Rayonier Advanced Materials Inc.: Form 10-Q for the period ended Sep 27, 2025

The following analysis of our financial condition and results of operations should be read in conjunction with our Financial Statements and the notes thereto included in this Quarterly Report on Form 10-Q and with our 2024 Form 10-K and information contained in subsequent Forms 8-K and other reports filed with the SEC.

Forward-Looking Statements

Certain statements in this Quarterly Report on Form 10-Q regarding anticipated financial, business, legal or other outcomes, including business and market conditions, outlook and other similar statements relating to future events, developments or financial or operational performance or results, are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are identified by the use of words such as “may,” “will,” “should,” “could,” “expect,” “estimate,” “target,” “believe,” “intend,” “plan,” “forecast,” “anticipate,” “project,” “guidance” and other similar language. However, the absence of these or similar words or expressions does not mean that a statement is not forward-looking.

Forward-looking statements are not guarantees of future performance or events and undue reliance should not be placed on these statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that these expectations will be attained, and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to various risks and uncertainties. The risk factors contained in Item 1A—Risk Factors of our 2024 Form 10-K, among others, could cause actual results or events to differ materially from our historical experience and those expressed in forward-looking statements made in this report.

Forward-looking statements are only as of the date of the filing of this Quarterly Report on Form 10-Q, and we undertake no duty to update forward-looking statements except as required by law. You are advised to review any disclosures that we have made or may make in our filings and other submissions to the SEC, including those on Forms 10-K, 10-Q, 8-K and other reports.

Business Overview

We are a global leader in the production of cellulose specialties, a natural polymer used in the manufacturing of various specialty chemical products, including liquid crystal displays, filters, textiles and performance additives for pharmaceutical, food and other industrial applications. Building upon nearly 100 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. Our specialized assets also produce bioelectricity, biomaterials, including biofuels, lignin and tall oil soap, and commodity fluff, viscose and paper pulp.

Additionally, we 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.

New Segment Structure

In the first quarter of 2025, we reorganized our High Purity Cellulose operating segment as a result of changes in our internal operating model, significant developments in our Biomaterials strategy and the successful launch of an enterprise reporting system that significantly enhances our financial reporting and costing capabilities. Specifically, we determined, in light of these new developments and capabilities, that the performance and outlook of the High Purity Cellulose business will be better managed as three separate businesses: Cellulose Specialties, Cellulose Commodities and a new Biomaterials business. No changes were made to the composition of the Paperboard and High-Yield Pulp operating segments.

As a result of this reorganization, we now operate in five operating segments: Cellulose Specialties, Biomaterials, Cellulose Commodities, Paperboard and High-Yield Pulp. Prior period segment results have been recast to align with this new segment reporting structure.

Recent Business Developments

• In August 2025, RYAM and USW jointly filed petitions with the USITC and the USDOC alleging that Brazilian and Norwegian producers of HPDP are selling into the U.S. market at unfairly low prices or with the benefit of government subsidies, causing material injury to the U.S. HPDP industry and its workers.

In September 2025, the USITC issued an affirmative injury determination, advancing the case to the USDOC, where preliminary determinations are expected in the first half of 2026. The Commission’s decision represents an important step toward restoring fair competition in the U.S. market and promoting greater pricing stability going forward.

• In October 2025, we expanded our Kallima® portfolio with the introduction of an enhanced freezer application for folding carton board. Engineered to withstand temperatures as low as -18°C (0°F), it maintains structural integrity and resists delamination in freezer conditions. Its natural resistance to moisture and condensation — without coatings or plastic extrusion — delivers cost efficiency, ease of converting and sustainability benefits. This innovation comes as the frozen food market continues to grow worldwide, driven by consumer demand for convenience and extended shelf life. With the Enhanced Freezer Application, RYAM provides packaging manufacturers with a solution that safeguards product integrity while delivering on sustainability and operational efficiency.

Business Outlook

We continue to expect a strong finish to 2025, with annual Adjusted EBITDA projected to approximate $135 million to $140 million, inclusive of the $12 million non-cash environmental charge taken in the first quarter, supported by stable Cellulose Specialties operations, improved order trends and continued cost discipline. Adjusted Free Cash Flow is expected to approximate $25 million to $30 million in the fourth quarter, reflecting improved working capital conversion and stronger financial performance as orders continue to normalize.

Looking ahead, we expect to more than double EBITDA over the next two years. This growth will be driven by multi-year Cellulose Specialties price actions, continued efficiency gains and structural cost reductions targeting approximately $30 million in annual savings by 2026. Beyond 2026, we are also evaluating incremental cost saving opportunities, with initiatives under review that could deliver up to $20 million of additional annual savings in 2027. In addition, Biomaterials projects are expected to add approximately $31 million of run-rate proportional EBITDA exiting 2027. Collectively, these actions reinforce RYAM’s long-term strategy and our path to achieve over $300 million in run-rate EBITDA by the end of 2027, with further upside as the AGE project comes online in late 2028.

We remain committed to disciplined capital allocation and cash management. The previously announced process to explore a potential sale of our Paperboard and High-Yield Pulp businesses remains in flux given current market dynamics, evolving trade conditions and ongoing discussions related to the renewal of the US-Mexico-Canada Agreement in July 2026. We continue to engage opportunistically with interested parties as inbound inquiries arise, while evaluating options that best support long-term value creation and balance sheet deleveraging.

The following segment outlooks reflect RYAM’s current performance expectations for our operating businesses for the remainder of 2025.

Cellulose Specialties

Sales prices in the fourth quarter are expected to bring the full year 2025 average price to a mid single-digit percentage above the prior year average. Sales volumes are anticipated to decline approximately 10 percent, reflecting tariff impacts, accelerated destocking of acetate and the absence of 2024 bridge volumes following the indefinite suspension of production at the Temiscaming plant. Acetate demand remains soft due to tariff-driven impacts, accelerated customer destocking and weaker global cigarette market trends. Ethers volumes are anticipated to improve, while demand for other cellulose specialties grades is mixed — strong in food and pharma end use applications but weak in automotive sectors. Raw material input and logistics costs are expected to increase moderately year-over-year.

Overall, EBITDA is expected to approximate $227 million to $230 million for the full year 2025, subject to additional impacts from tariffs.

Biomaterials

We continue to evaluate investments in new green energy and renewable products to provide both increased end-market diversity and incremental profitability. We intend to proceed only with those projects that are expected to meet our investment hurdles: a minimum 30 percent return on equity and a less than two-year payback period for RYAM equity. In the fourth quarter of 2024, we secured green capital of €67 million, which allows us to advance the biomaterials strategy and further progress towards our goal of generating over $80 million of proportional EBITDA from RYAM’s Biomaterials business, inclusive of the projects summarized below:

• Our bioethanol facility in France is operational since the first quarter of 2024.
• We re-started our lignosulfonate powder plant in France in the first quarter of 2025.
• We continue to advance engineering and commercial planning for a potential bioethanol facility in Fernandina Beach, Florida, similar to our bioethanol operation in France. Although the City of Fernandina Beach denied the site plan application earlier in 2025, we believe the decision was made in error and we are pursuing available administrative and legal avenues. We remain confident in the project’s merits and continue preparatory work to position for timely execution once approvals are secured.
• We are evaluating investments in CTO facilities in Jesup, Georgia and Tartas, France, and are currently working on permitting, engineering and commercial agreements for these new facilities. In September 2025, we purchased high-quality CTO plant equipment that will be used for the Jesup CTO project.
• We are evaluating a prebiotics facility at our Jesup plant. In July 2025, we received Generally Recognized As Safe status for our prebiotics product with a letter of no objection from the U.S. Food and Drug Administration. A Memorandum of Understanding has been signed with a feed additive manufacturer for the U.S. poultry and swine feed segments. Live animal tests of the prebiotics products showed over two times greater efficacy versus an existing prebiotics additive.
• We are a partner in AGE, a start-up entity that aims to utilize renewable forestry waste and other biomass generally discarded as waste to generate green electricity for the State of Georgia from a new facility to be constructed adjacent to our Jesup plant. Although the project remains in the development phase, construction planning is complete, the air permit has been obtained and an Engineering, Procurement and Construction agreement has been executed. AGE is actively evaluating financing options to advance the project toward a final investment decision.
• We recently signed Memoranda of Understanding with Verso Energy to explore eSAF opportunities at both our Jesup and Tartas facilities, and with GranBio to develop a pilot-scale ethanol-to-jet plant at the Jesup site to be fully funded by a U.S. Department of Energy grant. Together with GranBio, we are currently conducting due diligence on the feasibility of this project.

We expect to make final investment decisions on these projects in 2025 and early 2026.

Overall, EBITDA is expected to approximate $7 million for the full year 2025.

Cellulose Commodities

Chinese retaliatory tariffs continue to disrupt global fluff market dynamics, creating a mismatch between supply and demand. As a result, RYAM’s production is being actively shifted toward non-fluff commodities. While demand remains uncertain, we will continue to adjust production mix to mitigate the impact of direct tariffs and related second-order effects. Raw material input and logistics costs are expected to increase moderately.

Overall, EBITDA is expected to approximate a loss of $13 million to $15 million for the full year 2025, subject to additional impacts from tariffs.

Paperboard

Paperboard sales volumes are expected to remain soft due to continued economic uncertainty and weaker customer demand. The North American shipment to capacity ratio is below analysts’ projections for 2025. Additionally, average sales price is expected to decline year-over-year, reflecting increased competitive activity from European Union imports and new U.S. competitor capacity. Input costs are projected to rise due to higher purchased pulp prices and increased allocation of Temiscaming net custodial site costs. In response to ongoing market weakness and a softer sales outlook, we are idling Paperboard production for three weeks during the fourth quarter as a proactive measure to align inventory levels with demand and preserve cash flow.

Overall, EBITDA is expected to approximate $13 million for the full year 2025.

High-Yield Pulp

High-Yield Pulp average sales price and sales volumes are expected to remain low in the fourth quarter of 2025, driven primarily by continued oversupply in the Chinese market. Input costs are also projected to rise due to a higher allocation of net custodial site costs at the Temiscaming facility. Given the ongoing market weakness, we continue to take proactive steps to manage production and costs. In response to ongoing market weakness and a softer sales outlook, we are idling one of our two High-Yield Pulp production lines for three weeks during the fourth quarter to proactively manage inventory levels and preserve cash flow.

Overall, EBITDA is expected to approximate a loss of $27 million for the full year 2025.

Corporate

Corporate costs for full year 2025 are expected to be higher compared to the prior year primarily due to the $12 million of non-cash environmental reserve charges recorded in the first quarter and potential continued foreign exchange headwinds from a weaker U.S. dollar. These impacts are expected to be partially offset by lower corporate spending in the second half of the year following the completion of our ERP implementation.

Overall, Corporate costs are expected to approximate $70 million for the full year 2025.

Results of Operations

(in millions, except percentages)

26

Net Sales

(in millions)

Net sales for the quarter and nine months ended September 27, 2025 decreased $48 million, or 12 percent, and $159 million, or 13 percent, respectively, compared to the same prior year periods driven by lower average sales prices in Paperboard and High-Yield Pulp and lower sales volumes across all segments that were largely a response to imposed tariffs, lower Temiscaming sales in the current periods due to the indefinite suspension of operations in the previous year, increased competitive activity, operational challenges and labor strikes at the Tartas cellulose plant in the current year. These decreases were partially offset by higher average sales prices in Cellulose Specialties and Cellulose Commodities that were driven by negotiated price increases and sales mix.

See Operating Results by Segment below for further discussion.

Operating Income (Loss)

(in millions)

Operating results for the quarter ended September 27, 2025 improved $26 million, or 153 percent, compared to the same prior year quarter primarily driven by the prior year quarter’s $25 million non-cash asset impairment and $7 million in one-time indefinite suspension costs, as well as lower fixed costs due to the indefinite suspension of Temiscaming cellulose operations, favorable foreign exchange rates, lower variable compensation costs and an $8 million energy cost benefit from sales of excess emission allowances in the current quarter. Partially offsetting these improvements were the decrease in net sales and higher operating costs due to operational challenges, primarily at the Tartas cellulose plant, and French national labor strikes in the current quarter.

Operating results for the nine months ended September 27, 2025 declined $35 million, or 125 percent, compared to the same prior year period driven primarily by the decrease in net sales, higher costs due to lower productivity resulting from operational challenges and labor strikes at the Tartas cellulose plant, current period non-cash environmental reserves charges of $12 million, unfavorable foreign exchange rates and the one-time prior year recognition of $10 million in CEWS benefit claims. Partially offsetting these declines were the prior year’s $25 million non-cash asset impairment and $14 million in one-time indefinite suspension costs, lower fixed costs due to the indefinite suspension of Temiscaming cellulose operations, lower variable compensation costs and an $8 million energy cost benefit from sales of excess emission allowances in the current year.

See Operating Results by Segment below for further discussion.

Non-Operating Income & Expense

Interest expense for the quarter and nine months ended September 27, 2025 increased $5 million and $10 million, respectively, compared to the same prior year periods primarily driven by an increase in the average effective interest rate on debt.

Unfavorable foreign exchange rates during the nine months ended September 27, 2025 compared to favorable rates in the same prior year period resulted in a net unfavorable impact of $2 million.

Also included in other income, net during the nine months ended September 27, 2025 was a $2 million increase to our liability related to SWEN’s put option for its quarterly fair value remeasurement.

Income Taxes

The effective tax rate on the loss from continuing operations for the quarter ended September 27, 2025 was a benefit of 72 percent, which differed from the federal statutory rate of 21 percent primarily due to valuation allowances on nondeductible U.S. interest expense, state taxes, return-to-accrual adjustments and different statutory tax rates in foreign jurisdictions.

The effective tax rate on the loss from continuing operations for the nine months ended September 27, 2025 was not meaningful as a result of the valuation allowance placed on our Canadian DTAs in the second quarter. Also driving the difference between the effective tax rate and the federal statutory rate of 21 percent were different statutory tax rates in foreign jurisdictions, valuation allowances on nondeductible U.S. interest expense, U.S. tax credits and nondeductible executive compensation.

The effective tax rates on the loss from continuing operations for the quarter and nine months ended September 28, 2024 were benefits of 13 percent and 19 percent, respectively. These rates differed from the federal statutory rate of 21 percent primarily due to changes in the valuation allowance on disallowed interest deductions, the release of certain tax reserves, different statutory tax rates in foreign jurisdictions, U.S. tax credits, excess deficit on vested stock compensation and return-to-accrual adjustments.

See Note 17—Income Taxes to our Financial Statements for further details of the Canadian DTA write-off.

Discontinued Operations

During the nine months ended September 27, 2025, we recorded pre-tax income from discontinued operations of $4 million related to the remaining CEWS benefit claims deferred since 2021.

During the nine months ended September 28, 2024, we recorded pre-tax income from discontinued operations of $5 million related to CEWS benefit claims and a pre-tax loss of $1 million on the sale of our softwood lumber duty refund rights.

See Note 4—Discontinued Operations to our Financial Statements for further details.

Operating Results by Segment

Following the indefinite suspension of Temiscaming cellulose operations in the third quarter of 2024, certain infrastructure assets of the site’s cellulose plant continue to run in support of the ongoing energy needs of the Paperboard and High-Yield Pulp operations. As such, beginning in the fourth quarter of 2024, the net impact of the custodial site costs being incurred and the sales of any electricity generated by the running of the cellulose plant assets are reflected within the operating results of the Paperboard and High-Yield Pulp businesses.

Cellulose Specialties

(in millions, unless otherwise stated)

28

Net Sales - Three Months Ended

(in millions)

Net sales of our Cellulose Specialties segment for the quarter ended September 27, 2025 decreased $28 million, or 12 percent, compared to the same prior year quarter driven by a 17 percent decrease in sales volumes that was driven by larger customer orders in the prior year quarter in advance of the indefinite suspension of Temiscaming cellulose operations as well as weaker demand in the current quarter due to continued customer destocking in the acetate market that was further accelerated by ongoing global tariff impacts. Partially offsetting the sales volume decrease was a 7 percent increase in average sales price driven by negotiated price increases and sales mix.

Net Sales - Nine Months Ended

(in millions)

Net sales of our Cellulose Specialties segment for the nine months ended September 27, 2025 decreased $65 million, or 10 percent, compared to the same prior year period driven by a 12 percent decrease in sales volumes due to larger customer orders in the prior year period in advance of the indefinite suspension of Temiscaming cellulose operations as well as weaker demand in the current year period due to continued customer destocking in the acetate market that was further accelerated by ongoing global tariff impacts. Partially offsetting the sales volume decrease was a 4 percent increase in average sales price driven by negotiated price increases and sales mix.

Operating Income - Three Months Ended

(in millions, except percentages)

(a) Computed based on contribution margin.

Operating income of our Cellulose Specialties segment for the quarter ended September 27, 2025 increased $3 million, or 7 percent, compared to the same prior year quarter driven by the higher average sales price, lower fixed costs due to the indefinite suspension of Temiscaming cellulose operations and a $7 million energy cost benefit from sales of excess emission allowances in the current quarter, the prior year sales of which occurred in the fourth quarter. Partially offsetting these improvements were the lower sales volumes, higher operating costs due to operational challenges, primarily at our Tartas cellulose plant, and French national labor strikes also impacting Tartas production in the current quarter.

Operating Income - Nine Months Ended

(in millions, except percentages)

(a) Computed based on contribution margin.

Operating income of our Cellulose Specialties segment for the nine months ended September 27, 2025 decreased $24 million, or 18 percent, compared to the same prior year period driven by the lower sales volumes, higher wood and chemicals costs, higher operating costs due to lower production efficiency, including labor strikes at the Tartas cellulose plant, and the one-time prior year recognition of $3 million in CEWS benefit claims. Partially offsetting these decreases were the increase in average sales price, lower fixed costs due to the indefinite suspension of Temiscaming cellulose operations and the $7 million energy cost benefit from sales of excess emission allowances in the current year, the prior year sales of which occurred in the fourth quarter.

Biomaterials

(in millions)

Net Sales - Three Months Ended

Net sales of our Biomaterials segment for the quarter ended September 27, 2025 were flat compared to the same prior year quarter driven by higher turpentine sales that were offset by lower bioethanol sales volumes due to operational challenges and French national labor strikes at our Tartas cellulose plant in the current quarter, which limited raw material supply due to the bioethanol facility’s reliance on the plant for feedstock.

Net Sales - Nine Months Ended

Net sales of our Biomaterials segment for the nine months ended September 27, 2025 decreased $1 million, or 5 percent, compared to the same prior year period driven by lower lignin sales volumes due to the prior year indefinite suspension of Temiscaming cellulose operations, partially offset by higher bioethanol sales volumes due to the prior year period having only two quarters of sales following the commencement of production of the new facility in March.

Operating Income - Three Months Ended

Operating income of our Biomaterials segment for the quarter ended September 27, 2025 decreased $2 million, or 67 percent, compared to the same prior year quarter primarily driven by higher shared and ancillary service costs under the business’s newly established cost structure.

Operating Income - Nine Months Ended

Operating income of our Biomaterials segment for the nine months ended September 27, 2025 decreased $2 million, or 33 percent, compared to the same prior year period driven by the lower sales and higher shared and ancillary service costs under the business’s newly established cost structure, partially offset by lower production costs as a result of the current year operational challenges and labor strikes at the Tartas cellulose plant that reduced feedstock availability.

Cellulose Commodities

(in millions, unless otherwise stated)

30

Net Sales - Three Months Ended

(in millions)

Net sales of our Cellulose Commodities segment for the quarter ended September 27, 2025 decreased $1 million, or 1 percent, compared to the same prior year quarter driven by a 2 percent decrease in sales volumes due to lower production levels and resulting prioritization of available production to Cellulose Specialties, and the absence of Temiscaming sales in the current quarter due to the indefinite suspension of operations in the previous year, which were largely offset by increased viscose sales volumes for inventory management. The decrease in sales volumes was largely offset by an 8 percent increase in average sales price driven by higher fluff pricing and sales mix.

Net Sales - Nine Months Ended

(in millions)

Net sales of our Cellulose Commodities segment for the nine months ended September 27, 2025 decreased $48 million, or 18 percent, compared to the same prior year period driven by a 19 percent decrease in sales volumes due to the reduction of Temiscaming sales as a result of the prior year indefinite suspension of operations and lower production levels due to operational challenges and labor strikes at our Tartas cellulose plant. The lower sales volumes were partially offset by a 5 percent increase in average sales price driven by higher fluff pricing and sales mix.

Operating Loss - Three Months Ended

(in millions, except percentages)

(a) Computed based on contribution margin.

Operating loss of our Cellulose Commodities segment for the quarter ended September 27, 2025 improved $42 million, or 76 percent, compared to the same prior year quarter primarily driven by a $25 million non-cash asset impairment and $7 million in one-time indefinite suspension costs in the prior year quarter, the higher average sales price and lower fixed costs due to the indefinite suspension of Temiscaming cellulose operations.

Operating Loss - Nine Months Ended

(in millions, except percentages)

(a) Computed based on contribution margin.

Operating loss of our Cellulose Commodities segment for the nine months ended September 27, 2025 improved $59 million, or 63 percent, compared to the same prior year period driven by a $25 million non-cash asset impairment and $14 million in one-time indefinite suspension costs in the prior year, the higher average sales price, lower fixed costs due to the indefinite suspension of Temiscaming cellulose operations and reduced volumes of negative margin sales. Partially offsetting these improvements were higher costs due to lower productivity resulting from operational challenges and labor strikes at the Tartas cellulose plant, and the one-time prior year recognition of $2 million in CEWS benefit claims.

Paperboard

(in millions, unless otherwise stated)

Net Sales - Three Months Ended

(in millions)

Net sales of our Paperboard segment for the quarter ended September 27, 2025 decreased $16 million, or 29 percent, compared to the same prior year quarter. Average sales price and sales volumes decreased 10 percent and 21 percent, respectively, driven by mix, shifting customer dynamics associated with tariff uncertainty and increased competitive activity due to increased European Union imports and the start-up of new U.S. capacity.

Net Sales - Nine Months Ended

(in millions)

Net sales of our Paperboard segment for the nine months ended September 27, 2025 decreased $33 million, or 20 percent, compared to the same prior year period. Average sales price and sales volumes decreased 6 percent and 15 percent, respectively, driven by mix, shifting customer dynamics associated with tariff uncertainty and increased competitive activity in the first two quarters of 2025 due to increased European Union imports and the start-up of new U.S. capacity.

Operating Income (Loss) - Three Months Ended

(in millions, except percentages)

(a) Computed based on contribution margin.

Operating results of our Paperboard segment for the quarter ended September 27, 2025 declined $11 million, or 157 percent, compared to the same prior year quarter driven by the lower sales, higher fixed costs due to the current quarter market-driven downtime and the impact of Temiscaming net custodial site costs, partially offset by lower purchased pulp costs.

Operating Income (Loss) - Nine Months Ended

(in millions, except percentages)

(a) Computed based on contribution margin.

Operating results of our Paperboard segment for the nine months ended September 27, 2025 declined $33 million, or 122 percent, compared to the same prior year period driven by the lower sales, higher fixed costs due to the current quarter market-driven downtime, the impact of Temiscaming net custodial site costs and the one-time prior year recognition of $2 million in CEWS benefit claims.

High-Yield Pulp

(in millions, unless otherwise stated)

(a) External sales only. During the quarters ended September 27, 2025 and September 28, 2024, the High-Yield Pulp segment sold 14,000 MTs and 15,000 MTs of high-yield pulp to the Paperboard segment for $6 million and $7 million, respectively. During each of the nine months ended September 27, 2025 and September 28, 2024, the High-Yield Pulp segment sold 47,000 MTs of high-yield pulp to the Paperboard segment for $20 million.

Net Sales - Three Months Ended

(in millions)

Net sales of our High-Yield Pulp segment for the quarter ended September 27, 2025 decreased $4 million, or 14 percent, compared to the same prior year quarter. Average sales price and sales volumes decreased 10 percent and 8 percent, respectively, driven by lower demand, including in China where demand for all grades of market pulp were down, continued oversupply of domestic high-yield pulp in China and the timing of shipments, primarily related to shipping challenges to customers in India.

Net Sales - Nine Months Ended

(in millions)

Net sales of our High-Yield Pulp segment for the nine months ended September 27, 2025 decreased $11 million, or 12 percent, compared to the same prior year period. Average sales price and sales volumes decreased 10 percent and 5 percent, respectively, driven by lower demand, including in China where demand for all grades of market pulp were down, continued oversupply of domestic high-yield pulp in China, increased competitive activity due to the start-up of new Indonesian capacity late in 2024 and the timing of shipments, primarily related to shipping challenges to customers in India.

Operating Income (Loss) - Three Months Ended

(in millions, except percentages)

(a) Computed based on contribution margin.

Operating results of our High-Yield Pulp segment for the quarter ended September 27, 2025 declined $10 million, or 100 percent, compared to the same prior year quarter driven by the lower sales, higher fixed costs due to the current quarter market-driven downtime and the impact of Temiscaming net custodial site costs.

Operating Income (Loss) - Nine Months Ended

(in millions, except percentages)

(a) Computed based on contribution margin.

Operating results of our High-Yield Pulp segment for the nine months ended September 27, 2025 declined $24 million, or 100 percent, compared to the same prior year period driven by the lower sales, higher fixed costs due to the current quarter market-driven downtime, higher logistics costs, the impact of Temiscaming net custodial site costs and the one-time prior year recognition of $2 million in CEWS benefit claims. These negative impacts were partially offset by lower wood costs.

Corporate

(in millions)

The Corporate operating loss for the quarter ended September 27, 2025 improved $4 million, or 22 percent, compared to the same prior year quarter primarily driven by lower variable compensation costs and favorable foreign exchange rates in the current quarter compared to unfavorable rates in the prior year quarter.

The Corporate operating loss for the nine months ended September 27, 2025 declined $11 million, or 25 percent, compared to the same prior year period driven by first quarter non-cash environmental reserves charges of $12 million and unfavorable foreign exchange rates in the current period compared to favorable rates in the prior year period, partially offset by lower variable compensation costs. The environmental reserves charges are associated with recent developments at the Port Angeles, Washington, and Augusta, Georgia, remediation sites. The cash impact associated with the Augusta remediation site is expected in early 2027; the cash impact for the Port Angeles remediation site is not expected to begin before 2028, with outflows in the following three to five years.

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. 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.

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 will depend on 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 have not repurchased shares under this program since 2018 and do not expect to utilize any of the remaining $60 million in unused authorization in the future.

Our liquidity and capital resources are summarized below:

(in millions, except ratios)

(a) Amounts available under the ABL Credit Facility fluctuate based on eligible accounts receivable and inventory levels. At September 27, 2025, we had $162 million of gross availability and net available borrowings of $53 million after taking into account the facility’s quarter end balance of $59 million, outstanding letters of credit of $26 million and required availability of $24 million to avoid triggering the facility’s fixed charge coverage ratio covenant.

(b) See Note 9—Debt and Finance Leases to our Financial Statements for further information.

As of September 27, 2025, we were in compliance with all financial and other covenants under our debt agreements.

Other Sources of Cash

SWEN Investment

In November 2024, we secured €30 million to be provided by SWEN in return for a 20 percent preferred equity interest in BioNova. We received €15 million from SWEN in 2024. Subsequent funding is contingent on the achievement of certain project milestones.

BioNova Term Loan

In November 2024, we entered into a credit agreement that authorizes up to €37 million in seven- and eight-year secured term loan tranches. As of September 27, 2025, no amounts were outstanding on the BioNova Term Loan.

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, electricity and wood chips purchase contracts. There have been no material changes outside the ordinary course of business to the purchase obligations presented in our 2024 Form 10-K during the nine months ended September 27, 2025. See Note 19—Commitments and Contingencies to our Financial Statements for further information.

Cash Flows

(in millions)

35

Cash provided by operating activities decreased $157 million compared to the prior year period primarily due to the decline in operating results, the one-time prior year proceeds of $39 million from the sale of our softwood lumber duty refund rights and $20 million in income tax net refunds in the prior year compared to less than $1 million in net payments in the current year. These outflows were partially offset by lower outflows for working capital and lower interest paid on long-term debt due to the timing of payments. The tariff volatility and operational disruptions causing significant headwinds in the first half of the year peaked in the second quarter, with the third quarter showing increasing stabilization across demand, operational performance and costs.

Cash used in investing activities increased $17 million compared to the prior year period as higher custodial capital spend and our third quarter contribution to AGE were partially offset by decreased strategic capital spend and current year proceeds from our insurance claim related to the fire at our Jesup plant in the fourth quarter of 2024.

Cash inflows from financing activities increased $57 million compared to the prior year period due to net borrowings of short- and long-term debt in the current period compared to net repayments in the prior period and lower debt issuance costs, partially offset by higher repurchases of common stock to satisfy tax withholding requirements related to stock-based compensation.

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 Flow. 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 report.

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 Flow 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.

We do not provide a reconciliation of forward-looking EBITDA, Adjusted EBITDA and Adjusted Free Cash Flow to their most directly comparable GAAP financial measures due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations. These amounts may be material and could result in the projected GAAP financial measure being materially different than the projected non-GAAP measure. As such, reconciliations for our forward-looking non-GAAP financial measures are not available without unreasonable effort.

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.

Income (loss) from continuing operations is reconciled to EBITDA and Adjusted EBITDA from continuing operations by segment, as follows:

(in millions)

37

(in millions)

Adjusted Free Cash Flow

Adjusted Free Cash Flow is defined as cash provided by operating activities adjusted for capital expenditures, net of proceeds from the sale of assets and excluding strategic capital expenditures deemed discretionary by management. Adjusted Free Cash Flow is a non-GAAP financial measure of cash generated during a period that is available for debt reduction, strategic capital expenditures, acquisitions and repurchases of our common stock. Adjusted Free Cash Flow is not necessarily indicative of the Adjusted Free Cash Flow that may be generated in future periods.

Cash provided by (used in) operating activities is reconciled to Adjusted Free Cash Flow as follows:

(in millions)

(a) Net of proceeds from the sale of assets and insurance claims, and excluding strategic capital expenditures. Strategic capital expenditures for the nine months ended September 27, 2025 and September 28, 2024 were $20 million and $30 million, respectively.

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 our Board of Directors.

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 our Cellulose Commodities and High-Yield Pulp operating segments’ products have historically been cyclically affected by economic and market shifts, fluctuations in capacity and changes in foreign currency exchange rates. These products have fewer 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 operating segment’s 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

At September 27, 2025 and December 31, 2024, we had $762 million and $702 million, respectively, of variable rate debt subject to interest rate risk. At these borrowing levels, a hypothetical one percent change in interest rates would result in an annual change in interest expense of $8 million and $7 million, respectively.

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 September 27, 2025 and December 31, 2024 was $76 million and $75 million, respectively, compared to the debt’s respective $74 million and $75 million carrying values at period end. 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.

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 Quarterly Report on Form 10-Q, 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 Quarterly Report on Form 10-Q, our management, including the Chief Executive Officer and Chief Financial Officer, concluded the design and operation of the disclosure controls and procedures were effective as of September 27, 2025.

Internal Control over Financial Reporting

In January of 2025, the Company implemented a new financial accounting system for product costing. Our processes, procedures and controls have been fully updated and evaluated by management, as appropriate. For the quarter ended September 27, 2025, based upon the evaluation required by SEC Rule 13a-15(d), including the changes related to the new financial accounting system, 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.