gaap:AssetsCurrent | | Total assets | at 2023-12-31 | $2.18bn | us-gaap:Assets | | Current liabilities | at 2023-12-31 | $375.8m | us-gaap:LiabilitiesCurrent | | Current portion of debt | at 2023-12-31 | $25.3m | us-gaap:DebtCurrent | | Shareholders' equity | at 2023-12-31 | $746.4m | us-gaap:StockholdersEquity | ## Business As filed, 34,356 characters. We are a global leader of specialty cellulose materials with a broad offering of high purity cellulose specialties, a natural polymer used in the production of a variety of specialty chemical products, including liquid crystal displays, filters, textiles and performance additives for pharmaceutical, food and other industrial applications. Building upon more than 95 years of experience in cellulose chemistry, we provide some of the highest quality high-purity cellulose pulp products that make up the essential building blocks for our customers’ products while providing exceptional service and value. We also produce a unique, lightweight multi-ply paperboard product and a bulky, high-yield pulp product. Our paperboard is used for production in the commercial printing, lottery ticket and high-end packaging sectors. Our high-yield pulp is used by paperboard producers, as well as in traditional printing, writing and specialty paper manufacturing. ### Strategic Growth Investments We focus our strategic investments in projects that optimize and align our assets to meet the ever-growing demand for renewable products. Our portfolio is aligned with sustainability drivers, including the European Union Green Deal for the Renewable Energy Directive II. Our ongoing projects include: - Our investment in Anomera, who manufactures CNC, a patented, biodegradable product used as an ingredient in cosmetics and various industrial materials, at our Temiscaming facility; - Development of a prebiotic for enhanced gut health in poultry and swine at our Jesup facility, which is expected to support sustainable poultry and swine farming and provide a healthy alternative nutrient to enhance gut health; - Production of 2G bioethanol fuel at our Tartas facility, intended to help meet the demand for Europe’s fast-growing biofuels market and further improve the sustainability of our operating model. With production expected to begin in the first quarter of 2024, we will be among the first in France to produce wood-based 2G bioethanol fuel, a product that is noncompetitive to the human food supply and is expected to help petrochemical companies improve the climate profile of their energy offerings in the European market; - Production of 2G bioethanol fuel at our Fernandina facility, a multi-year project expected to have similar carbon impacts as our Tartas bioethanol facility and may be used in additional market segments, including as a feedstock for sustainable aviation fuel; and - Our involvement with Altamaha Green Energy, a start-up entity bidding on an annual contract with Georgia Power to sell green electricity from a new plant to be constructed adjacent to our Jesup facility. The multi-year project offers significant potential long-term benefits to RYAM. Our strategic investment approach unlocks the capabilities of our facilities and capitalizes on the sustainably harvested trees that we use as our primary feedstock. ### Our Sustainability Profile We operate four production facilities strategically located in the U.S., Canada and France. Our Fernandina Beach and Tartas facilities are ISCC PLUS and ISCC EU certified, respectively, underscoring our commitment to independently audited sustainability standards and processes within our supply chain. Moreover, all our production facilities hold certification in both the Forest Stewardship Council and Programme for the Endorsement of Forest Certification Chain of Custody standards. We believe this dual certification reinforces our dedication to responsible and sustainable forestry practices throughout our manufacturing processes. Our fluff pulp, produced at our Jesup facility, carries the distinction of being certified as an “Inspected Raw Material” by Nordic Swan Ecolabeling. This label signifies adherence to rigorous environmental requirements at every stage of manufacturing, assuring consumers and commercial buyers of our product’s sustainable and environmentally friendly nature. In 2021, we set an ambitious goal of achieving at least a 40 percent reduction in overall Scope 1 and Scope 2 GHG emissions, on both an absolute and intensity basis, by 2030, using 2020 as a baseline. We are on track to meet this objective, with external verification confirming total reductions of 15 percent and 10 percent in absolute and intensity emissions, respectively, for 2021 and 2022. This translates to an aggregate goal achievement for absolute and intensity emissions of approximately 40 percent and 25 percent, respectively. We continue to actively monitor and pursue additional opportunities for sustainability. Our 2023 results are pending confirmation. ### Energy Our facilities are energy intensive; however, over 75 percent of the energy consumed by them is derived from renewable sources, primarily biomass. We do not harvest living trees directly for energy production, but rather use production process biomass residuals or waste to generate energy in our facilities. The remaining energy consumed is primarily sourced from natural gas. ### Water Water is utilized during various stages of our production cycle, including wood chip digestion, pulp washing and screening and fiber handling and transportation. Water is also necessary for steam and on-site power generation, air emissions control, process cooling and equipment cleaning. Each gallon of water gets used and reused multiple times in our process and 98 out of every 100 gallons we use are treated and returned to natural water sources in keeping with stringent government-issued permit limitations. The remaining two gallons are either captured in the final product or evaporated during manufacturing. ### Waste Our facilities are designed to minimize waste. We recycle our pulping chemicals, produce environmentally friendly co-products from the material extracted from the trees and generate energy from biomass residuals. We take special care to limit our generation of hazardous or dangerous wastes through source reduction, reuse and recycling. We seek to comply with all waste management expectations in each country where we operate. Each facility has ongoing relationships with local recyclers and we strive to reuse or recycle as much as possible. Certified waste handlers dispose of any hazardous waste. ### Business Operations Prior to June 27, 2014, we consisted of Rayonier Inc.’s wholly-owned performance fibers business, which was engaged primarily in the production of cellulose specialties. On that date, we separated from Rayonier Inc. and started our business as an independent, publicly-traded company. In November 2017, we completed the acquisition of Tembec Inc., a manufacturer of cellulose specialties, lumber, paperboard, newsprint and high-yield pulp. In August 2021, we sold the lumber and newsprint assets acquired in the Tembec acquisition. As a result of this sale, the operating results of the lumber and newsprint operations are presented as discontinued operations in our Financial Statements. See Note 3—Discontinued Operations to our Financial Statements for further information. We currently operate the following business segments, to which all prior period disclosures have been conformed: - High Purity Cellulose - Paperboard - High-Yield Pulp See Note 20—Segment and Geographical Information to our Financial Statements for further information. In October 2023, we announced that we engaged a financial advisor to explore the potential sale of our Paperboard and High-Yield Pulp assets located at our Temiscaming site. The process is ongoing for this strategic review, which is consistent with our commitment to align our portfolio with our long-term growth strategy and providing flexibility to pay down debt, reduce leverage and minimize earnings volatility. ### High Purity Cellulose Our High Purity Cellulose segment, and in particular, cellulose specialties products, is the primary driver of our profitability. Cellulose specialties are natural polymers, used as raw materials to manufacture a broad range of consumer-oriented products such as liquid crystal displays, impact-resistant plastics, thickeners for food products, pharmaceuticals, cosmetics, cigarette filters, high-tenacity rayon yarn for tires and industrial hoses, food casings, paints and lacquers. We manufacture products tailored to the precise and demanding chemical and physical specifications of our customers, achieving industry-leading purity and product functionality. Our ability to consistently manufacture high-quality cellulose specialties products is the result of our proprietary production processes, intellectual property and over 95 years of technical expertise and knowledge of cellulosic chemistry. We believe end-use market diversity reduces our exposure to a potential global recession. In addition to cellulose specialties, a significant portion of our production capacity is dedicated to manufacturing high-purity commodity products for absorbent materials and viscose applications. Absorbent materials, typically referred to as fluff fibers, are used as an absorbent medium in products such as disposable baby diapers, feminine hygiene products, incontinence pads, convalescent bed pads, industrial towels and wipes and non-woven fabrics. Commodity viscose pulp is a raw material required for the manufacture of viscose staple fibers which are used in woven applications, such as rayon textiles for clothing and other fabrics, and in non-woven applications, such as baby wipes, cosmetic and personal wipes, industrial wipes and mattress ticking. Cellulose specialties typically contain over 95 percent cellulose, while commodity products typically contain less than 95 percent cellulose. Our specialized assets, capable of creating the world’s leading high purity cellulose products, are also suited for generating biofuels, bioelectricity and other biomaterials such as lignin and tall oils. Our 2G bioethanol project, for example, will capture residual sugars from our existing pulp process, which we will then use in the production of wood-based 2G bioethanol fuel. Our Tartas bioethanol facility is expected to be operational in the first quarter of 2024. Our four production facilities have a combined annual production capacity of 1,045,000 MTs of cellulose specialties and commodity products. Of our total annual capacity, we dedicate 270,000 MTs of annual production to commodity products, primarily absorbent materials. Wood fiber, chemicals and energy represent approximately 50 percent of our per MT cost of sales. Labor, manufacturing and maintenance supplies, depreciation, manufacturing overhead and transportation costs comprise the rest of our cost of sales. ### Products #### Cellulose Specialties Cellulose specialties are a natural polymer primarily derived from either wood or cotton and are used as a principal raw material to manufacture a broad range of products. Cellulose specialties generally command a price premium and earn higher margins relative to other commodity wood pulp products. Cellulose specialties are a dissolving wood pulp product which target a combination of high purity and high viscosity. Unlike other wood pulps used for their physical properties, cellulose specialties are sought after for the unique chemical properties and reactivity they impart to downstream products. Derived from wood, our cellulose specialties require high levels of purity, consistency and process knowledge. Our products play a significant role in our customers’ manufacturing processes, which require cellulose specialties of high purity and uniformity for efficient production. As such, our customers demand products of the highest quality. To meet this demand, our products are custom-engineered and manufactured to each customer’s unique specifications and undergo a stringent qualification process, resulting in the quality and consistency that allow our customers to operate more efficiently and cost-effectively. One of our key competitive advantages is our unique ability to leverage our global manufacturing asset base to provide our customers greater supply chain security for cellulose specialties fibers. With four facilities and five manufacturing lines capable of producing cellulose specialties, we are the only cellulose specialties producer in the world with the flexibility to use both hardwood and softwood fibers, kraft and sulfite cooking processes and a variety of proprietary chemical treatments to provide customized product functionality. Additionally, we possess significant knowledge of wood fiber properties and their modification under a sequence of chemical processes, which we have accumulated and developed over 95 years of practical application to satisfy a variety of customer needs. This process knowledge, combined with our manufacturing scale and flexibility and knowledge of customer applications and specifications, makes us the industry’s most adaptable modifier of cellulose fibers. #### Commodity Products We have the ability to shift our High Purity Cellulose segment manufacturing assets from cellulose specialties production to commodity absorbent materials and viscose pulp production. Our operating lines fluctuate production of cellulose specialties and commodity products based on market conditions and to generate the most attractive margins. Absorbent materials, or fluff fibers, are typically used in consumer products such as baby diapers. These fibers provide a medium for fluid acquisition, distribution and retention in the products in which they are incorporated. Commodity viscose pulp is primarily sold to producers of viscose staple fibers, which in turn are used to manufacture rayon fibers, which are widely used in the clothing and textile industries. Shifts in fashion styles and textile fiber blending have increased demand for viscose staple fibers. Additionally, variability in cotton linter supply and increasing environmental concerns about cotton production have resulted in viscose staple producers shifting volume away from cotton linter pulp to wood-based dissolving pulp, absent other pricing factors. #### Biomaterials We are uniquely positioned to meet the rapidly growing demand for renewable materials and sustainable products. Fully unlocking the capabilities of our biorefineries and the sustainably harvested trees we use as our primary feedstock is a core priority. Generally, a tree’s mass is comprised of 50 percent water and 50 percent “dry solids.” Dry solids are comprised of roughly 40 percent cellulose and 60 percent other chemical compounds, including hemicellulose, lignin, sugars and other extractives. These chemical compounds can be utilized to produce sustainable biomaterials, including lignosulfonates, biofuels, prebiotics, crude tall oil, turpentine and bioelectricity. We currently generate and sell lignosulfonates and tall oil soap using these compounds. Lignosulfonates are used to produce a variety of products, including construction materials, dispersants, plant nutrients, leather tanning and fungicides, and tall oil soap is used as feedstock for producing crude tall oil. We also produce bio-generated electricity utilizing renewable biomass. Our Tartas bioethanol facility is expected to be operational in the first quarter of 2024. When complete, this facility will produce 2G bioethanol, a non-food-based ethanol to be utilized as an environmentally-friendly fuel blend supporting transport decarbonization. Commercial sales of this 2G bioethanol are targeted to begin in the first quarter of 2024 under a long-term offtake agreement with a large international petrochemicals company. ### Competition #### Cellulose Specialties Significant intellectual property, capital investment and technical expertise are needed to design and manufacture customized cellulose specialties fibers to exacting customer specifications. The product must be formulated to achieve the desired characteristics, including parameters for purity, viscosity, brightness, reactivity and other physical properties. Product qualification time can be lengthy, extending six to 24 months. Customer relationships are typically long-term and are based on an understanding of the customer’s production processes and on our technical expertise, which we utilize to help solve our customers’ production challenges and support new product development. Establishing a production line and obtaining the necessary production technologies requires substantial capital and ongoing maintenance expenditures. Product performance and customization, technical service and price are principal methods of competition in cellulose specialties. Product performance is primarily determined by the chemical attributes of the pulp, including purity, viscosity and uniformity of the cellulose specialties. Our processes, which are a key element of our intellectual property, are capable of generating cellulose specialties purity levels in excess of 98 percent, as well as the highest levels of viscosity derived from wood pulp. Typically, product pricing is set annually in the fourth quarter for the following year based on discussions with customers and the terms of contractual arrangements. We compete with both domestic and foreign producers in cellulose specialties. Our major competitors include Bracell and Borregaard. Our multiple manufacturing lines, processes and intellectual property allow us to compete in more segments of the cellulose specialties market than any of our competitors. #### Commodity Products The principal method of competition in commodity products is price, as purity and uniformity are less critical differentiators. Pricing for commodity products is typically referenced to published indices or based on publicly available spot market prices. We compete with both domestic and foreign producers of commodity products. For commodity viscose pulp, many competitors derive their commodity viscose pulp from either wood or cotton. However, in recent years, commodity viscose pulp from wood has supplanted cotton as the preferred raw material input for viscose staple fiber production. Although cellulose specialties can generally be sold to meet commodity viscose demand, the reverse is not typically true. Our major competitors for commodity viscose pulp include April/Bracell, Sappi, Lenzing, Aditya Birla Group and Sun Paper. For absorbent materials, our major competitors include International Paper, GP Cellulose, Paper Excellence Group, Klabin and Stora Enso. #### Biomaterials Competition in this space is limited, driven by capital investment, technical expertise and sustainable feedstock that are needed to produce these materials. Each biomaterial product has its own unique market drivers. The primary global market driver for bioethanol is the regulatory agenda towards production of bioethanol with an active participation of GHG emission reduction and the positive impact on climate change. Key growth drivers for lignosulfonates include increasing usage of lignosulfonates in all the market segments where fossil petrochemicals can be replaced by sustainable bioproducts. Pricing for biomaterials that we currently produce is based on the market dynamics of supply and demand. The 2G bioethanol that we expect to supply beginning in the first quarter of 2024 trades at a premium in Europe. Our major biomaterials competitors in the lignosulfonates market include Borregaard and Domsjö Aditya Birla and in the bioethanol market include Borregaard and AustroCel Hallein. ### Paperboard We manufacture paperboard in the Temiscaming plant in Quebec, Canada. Our production facility has an annual production capacity of 180,000 MTs of paperboard. Wood pulp, chemicals and energy represent approximately 80 percent of our per MT cost of sales. Labor, manufacturing and maintenance supplies, depreciation, manufacturing overhead and transportation costs represent our remaining cost of sales. ### Products Products in the Paperboard business include packaging, printing documents, brochures, promotional materials, paperback book and catalog covers, file folders, tags and lottery tickets. We are the only multi-ply paperboard producer in North America, with our competition producing single ply solid bleached sulfite paperboard. ### Competition The principal method of competition in our Paperboard segment is price and product performance. Pricing for paperboard is typically referenced to published indices and marketed through our internal sales team and is impacted by the balance between supply and demand, as affected by global economic conditions, changes in consumption and capacity, the level of customer and producer inventories and fluctuations in currency exchange rates. Product performance is determined based on the physical attributes of the products in a customer’s manufacturing processes. To a lesser extent, quality and service are also competitive determinants. Our major paperboard competitors include WestRock, Graphic Packaging, Clearwater Paper, Sappi, Metsa Group and Billerud. ### High-Yield Pulp We manufacture and market high-yield pulp produced in our Temiscaming plant in Quebec, Canada. Our Temiscaming plant has an annual production capacity of 290,000 MTs of high-yield pulp, approximately 65,000 MTs of which are used internally to produce paperboard. Wood fiber, chemicals and energy represent approximately 40 percent of our per MT cost of sales. Labor, manufacturing and maintenance supplies, depreciation, manufacturing overhead and transportation costs represent our remaining cost of sales. ### Products We produce our high-yield pulp primarily from hardwood aspen, maple and birch species. This unique fiber supply produces a highly sought-after bulky high-yield pulp product. High-yield pulp is used by paper manufacturers to produce paperboard, packaging, printing and writing papers and a variety of other paper products. ### Competition The principal method of competition in the High-Yield Pulp segment is price, however a better quality (i.e., higher bulk) can sometimes command a premium price. Pricing for high-yield pulp is typically referenced to published indices marketed through our internal sales team and is impacted by the balance between supply and demand, as affected by global economic conditions, changes in consumption and capacity, the level of customer and producer inventories and fluctuations in currency exchange rates. Our major high-yield pulp competitors include Winstone Pulp, Sappi, Millar Western, West Fraser, Paper Excellence, SCA and Estonia Cell. ### Raw Materials and Input Costs All of our manufacturing operations require significant amounts of wood fiber, in the form of logs or wood chips, as a raw material and energy to produce our products. Additionally, our High Purity Cellulose and High-Yield Pulp segments’ manufacturing processes require significant amounts of chemicals. These raw materials and input costs are subject to significant changes in price as a result of weather conditions, supply and demand. To control cost, we continually pursue reductions in usage and cost of key supplies, services and raw materials. ### Wood We procure wood chips for our high purity cellulose and high-yield pulp plants through the purchase of chips from lumber producers or the production for chips from roundwood at our own wood chipping facilities. The price for wood is impacted by various factors, including supply and demand, weather events, transportation costs for delivery and overall economic conditions. ### Chemicals Chemicals, which include caustic soda (sodium hydroxide), sulfuric acid, ammonia, sodium chlorate and various specialty chemicals, are purchased under negotiated supply agreements with third parties. The price for these chemicals is impacted by various factors, including supply and demand, environmental regulation, energy prices and overall economic conditions. ### Energy Our energy is primarily produced through the burning of lignin and other residual biomass in recovery and power boilers located at our plants. In addition, our manufacturing facilities utilize significant amounts of fuel oil, natural gas and purchased electricity to supplement their energy requirements. Our energy costs are also impacted by emission allowances purchased or sold at market prices during any given period. In addition, energy prices impact our transportation costs for delivery of raw materials to our manufacturing facilities and delivery of our finished products to customers. ### Intellectual Property Substantially all of our intellectual property relates to our High Purity Cellulose segment. We own patents, trademarks and trade secrets, and have developed significant expertise, particularly in the production of high purity cellulose, which we deem vital to our operations, and also in the production of paperboard. We intend to protect our intellectual property, including, when appropriate, through the filing of patent applications for inventions that we deem important to our business and operations. Our U.S. patents generally have a duration of 20 years from the date of filing. We also require key employees to enter into non-compete agreements and intellectual property assignment agreements as appropriate. ### Seasonality Our operating results may be materially affected by seasonal changes and the related impact on energy prices. ### Customers One customer in the High Purity Cellulose segment represented 10 percent of total sales for the year ended December 31, 2023. No single customer accounted for 10 percent or more of total sales during the years ended December 31, 2022 and 2021. ### Research and Development Our R&D capabilities and activities are primarily focused on our High Purity Cellulose segment. The quality and consistency of our cellulose specialties, together with our R&D capabilities, are important factors in achieving an optimal value for our cellulose specialties products and create a material competitive advantage. Our R&D efforts are directed at further developing products and technologies, improving the quality of cellulose fiber grades, improving manufacturing efficiency and environmental controls and reducing fossil fuel consumption. We also focus our R&D activities on the development and marketing of new products and applications. During the years ended December 31, 2023, 2022 and 2021, our R&D spend totaled $6 million, $7 million and $7 million, respectively. ### Environmental Matters Our manufacturing operations are subject to stringent federal, state, provincial and local environmental laws and regulations concerning air emissions, wastewater discharges, waste handling and disposal and assessment and remediation of environmental contamination, which impact our current ongoing operations and approximately 20 former operating facilities and third party-owned sites classified as disposed operations. These laws and regulations include the Clean Air Act, the Clean Water Act, the RCRA, the CERCLA and similar state laws and regulations impacting U.S. facilities, as well as requirements relating to ancillary matters such as financial assurance of our legal obligations for facility closure and post-closure care. Similar laws and legal requirements also impact current and former operating sites in Canada and France, respectively. In addition to ongoing compliance with laws and regulations, our facilities operate in accordance with various permits, which are issued by state and federal environmental agencies. Many of these permits impose operating conditions which require significant expenditures to ensure compliance. Upon renewal and renegotiation of these permits, the issuing agencies often seek to impose new or additional conditions in response to new environmental laws and regulations or more stringent interpretations of existing laws and regulations. In addition, under many federal environmental laws, private citizens and organizations, such as environmental advocacy groups, have the right to legally challenge permitting and other decisions made by regulatory agencies. Our operations are subject to constantly changing environmental requirements, and interpretations of existing requirements, which are often impacted by new policy initiatives, new and amended legislation and regulation, negotiations involving state and federal governmental agencies and various other stakeholders, as well as, at times, litigation. Our future spending requirements in the area of environmental compliance could change significantly based on the passage of new environmental laws and regulations. Management closely monitors our environmental responsibilities and believes we are in material compliance with current requirements. See Item 1A—Risk Factors for a discussion of the potential impact of environmental risks on our business, as well as Note 10—Environmental Liabilities and Note 21—Commitments and Contingencies to our Financial Statements for further discussion of our estimated environmental liabilities and any environmental-related litigation. ### Human Capital ### Employees We have production facilities in the U.S., Canada and France and sales offices in the U.S., Canada, France, United Kingdom, Japan and China. Of our approximately 2,800 employees, 61 percent belong to labor unions, as all of our manufacturing sites are represented by various local and national unions. We believe our relationships with the union employee representatives are strong. ### Safety The safety of our employees is our highest priority. We are committed to our vision of every employee returning home every day injury-free and we continue to make progress each year. While no injury is acceptable, our company-wide injury rate decreased 8 percent, 5 percent and 17 percent in 2021, 2022 and 2023, respectively. We drive towards our vision of injury-free operations by focusing on five leading safety metrics: housekeeping, leadership engagement, corrective action closure, gas emissions and life safety programs. We continuously track and measure our progress against these metrics at the individual plant level, with each plant accountable for their respective metrics and reporting to the Safety Steering Committee chaired by our CEO. ### Employee Engagement Attracting, retaining and developing employees is vital to our success. We partner with colleges and universities to develop a robust pipeline of prospective employees and provide scholarships and internships to students whose academic pursuits align with career opportunities in chemical, electrical, mechanical and process control engineering. We strive to ensure that all of our employees have the mentorship, training and support they need to develop lasting and rewarding careers, as we believe that engaged employees are happier, safer and more productive. Our ECD program provides recent graduates and new hires with structured onboarding, on-the-job training and leadership experiences to support the ongoing development of the technical and leadership skills required to support and sustain our operations. The ECD program covers engineering, supply chain, accounting, information technology and human resources. In addition, we provide our employees with training and education opportunities such as financial services and retirement planning workshops. ### Commitment to Human Rights To reinforce and strengthen our commitment to socially responsible business practices, we have a Human Rights Policy that specifically addresses the following fundamental human rights principles: - Safe and healthy workplaces - Environmentally responsible operations - No forced or child labor - Anti-corruption and bribery compliance - Freedom of association and the right to collective bargaining if legally elected - Fair compensation and working hours - Diversity and inclusion - Harassment and discrimination free workplace - Community and stakeholder engagement ### Code of Conduct Within the framework of our core values of Integrity, Accountability, Quality and People, the Rayonier Advanced Materials Standard of Ethics and Code of Corporate Conduct is our guide to the lawful and ethical performance of our duties. Adherence to the Code is intended to ensure that we: - Fulfill our obligation to observe the law both in letter and spirit in all countries in which we do business; and - Deal fairly with our stockholders, employees, customers, suppliers, regulators and communities. We publish and communicate these expectations and values for all new hires and for all other employees several times throughout each year, including through various trainings. ### Diversity and Inclusion Fostering a diverse and inclusive culture is integral to our success as a company and also an important component of our commitment to people as outlined in our Standard of Ethics and Code of Corporate Conduct, Company Values and Human Rights Policy. We have taken several important steps to strengthen our approach to diversity and inclusion. Our DIAG, led by our Vice President of Talent Management and Diversity, has the mandate to help foster meaningful, lasting progress and to position us as a leader in diversity and inclusion. The DIAG reports regularly to senior leadership and our Board of Directors on our progress in various focus areas, including recruiting, retention, mentoring and community engagement. ### Availability of Reports and Other Information Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and amendments to those reports filed or furnished pursuant to Sections 13(a) or 14 of the Exchange Act are made available to the public free of charge in the Investor Relations section of our website *www.ryam.com* shortly after we electronically file such material with, or furnish them to, the SEC. All reports we file with or furnish to the SEC are also available free of charge on the SEC’s website *http://www.sec.gov*. Our corporate governance guidelines, including the Standard of Ethics and Code of Corporate Conduct, and charters of all standing committees of our Board of Directors are also available on our website. Our website and the information posted thereon are not incorporated into this 2023 Form 10-K or any current or other periodic report that we file with or furnish to the SEC. ## Risk factors As filed, 55,680 characters. Our business, financial condition, results of operations and cash flows are subject to a number of risks 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 this 2023 Form 10-K and our other filings and submissions to the SEC. If any of the events described in the following risk factors occur, our business, financial condition, operating results and cash flows, as well as the market price of our securities, could be materially adversely affected. ### Macroeconomic and Industry Risks ***Our business, financial condition and results of operations could be adversely affected by disruptions in the global economy caused by geopolitical conflicts and related impacts.*** Geopolitical conflicts and related effects may negatively impact the global economy and our business. While historically we have not had direct operations in geographic areas under conflict, we have significant operations and customers in Europe and Asia and have experienced shortages in key input materials and increased costs for transportation, energy and raw materials as a result of various conflicts. Escalation of geopolitical tensions could result in, among other things, natural gas shortages, disruptions of operations for us, our customers and our suppliers, an increase in cyber intrusion attempts, lower consumer demand and changes to foreign currency exchange rates and financial markets, any of which would adversely affect our business. In addition, the effects of any geopolitical conflict could heighten many of the other known risks described in this Item 1A—Risk Factors. ***We are subject to risks associated with epidemics and pandemics, which could have a material adverse impact on our business, financial condition, results of operations and cash flows.*** Our global operations expose us to risks associated with public health crises, including epidemics and pandemics, which may generate significant volatility, uncertainty and economic disruption in many markets in which we or our customers do business. Over the past several years, COVID-19 adversely impacted our business and financial condition in various ways, including increased operating costs due to social distancing and other strict health and safety protocols implemented at our facilities to protect employees and contractors, reductions and unpredictable fluctuations in demand and reduced supply chain reliability due to international shipping congestion and the pandemic’s adverse impact on our suppliers, vendors and other global supply chain partners, which impaired our ability to timely and efficiently move our products through the various steps in the global supply chain process to our end customers. ***The businesses we operate are highly competitive and many of them are cyclical, which may result in fluctuations in pricing and volume that can materially adversely affect our business, financial condition, results of operations and cash flows.*** Competition, demand fluctuations and cyclicality are the most significant drivers of sales volumes and pricing for our products. We face significant competition from domestic and foreign producers in all of our businesses. For example, in the market for our cellulose specialties product line, increased cellulose specialties production capacity from our competitors, some of whom have lower raw material, wood and production costs than we do, combined with demand weakness, can collectively contribute to lower cellulose specialties sales prices over periods of time. Likewise, certain cellulose specialty grade volumes have declined meaningfully in recent years due to these factors. Our high-purity commodity products for viscose and absorbent materials applications were also at extremely low pricing levels in 2019 and 2020 and later rebounded. There can be no assurance as to the duration and magnitude of a rebound or whether elevated levels during any one period can be sustained over a significant period of time. With respect to demand for cellulose specialties, and in particular our acetate grades, the majority of these acetate grades are used to manufacture acetate tow, which is used to make the filter component of a cigarette. Significant increases in cigarette costs and potential actions taken by the U.S. and other countries to discourage smoking, such as tax increases on tobacco products, policy changes and future legislation, may have a material adverse effect on the demand for tobacco products. Additionally, increased use of e-cigarettes, electronically heated tobacco products and smokeless tobacco products may affect demand for traditional cigarettes. In addition, some of the industries in which our end-use customers participate, such as publishing, packaging, automotive and textiles, are cyclical in nature, thus posing risks to us which are beyond our control. These industries are highly competitive and may experience overcapacity and reductions in end-use demand, each of which may affect demand for and pricing of our products. The consequences of this could include reduction, delay or cancellation of customer orders. Our high-yield pulp business is cyclical and influenced by a variety of factors, including periods of excess product supply due to industry capacity increases, periods of decreased demand due to reduced economic activity or market conditions, inventory destocking by customers, reduced market prices, scarcity of economically viable fiber in Canada and fluctuations in currency exchange rates. These factors may cause significant price changes over a short period. To address these factors, we have in the past, and may in the future, elect to schedule production curtailments and shutdowns. In particular, our high-yield pulp business has been the subject of temporary curtailments at various points in recent years in reaction to market conditions. Our paperboard business has a blend of long- and short-term contracts and has generally been more stable than our high-yield pulp business due to strong ties to and steady demand of the lottery and packaging sectors. ***Changes in the availability and price of raw materials and energy and continued inflationary pressure could have a material adverse effect on our business, financial condition and results of operations.*** Raw material and energy costs, such as chemicals, oil, natural gas and electricity, are a significant operating expense for us. The cost of these inputs can be volatile and are susceptible to rapid and substantial increases due to factors beyond our control, such as lack of availability, changing economic and weather conditions, political, civil or other unrest or instability in energy-producing nations, and supply and demand considerations. For example, we experienced significant price volatility in various chemicals we use during 2021 and 2022 driven by weather events in the southeastern U.S. that substantially impacted supply. Caustic soda, a key manufacturing input in our high purity cellulose business, has historically had significant price volatility. Similarly, the price of oil and natural gas and their pipeline transportation has historically experienced significant fluctuations based on weather and market demand and other factors. Additionally, industrial and other policies of the governmental agencies having jurisdiction over the suppliers of raw materials to our facilities may change due to changes in political leadership or otherwise, which also could adversely impact the cost of energy and its transportation. Given inflation in the broader economy, we monitor the risk that inflation presents to our active and future contracts. In contracts for certain of our products, pricing is set annually or is otherwise not subject to change for a contractually agreed-upon period of time. In these cases, we may have limited ability to pass along fluctuations in input costs. For example, in 2022, we saw broad-based increases in costs from inflation that are material to our business as a whole, including with respect to key product inputs such as wood, energy, chemicals and transportation. Mitigation of inflationary impacts to some extent through cost surcharges may not be sufficient and continued inflationary pressure could materially adversely affect our profits and margins under our customer contracts. The impact of raw material and energy pricing increases could materially adversely affect our business, financial condition and results of operations. ***We are subject to material risks associated with doing business outside of the U.S.*** We have large manufacturing operations in Canada and France and a significant portion of our sales are to customers located outside of the U.S., including China, the European Union, Japan, Canada, South Korea and other international markets. Sales to customers outside of the U.S. made up 67 percent of our revenue in 2023. The manufacture and sale of our products in non-U.S. markets results in risks that are inherent to conducting business under international laws, regulations and customs. We expect international sales will continue to contribute significantly to our results of operations and future growth. The risks associated with our business operations outside the U.S. include: - maintaining and governing international subsidiaries and managing international operations; - complying with changes in and reinterpretations of the laws, regulations and enforcement priorities of the countries in which we manufacture and sell our products; - complying with anti-bribery laws, such as the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions; - trade protection laws, policies and measures and other regulatory requirements affecting trade and investment, including loss or modification of exemptions for taxes and tariffs, imposition of new tariffs and duties and import and export licensing requirements, as discussed below in further detail; - complying with data privacy laws, such as the European Union’s General Data Privacy Regulation and similar data privacy laws in other jurisdictions; - repatriating cash from foreign countries to the U.S.; - changes in tax laws and their interpretations in the countries in which we do business, including the potential impact on the value of recorded and future deferred tax assets and liabilities; - product damage or loss incurred during shipping; - political instability and actual or anticipated military or political conflicts; - economic instability, inflation, recessions and interest rate and currency exchange rate fluctuations, as discussed below in further detail; - uncertainties regarding non-U.S. judicial systems, rules and procedures; and - minimal or limited protection of intellectual property in some countries. These and other risks of doing business outside of the U.S. could materially adversely affect our business, financial condition and results of operations. ***Foreign currency exchange fluctuations may have a material adverse impact on our business, financial condition and results of operations.*** We have manufacturing operations in the U.S., Canada and France, and we sell our products all over the world, in either USD, CAD or Euros. As a result, we are exposed to movements in foreign currency exchange rates and our earnings are affected by changes in the value of the CAD and Euro relative to the USD. A strengthening of the USD or a weakening of the home currency of the countries in which our international competitors manufacture products can adversely impact our competitive position. In addition to ordinary-course currency fluctuations, specific events have had, and could in the future have, an impact on currency valuation. Our risk management policy allows management, with oversight from the Audit Committee of our Board of Directors, to hedge a significant portion of our exposure to fluctuations in foreign currency exchange rates, though no hedges are currently in place. To accomplish this, we have used, and may in the future use, derivative instruments, such as currency options and foreign exchange forward contracts, to mitigate our exposure to fluctuations in foreign currency exchange rates. Such measures, however, may not fully protect against substantial foreign currency fluctuations and such fluctuations may have a material adverse 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 U.S. and internationally, could materially adversely affect our ability to access certain markets.*** We manufacture our products in the U.S., Canada and France, and sell them in more than 40 countries. Our financial results are highly dependent on our ability to sell our products globally. Trade barriers such as tariffs, countervailing and anti-dumping duties, quotas and other similar restrictions on trade have in the past resulted in, and may in the future result in, a material reduction in revenues and profitability. The effects of such restrictions on trade on our business in China and Canada are set forth below. #### China In 2023, we had product sales of $474 million shipped to customers in China and, of this amount, $352 million were products manufactured in the U.S. Trade tensions and trade-related actions, such as tariffs and duties, between China and the U.S. have previously impacted our business and our customers’ businesses and could do so in the future. For example, in 2018, in retaliation against U.S. tariffs, China imposed a tariff on certain U.S. product exports, including all wood pulp sold by us from the U.S. into China, a result of which was a significant decline in operating income for as long as the tariffs remained in place. Failure of the U.S. and Chinese governments to reach acceptable agreements regarding trade, as well as continued trade volatility and additional trade-related actions by the Chinese government, could have a material adverse impact on our business, financial condition and results of operations. #### Canada We previously operated six softwood lumber mills in Ontario and Quebec, Canada, and exported softwood lumber into the U.S. from Canada. As part of the sale of our lumber assets in August 2021, we retained all rights and obligations to softwood lumber duties generated or incurred through the closing date of the transaction. The U.S. and Canada have a history of trade disputes, dating to the early 1980s, related to the export of softwood lumber from Canada into the U.S. Each dispute has been resolved via agreement or litigation, which generally involved some combination of duties and/or quotas, as well as a return of all or most of the duties previously paid by Canadian softwood lumber producers. In October 2015, a 10-year Softwood Lumber Agreement between the U.S. and Canada, which resolved a 2001-2006 lumber dispute between the countries, expired. No agreement was reached to extend or renew it, and as a result, after a one-year cooling-off period, the U.S. commenced a dumping investigation of lumber exports from Canada into the U.S. Beginning in 2017, anti-dumping and countervailing duties were assessed by the USDOC on lumber exported into the U.S. and we were assigned an anti-dumping duty rate of six percent and a countervailing duty rate of 14 percent. These duties are being legally challenged by Canada under both the North American Free Trade Agreement and World Trade Organization dispute resolution processes. Canada has filed an appeal under Chapter 10 of the United States-Mexico-Canada Agreement on Trade to contest these revised duties. The USDOC has completed administrative reviews of the 2017, 2018, 2019, 2020 and 2021 periods and reduced rates applicable to us to a combined anti-dumping and countervailing duty rate of approximately 8 percent. Canada has filed an appeal under Chapter 10 of the United States-Mexico-Canada Agreement on Trade to contest these revised duties. We paid approximately $112 million of softwood lumber duties between 2017 and the August 2021 sale of our lumber assets, including $1 million of ancillary fees, which were recorded as expense in the periods incurred. As of December 31, 2023, we had a $40 million long-term receivable associated with the USDOC’s administrative reviews. This amount does not include interest, which will be due on any amounts refunded. We estimate that interest earned on the total amount of softwood lumber duties paid will exceed $10 million. Cash is not expected to return to us until final resolution of the softwood lumber dispute, which remains subject to legal challenges. No assurances can be given that the duties will be overturned or repaid through the legal process or a negotiated settlement, or that lumber pricing will be sufficient to substantially offset their impact. ### Business and Operational Risks ***Our ten largest customers represented approximately 40 percent of our 2023 revenue and the loss of all or a substantial portion of our revenue from these customers could have a material adverse effect on our business.*** While we are not dependent on any single customer or group of customers and we continue to strive to broaden and diversify our customer base, our ten largest customers accounted for a significant portion, approximately 40 percent, of our 2023 revenue. Due to the highly competitive nature of our businesses, we regularly bid to both acquire new business and retain existing business; as such, we are subject to the potential for material changes in revenue and sales volumes. The loss of all or a substantial portion of sales of any of our largest customers, or significant, unfavorable changes to pricing or terms contained in contracts with them, could materially adversely affect our business, financial condition and results of operations. We are also subject to credit risk associated with these customers. If one or more of our ten largest customers were to become bankrupt, insolvent or otherwise were unable to pay for our products, we may incur significant write-offs that may have a material adverse effect on our business, financial condition and results of operations. ***A material disruption at any of our manufacturing facilities could prevent us from meeting customer demand, reduce our sales and profitability, increase our cost of production and capital needs, or otherwise materially adversely affect our business, financial condition and results of operations.*** Any of our manufacturing facilities, or a significant portion of any of our facilities, could cease operations unexpectedly or suffer a material disruption to all or a portion of its operations due to a number of material adverse events, including: - unscheduled outages or downtime due to the need for unexpected maintenance or equipment failure, including boilers and turbines that produce steam and electricity, pollution control equipment and equipment directly used to manufacture our products. We experienced significant reliability issues during the first quarter of 2019 at our Temiscaming, Quebec plant and during the third quarter of 2021 at our Jesup, Georgia plant; - prolonged power interruptions or failures; - explosion of boilers or other pressure vessels; - interruptions in the supply of raw materials, including chemicals and wood fiber; - disruptions to or failures in the transportation infrastructure, such as roads, bridges, railroad tracks and tunnels, as well as lack of availability of rail, trucking and ocean shipping equipment and service from third party transportation providers; - interruption or material reduction of water supply; - a chemical spill or release or other event causing impacts to the environment or human health and safety; - information technology system failures and cybersecurity incidents causing systems to be inaccessible or unusable; - natural disasters (including those as a result of climate change), including fires, floods, windstorms, earthquakes, hurricanes or other similar catastrophes; - labor interruptions, including strikes and short duration walk-outs, such as the walk-outs in 2019 and 2021 at our plant in Tartas, France; - terrorism or threats of terrorism; - new climate change or other environmental regulations, compliance with which may require significant capital expenditures to address modifications to our facilities, supply chain or other infrastructure; and - other operational issues resulting from these and other risks. Some of these matters are discussed in more detail in other risk factors within this Item 1A—Risk Factors. Depending on the nature, magnitude and duration of any operational interruption, the event could materially adversely affect our business, financial condition and results of operations. ***Unfavorable changes in the availability of, and prices for, wood fiber may have a material adverse impact on our business, financial condition and results of operations.*** Wood fiber is the largest volume of raw material used in the manufacturing process for virtually all of our products. Many factors can impact its availability and pricing. Fiber for our U.S. and France facilities is primarily harvested from privately-held lands, while fiber for our Canadian facilities is primarily harvested from lands owned or controlled by the governments of the provinces of Ontario and Quebec, referred to as “Crown Lands.” In connection with the sale of our lumber and newsprint assets in August 2021, we transferred agreements with provincial authorities, which granted timber “tenures” for terms varying from five to 20 years, to a third party. Concurrent with the transaction, we entered into a 20-year assignable wood chip and residual fiber supply agreement with the buyer of those assets, securing supply for our operations at the Temiscaming plant. There can be no assurance that, upon termination of this wood chip and residual fiber supply agreement due to its natural expiration or otherwise, this agreement will be renewed, extended or replaced in the future on acceptable terms, or at all. Regulatory developments and environmental litigation also have caused, and may cause in the future, significant reductions in the amount of timber available for commercial harvest from non-Crown Lands in Canada and privately-owned lands in the U.S. and France, thereby increasing prices for these sources of wood fiber. In Canada, for example, future legislation and policy changes, litigation advanced by environmental groups and Indigenous communities concerning rights and limitations on harvesting and use of timberlands, the protection of endangered species, the promotion of forest diversity, control over insect and disease infestations, and the response to and prevention of wildfires could also affect wood fiber supply, pricing and availability. In addition, much of the wood fiber we use is sourced by or from third party contractors who harvest, chip and/or transport the wood fiber to our manufacturing facilities, either as logs for lumber and chipping or as chips. A significant reduction in the availability of contractors experienced in harvesting and transporting logs could impact wood fiber supply, pricing and availability. Wood fiber supply and pricing may also be impacted by the proximity between available experienced logging and fiber transportation contractors and our manufacturing facilities. Sourcing wood fiber from greater distances could result in increased transportation costs. Finally, natural conditions, including prolonged wet or cold or other weather events, timber growth cycles and restrictions on access to timberlands for harvesting, may also limit the availability, and increase the price, of wood, as may other factors, including damage by fire, insect infestation, disease, prolonged drought and natural disasters (including those as a result of climate change) such as windstorms and hurricanes. During 2021 and 2022, we experienced significant price volatility in various chemicals we rely upon as a result of weather events in the southeastern U.S. that substantially impacted supply. The occurrence, magnitude and duration of natural conditions and events and their impact on the availability and price of wood fiber cannot be predicted. In sum, any sustained decrease in harvestable lands or wood supply, increase in wood fiber prices, whether sourced from Crown Lands in Canada or from private parties in Canada, the U.S. or France, changes in the logging and transportation supply base or significant changes to historically customary natural conditions could materially increase our costs and thereby materially adversely impact our business, financial condition and results of operations. ***Substantial capital is required to maintain our production facilities, and the cost to repair or replace equipment, as well as the associated downtime, could materially adversely affect our business.*** We operate capital intensive businesses and require substantial capital for ongoing maintenance, repair and replacement of existing facilities and equipment. Although we endeavor to maintain our production equipment with regular scheduled maintenance, key pieces of equipment and systems, some of which are large in scale, may need to be repaired or replaced periodically. The costs of repairing or replacing such equipment and the associated downtime of the affected production line could adversely affect our financial condition and results of operations. In addition, new or existing environmental regulations at times require additional capital expenditures for compliance. We believe our capital resources are currently adequate to meet our projected operating needs, capital expenditures and other cash requirements. However, our inability to provide for our operating cash requirements on reasonable economic terms could materially adversely affect our business, financial condition and results of operations. ***We face substantial asset risk, including the potential for impairment related to our long-lived assets and the potential impact to the value of recorded deferred tax assets.*** We have major manufacturing operations in the U.S., Canada and France that are conducted through four production facilities. Our ability to generate sufficient cash flows to fully recover the carrying value of our assets depends on the successful execution of our strategies and may be materially adversely impacted by a significant change in business climate, disruptions in the global economy, unanticipated competition or other causes of a material decline in demand, an adverse action or assessment by a regulator, significant disposal activity, by sale or otherwise, or a material change in how we manage our assets, among other things. If any such events or circumstances arise and it is determined that sufficient future cash flows do not exist to support the current carrying value, we will be required to record an impairment charge for our long-lived assets or write-off of recognized DTAs. In the fourth quarter of 2023, in conjunction with the optimization and realignment of our High Purity Cellulose assets, we recorded a non-cash impairment of $62 million related to certain assets at the Temiscaming and Jesup facilities. See Note 7—Property, Plant and Equipment, Net for further details of this impairment. ***We depend on third parties for transportation services and unfavorable changes in the cost and availability of transportation could materially adversely affect our business.*** Our business depends on transportation services provided by third parties, both domestically and internationally. We rely on these providers for transportation of the products we manufacture as well as delivery of raw materials to our manufacturing facilities. A significant portion of the products we manufacture and raw materials we use are transported by railroad, truck and ship. If any of our transportation providers fail to deliver the goods we manufacture in a timely manner, or damage them during transport, we may be unable to sell those products at full value, if at all. Similarly, if any of these providers fail to deliver raw materials to us in a timely manner, we may be unable to timely manufacture our products in response to customer demand. In addition, the cost of energy, and specifically fuel, may adversely impact the cost of transporting our products. Finally, if the port system that we rely on for international shipping suffers work stoppages, slowdowns or strikes, our business could be materially adversely impacted. ***Failure to maintain satisfactory labor relations could have a material adverse effect on our business.*** As of December 31, 2023, 61 percent of our global work force was unionized. We are required to negotiate the wages, benefits and other terms of employment with these employees collectively. Our financial results could be materially adversely affected if labor negotiations result in substantially higher compensation costs or materially restrict how we are able to run our operations. In addition, our inability to negotiate acceptable contracts with any of these labor unions as existing agreements expire could result in strikes or work stoppages by the affected workers. While we do not expect any labor interruptions of significant duration, if our unionized employees were to engage in a strike or other work stoppage, such as the short-duration walk-outs in 2019 and 2021 at our plant in Tartas, France, at one or more of our major facilities, we could experience a significant disruption of our operations, which could materially adversely affect our business, financial condition and results of operations. ***We are dependent upon attracting and retaining key personnel, the loss of whom could materially adversely affect our business.*** We believe our success depends, to a significant extent, upon our ability to attract and retain key senior management and operations management personnel. Changing demographics and labor work force trends may result in the loss of knowledge and skills as experienced workers retire. Furthermore, some of our facilities are in relatively remote locations, which can challenge our ability to recruit and retain employees. To the extent that the demand for qualified personnel exceeds supply, as has been the case from time to time in recent years due to industry trends, we could experience higher labor, recruiting or training costs in order to attract and retain such employees or difficulties in performing under our customer contracts if our needs for such employees were unmet. Our failure to develop and retain key personnel and recruit and develop qualified replacements for retiring and other departing employees could materially adversely affect our business, financial condition and results of operations, as well as our ability to succeed in our human capital goals and priorities. ***Failure to develop new products or discover new applications for our existing products, or our inability to protect the intellectual property underlying new products or applications, could have a material adverse impact on our business.*** We have an active R&D program to develop new products and applications for our existing products. However, there can be no assurance this program will be successful, either from a product development or commercialization perspective, or that any particular invention, product or development, or the program as a whole, will lead to significant revenue or profit generation. Moreover, some of our new products and applications may not contain intellectual property that can be protected under intellectual property laws. In addition, artificial intelligence technologies have developed rapidly and our future success may depend on our ability to integrate the technology into our internal business processes and new products, services and technologies. Failure to generate meaningful revenue and profit from our R&D efforts could materially adversely affect our business, financial condition and results of operations. ***Loss of our intellectual property and sensitive data or disruption of our manufacturing operations due to a cybersecurity incident could materially adversely impact our business.*** Like most companies, we have been, and expect to continue to be, subject to attempted cyber intrusions. One form of intrusion that has become increasingly prevalent is the practice of cyber extortion, particularly through the use of ransomware. The sophistication of cyber intrusions continues to grow, and the use of emerging technologies, such as artificial intelligence and quantum computing, for nefarious purposes increases the risk of cyber security incidents. Cyber intrusions targeting our business systems, operational tools and external vendor software could compromise our intellectual property and confidential business data, cause a disruption to our operations or damage our reputation. Functions that serve an important role in the efficient operation of our business include purchasing and fulfillment, inventory and manufacturing process management, the reporting of financial results and various other business process support. We have established and maintain cybersecurity policies, programs, controls and systems. These measures are in place to safeguard against, detect and manage cybersecurity risks across our processes, including those associated with our third party service providers, on whom we rely to maintain security programs that align with their respective risks. While we have not experienced any material information security breaches within the periods being reported (or to the best of our knowledge, any material information security breach prior to that), there can be no assurance that our third party service providers’ security efforts and programs will be successful and/or that a successful cybersecurity incident will not otherwise occur in the future. Such an event could have a material adverse impact on our financial condition and results of operations. ### Regulatory and Environmental Risks ***Our business is subject to extensive environmental laws, regulations and permits that may materially restrict or adversely affect how we conduct business and our financial results.*** *Our plants are subject to environmental laws, regulations and permits that may require significant capital to enable our compliance or that could limit our operations and production.* We are subject to environmental laws, regulations and permits that contain stringent conditions governing how we operate our facilities, including how much and, in some cases, what types of products, we can produce. These laws, regulations and permits, now and in the future, may materially adversely restrict our current production, limit our ability to increase production and impose significant costs on our operations with respect to environmental compliance. We expect that compliance-related capital expenditures and operating costs will likely increase over time as environmental laws, regulations and permit conditions become more strict, and as the expectations of the communities in which we operate become more demanding. *Environmental laws, regulations and permits are constantly changing and are generally becoming more restrictive.* Laws, regulations, permits and related judicial decisions and administrative interpretations affecting our business are subject to change, and new laws and regulations are frequently enacted. These laws and regulations may limit, prohibit or affect, among other things, air emissions, wastewater discharges, receiving water quality, water withdrawal, remedial standards for contaminated property and groundwater, and the type of chemicals we use in our manufacturing processes. Over time, the complexity and restrictions imposed by these laws and regulations have increased and regulatory enforcement efforts have intensified. Environmental regulatory authorities have pursued a number of initiatives which, if implemented, could impose additional obligations and constraints on our operations, especially in the area of air emissions, wastewater and storm water control. See Item 1—Business—Environmental Matters of this 2023 Form 10-K for further information. Environmental laws and regulations will likely continue to become more restrictive and over time could materially adversely affect our business, financial condition and results of operations. *Environmental groups, Indigenous communities and interested individuals may seek to delay or prevent a variety of our operations*. We expect that environmental groups, Indigenous communities and interested individuals will intervene with increasing frequency in the regulatory processes in areas where we operate. Generally, environmental permitting programs in all areas where we operate include provisions for public and stakeholder engagement for both renewal of existing permits and approvals for expansions or modifications of our manufacturing operations. In Canada, direct consultation with Indigenous communities may also be required. Delays, restrictions and increased costs caused by the intervention of these groups or interested individuals could adversely affect our operating results. In addition to intervention in permit proceedings, interested groups and individuals may file or threaten to file lawsuits that seek to prevent us from obtaining permits, implementing capital improvements or pursuing operating plans. For example, in March 2014, litigation was commenced in federal court by the Altamaha Riverkeeper alleging violations of federal and state environmental laws relating to permitted wastewater discharges from our plant in Jesup, Georgia (although it was dismissed by the court on summary judgment in 2015), and in January of 2016 the same group brought an action against the Georgia EPD in opposition to the Georgia EPD’s issuance of a renewed wastewater treatment permit for our Jesup plant. While these proceedings have, to date, been decided largely in our favor, we expect similar attempts at legal intervention to be made in the future. *We currently own and may acquire properties that require environmental remediation or otherwise are subject to environmental and other liabilities.* We currently own, and may acquire in the future, properties which are subject to environmental liabilities, such as remediation of soil, sediment and groundwater contamination and other liabilities. In addition, we may have such liabilities at properties, such as formerly operated manufacturing facilities, that we no longer own. The cost of assessment and remediation of contaminated properties could be substantial and materially adversely affect our financial results. These costs could include costs of investigation and assessment, corrective measures, installation of pollution control equipment and other remediation and closure costs, as well as costs to resolve third-party claims for property damage and personal injury as a result of alleged violations of, or liabilities arising out of, environmental laws and regulations. Although we believe we have adequate liabilities recorded, legal requirements relating to assessment and remediation of contaminated properties continue to become more stringent and there can be no assurance that actual expenditures will not exceed current liabilities and forecasts or that other presently unknown liabilities will not be discovered in the future. See Item 1—Business—Environmental Matters and Note 10—Environmental Liabilities to our Financial Statements for additional information. ***The potential longer-term impacts of climate-related risks remain uncertain at this time.*** Climate change and its impacts on people and our planet continue to be a topic of significant focus and attention of our customers, investors and various other stakeholders. We can give no assurance that climate-related issues or associated expenditures will not exceed current expectations and increase in future years. ***Regulatory measures to address climate change may materially restrict how we conduct business or adversely affect our financial results.*** *Regulatory risks associated with climate change.* There are numerous international, federal and state-level initiatives and proposals to address domestic and global climate issues. Within the U.S., Canada and France, where we have operations, most of these initiatives and proposals would, or currently do, regulate and/or tax the production of carbon dioxide and other GHGs to facilitate the reduction of carbon compound emissions into the atmosphere and provide incentives to produce and use more “clean energy.” Initiatives that materially impact purchased electricity prices could increase our manufacturing costs, especially in our Canadian operations, which use more purchased electricity (on a percentage basis) than our U.S. facilities. In addition, the federal government of Canada has indicated its intent to regulate priority air pollutants and GHGs under its Clean Air Act and Canadian Environmental Protection Act. Under the proposed regulatory targets, our Canadian operations may be required to reduce air pollutants, such as particulate matter, SOx, NOx and GHGs. While industry consultations are ongoing with the federal government of Canada, the cost of making any such reductions cannot currently be estimated; however, the requirements associated with particulate matter, SOx and NOx are not expected to be material to our business given our current operations and pollution control systems. The federal government of Canada has adopted the Greenhouse Gas Pollution Pricing Act which implements the federal carbon pollution pricing system. Under the provisions of the Greenhouse Gas Pollution Pricing Act, the provinces, who have previously implemented their own carbon pollution price, or “cap-and-trade” system, will not be subject to the federal program provided their program meets the minimum federal pricing and emissions reduction targets. Quebec has a cap-and-trade program for GHGs that meets the minimum criteria, and our Temiscaming, Quebec plant was a net purchaser of credits under this program in 2023. To date, the cost of GHG credits under cap-and-trade programs purchased by our business and incorporated into the overall cost of our purchased wood fiber has not been material, although no assurances can be given that they will not substantially increase in the future, as the future regulatory state and the cost of GHG credits in applicable jurisdictions is currently unknown. As regulators increasingly focus on climate change and other sustainability issues, we have and may become subject to new disclosure frameworks and regulations. In January 2023, the European Commission issued the Corporate Sustainability Reporting Directive, which we believe will apply to RYAM’s business, that requires expansive disclosure on various sustainability topics, including climate change, biodiversity, workforce, supply chain and business ethics. The State of California has also recently issued new climate change disclosure requirements for certain entities conducting business in California and the SEC is expected to finalize its proposed rule on climate change disclosures in 2024. Our compliance with such rulemakings may require significant increased effort and costs. We are closely monitoring these rules and regulations and their potential impact on us. *Transition risks associated with climate change.* The transition to a low carbon economy, as predicted by many investors and other stakeholders, poses both risk and opportunity for us that are, as yet, not able to be quantified. Similar to other manufacturers in our industry, we use biomass, natural gas, liquid fossil fuels and purchased electricity to power our plants. Changes in policy, regulation or technology related to fuels that we, or our electricity providers, use could materially increase our costs. Additionally, customers continue to express a desire for certified material and improvements in sustainable performance, which may cause us to incur additional costs, invest more in R&D, implement emerging technologies or make other changes to our operations to respond to such demands, which could require additional material expenditures. The primary input of all our products is wood, a renewable, natural raw material. Further, our cellulose specialty products are natural polymers that can be used as an effective, more climate-friendly substitute for certain applications that currently use fossil fuel-based products. We continue to explore additional climate-friendly applications for existing products and pursue projects to develop new sustainable products from renewable resources, including our 2G bioethanol project in Tartas, France; however, these opportunities, as well as their attendant risks, are not fully known or understood at this time. *Physical risks associated with climate change.* The potential impacts of extreme weather, such as hurricanes, blizzards, and heavy rain, which could result from the impacts of climate change, are factored into our enterprise risk assessment process and the mitigation measures we currently take to protect our assets and business. It is not clear whether increased frequency of these or similar events would materially change our risk profile, analyses or mitigation measures, but there can be no assurance that they would not require additional material expenditures. In sum, additional business and regulatory initiatives may be implemented to address GHG emissions and other climate change-related concerns. If such initiatives are implemented, we may be required to incur additional capital expenditures, increased operating costs for wood fiber or raw materials and/or increased mitigating expenses, such as carbon taxes or other charges, to address and comply with any such initiatives. No assurance can be given that the increased costs associated with compliance of future GHG-related requirements will not have a material adverse effect on our business, financial condition and results of operations. ### Financial Risks ***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 a qualified non-contributory defined benefit pension plan, which covers many of our salaried and hourly employees in the U.S. The Federal Pension Protection Act of 2006 requires that certain capitalization levels be maintained in each of these benefit plans. Our non-U.S. pension plans, while currently adequately funded, will also require periodic contributions to ensure that applicable legal requirements are met. Because it is unknown what interest rates and the investment return on pension assets will be in future years, no assurances can be given that applicable law will not require us to make future material plan contributions. In addition, it is possible that new accounting rules and/or changes to actuarial requirements may also result in the need for additional contributions to the plans. Any such contributions could materially adversely affect our financial condition. See Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations —Critical Accounting Estimates and Note 17—Employee Benefit Plans to our Financial Statements for additional information about these plans. ***We have debt obligations that could materially adversely affect our business and our ability to meet our obligations.*** As of December 31, 2023, our total indebtedness was $777 million. This significant amount of debt could have material adverse consequences to us and our investors, including: - requiring a substantial portion of our cash flows from operations to be used for interest payments on this debt; - making it more difficult to satisfy debt service and other obligations; - increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs and limit the future availability of debt financing; - increasing our vulnerability to general adverse economic and industry conditions; - reducing the cash flows available to fund capital expenditures and other corporate purposes and to grow our business; - limiting our flexibility in planning for, or reacting to, market or other changes in our businesses and industry; - placing us at a disadvantage to our competitors that may not be as highly leveraged with debt; - limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase shares of our common stock; and - limiting access to liquidity, including through our asset-based revolving credit facility. To the extent we incur additional indebtedness, the risks described above could increase. In addition, our actual cash requirements in the future may be greater than expected. Our cash flows from operations may not be sufficient to repay all of the outstanding debt as it becomes due, and we may not be able to borrow money, sell assets or otherwise raise funds on acceptable terms, or at all, to refinance our debt. See Note 9—Debt and Finance Leases to our Financial Statements for further information regarding our debt obligations. ### Covenants in our debt agreements may impair our ability to operate our business Our debt agreements contain various covenants that limit our ability to take certain specified actions, including incurring debt or liens, making investments, entering into mergers, consolidations and acquisitions, paying dividends and making other restricted payments. Our Credit Facility and 2027 Term Loan are also subject to financial covenant requirements. If we anticipate non-compliance with these financial covenants, we may take actions to maintain compliance with them, including reductions in our general and administrative expenses and capital expenditures. The breach of any of the covenants under any of our debt agreements could result in a default under the agreement, which could cause indebtedness under the agreement to become due and payable. If the repayment obligation under a debt agreement is accelerated, we may not be able to repay the debt or refinance the debt on acceptable terms and our financial position would be materially adversely affected. In January 2024, we amended our 2027 Term Loan agreement to increase the maximum consolidated secured net leverage ratio that we must maintain through our 2024 fiscal year to address the risk of potential noncompliance with the covenant as of the end of the fourth quarter of 2023. Though we are in compliance with all covenants and other terms of the 2027 Term Loan, as amended, as of December 31, 2023, there can be no assurance given of future compliance or that additional amendments to the credit facilities will not be necessary. ***Challenges in the commercial and credit environments may materially adversely affect our future access to capital.*** Our ability to issue debt or equity or enter into other financing arrangements on acceptable terms could be materially adversely affected if there is a material decline in the pricing or sales volume of our products, or if significantly unfavorable changes in economic conditions occur. Volatility in the world financial markets could increase borrowing or other costs of capital or affect our ability to gain access to the capital markets, which could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows. ***We may require 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.*** We may require additional financing in the future for general corporate purposes, such as to increase our investment in R&D activities, make strategic investments in our facilities, invest in joint ventures or make acquisitions. We may be unable to obtain desired additional financing on terms favorable to us, if at all. For example, during periods of volatile credit markets, there is a risk that lenders, even those with strong balance sheets and sound lending practices, could fail or refuse to honor their credit commitments and obligations, including, but not limited to, extending credit up to the maximum permitted by a credit facility and otherwise accessing capital and/or honoring loan commitments. If our lenders are unable to fund borrowings under their loan commitments or we are unable to borrow, it could be difficult to replace such loan commitments on similar terms or at all. If adequate funds are not available on acceptable terms, we may be unable to fund growth opportunities, successfully develop or enhance products or respond to competitive pressures, any of which could negatively affect our business. If we raise additional funds through the issuance of equity securities, our stockholders will experience dilution of their ownership interest. If we raise additional funds by issuing debt, the terms of such debt may subject us to further limitations on our operations and ability to pay dividends or repurchase stock than are currently in place pursuant to our existing indebtedness. ### Common Stock and Certain Corporate Matters Risks ### Our stockholders’ ownership in RYAM may be diluted. In the future, stockholder ownership in RYAM may be diluted as the result of equity issuances for acquisitions, capital market transactions and other corporate purposes, including equity awards for our directors, officers and employees. Additionally, our employees have options to purchase shares of our common stock. We anticipate that our compensation committee will continue to grant stock options or other stock-based awards to our employees under our employee benefit plans. Such awards and other issuances would have a dilutive effect on our earnings per share, which could adversely affect the market price of our common stock. ***Certain provisions in our amended and restated certificate of incorporation and bylaws, and of Delaware law, could prevent or delay an acquisition of RYAM, which could decrease the price of our common stock.*** Our amended and restated certificate of incorporation authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designation, powers, preferences and relative, participating, optional and other special rights, including preferences over our common stock respecting dividends and distributions, as our Board of Directors generally may determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of our common stock. For example, we could issue preferred stock and grant the holders thereof the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we could assign to holders of preferred stock could affect the residual value of the common stock. ## Cybersecurity As filed, 3,391 characters. ### Risk Management and Strategy Our information technology systems serve an important role in the efficient operation of our business. Identifying, assessing and managing material risks from cybersecurity threats are activities integrated into our overall risk management system. Cybersecurity risks are identified and addressed through coordinated efforts of our internal information technology security audit teams, internal governance and compliance reviews. We also engage external consultants to assist us with the review of our assessment and risk mitigation strategies for cybersecurity threats and the development of new approaches as needed. To protect our information technology systems from cyber threats, we use various tools that help us prevent, detect, investigate, resolve and recover from cybersecurity incidents, including proactive cybersecurity reviews of systems and applications, annual risk assessments that identify and evaluate new and recurring cyber threats, tabletop exercises and infiltration testing. Cybersecurity events, including those identified and communicated to us by our third-party service providers, are evaluated for severity and materiality to our business, based on both quantitative and qualitative factors, and prioritized accordingly for response and remediation. Our information technology systems have been, and we expect will continue to be, subject to cyber intrusion attempts. We describe whether and how risks from cybersecurity threats have materially affected or are reasonably likely to materially affect our business, results of operations or financial condition under the risk factor “Loss of our intellectual property and sensitive data or disruption of our manufacturing operations due to a cybersecurity incident could materially adversely impact our business” found in Item 1A—Risk Factors. ### Governance Our Audit Committee is responsible for the oversight of risk from cybersecurity threats and includes one committee member with significant cybersecurity consulting experience. On a quarterly basis, the Audit Committee receives reports from senior management on our cybersecurity program covering our strategies and processes for the identification, assessment and mitigation of the material cybersecurity risks that we face, existing and emerging cybersecurity trends and threat landscapes and the status of projects in process that are intended to strengthen our information security systems and improve our cyber readiness. Under the oversight of our Audit Committee, our CEO-chaired Enterprise Risk Management team and our Cybersecurity Governance Committee, each comprised of a cross-functional team of executives and key functional leads and subject matter experts, convene at least quarterly to assess the identification and mitigation of cybersecurity risks, ensure the effective execution of our cybersecurity strategy and verify that our cybersecurity processes are adequately strengthened. The Cybersecurity Governance Committee is also responsible for evaluating findings and proposals presented by external consultants and developing the appropriate remediation actions. These teams are informed of cybersecurity threats and incidents through their management of the cybersecurity risk management and strategy processes described above, and report any such items to the Audit Committee as deemed appropriate. ## Properties As filed, 1,867 characters. The following table details the material properties we owned or leased at December 31, 2023: | Location by Segment | Annual Production Capacity(a) | Owned/Leased | | --- | --- | --- | | **High Purity Cellulose Facilities** | | | | Jesup, Georgia, United States | 330,000 MTs of cellulose specialties or commodity products 270,000 MTs of commodity products | Owned | | Fernandina Beach, Florida, United States | 155,000 MTs of cellulose specialties or commodity products | Owned | | Temiscaming, Quebec, Canada | 150,000 MTs of cellulose specialties or commodity products | Owned | | Tartas, France | 140,000 MTs of cellulose specialties or commodity products | Owned | | **Paperboard Facilities** | | | | Temiscaming, Quebec, Canada | 180,000 MTs of paperboard | Owned | | **High-Yield Pulp Facilities** | | | | Temiscaming, Quebec, Canada | 290,000 MTs of high-yield pulp | Owned | | **Corporate and Other** | | | | Jacksonville, Florida, United States | Corporate Headquarters | Leased | (a) Based on the facility equipment operating under average production conditions. Actual production is impacted by overall equipment effectiveness and market circumstances. Our manufacturing facilities are maintained through ongoing capital investments, regular maintenance and equipment upgrades. As a result, production capacities may vary from the amounts listed above. These facilities, warehouses, machinery and equipment that we owned or leased as of December 31, 2023 are in good operating condition and in regular use. We recently began efforts towards a realignment of our High Purity Cellulose assets to optimize production mix, including the consolidation of commodity viscose production into the Temiscaming plant and fluff production into the Jesup plant’s C Line. See Note 7—Property, Plant and Equipment, Net for further details of this realignment. ## Legal proceedings As filed, 235 characters. As disclosed in Note 21—Commitments and Contingencies to our Financial Statements, we are engaged in certain legal proceedings and the disclosures set forth in Note 21 relating to legal proceedings are incorporated herein by reference. ## Management's discussion and analysis As filed, 47,675 characters. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Financial Statements, the notes thereto, and the financial information appearing elsewhere in this 2023 Form 10-K. The following discussion includes forward-looking statements that involve certain risks and uncertainties. See Forward-Looking Statements and Item 1A—Risk Factors in this 2023 Form 10-K. This section primarily discusses 2023 and 2022 items and comparisons between these years. For a discussion of year-over-year comparisons between 2022 and 2021 and other financial information related to 2021 that is not included in this 2023 Form 10-K, refer to Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 1, 2023. ### Overview of Operations We are a diversified global leader of cellulose-based technologies that operates in the following business segments: - High Purity Cellulose - Paperboard - High-Yield Pulp ### High Purity Cellulose We manufacture and market high purity cellulose, which is sold as either cellulose specialties or commodity products. We are the leading global producer of cellulose specialties, which are primarily used in dissolving chemical applications that require a highly purified form of cellulose. Pricing for our cellulose specialties products is typically set by contract for a duration of at least one year, based on discussions with customers. Our commodity products primarily consist of commodity viscose and absorbent materials. Commodity viscose pulp is a raw material required for the manufacture of viscose staple fibers which are used in woven and non-woven applications. Absorbent materials, typically referred to as fluff fibers, are used as an absorbent medium in consumer products. Pricing for commodity products is typically referenced to published indices or based on publicly available spot market prices. Sales of chemicals and energy, a majority of which are by-products of our manufacturing processes, are included in the High Purity Cellulose segment. Our four production facilities, located in the U.S., Canada and France, have a combined annual production capacity of 1,045,000 MTs of cellulose specialties and commodity products. Of our total annual capacity, we dedicate 270,000 MTs of annual production to commodity products, primarily absorbent materials. Wood fiber, chemicals and energy represent approximately 50 percent of our per MT cost of sales. Labor, manufacturing and maintenance supplies, depreciation, manufacturing overhead and transportation costs represent our remaining cost of sales. ### Paperboard We manufacture paperboard that is used for packaging, printing documents, brochures, promotional materials, paperback book and catalog covers, file folders, tags and lottery tickets. Pricing for paperboard is typically referenced to published indices and marketed through our internal sales team. Our production facility, located in Canada, has an annual production capacity of 180,000 MTs of paperboard. Wood pulp, chemicals and energy represent approximately 80 percent of our per MT cost of sales. Labor, manufacturing and maintenance supplies, depreciation, manufacturing overhead and transportation costs represent our remaining cost of sales. ### High-Yield Pulp We manufacture and market high-yield pulp, which is used by paper manufacturers to produce paperboard, packaging, printing and writing papers and a variety of other paper products. Pricing for high-yield pulp is typically referenced to published indices marketed through our internal sales team. Our production facility, located in Canada, has an annual production capacity of 290,000 MTs of high-yield pulp. Wood fiber, chemicals and energy represent approximately 40 percent of our per MT cost of sales. Labor, manufacturing and maintenance supplies, depreciation, manufacturing overhead and transportation costs represent our remaining cost of sales. ### Recent Business Developments - In January 2024, we amended our 2027 Term Loan agreement to increase the maximum consolidated secured net leverage ratio that we must maintain in the fourth quarter of 2023 and through fiscal year 2024. In addition, should we exceed the maximum ratio established by the original agreement during this period, we will incur a fee of 0.25% of the principal balance outstanding at the end of the applicable quarter. - In the fourth quarter of 2023, we recorded a non-cash impairment of $62 million related to certain assets at our Temiscaming and Jesup plants in conjunction with the optimization and realignment of our High Purity Cellulose assets. This realignment reflects a strategic decision expected to reduce commodity exposure and earnings volatility and allow us to better manage excess capacity of cellulose specialties by operating assets based on current demand for each end market. See Note 7—Property, Plant and Equipment, Net to our Financial Statements for further information. - In July 2023, we secured term loan financing of $250 million in aggregate principal amount, the proceeds of which were used, together with cash on hand, to redeem the $318 million principal balance of the 2024 Notes in August 2023. - In April 2023, we repurchased $10 million of our 2026 Notes through open-market transactions and retired the notes for cash of $9 million. - In March 2023, we repurchased $5 million of our 2024 Notes through open-market transactions and retired the notes for cash of $5 million. See Note 9—Debt and Finance Leases to our Financial Statements for further information on debt-related items. ### 2024 Outlook In October 2023, we announced that we engaged a financial advisor to explore the potential sale of our Paperboard and High-Yield Pulp assets located at our Temiscaming site. The process is ongoing for this strategic review, which is consistent with our commitment to align our portfolio with our long-term growth strategy and provide flexibility to pay down debt, reduce leverage and minimize earnings volatility. The following market assessment represents our current outlook of our business segments’ future performance. ### High Purity Cellulose Average sales prices for cellulose specialties in 2024 are expected to increase by a low single-digit percentage as compared to average sales prices in 2023. Sales volumes for cellulose specialties are expected to remain flat compared to 2023 as increased volumes from the closure of a competitor’s plant are offset by a favorable change in customer contract terms in the first quarter of 2023 that is not expected to repeat in 2024. Demand for RYAM cellulose specialties will be mixed. Acetate is expected to experience moderate destocking. Ethers volumes are anticipated to improve albeit at lower than historical levels. Other cellulose specialties volumes will benefit from the closure of a competitor’s facility. Demand for RYAM commodity products remains resilient with fluff and viscose prices expected to improve from the fourth quarter of 2023, however not to the level of realized prices in early 2023. Commodity sales volumes are expected to increase in 2024 as we focus on improving productivity, with fluff volume expected to improve due to higher demand and both viscose and paper pulp sales volume expected to decrease. Raw material input and logistics costs are expected to be lower in 2024. Additionally, we expect to commission our bioethanol facility in Tartas in the first quarter of 2024. With a gradual ramp up, we expect to deliver $4 million of EBITDA from bioethanol in 2024, growing to $8 million to $10 million beginning in 2025. Overall, EBITDA is expected to remain relatively flat in the first quarter of 2024 compared to the fourth quarter of 2023, with a strong finish in the back half of 2024. ### Paperboard Paperboard prices in 2024 are expected to decrease slightly as compared to the fourth quarter of 2023, while sales volumes are expected to improve as production is ramped up to meet improved customer demand. Raw material prices are expected to increase as purchased pulp prices are forecast to increase from fourth quarter 2023 levels. Overall, EBITDA is expected to remain flat sequentially. ### High-Yield Pulp High-yield pulp prices are expected to increase in the first quarter of 2024 as we capture the value of higher index pricing from the latter part of the fourth quarter of 2023. Sales volumes are also expected to increase in the first quarter as production is ramped up to meet customer demand. Overall, we expect to generate positive EBITDA from this segment in the coming quarter. ### Corporate Corporate costs are expected to be flat or increase slightly in 2024 as we complete the final year of our multi-year ERP implementation. The project will enhance our operating and reporting systems and is expected to drive additional improvements and efficiencies beginning in 2025. ### Biomaterials Strategy As previously announced at our Investor Day in October 2023, we are investing in new products to provide both increased end market diversity and incremental profitability. These new products will target the growing green energy and products markets. The commissioning of the bioethanol facility is a significant milestone towards our goal of generating $42 million of annual EBITDA from these new products by 2027. We are progressing several other initiatives and expect to make announcements on the progress of these initiatives throughout the year. ### Results of Operations: Year Ended December 31, 2023 versus December 31, 2022 *(in millions, except percentages)* | | Year Ended December 31, 2023 | 2022 | | --- | ---: | ---: | | **Net sales** | $1,643 | $1,717 | | **Cost of sales** | (1,555) | (1,594) | | **Gross margin** | 88 | 123 | | Selling, general and administrative expenses | (76) | (91) | | Foreign exchange gain (loss) | (3) | 4 | | Asset impairment | (62) | — | | Other operating expense, net | (12) | (10) | | **Operating income (loss)** | (65) | 26 | | Interest expense | (74) | (66) | | Components of pension and OPEB, excluding service costs | — | 5 | | Gain on GreenFirst equity securities | — | 5 | | Other income, net | 7 | 6 | | **Loss from continuing operations before income tax** | (132) | (24) | | Income tax (expense) benefit | 32 | (1) | | Equity in loss of equity method investment | (2) | (2) | | **Loss from continuing operations** | (102) | (27) | | Income from discontinued operations, net of tax | — | 12 | | **Net loss** | $(102) | $(15) | | Gross margin % | 5.4% | 7.2% | | Operating margin % | (4.0)% | 1.5% | | Effective tax rate | 24.4% | (3.8)% | ### Net Sales *(in millions)* | | Year Ended December 31, 2023 | 2022 | | --- | ---: | ---: | | High Purity Cellulose | $1,313 | $1,336 | | Paperboard | 219 | 250 | | High-Yield Pulp | 136 | 160 | | Eliminations | (25) | (29) | | **Net sales** | $1,643 | $1,717 | 27 Net sales decreased $74 million in 2023 compared to 2022 driven by lower sales prices in commodity products and our High-Yield Pulp segment and lower sales volumes in cellulose specialties and our Paperboard and High-Yield Pulp segments, partially offset by higher sales prices in cellulose specialties and our Paperboard segment and higher commodity sales volumes. See ***Operating Results by Segment*** below for further discussion. ### Operating Income (Loss) *(in millions)* | | Year Ended December 31, 2023 | 2022 | | --- | ---: | ---: | | High Purity Cellulose | $(42) | $31 | | Paperboard | 37 | 37 | | High-Yield Pulp | (3) | 16 | | Corporate | (57) | (58) | | **Operating income (loss)** | $(65) | $26 | Operating results for 2023 declined $91 million compared to 2022 primarily driven by a $62 million High Purity Cellulose non-cash asset impairment recorded in the fourth quarter of 2023 and the decrease in net sales across all segments due to the lower sales prices and sales volumes discussed above. Additionally, our High Purity Cellulose and High-Yield Pulp segments saw increases in labor and wood costs, respectively. These decreases were partially offset by lower key input and logistics costs in our High Purity Cellulose and Paperboard segments. See ***Operating Results by Segment*** below for further discussion. ### Non-Operating Income & Expense Interest expense increased $8 million in 2023 compared to 2022 driven by an increase in the average effective interest rate on debt, partially offset by a decrease in the average outstanding balance of debt. Total debt decreased $76 million from December 31, 2022 to December 31, 2023. Interest income increased $3 million in 2023 compared to 2022 primarily due to the timing of the receipt of the 2027 Term Loan proceeds and their subsequent use in the repayment of the 2024 Notes. See Note 9—Debt and Finance Leases to our Financial Statements for further information on these debt items. Also included in non-operating other income in the year ended December 31, 2023 was a $2 million gain on a passive land sale and a pension settlement loss of $2 million. Included in non-operating other income in the year ended December 31, 2022 was a $5 million net gain associated with the monetization of the GreenFirst common shares received in connection with the sale of our lumber and newsprint assets in 2021. See Note 3—Discontinued Operations to our Financial Statements for further information. ### Income Taxes The effective tax rate on the loss from continuing operations for 2023 was a benefit of 24 percent. The 2023 effective tax rate differed from the federal statutory rate of 21 percent primarily due to different statutory tax rates in foreign jurisdictions, U.S. tax credits, return-to-accrual adjustments related to previously filed tax returns and changes in the valuation allowance on disallowed interest deductions. The effective tax rate on the loss from continuing operations for 2022 was an expense of 4 percent. The most significant items creating a difference between the 2022 effective tax rate and the statutory rate of 21 percent were changes in the valuation allowance on disallowed interest deductions, nondeductible executive compensation, U.S. tax credits, tax return-to-accrual adjustments on filed returns and interest received from tax overpayments. See Note 19—Income Taxes to our Financial Statements for further information. ### Discontinued Operations In 2023, we recorded a pre-tax gain of $2 million related to a reduction in the rates applied to Canadian softwood lumber exports to the U.S. during 2021 and a $2 million loss related to the settlement of a claim pursuant to the representations and warranties in the asset purchase agreement. In 2022, we recorded a pre-tax gain of $16 million related to a reduction in the rates applied to Canadian softwood lumber exports to the U.S. during 2020. Cumulative through December 31, 2023 we have recorded total gains of $40 million related to USDOC administrative reviews, which are included as a long-term receivable within “other assets” in our consolidated balance sheets. See Note 3—Discontinued Operations to our Financial Statements for further information. ### Operating Results by Segment ### High Purity Cellulose *(in millions, unless otherwise stated)* | | Year Ended December 31, 2023 | 2022 | | --- | ---: | ---: | | Net sales | $1,313 | $1,336 | | Operating income (loss) | $(42) | $31 | | Average sales prices ($ per MT) | $1,273 | $1,330 | | Sales volumes (thousands of MTs) | 955 | 918 | #### Net Sales *(in millions)* | | Year Ended December 31, 2022 Price | Changes Attributable to: Volume/Mix/Other | | Year Ended December 31, 2023 | | --- | ---: | ---: | ---: | ---: | | Cellulose specialties | $866 | $75 | $(158) | $783 | | Commodity products | 355 | (48) | 125 | 432 | | Other sales (a) | 115 | — | (17) | 98 | | Net sales | $1,336 | $27 | $(50) | $1,313 | (a) Includes sales of bioelectricity, lignosulfonates and other by-products to third parties. Net sales of our High Purity Cellulose segment decreased $23 million in 2023 compared to 2022. Despite an 11 percent increase in cellulose specialties prices, total sales prices decreased 4 percent during the current year due to a 13 percent decrease in commodity prices. Total sales volumes increased 4 percent during the current year driven by a 39 percent increase in commodity volumes, partially offset by an 18 percent decrease in cellulose specialties volumes. Despite a significant increase in volume in the first quarter of 2023 due to improved customer contract terms, overall sales volumes for cellulose specialties were negatively impacted by significant customer destocking and market-driven demand declines, particularly in construction markets. Included within net sales for 2023 and 2022 were $98 million and $115 million, respectively, of other sales primarily from bio-based energy and lignosulfonates. #### Operating Income (Loss) *(in millions, except percentages)* | | Year Ended December 31, 2022 Sales Price | Gross Margin Changes Attributable to: Sales Volume/Mix/Other(a) | Cost | SG&A and other | | Year Ended December 31, 2023 | | --- | ---: | ---: | ---: | ---: | ---: | ---: | | Operating income (loss) | $31 | $27 | $(31) | $(11) | $(58) | $(42) | | Operating margin % | 2.3% | 1.9% | (2.2)% | (0.8)% | (4.4)% | (3.2)% | (a) Computed based on contribution margin. Operating results of our High Purity Cellulose segment declined $73 million in 2023 compared to 2022 driven by a $62 million non-cash impairment recorded in the fourth quarter of 2023 as a result of the optimization and realignment of our High Purity Cellulose assets. The higher cellulose specialties sales prices and commodity sales volumes and decreased key input and logistics costs were offset by the lower cellulose specialties sales volumes and commodity sales prices and higher labor costs due to inflation. Also contributing to the decline in operating results were $8 million of energy cost offsets in 2022 from sales of energy savings certificates associated with our Tartas operations, compared to only $1 million in 2023. In addition, we earned income on our investment in LTF in 2023 as compared to a loss in 2022. ### Paperboard *(in millions, unless otherwise stated)* | | Year Ended December 31, 2023 | 2022 | | --- | ---: | ---: | | Net sales | $219 | $250 | | Operating income | $37 | $37 | | Average sales prices ($ per MT) | $1,491 | $1,478 | | Sales volumes (thousands of MTs) | 147 | 169 | #### Net Sales *(in millions)* | | Year Ended December 31, 2022 Price | Changes Attributable to: Volume/Mix | | Year Ended December 31, 2023 | | --- | ---: | ---: | ---: | ---: | | Net sales | $250 | $2 | $(33) | $219 | Net sales of our Paperboard segment decreased $31 million in 2023 compared to 2022 driven by a 13 percent decrease in sales volumes due to customer destocking. Sales prices increased slightly year over year. #### Operating Income *(in millions, except percentages)* | | Year Ended December 31, 2022 Sales Price | Gross Margin Changes Attributable to: Sales Volume/ Mix(a) | Cost | SG&A and other | | Year Ended December 31, 2023 | | --- | ---: | ---: | ---: | ---: | ---: | ---: | | Operating income | $37 | $2 | $(13) | $11 | $— | $37 | | Operating margin % | 14.8% | 0.7% | (3.6)% | 5.0% | —% | 16.9% | (a) Computed based on contribution margin. Operating income of our Paperboard segment was flat in 2023 compared to 2022 as lower purchased pulp, maintenance and logistics costs and the impact of maintenance and market-driven shutdowns were offset by the lower sales volumes. ### High-Yield Pulp *(in millions, unless otherwise stated)* | | Year Ended December 31, 2023 | 2022 | | --- | ---: | ---: | | Net sales | $136 | $160 | | Operating income (loss) | $(3) | $16 | | Average sales prices ($ per MT)(a) | $606 | $685 | | Sales volumes (thousands of MTs)(a) | 182 | 191 | (a) Average sales prices and sales volumes for external sales only. During the years ended December 31, 2023 and 2022, the High-Yield Pulp segment sold 60,000 MTs and 66,000 MTs of high-yield pulp for $25 million and $29 million, respectively, to the Paperboard segment. #### Net Sales *(in millions)* | | Year Ended December 31, 2022 Price | Changes Attributable to: Volume/Mix | | Year Ended December 31, 2023 | | --- | ---: | ---: | ---: | ---: | | Net sales | $160 | $(15) | $(9) | $136 | Net sales of our High-Yield Pulp segment decreased $24 million in 2023 compared to 2022 driven by 12 percent and 5 percent decreases in sales prices and sales volumes, respectively, due to lower demand. #### Operating Income (Loss) *(in millions, except percentages)* | | Year Ended December 31, 2022 Sales Price | Gross Margin Changes Attributable to: Sales Volume/Mix(a) | Cost | SG&A and other | | Year Ended December 31, 2023 | | --- | ---: | ---: | ---: | ---: | ---: | ---: | | Operating income (loss) | $16 | $(15) | $(3) | $(1) | $— | $(3) | | Operating margin % | 10.0% | (9.3)% | (2.2)% | (0.7)% | —% | (2.2)% | (a) Computed based on contribution margin. Operating results of our High-Yield Pulp segment declined $19 million in 2023 compared to 2022 driven by the lower sales prices and sales volumes and increased wood costs. ### Corporate *(in millions)* | | Year Ended December 31, 2023 | 2022 | | --- | ---: | ---: | | Operating loss | $(57) | $(58) | Our Corporate operating loss decreased $1 million in 2023 compared to 2022 driven by lower variable compensation and other benefit costs and one-time severance costs incurred in 2022, largely offset by unfavorable foreign exchange rates in 2023 as compared to favorable rates in 2022. Additionally, higher costs were recognized related to ERP transformation project expenditures, discounting and financing fees incurred to facilitate working capital enhancements and advisory and professional expenses related to the refinancing of our 2024 Notes. ### Liquidity and Capital Resources ### Overview Cash flows from operations, primarily driven by operating results, have historically been our primary source of liquidity and capital resources. As operating cash flows can be negatively impacted by fluctuations in market prices for our commodity products and changes in demand for our products, we maintain a key focus on cash, managing working capital closely and optimizing the timing and level of our capital expenditures. Our Board of Directors suspended our quarterly common stock dividend in September 2019. No dividends have been declared since. The declaration and payment of future common stock dividends, if any, will be at the discretion of our Board of Directors and dependent upon our financial condition, results of operations, capital requirements and other factors that the Board of Directors deems relevant. In addition, our debt facilities place limitations on the declaration and payment of future dividends. In January 2018, our Board of Directors authorized a $100 million common stock share buyback program. We did not repurchase any shares under this program during the years ended December 31, 2023, 2022 and 2021, and do not expect to utilize any of the remaining $60 million in unused authorization in the future. We believe our future cash flows from operations, availability under our ABL Credit Facility and our ability to access the capital markets, if necessary or desirable, will be adequate to fund our operations and anticipated long-term funding requirements, including capital expenditures, defined benefit plan contributions and repayment of debt maturities. In January 2024, we amended the 2027 Term Loan to increase the maximum consolidated secured net leverage ratio that we must maintain in the fourth quarter of 2023 and through our 2024 fiscal year. The amendment provides us with the operational flexibility to execute our strategic initiatives in 2024. In addition, should we exceed the maximum ratio established by the original agreement in any of these quarters, we will incur a fee of 0.25% of the principal balance outstanding at the end of the applicable quarter. As of December 31, 2023, we were in compliance with all financial and other customary covenants under our 2027 Term Loan and other credit arrangements. Our non-guarantor subsidiaries had assets of $470 million, liabilities of $408 million, year-to-date revenue of $164 million and a trailing twelve month ABL Credit Facility covenant EBITDA for continuing operations of $17 million as of December 31, 2023. Our liquidity and capital resources are summarized below: *(in millions, except ratios)* | | December 31, 2023 | 2022 | | --- | ---: | ---: | | Cash and cash equivalents(a) | $76 | $152 | | Availability under the ABL Credit Facility(b)(c) | 118 | 130 | | Total debt(c) | 777 | 853 | | Stockholders’ equity | 747 | 829 | | Total capitalization (total debt plus stockholders’ equity) | 1,524 | 1,682 | | Debt to capital ratio | 51% | 51% | (a) Consisted of cash, money market deposits and time deposits with original maturities of 90 days or less. (b) Amounts available under the ABL Credit Facility fluctuate based on eligible accounts receivable and inventory levels. At December 31, 2023, we had $151 million of gross availability and net available borrowings of $118 million after taking into account outstanding letters of credit of $33 million. In addition to the availability under the ABL Credit Facility, we have $5 million available under our accounts receivable factoring line of credit in France. (c) See Note 9—Debt and Finance Leases to our Financial Statements for further information. ### Cash Requirements #### Contractual Commitments Our principal contractual commitments include standby letters of credit, surety bonds, guarantees, purchase obligations and leases. We utilize arrangements such as standby letters of credit and surety bonds to provide credit support for certain suppliers and vendors in case of their default on critical obligations, collateral for certain of our self-insurance programs and guarantees for the completion of our remediation of environmental liabilities. As part of our ongoing operations, we also periodically issue guarantees to third parties. Our primary purchase obligation payments relate to natural gas, steam energy and wood chips purchase contracts. As of December 31, 2023, our noncancellable unconditional purchase obligations totaled $728 million. See Note 21—Commitments and Contingencies to our Financial Statements for further information. #### Debt In March 2023, we repurchased $5 million of our 2024 Notes through open-market transactions and retired the notes for cash of $5 million. In April 2023, we repurchased $10 million of our 2026 Notes through open-market transactions and retired the notes for cash of $9 million. In July 2023, we secured term loan financing of $250 million in aggregate principal amount and received net proceeds of $243 million after original issue discount, which was used, together with cash on hand of $89 million, to redeem the remaining $318 million in aggregate principal balance and accrued interest of $4 million of the 2024 Notes and pay fees and expenses related to the transaction. The 2027 Term Loan matures in July 2027, bears interest at an annual rate equal to three-month Term SOFR (or, if greater, 3.00 percent) plus 8.00 percent and requires quarterly principal payments of $1.25 million. See Note 9—Debt and Finance Leases to our Financial Statements for further information. ### Cash Flows *(in millions)* | Cash flows provided by (used in): | Year Ended December 31, 2023 | 2022 | | --- | ---: | ---: | | Operating activities | $136 | $69 | | Investing activities-continuing operations | (128) | (138) | | Investing activities-discontinued operations | 1 | 44 | | Financing activities | (87) | (73) | Cash provided by operating activities increased $67 million primarily due to increased cash inflows from working capital, partially offset by payments on deferred energy liabilities associated with our Tartas facility operations, net tax payments of $7 million in 2023 and the receipt of net tax refunds of $15 million in 2022. Cash used in investing activities of continuing operations decreased $10 million primarily due to lower capital spending. Cash provided by investing activities of discontinued operations of $44 million in 2022 related to the proceeds from the sale of GreenFirst equity securities. Cash used in financing activities increased $14 million primarily due to the redemption of the 2024 Notes and repayment of borrowings under the ABL Credit Facility and other long-term debt, the payment of issuance costs related to our 2027 Term Loan and higher repurchases of common stock to satisfy tax withholding requirements related to the issuance of stock under our incentive stock plans. These outflows were partially offset by the net proceeds received from the 2027 Term Loan issuance and borrowings under the ABL Credit Facility. ### Performance and Liquidity Indicators The discussion below is presented to enhance the reader’s understanding of our operating performance, liquidity and ability to generate cash and satisfy rating agency and creditor requirements. This information includes the non-GAAP financial measures of EBITDA, adjusted EBITDA and adjusted free cash flows. These measures are not defined by GAAP and our discussion of them is not intended to conflict with or change any of our GAAP disclosures provided in this 2023 Form 10-K. We believe these non-GAAP financial measures provide useful information to our Board of Directors, management and investors regarding our financial condition and results of operations. Our management uses these non-GAAP financial measures to compare our performance to that of prior periods for trend analyses, to determine management incentive compensation and for budgeting, forecasting and planning purposes. Our management considers these non-GAAP financial measures, in addition to operating income, to be important in estimating our enterprise and stockholder values and for making strategic and operating decisions. In addition, analysts, investors and creditors use these non-GAAP financial measures when analyzing our operating performance, financial condition and cash-generating ability. We use EBITDA and adjusted EBITDA as performance measures and adjusted free cash flows as a liquidity measure. We do not consider non-GAAP financial measures an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they may exclude significant expense and income items that are required by GAAP to be recognized in our Financial Statements. In addition, they reflect the exercise of management’s judgment about which expense and income items are excluded or included in determining these non-GAAP financial measures. To compensate for these limitations, reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measures are provided below. Non-GAAP financial measures are not necessarily indicative of results that may be generated in future periods and should not be relied upon, in whole or part, in evaluating our financial condition, results of operations or future prospects. ### EBITDA and Adjusted EBITDA EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for items that management believes are not representative of our core operations. Loss from continuing operations is reconciled to EBITDA and adjusted EBITDA as follows: *(in millions)* | | Year Ended December 31, 2023 | 2022 | | --- | ---: | ---: | | Loss from continuing operations | $(102) | $(27) | | Depreciation and amortization | 140 | 135 | | Interest expense, net | 69 | 64 | | Income tax expense (benefit) | (32) | 1 | | EBITDA-continuing operations | 75 | 173 | | Asset impairment | 62 | — | | Pension settlement loss | 2 | 1 | | Severance | — | 4 | | Gain on debt extinguishment | — | (1) | | Adjusted EBITDA-continuing operations | $139 | $177 | 33 EBITDA from continuing operations decreased $98 million, primarily driven by the $62 million non-cash asset impairment recorded on certain High Purity Cellulose assets in the fourth quarter of 2023, the decrease in net sales across all segments and increased labor and wood costs in our High Purity Cellulose and High-Yield Pulp segments, respectively, partially offset by lower key input and logistics costs in our High Purity Cellulose and Paperboard segments. See ***Results of Operations*** above for additional discussion of the changes in our operating results. ### Adjusted Free Cash Flows Adjusted free cash flows is defined as cash provided by operating activities of continuing operations adjusted for capital expenditures, net of proceeds from the sale of assets and excluding strategic capital expenditures deemed discretionary by management. Adjusted free cash flows is a non-GAAP financial measure of cash generated during a period, which is available for debt reduction, strategic capital expenditures, acquisitions and repurchases of our common stock. Cash flows of operating activities of continuing operations is reconciled to adjusted free cash flows as follows: *(in millions)* | | Year Ended December 31, 2023 | 2022 | | --- | ---: | ---: | | Cash provided by operating activities-continuing operations | $136 | $69 | | Capital expenditures, net(a) | (83) | (104) | | Adjusted free cash flows-continuing operations | $53 | $(35) | (a) Net of proceeds from the sale of assets and excluding strategic capital expenditures. Strategic capital expenditures were $45 million and $34 million for the years ended December 31, 2023 and 2022, respectively. Adjusted free cash flows of continuing operations increased primarily due to changes in working capital and lower capital expenditures. See ***Liquidity and Capital Resources—Cash Flows*** for additional discussion of our operating cash flows. ### Critical Accounting Estimates The preparation of financial statements requires us to make estimates, assumptions and judgments that affect our assets, liabilities, revenues and expenses, and to disclose contingent assets and liabilities in our Financial Statements. We base these estimates and assumptions on historical data and trends, current fact patterns, expectations and other sources of information we believe are reasonable. Actual results may differ from these estimates. ### Revenue Recognition and Measurement Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied. The majority of our contracts have a single performance obligation to transfer products. Accordingly, we recognize revenue when control has been transferred to the customer. Generally, control transfers upon delivery to a location in accordance with terms and conditions of the sale. Changes in customer contract terms and conditions, as well as the timing of orders and shipments, may have an impact on the timing of revenue recognition. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring our products and is generally based upon contractual arrangements with customers or published indices. We sell our products both directly to customers and through distributors and agents typically under agreements with payment terms less than 90 days. The nature of our contracts may give rise to variable consideration, which may be constrained, including sales volume-based rebates to customers. We estimate the level of volumes based on anticipated purchases at the beginning of the period and record a rebate accrual for each purchase toward the requisite rebate volume. These estimated rebates are included in the transaction price as a reduction to net sales. ### Property, Plant & Equipment #### Depreciation Depreciation expense is computed using the units-of-production method for our high purity cellulose, paperboard and high-yield pulp plant and equipment and the straight-line method for all other property, plant and equipment over the useful economic lives of the assets involved. The total units of production used to calculate depreciation expense is determined by factoring annual production days, based on normal production conditions, by the economic useful life of the asset involved. Our estimate of useful lives and salvage values are based on assumptions and judgments that reflect both historical experience and expectations regarding future use of our assets, including wear and tear, obsolescence, technical standards, market demand and geographic location. The use of different assumptions and judgments in the calculation of depreciation, especially those involving useful lives, would likely result in significantly different net book values and results of operations. #### Asset Impairment Long-lived assets are reviewed annually for impairment or when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets that are held and used is measured by net undiscounted cash flows expected to be generated by the asset. An impairment loss may exist when the estimated recovery value is less than the carrying amount. Should a review for impairment be required, determining whether the carrying amount of an asset is recoverable requires judgments regarding long-term forecasts of future revenue and costs related to the asset subject to review. These forecasts are uncertain, as they require significant assumptions about future market conditions. Significant and unanticipated changes to these assumptions could require a provision for impairment in a future period. Property, plant and equipment are primarily grouped for purposes of evaluating recoverability at the combined plant level, the lowest level for which independent cash flows are identifiable. In the fourth quarter of 2023, we began efforts towards the optimization and realignment of our High Purity Cellulose assets that included the consolidation of commodity viscose production into our Temiscaming plant and fluff production into our Jesup plant’s C Line. This realignment materially impacts the way we have managed and will manage the underlying assets and ultimately led to the recognition of a $62 million impairment. Our impairment analysis involved various assumptions and estimates in the determination of fair value, the most significant being our estimates of future cash flows, including key assumptions regarding production levels, price levels, profit margins, capital expenditures and discount rate. While the result of the impairment analysis is highly sensitive to these assumptions, we believe the assumptions are reasonable and appropriately supported; however, our operating results could be adversely affected if actual results are not consistent with our estimates and assumptions. See Note 7—Property, Plant and Equipment, Net to our Financial Statements for further information regarding this asset realignment and impairment. ### Environmental Liabilities At December 31, 2023, we had $170 million of accrued liabilities for environmental costs relating to disposed operations. Numerous price, quantity, cost and probability assumptions are used in estimating these obligations. Factors affecting these estimates include changes in the nature or extent of contamination, changes in the content or volume of the material discharged or treated in connection with one or more impacted sites, requirements to perform additional or different assessment or remediation, changes in technology that may lead to additional or different environmental remediation strategies, approaches and workplans, discovery of additional or unanticipated contaminated soil, groundwater or sediment on or off-site, changes in remedy selection, changes in law or interpretation of existing law and the outcome of negotiations with governmental agencies or non-governmental parties. We periodically review our environmental liabilities and also engage third-party consultants to assess our ongoing remediation of contaminated sites. Quarterly, we review our environmental liabilities related to assessment activities and remediation costs and adjust them as necessary. Liabilities for financial assurance, monitoring and maintenance activities and other activities are assessed annually. A significant change in any of these estimates could have a material effect on our results of operations and financial condition. See Note 10—Environmental Liabilities to our Financial Statements for further information. ### Pension and Other Postretirement Benefit Assets and Liabilities Our defined benefit pension and postretirement plans for employees in the U.S. and Canada require numerous estimates and assumptions to determine the proper amount of pension and postretirement liabilities and annual expense to record in our Financial Statements. The key assumptions include discount rate, return on assets, salary increases, health care cost trends, mortality rates, longevity and service lives of employees. Although authoritative guidance on how to select most of these assumptions exists, we exercise judgment when selecting these assumptions based on input from our actuary and other advisors. Different assumptions, as well as actual versus expected results, would change the periodic benefit cost and funded status of the benefit plans recognized in the financial statements. Our assumed long-term return on plan assets was established based on historical long-term rates of return on broad equity and bond indices, discussions with our actuary and investment advisors and consideration of the actual historical annualized rate of returns. In determining future pension obligations, we select a discount rate based on information supplied by our actuary. The actuarial rates are developed by models which incorporate high-quality (AA rated), long-term corporate bond rates into their calculations. The weighted average discount rate decreased from 4.95 percent at December 31, 2022 to 4.71 percent at December 31, 2023. Our defined pension plans were underfunded by $83 million at December 31, 2023. The underfunded status decreased by $4 million in 2023, primarily due to actuarial losses as a result of decreased discount rates, offset by returns on plan assets. In 2024, pension expense is expected to be flat compared to 2023. Future pension expense will be impacted by many factors including actual investment performance, changes in discount rates, timing of contributions and other employee related matters. See Note 17—Employee Benefit Plans to our Financial Statements for further information. In 2023, we made mandatory contributions and benefit payments to plan participants of $10 million. During 2024, we expect to make mandatory contributions and benefit payments to plan participants of $10 million. Future mandatory contribution requirements will vary depending on actual investment performance, changes in valuation assumptions, interest rates and legal requirements to maintain a certain funding status. The sensitivity of pension expense and projected benefit obligation related to our pension plans to changes in economic assumptions is presented below: *(in millions)* | Change in Assumption | Increase (Decrease) in 2024 Pension Expense | Increase (Decrease) in December 31, 2023 Projected Benefit Obligation | | --- | ---: | ---: | | 50 bp decrease in discount rate | $(1) | $33 | | 50 bp increase in discount rate | $— | $(30) | | 50 bp decrease in long-term return on assets | $3 | n/a | | 50 bp increase in long-term return on assets | $(3) | n/a | ### Realizability of Recorded and Unrecorded Tax Assets and Liabilities Our income tax expense, deferred tax assets and liabilities and reserves for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid. Significant judgments and estimates are required in determining consolidated income tax expense. #### Realizability of Deferred Tax Assets We have recorded certain DTAs that we believe will be realized in future periods. The recognition of these DTAs is based on our analysis of both positive and negative evidence regarding the future realization of the tax benefit of each existing deductible temporary difference or carryforward. Future realization is based on the existence of sufficient taxable income, of the appropriate character, within the appropriate taxing jurisdiction (for example country, state or province) and within the carryback and carryforward periods available under applicable tax laws. In projecting future taxable income, we evaluate historical earnings, excluding results from discontinued operations, along with future earnings forecasts, the reversal of temporary differences, and the implementation of feasible and prudent tax-planning strategies. The vast majority of our DTAs are in Canada, including $477 million of NOLs subject to expiration after 20 years and other DTAs which can be carried forward indefinitely. We evaluate the realizability of these Canadian DTAs in two steps. The first step determines the realizability of the Canadian NOLs prior to expiration. This is done by forecasting Canadian taxable income in each year to confirm each NOL pool is more-likely-than-not to be realized before its respective expiration, which ranges from 2025 to 2037. The forecasted taxable income excludes depreciation, which can be deferred indefinitely under Canadian tax law. The second step evaluates future projected Canadian earnings from continuing operations to confirm the Canadian operations are more-likely-than-not to be profitable in future years, inclusive of deductible depreciation. This second step establishes that the NOLs are not realized due solely to the suspension of Canadian tax depreciation. Although this step does not require earnings be realized before any set time period, the Canadian operations would eventually need cumulative profits (excluding permanent tax adjustments) sufficient to utilize the indefinite-lived DTAs. Evaluation of all available evidence supports the realizability of most recorded DTAs. If the review of evidence indicates the realizability may be less than likely, then a valuation allowance is recorded, with the exception of recorded DTAs for suspended U.S. interest deductions, which do not have a full valuation allowance in accordance with specific AICPA guidance. See Note 19—Income Taxes to our Financial Statements for further information. #### Unrecognized Tax Benefits Our income tax returns are subject to examination by U.S. federal and state taxing authorities as well as foreign jurisdictions, including Canada and France. In evaluating the tax benefits associated with various tax filing positions, we record a tax benefit for an uncertain tax position if it is more-likely-than-not to be realized upon ultimate settlement of the issue. We record a liability or an offset to the corresponding DTAs for any uncertain tax position that does not meet this criterion. The liabilities for unrecognized tax benefits are adjusted in the period in which it is determined the issue is settled with the taxing authorities, the statute of limitations expires for the relevant taxing authority to examine the tax position or when new facts or information become available. See Note 19—Income Taxes to our Financial Statements for further information. ## Market risk As filed, 3,893 characters. ### Market and Other Economic Risks We are exposed to various market risks, primarily changes in interest rates, currency and commodity prices. Our objective is to minimize the economic impact of these market risks. We may use derivatives in accordance with policies and procedures approved by the Finance & Strategic Planning Committee of our Board of Directors. See Note 11—Derivative Instruments to our Financial Statements for further information. ### Foreign Currency We manage our foreign currency exposures by balancing certain assets and liabilities denominated in foreign currencies. We may also use foreign currency forward contracts to manage these exposures. The principal objective of such contracts is to minimize the potential volatility and financial impact of changes in foreign currency exchange rates. We do not utilize financial instruments for trading or other speculative purposes. ### Prices The prices, sales volumes and margins of the commodity products of our High Purity Cellulose segment and all the products of the High-Yield Pulp segment have historically been cyclically affected by economic and market shifts, fluctuations in capacity and changes in foreign currency exchange rates. These products have less distinguishing qualities from producer to producer and competition is based primarily on price, which is determined by market supply relative to demand. The overall levels of demand for the products we manufacture, and consequently our sales and profitability, reflect fluctuations in end user demand. Our cellulose specialties product prices are impacted by market supply and demand, raw material and processing costs, changes in global currencies and other factors. Certain key input costs, such as wood fiber, chemicals and energy, may experience significant price fluctuations, also impacted by market shifts, fluctuations in capacity and other demand and supply dynamics. We may periodically enter into commodity forward contracts to fix some of our energy costs that are subject to price volatility caused by weather, supply conditions, political and economic variables and other unpredictable factors. Such forward contracts partially mitigate the risk of changes to our gross margins resulting from an increase or decrease in these costs. Forward contracts that are derivative instruments are reported in our consolidated balance sheets at their fair values, unless they qualify for the normal purchase normal sale exception and such exception has been elected, in which case the fair values of such contracts are not recognized in the balance sheet. ### Variable Interest Rates As of December 31, 2023, we had $255 million of variable rate debt subject to interest rate risk. In the third quarter of 2023 we issued variable rate term loan financing of $250 million, which was used with cash on hand to redeem the $318 million outstanding principal balance of our fixed rate 2024 Notes. At this borrowing level, a hypothetical one percent change in interest rates would have resulted in a $2 million annual change in interest expense. At December 31, 2022, we had $4 million of variable rate debt subject to interest rate risk, for which a hypothetical one percent change in rates would have resulted in an immaterial change in interest expense for the period. The fair market value of our long-term fixed interest rate debt is also subject to interest rate risk when the debt becomes due or if we do not hold the debt until maturity. The estimated fair value of our fixed-rate debt at December 31, 2023 and 2022 was $498 million and $839 million, respectively, compared to their respective $540 million and $854 million principal amounts. We use quoted market prices to estimate the fair value of our fixed-rate debt. Generally, the fair market value of fixed-rate debt will increase as interest rates fall and decrease as interest rates rise. ## Controls and procedures As filed, 2,129 characters. #### Management’s Evaluation of Disclosure Controls and Procedures Our management is responsible for establishing and maintaining adequate disclosure controls and procedures. Disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) are designed with the objective of ensuring that information required to be disclosed in reports filed under the Exchange Act, such as this 2023 Form 10-K, is (1) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Because of the inherent limitations in all control systems, no control evaluation can provide absolute assurance that all control exceptions and instances of fraud have been prevented or detected on a timely basis. Even systems determined to be effective can provide only reasonable assurance their objectives are achieved. Based on an evaluation of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that the design and operation of our disclosure controls and procedures were effective as of December 31, 2023. #### Internal Control over Financial Reporting With regard to our internal control over financial reporting as defined in Rule 13a-15(f), our Management’s Report on Internal Control over Financial Reporting on page F-2, and the Reports of Independent Registered Public Accounting Firm beginning on page F-3, included in Item 8—Financial Statements and Supplementary Data of this 2023 Form 10-K, are incorporated by reference into this Item 9A. For the quarter ended December 31, 2023, based upon the evaluation required by Rule 13a-15(d), there were no changes in our internal control over financial reporting that would materially affect or are reasonably likely to materially affect our internal control over financial reporting. Filed Feb 29, 2024. Source: SEC EDGAR, the filing index for accession 0001597672-24-000006. Last ingested by Listed: Nov 4, 2026, 15:32 ET. No prices; not investment advice.