UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 27,~~June 26, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


			For the transition period from to

Commission File Number 001-36285

RAYONIER ADVANCED MATERIALS INC.

Incorporated in the State of Delaware

I.R.S. Employer Identification No. 46-4559529

1301 RIVERPLACE BOULEVARD, SUITE 2300

JACKSONVILLE, FL 32207

(Principal Executive Office)

Telephone Number: (904) 357-4600

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	RYAM	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

The registrant had ~~63,597,353~~63,737,353 shares of common stock, $.01 par value per share, outstanding as of ~~May 3,~~August 2, 2021.

Table of Contents


Item	Item		Page	Item		Page
		Part I — Financial Information			Part I — Financial Information
1.	1.	Financial Statements (U naudited)		1.	Financial Statements (U naudited)
		Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the Three Months Ended March 27 , 202 1 and March 28, 2020	1		Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the Three and Si x Months Ended June 26, 2021 and June 27 , 2020	1
		Consolidated Balance Sheets as of March 27, 2021 a nd December 31, 2020	3		Consolidated Balance Sheets as of June 26, 2021 and December 31, 2020	3
		Consolidated Statements of Cash Flows for the Three Months Ended March 27 , 2021 and March 28, 2020	4		Consolidated Statements of Cash Flows for the Six Months Ended June 26 , 2021 and June 27 , 2020	4
		Notes to Consolidated Financial Statements	5		Notes to Consolidated Financial Statements	5
2.	2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20	2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
3.	3.	Quantitative and Qualitative Disclosures about Market Risk	33	3.	Quantitative and Qualitative Disclosures about Market Risk	37
4.	4.	Controls and Procedures	34	4.	Controls and Procedures	38
		Part II — Other Information			Part II — Other Information
1.	1.	Legal Proceedings	35	1.	Legal Proceedings	39
1A.	1A.	Risk Factors	35	1A.	Risk Factors	39
2.	2.	Unregistered Sales of Equity Securities and Use of Proceeds	36	2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
6.	6.	Exhibits	37	6.	Exhibits	41
		Signature	38		Signature	42

Table of Contents


Part I.			Financial Information


Item 1.			Financial Statements

Rayonier Advanced Materials Inc.

Consolidated Statements of Income (Loss)

(Unaudited)

(Dollars in thousands, except per share amounts)


		Three Months Ended			Three Months Ended						Six Months Ended
			March 27, 2021			March 28, 2020			June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020
Net Sales	Net Sales		$	465,141		$	409,808	Net Sales	$	341,019	$	324,170	$	659,697	$	648,645
Cost of Sales	Cost of Sales		(380,981)			(399,347)		Cost of Sales	(318,740)		(301,632)		(616,994)		(617,827)
Gross Margin	Gross Margin		84,160			10,461		Gross Margin	22,279		22,538		42,703		30,818

Selling, general and administrative expenses	Selling, general and administrative expenses		(17,748)			(20,247)		Selling, general and administrative expenses	(18,235)		(20,491)		(34,075)		(39,068)
Duties			(6,515)			(6,451)

Foreign exchange gains (losses)	Foreign exchange gains (losses)		(691)			5,797		Foreign exchange gains (losses)	(2,127)		(4,591)		(2,733)		1,158
Other operating income (expense), net	Other operating income (expense), net		(4,410)			(1,568)		Other operating income (expense), net	(540)		(3,617)		(4,992)		(5,235)
Operating Income (Loss)	Operating Income (Loss)		54,796			(12,008)		Operating Income (Loss)	1,377		(6,161)		903		(12,327)
Interest expense	Interest expense		(17,963)			(15,225)		Interest expense	(16,470)		(13,651)		(31,819)		(26,815)
Interest income and other, net	Interest income and other, net		(845)			423		Interest income and other, net	(939)		(1,036)		(1,733)		(563)
Other components of pension and OPEB, excluding service costs	Other components of pension and OPEB, excluding service costs		1,203			353		Other components of pension and OPEB, excluding service costs	(66)		(257)		742		(607)

Income (Loss) from Continuing Operations Before Income Taxes	Income (Loss) from Continuing Operations Before Income Taxes		37,191			(26,457)		Income (Loss) from Continuing Operations Before Income Taxes	(16,098)		(21,105)		(31,907)		(40,312)
Income tax (expense) benefit (Note 16)	Income tax (expense) benefit (Note 16)		(63,910)			1,622		Income tax (expense) benefit (Note 16)	24,656		17,600		24,564		18,819
Equity in income (loss) of equity method investment	Equity in income (loss) of equity method investment		(308)			0		Equity in income (loss) of equity method investment	(261)		0		(570)		0
Income (Loss) from Continuing Operations	Income (Loss) from Continuing Operations		(27,027)			(24,835)		Income (Loss) from Continuing Operations	8,297		(3,505)		(7,913)		(21,493)
Income from discontinued operations, net of taxes (Note 2)			0			708
Income (loss) from discontinued operations, net of taxes (Note 2)								Income (loss) from discontinued operations, net of taxes (Note 2)	113,931		(9,358)		103,114		(15,497)
Net Income (Loss)	Net Income (Loss)		$	(27,027)		$	(24,127)	Net Income (Loss)	$	122,228	$	(12,863)	$	95,201	$	(36,990)

Basic Earnings Per Common Share (Note 13)	Basic Earnings Per Common Share (Note 13)							Basic Earnings Per Common Share (Note 13)
Income (loss) from continuing operations	Income (loss) from continuing operations		$	(0.43)		$	(0.39)	Income (loss) from continuing operations	$	0.13	$	(0.05)	$	(0.12)	$	(0.34)
Income from discontinued operations			0			0.01
Income (loss) from discontinued operations								Income (loss) from discontinued operations	1.79		(0.15)		1.62		(0.25)
Net income (loss) per common share-basic	Net income (loss) per common share-basic		$	(0.43)		$	(0.38)	Net income (loss) per common share-basic	$	1.92	$	(0.20)	$	1.50	$	(0.59)
Diluted Earnings Per Common Share (Note 13)	Diluted Earnings Per Common Share (Note 13)							Diluted Earnings Per Common Share (Note 13)
Income (loss) from continuing operations	Income (loss) from continuing operations		$	(0.43)		$	(0.39)	Income (loss) from continuing operations	$	0.13	$	(0.05)	$	(0.12)	$	(0.34)
Income from discontinued operations			0			0.01
Income (loss) from discontinued operations								Income (loss) from discontinued operations	1.76		(0.15)		1.62		(0.25)
Net income (loss) per common share-diluted	Net income (loss) per common share-diluted		$	(0.43)		$	(0.38)	Net income (loss) per common share-diluted	$	1.89	$	(0.20)	$	1.50	$	(0.59)

See Notes to Consolidated Financial Statements.

Table of Contents

Rayonier Advanced Materials Inc.

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(Dollars in thousands)


		Three Months Ended			Three Months Ended						Six Months Ended
			March 27, 2021			March 28, 2020			June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020
Net Income (Loss)	Net Income (Loss)		$	(27,027)		$	(24,127)	Net Income (Loss)	$	122,228	$	(12,863)	$	95,201	$	(36,990)
Other Comprehensive Income (Loss), net of tax (Note 11):	Other Comprehensive Income (Loss), net of tax (Note 11):							Other Comprehensive Income (Loss), net of tax (Note 11):
Foreign currency translation adjustments	Foreign currency translation adjustments		(9,268)			(6,471)		Foreign currency translation adjustments	3,046		5,888		(6,221)		(583)
Unrealized gain (loss) on derivative instruments	Unrealized gain (loss) on derivative instruments		(1,268)			(20,660)		Unrealized gain (loss) on derivative instruments	(1,585)		10,129		(2,853)		(10,530)
Net gain from pension and postretirement plans	Net gain from pension and postretirement plans		3,302			6,573		Net gain from pension and postretirement plans	3,363		2,741		6,664		9,313
Total other comprehensive income (loss)	Total other comprehensive income (loss)		(7,234)			(20,558)		Total other comprehensive income (loss)	4,824		18,758		(2,410)		(1,800)
Comprehensive Income (Loss)	Comprehensive Income (Loss)		$	(34,261)		$	(44,685)	Comprehensive Income (Loss)	$	127,052	$	5,895	$	92,791	$	(38,790)

See Notes to Consolidated Financial Statements.

Table of Contents

Rayonier Advanced Materials Inc.

Consolidated Balance Sheets

(Unaudited)

(Dollars in thousands, except per share amounts)


		March 27, 2021		December 31, 2020			June 26, 2021		December 31, 2020
Assets	Assets					Assets
Current Assets	Current Assets					Current Assets
Cash and cash equivalents	Cash and cash equivalents	$	106,750	$	93,653	Cash and cash equivalents	$	214,739	$	93,653
Accounts receivable, net (Note 3)	Accounts receivable, net (Note 3)	182,639		179,208		Accounts receivable, net (Note 3)	187,882		179,208
Inventory (Note 4)	Inventory (Note 4)	295,544		233,484		Inventory (Note 4)	195,171		170,647
Income tax receivable	Income tax receivable	53,309		58,657		Income tax receivable	48,663		58,657
Prepaid and other current assets	Prepaid and other current assets	61,148		68,570		Prepaid and other current assets	68,504		58,845

Assets of discontinued operations-held for sale (Note 2)						Assets of discontinued operations-held for sale (Note 2)	245,643		72,562
Total current assets	Total current assets	699,390		633,572		Total current assets	960,602		633,572

Property, Plant and Equipment (net of accumulated depreciation of $1,633,320 at March 27, 2021 and $1,610,454 at December 31, 2020)		1,249,390		1,274,942
Property, Plant and Equipment (net of accumulated depreciation of $1,623,146 at June 26, 2021 and $1,578,140 at December 31, 2020)						Property, Plant and Equipment (net of accumulated depreciation of $1,623,146 at June 26, 2021 and $1,578,140 at December 31, 2020)	1,161,012		1,177,791
Deferred Tax Assets	Deferred Tax Assets	330,012		385,459		Deferred Tax Assets	342,749		382,959
Intangible Assets, net	Intangible Assets, net	36,689		38,441		Intangible Assets, net	34,937		38,441
Other Assets	Other Assets	199,794		197,451		Other Assets	149,002		156,399

Assets of discontinued operations-held for sale (Note 2)						Assets of discontinued operations-held for sale (Note 2)	0		140,703
Total Assets	Total Assets	$	2,515,275	$	2,529,865	Total Assets	$	2,648,302	$	2,529,865

Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity					Liabilities and Stockholders’ Equity
Current Liabilities	Current Liabilities					Current Liabilities
Accounts payable	Accounts payable	$	145,857	$	156,721	Accounts payable	$	157,166	$	156,721
Accrued and other current liabilities (Note 6)	Accrued and other current liabilities (Note 6)	137,850		110,495		Accrued and other current liabilities (Note 6)	137,489		109,715
Debt due within one year (Note 7)	Debt due within one year (Note 7)	17,446		17,100		Debt due within one year (Note 7)	17,013		17,100
Current environmental liabilities (Note 8)	Current environmental liabilities (Note 8)	8,694		8,684		Current environmental liabilities (Note 8)	8,712		8,684

Liabilities of discontinued operations-held for sale (Note 2)						Liabilities of discontinued operations-held for sale (Note 2)	13,913		780
Total current liabilities	Total current liabilities	309,847		293,000		Total current liabilities	334,293		293,000

Long-Term Debt (Note 7)	Long-Term Debt (Note 7)	1,065,163		1,066,837		Long-Term Debt (Note 7)	1,063,739		1,066,837
Long-Term Environmental Liabilities (Note 8)	Long-Term Environmental Liabilities (Note 8)	162,946		162,995		Long-Term Environmental Liabilities (Note 8)	162,384		162,995
Pension and Other Postretirement Benefits	Pension and Other Postretirement Benefits	258,195		260,708		Pension and Other Postretirement Benefits	246,681		251,391
Deferred Tax Liabilities	Deferred Tax Liabilities	30,136		24,462		Deferred Tax Liabilities	23,822		24,462
Other Long-Term Liabilities	Other Long-Term Liabilities	30,234		26,776		Other Long-Term Liabilities	30,542		24,279

Liabilities of Discontinued Operations-Held for Sale (Note 2)						Liabilities of Discontinued Operations-Held for Sale (Note 2)	0		11,814
Commitments and Contingencies (Note 18)	Commitments and Contingencies (Note 18)	0		0		Commitments and Contingencies (Note 18)	0		0

Stockholders’ Equity	Stockholders’ Equity					Stockholders’ Equity

Common stock, 140,000,000 shares authorized at $0.01 par value, 63,597,356 and 63,359,839 issued and outstanding, as of March 27, 2021 and December 31, 2020, respectively		636		633
Common stock, 140,000,000 shares authorized at $0.01 par value, 63,737,356 and 63,359,839 issued and outstanding, as of June 26, 2021 and December 31, 2020, respectively						Common stock, 140,000,000 shares authorized at $0.01 par value, 63,737,356 and 63,359,839 issued and outstanding, as of June 26, 2021 and December 31, 2020, respectively	637		633
Additional paid-in capital	Additional paid-in capital	403,086		405,161		Additional paid-in capital	404,120		405,161
Retained earnings	Retained earnings	395,901		422,928		Retained earnings	518,129		422,928
Accumulated other comprehensive income (loss) (Note 11)	Accumulated other comprehensive income (loss) (Note 11)	(140,869)		(133,635)		Accumulated other comprehensive income (loss) (Note 11)	(136,045)		(133,635)
Total Stockholders’ Equity	Total Stockholders’ Equity	658,754		695,087		Total Stockholders’ Equity	786,841		695,087
Total Liabilities and Stockholders’ Equity	Total Liabilities and Stockholders’ Equity	$	2,515,275	$	2,529,865	Total Liabilities and Stockholders’ Equity	$	2,648,302	$	2,529,865

See Notes to Consolidated Financial Statements.

Table of Contents

Rayonier Advanced Materials Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)

Three Months Ended
March 27, 2021 March 28, 2020
Operating Activities
Net income (loss) $ (27,027) $ (24,127)
Loss (income) from discontinued operations 0 (708)
Adjustments to reconcile income (loss) from continuing operations to cash provided by operating activities:
Depreciation and amortization 36,489 37,842
Stock-based incentive compensation expense (653) 1,943
Deferred income tax expense (benefit) 61,698 17,381
Net periodic benefit cost of pension and other postretirement plans 2,250 2,677
Unrealized loss (gain) on derivative instruments 0 6,792
Unrealized loss (gain) from foreign currency 1,599 (11,368)
Other 879 275
Changes in operating assets and liabilities:
Receivables (6,580) (10,686)
Inventories (63,133) (24,924)
Accounts payable (256) (1,518)
Accrued liabilities 27,375 20,707
All other operating activities 7,156 (25,292)
Contributions to pension and other postretirement plans (1,582) (1,944)
Cash Provided by (Used for) Operating Activities-continuing operations 38,215 (12,950)
Cash Provided by (Used for) Operating Activities-discontinued operations 0 204
Cash Provided by (Used for) Operating Activities 38,215 (12,746)
Investing Activities
Capital expenditures, net (19,525) (12,582)
Investment in equity method investment (987) 0
Cash Used for Investing Activities (20,512) (12,582)
Financing Activities
Revolving credit facility and other borrowings 0 7,592
Repayment of long-term debt (1,549) (1,786)
Short-term financing, net (520) 0
Common stock repurchased (1,420) (438)
Cash Provided by (Used for) Financing Activities (3,489) 5,368
Cash and Cash Equivalents
Change in cash and cash equivalents 14,214 (19,960)
Net effect of foreign exchange on cash and cash equivalents (1,117) (1,393)
Balance, beginning of year 93,653 64,025
Balance, end of period $ 106,750 $ 42,672


	Six Months Ended
	June 26, 2021		June 27, 2020
Operating Activities
Net income (loss)	$	95,201	$	(36,990)
Loss (income) from discontinued operations	(103,114)		15,497
Adjustments to reconcile income (loss) from continuing operations to cash provided by operating activities:
Depreciation and amortization	65,728		67,235
Stock-based incentive compensation expense	317		5,074
Deferred income tax expense (benefit)	(23,290)		3,952



Net periodic benefit cost of pension and other postretirement plans	5,163		5,762

Unrealized loss (gain) on derivative instruments	(3,885)		2,311
Unrealized loss (gain) from foreign currency	5,236		(7,054)
Other	(145)		270
Changes in operating assets and liabilities:
Receivables	(13,283)		4,851
Inventories	(25,231)		1,335
Accounts payable	6,126		6,058
Accrued liabilities	27,555		12,001
All other operating activities	12,943		(51,925)
Contributions to pension and other postretirement plans	(3,535)		(5,783)

Cash Provided by Operating Activities-continuing operations	45,786		22,594
Cash Provided by (Used for) Operating Activities-discontinued operations	140,633		(11,523)
Cash Provided by Operating Activities	186,419		11,071

Investing Activities

Capital expenditures, net	(47,048)		(19,169)


Investment in equity method investment	(4,013)		0

Cash Used for Investing Activities-continuing operations	(51,061)		(19,169)
Cash Used for Investing Activities-discontinued operations	(5,758)		(3,428)
Cash Used for Investing Activities	(56,819)		(22,597)

Financing Activities

Revolving credit facility and other borrowings	0		10,561
Repayments of revolving credit and other facilities	0		(8,000)
Repayment of long-term debt	(4,651)		(2,359)
Short-term financing, net	(1,296)		0


Common stock repurchased	(1,423)		(438)
Debt issue costs	(449)		(3,378)



Cash Used for Financing Activities	(7,819)		(3,614)

Cash and Cash Equivalents
Change in cash and cash equivalents	121,781		(15,140)
Net effect of foreign exchange on cash and cash equivalents	(695)		(146)
Balance, beginning of year	93,653		64,025
Balance, end of period	$	214,739	$	48,739

See Notes to Consolidated Financial Statements.

Table of Contents

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

1. Basis of Presentation and New Accounting Pronouncements

Basis of Presentation

The unaudited consolidated financial statements and notes thereto of Rayonier Advanced Materials Inc. (the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). In the opinion of management, these consolidated financial statements and notes reflect all adjustments (all of which are normal recurring adjustments) necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented. These statements and notes should be read in conjunction with the consolidated financial statements and supplementary data included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on March 1, 2021.

~~The~~On April 12, 2021, the Company announced the sale of its lumber and newsprint assets (the “Purchased Assets”) located in Ontario and Québec Canada to GreenFirst Forest Products, Inc. (“GreenFirst”). As a result of the announced sale of its lumber and newsprint assets, these operations have been presented as discontinued operations and the Company has reclassified certain prior year amounts to conform to ~~the current year’s presentation for discontinued operations to reflect the November 2019 sale of its Matane high-yield pulp operations.~~this presentation. Unless otherwise stated, information in these notes to consolidated financial statements relates to continuing operations. The Company presents businesses that represent components as discontinued operations when they meet the criteria for held for sale or are sold, and their disposal represents a strategic shift that has, or will have, a major effect on our operations and financial results. See Note 2 —Discontinued Operations for additional information.

Coronavirus Pandemic

During 2020, the Company’s businesses were significantly impacted by the coronavirus ("COVID-19") pandemic. While market demand and pricing for certain of the Company’s products began to recover towards the end of the year and continued to improve throughout the first ~~quarter~~half of 2021, the Company's operations remain vulnerable to a reversal of these trends or other continuing negative effects caused by COVID-19.

In its operating facilities and work spaces, the Company continues to maintain protocols previously implemented to reduce the potential spread of COVID-19 and ensure the safety of its employees and continuity of operations.

Due to the financial impacts of COVID-19, the Company has actively monitored the recoverability of the carrying value of its long-term assets. During the three months ended March 27, 2021 and the year ended December 31, 2020, the Company did not recognize any impairment charges related to long-lived assets held for use. The Company will continue to evaluate the recoverability of these and other assets as necessary.

New or Recently Adopted Accounting Pronouncements

There have been no new or recently adopted accounting pronouncements ~~not yet effective or adopted in~~impacting the ~~current year that we believe have a significant impact, or potential significant impact, to our~~Company’s unaudited consolidated interim financial statements.

Subsequent Events

~~Sale of lumber and newsprint assets~~

Events and transactions subsequent to the consolidated balance sheets date have been evaluated for potential recognition and disclosure through the date of issuance of these Consolidated Financial Statements. The following subsequent ~~events~~event warranting disclosure ~~were~~was identified.

As previously disclosed, in January 2021, the Company's Canadian subsidiaries applied for the Canada Emergency Wage Subsidy (“CEWS”) in the amount of CAD $25 million for periods between March 2020 and August 2020. Through June 26, 2021, the Company had received cash of CAD $6 million and subsequently has received the remaining CAD $19 million. All CEWS claims are subject to mandatory audit. The Company will recognize amounts from these claims in income at the time that there is sufficient evidence that it will not be required to repay such amounts.

2. Discontinued Operations

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

On April 12, 2021, the Company announced the sale of its lumber and newsprint assets (the “Purchased Assets”) located in Ontario and Québec Canada to GreenFirst Forest Products, Inc. (“GreenFirst”), for approximately $214 million, including an assumed $74 million associated with finished goods, work-in-process and raw materials inventory value, which is subject to dollar-for-dollar fluctuation until closing. The purchase price ~~to be adjusted at closing by changes in the value of the inventory,~~ will be paid 85 percent in cash and the remainder in common shares of ~~GreenFirst.~~GreenFirst, to be held for a minimum of six months. In addition, a credit note will be issued to the Company by GreenFirst in the amount of CDN$8 million, which may be offset against amounts owed to GreenFirst in the future for wood chip purchases, equally over the next 5 years. The closing of the transaction ~~which~~ is expected to occur inon August 28, 2021. The sale completes the ~~second half of 2021, but not before July 31, is subject to customary closing conditions, including receipt of regulatory approvals,~~strategic portfolio optimization plans for the ~~transfer of forestry licenses and the approval of the TSX Venture Exchange.~~

~~Rayonier Advanced Materials Inc.~~

~~Notes to Consolidated Financial Statements - (Unaudited) (Continued)~~

Company.

The Purchased Assets include the Company’s 6 lumber facilities, newsprint facility, inventory and certain real property, machinery, ~~inventory,~~ permits, leases, licenses, pension assets and liabilities and other related assets associated with the successful operations of these businesses. Other assets and liabilities, including accounts receivable, accounts payable, certain retained inventory and rights and obligations to softwood lumber duties, generated or incurred through the closing date, are excluded. Since 2017, the Company has paid a total of ~~$98~~$108 million in duties.

In connection with the transaction, the Company will enter into a ~~20 year~~20-year wood chip and residual fiber supply agreement with GreenFirst, securing supply for the Company’s operations at the Temiscaming plant. Additionally, the parties entered into a Transition Services Agreement ("TSA") whereby the Company will provide certain transitional services to GreenFirst, for a period of time following the closing of the transaction, not to exceed twelve months from such date. The TSA includes support related to information technology, accounting, treasury, human resources and payroll, tax, supply chain and procurement functions. Costs incurred by the Company associated with the TSA will be reimbursed by GreenFirst.

As of ~~March 27,~~June 26, 2021, the carrying value of the net assets included in the transaction was ~~$238~~$232 million, including the carrying value of inventory which was ~~$107~~$93 million. The Company expects a cash tax impact in 2021 and 2022 oftotaling less than ~~$10~~$5 million as a result of this transaction, although the full extent of tax impacts are still being evaluated.

~~Contingency resolution~~

~~On April 19, 2021, the Company reached final settlement in its dispute with~~ ~~the Market Assessment and Compliance Division (“MACD”) branch~~Income (loss) from discontinued operations is comprised of the ~~Independent Electricity System Operator (“IESO”) regarding the investigation of the Kapuskasing facility. See Note 18 —~~ ~~Contingencies and Guarantees~~ ~~for additional information.~~following:


	Three Months Ended				Six Months Ended
	June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020
Net sales (a)	$	212,376	$	72,583	$	358,838	$	157,916
Cost of sales	(86,961)		(74,907)		(169,688)		(158,057)
Gross margin	125,415		(2,324)		189,150		(141)
Selling, general and administrative expenses and other	(10,428)		(6,935)		(18,894)		(14,958)
Operating income (loss)	114,987		(9,259)		170,256		(15,099)
Interest expense (b)	(2,703)		(2,110)		(5,317)		(4,172)
Other non-operating income	368		604		713		1,257
Income (loss) from discontinued operations before income taxes	112,652		(10,765)		165,652		(18,014)
Income tax benefit (expense)	1,279		1,343		(62,538)		1,745
Income (loss) from discontinued operations, net of taxes	$	113,931	$	(9,422)	$	103,114	$	(16,269)

Gain from sale of discontinued operation, pre-tax	0		0		0		955
Income tax benefit (expense) on gain	0		64		0		(183)
Gain from sale of discontinued operations, net of tax (c)	0		64		0		772

Income (Loss) from Discontinued Operations	$	113,931	$	(9,358)	$	103,114	$	(15,497)

(a) Net of intercompany sales of $10 million and $9 million for three months ended June 26, 2021 and June 27, 2020, respectively, and $22 million and $22 million for the six months ended June 26, 2021 and June 27, 2020, respectively.

~~2. Discontinued Operations~~(b) The Company has allocated interest expense to discontinued operations based on the portion of debt not attributable to other operations that it expects to repay as a result of the transaction.

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

~~In November 2019, the Company sold its Matane, Quebec pulp mill to Sappi Limited, a global diversified wood fiber company, for a gross purchase price of approximately $175 million. Income~~(c) Also included in income from discontinued operations for the three and six months ended ~~March 28,~~June 27, 2020 ~~represents an adjustment to the gain on sale~~is income of ~~the Matane mill~~$64 thousand and $772 thousand, respectively, from working capital adjustments that arose following the closing of the November 2019 ~~closing.~~sale of the Company’s Matane, Quebec pulp mill.

Other discontinued operations information is as follows:


	Three Months Ended				Six Months Ended
	June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020
Depreciation and amortization	$	0	$	2,957	$	3,173	$	5,782
Capital expenditures	$	2,326	$	(187)	$	5,814	$	3,428

The following table presents the major classes of assets and liabilities of discontinued operations that are classified as held for sale:


	June 26, 2021		December 31, 2020

Inventory	$	92,624	$	62,837
Prepaid and other current assets	9,446		9,725
Total current assets	102,070		72,562
Property, plant and equipment, net	97,980		97,151

Other assets	45,593		43,552
Total assets	$	245,643	$	213,265


Accrued and other current liabilities	$	933	$	780
Total current liabilities	933		780
Pension and Other Postretirement Benefits	9,578		9,316
Other long-term liabilities	3,402		2,498
Total liabilities	$	13,913	$	12,594

As of June 26, 2021, the assets and liabilities are classified as current in the Company’s consolidated balance sheet as the transaction is expected to close within one year.

As of June 26, 2021, collective bargaining agreements covering approximately 400 unionized employees in Canada working in the lumber and newsprint operations had expired. In all cases, the parties have continued to work under the terms of the expired contracts while negotiations continue. While there can be no assurances, the Company expects to reach agreements with the unions, for the benefit of GreenFirst. However, a work stoppage could have a significant negative effect on these operations, including results of operations and financial condition.

3. Accounts Receivable, Net

The Company’s accounts receivable included the following:


		March 27, 2021		December 31, 2020			June 26, 2021		December 31, 2020
Accounts receivable, trade	Accounts receivable, trade	$	152,194	$	140,036	Accounts receivable, trade	$	154,417	$	140,036
Accounts receivable, other (a)	Accounts receivable, other (a)	30,935		39,659		Accounts receivable, other (a)	33,900		39,659

Allowance for doubtful accounts		(490)		(487)
Allowance for expected credit losses						Allowance for expected credit losses	(435)		(487)
Total accounts receivable, net	Total accounts receivable, net	$	182,639	$	179,208	Total accounts receivable, net	$	187,882	$	179,208

(a) Accounts receivable, other consists primarily of value added/consumption taxes, grants receivable and accrued billings due from government agencies.

~~4. Inventory~~

~~The Company’s inventory included the following:~~

March 27, 2021 December 31, 2020
Finished goods $ 163,618 $ 138,064
Work-in-progress 19,243 17,246
Raw materials 104,189 70,009
Manufacturing and maintenance supplies 8,494 8,165
Total inventory $ 295,544 $ 233,484

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

4. Inventory

The Company’s inventory included the following:


	June 26, 2021		December 31, 2020
Finished goods	$	141,586	$	119,549
Work-in-progress	4,968		2,242
Raw materials	44,654		43,697
Manufacturing and maintenance supplies	3,963		5,159
Total inventory	$	195,171	$	170,647

5. Leases

The Company’s operating and finance leases are primarily for corporate offices, warehouse space, rail cars and equipment. As of ~~March 27,~~June 26, 2021, the Company’s leases have remaining lease terms of 1 year to ~~7.9~~7.7 years with standard renewal and termination options available at the Company’s discretion. Certain equipment leases have purchase options at the end of the term of the lease, which are not included in the Right of Use (“ROU”) assets as it is not reasonably certain that the Company will exercise such options. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company uses its incremental borrowing rate in determining the present value of lease payments unless the lease provides an implicit or explicit interest rate. The weighted average discount rate used in determining the operating lease ROU assets and liabilities as of ~~March 27,~~June 26, 2021 and December 31, 2020 was ~~5.8~~6.1 percent and 6.1 percent, respectively. The weighted average discount rate used in determining the finance lease ROU assets and liabilities as of ~~March 27,~~June 26, 2021 and December 31, 2020 was 7.0 percent.

The Company’s operating and finance lease cost is as follows:


		Three Months Ended					Three Months Ended				Six Months Ended
			March 27, 2021		March 28, 2020				June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020
Operating Leases	Operating Leases							Operating Leases
Operating lease expense	Operating lease expense		$	1,841	$	1,804		Operating lease expense	$	1,423	$	1,499	$	2,838	$	2,991
Finance Leases	Finance Leases							Finance Leases
Amortization of ROU assets	Amortization of ROU assets		86		80			Amortization of ROU assets	87		81		173		161
Interest	Interest		43		49			Interest	42		47		85		96
Total	Total		$	1,970	$	1,933		Total	$	1,552	$	1,627	$	3,096	$	3,248

As of ~~March 27,~~June 26, 2021, the weighted average remaining lease term is ~~3.4~~3.1 years and ~~5.7~~5.4 years for operating leases and financing leases, respectively. As of December 31, 2020, the weighted average remaining lease term is ~~3.6~~3.5 years and 5.9 years for operating leases and finance leases, respectively. Cash provided by operating activities includes approximately $2$3 million and $2$3 million from operating lease payments made during the ~~three~~six months ended ~~March 27,~~June 26, 2021 and ~~March 28,~~June 27, 2020, respectively. Finance lease cash flows were immaterial during the ~~three~~six months ended ~~March 27,~~June 26, 2021 and ~~March 28,~~June 27, 2020.

As of ~~March 27,~~June 26, 2021 and December 31, 2020, assets acquired under finance leases of $2 million and $2 million, respectively, are reflected in Property, Plant and Equipment, net. The Company’s finance leases are included as debt and the maturities for the remainder of 2021 and the next four years and thereafter are included in Note 7 — Debt and Finance Leases. The Company’s consolidated balance sheet includes the following operating lease assets and liabilities:

Balance Sheet Classification March 27, 2021 December 31, 2020
Right-of-use assets Other assets $ 18,238 $ 17,566
Lease liabilities, current Accrued and other current liabilities $ 6,266 $ 5,666
Lease liabilities, non-current Other long-term liabilities $ 13,140 $ 13,007

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)


	Balance Sheet Classification	June 26, 2021		December 31, 2020
Right-of-use assets	Other assets	$	14,084	$	15,847
Lease liabilities, current	Accrued and other current liabilities	$	5,301	$	4,886
Lease liabilities, non-current	Other long-term liabilities	$	9,922	$	11,974

As of ~~March 27,~~June 26, 2021, operating lease maturities for the remainder of 2021 through 2025 and thereafter are as follows:

~~Rayonier Advanced Materials Inc.~~

~~Notes to Consolidated Financial Statements - (Unaudited) (Continued)~~


		March 27, 2021			June 26, 2021
Remainder of 2021	Remainder of 2021	$	5,437	Remainder of 2021	$	3,024
2022	2022	6,819		2022	5,978
2023	2023	5,713		2023	5,089
2024	2024	1,835		2024	1,498
2025	2025	789		2025	657
Thereafter	Thereafter	841		Thereafter	476
Total minimum lease payments	Total minimum lease payments	$	21,434	Total minimum lease payments	$	16,722
Less: imputed interest	Less: imputed interest	(2,028)		Less: imputed interest	(1,499)
Present value of future minimum lease payments	Present value of future minimum lease payments	$	19,406	Present value of future minimum lease payments	$	15,223

6. Accrued and Other Current Liabilities

The Company’s accrued and other current liabilities included the following:


		March 27, 2021		December 31, 2020			June 26, 2021		December 31, 2020
Accrued customer incentives and prepayments	Accrued customer incentives and prepayments	$	24,651	$	29,387	Accrued customer incentives and prepayments	$	28,769	$	29,387
Accrued payroll and benefits	Accrued payroll and benefits	30,118		21,500		Accrued payroll and benefits	32,509		21,500
Accrued interest	Accrued interest	19,343		3,230		Accrued interest	22,073		3,230
Accrued income taxes	Accrued income taxes	6,000		5,052		Accrued income taxes	4,996		5,052
Accrued stumpage	Accrued stumpage	19,017		10,045		Accrued stumpage	2,072		10,045
Accrued property and other taxes	Accrued property and other taxes	6,194		3,995		Accrued property and other taxes	7,941		3,995

Other current liabilities	Other current liabilities	32,527		37,286		Other current liabilities	39,129		36,506
Total accrued and other current liabilities	Total accrued and other current liabilities	$	137,850	$	110,495	Total accrued and other current liabilities	$	137,489	$	109,715

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

7. Debt and Finance Leases

The Company’s debt and finance leases included the following:


		March 27, 2021		December 31, 2020			June 26, 2021		December 31, 2020
ABL Credit Facility due 2025, $142 million available, bearing interest 0.25% LIBOR floor plus 2.75%, interest rate of 3.00% at March 27, 2021		0		0
ABL Credit Facility due 2025, $124 million available, bearing interest 0.25% LIBOR floor plus 2.75%, interest rate of 3.00% at June 26, 2021						ABL Credit Facility due 2025, $124 million available, bearing interest 0.25% LIBOR floor plus 2.75%, interest rate of 3.00% at June 26, 2021	0		0
Senior Secured Notes due 2026 at a fixed interest rate of 7.625%	Senior Secured Notes due 2026 at a fixed interest rate of 7.625%	$	500,000	$	500,000	Senior Secured Notes due 2026 at a fixed interest rate of 7.625%	$	500,000	$	500,000
Senior Notes due 2024 at a fixed interest rate of 5.5%	Senior Notes due 2024 at a fixed interest rate of 5.5%	495,647		495,647		Senior Notes due 2024 at a fixed interest rate of 5.5%	495,647		495,647
Canadian dollar, fixed interest rate term loans with rates ranging from 5.5% to 6.86% and maturity dates ranging from July 2022 through April 2028, secured by certain assets of the Temiscaming mill	Canadian dollar, fixed interest rate term loans with rates ranging from 5.5% to 6.86% and maturity dates ranging from July 2022 through April 2028, secured by certain assets of the Temiscaming mill	73,686		73,791		Canadian dollar, fixed interest rate term loans with rates ranging from 5.5% to 6.86% and maturity dates ranging from July 2022 through April 2028, secured by certain assets of the Temiscaming mill	72,983		73,791
Other loans (a)	Other loans (a)	17,082		18,193		Other loans (a)	16,605		18,193
Short-term factoring facility-France	Short-term factoring facility-France	4,471		5,089		Short-term factoring facility-France	3,730		5,089
Finance lease obligation	Finance lease obligation	2,404		2,489		Finance lease obligation	2,317		2,489
Total debt principal payments due	Total debt principal payments due	1,093,290		1,095,209		Total debt principal payments due	1,091,282		1,095,209
Less: Debt premium, original issue discount and issuance costs, net	Less: Debt premium, original issue discount and issuance costs, net	(10,681)		(11,272)		Less: Debt premium, original issue discount and issuance costs, net	(10,530)		(11,272)
Total debt	Total debt	1,082,609		1,083,937		Total debt	1,080,752		1,083,937
Less: Debt due within one year	Less: Debt due within one year	(17,446)		(17,100)		Less: Debt due within one year	(17,013)		(17,100)
Long-term debt	Long-term debt	$	1,065,163	$	1,066,837	Long-term debt	$	1,063,739	$	1,066,837
(a) Primarily loans for energy projects in France.	(a) Primarily loans for energy projects in France.					(a) Primarily loans for energy projects in France.

As of ~~March 27,~~June 26, 2021, debt and finance lease payments due during the remainder of 2021, the next four years and thereafter are as follows:


		Finance Lease Payments		Debt Principal Payments			Finance Lease Payments		Debt Principal Payments
Remainder of 2021	Remainder of 2021	$	386	$	14,649	Remainder of 2021	$	258	$	11,041
2022	2022	515		30,426		2022	515		31,082
2023	2023	515		10,326		2023	515		10,533
2024	2024	515		505,895		2024	515		506,100
2025	2025	515		10,290		2025	515		10,495
Thereafter	Thereafter	473		519,300		Thereafter	472		519,714
Total principal payments	Total principal payments	$	2,919	$	1,090,886	Total principal payments	$	2,790	$	1,088,965
Less: Imputed interest	Less: Imputed interest	515				Less: Imputed interest	473
Present value minimum finance lease payments	Present value minimum finance lease payments	$	2,404			Present value minimum finance lease payments	$	2,317

8. Environmental Liabilities

An analysis of liabilities for the ~~three~~six months ended ~~March 27,~~June 26, 2021 is as follows:



Balance, December 31, 2020	$	171,679
Increase in liabilities	~~225~~1,168
Payments	~~(419)~~(2,165)
Foreign currency adjustments	~~155~~414
Balance, ~~March 27,~~June 26, 2021	~~171,640~~171,096
Less: Current portion	~~(8,694)~~(8,712)
Long-term environmental liabilities	$	~~162,946~~162,384

910

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

In addition to the estimated liabilities, the Company is subject to the risk of reasonably possible additional liabilities in excess of the established reserves due to potential changes in circumstances and future events, including, without limitation, changes to current laws and regulations; changes in governmental agency personnel, direction, philosophy and/or enforcement policies; developments in remediation technologies; increases in the cost of remediation, operation, maintenance and monitoring of its environmental liability sites; changes in the volume, nature or extent of contamination to be remediated or monitoring to be undertaken; the outcome of negotiations with governmental agencies and non-governmental parties; and changes in accounting rules or interpretations. Based on information available as of ~~March 27,~~June 26, 2021, the Company estimates this exposure could range up to approximately $78 million, although no assurances can be given that this amount will not be exceeded given the factors described above. These potential additional costs are attributable to several sites and other applicable liabilities. Further, this estimate excludes reasonably possible liabilities which are not currently estimable primarily due to the factors discussed above.

Subject to the previous paragraph, the Company believes established liabilities are sufficient for probable costs expected to be incurred over the next 20 years with respect to its environmental liabilities. However, no assurances are given they will be sufficient for the reasons described above, and additional liabilities could have a material adverse effect on the Company’s financial position, results of operations and cash flows.

9. Derivative Instruments

The Company’s earnings and cash flows are subject to fluctuations due to changes in interest rates and foreign currency exchange rates. The Company allows for the use of derivative financial instruments to manage interest rate and foreign currency exchange rate exposure but does not allow derivatives to be used for speculative purposes.

All derivative instruments are recognized on the consolidated balance sheets at their fair value and are either designated as a hedge of a forecasted transaction or undesignated. Changes in the fair value of a derivative designated as a hedge are recorded in other comprehensive income until earnings are affected by the hedged transaction and are then reported in current earnings. Changes in the fair value of undesignated derivative instruments and the ineffective portion of designated derivative instruments are reported in current earnings.

In December 2020, the Company terminated all outstanding derivative instruments, which had been previously designated as hedging instruments and had various maturity dates through 2028. Accumulated gains and losses associated with these instruments were deferred as a component of accumulated other comprehensive income (loss), totaling a net after tax gain of $2 million as of December 31, 2020, to be recognized in earnings as the underlying hedged transactions occur and affect earnings. During the three and six months ended ~~March 27,~~June 26, 2021, the Company recognized ~~a $1.3~~after-tax gains of $1.6 million ~~after-tax gain~~and $2.9 million, respectively, associated with the deferred component in accumulated other comprehensive income (loss) related to these settlements. A ~~$0.6~~$1.0 million net ~~after tax gain~~after-tax loss remains deferred within accumulated other comprehensive income (loss) as of ~~March 27,~~June 26, 2021, which will be recognized in earnings as the underlying hedged transactions occur and affect earnings.

Interest Rate Risk

The Company’s current debt obligations are primarily fixed and therefore not materially exposed to variability in interest payments due to changes in interest rates. The Company previously entered into interest rate swap agreements to reduce the volatility of interest expense, achieve a desired proportion of fixed-rate versus floating-rate debt and to hedge the variability in cash flows attributable to interest rate risks caused by changes in the LIBOR benchmark.

The Company had designated the swaps as cash flow hedges and assesses their effectiveness using the hypothetical derivative method in conjunction with regression. Effective gains and losses deferred to AOCI are reclassified into earnings over the life of the associated hedge. Ineffective gains and losses are classified to earnings immediately. There was no hedge ineffectiveness during 2020.

Foreign Currency Exchange Rate Risk

Foreign currency fluctuations affect investments in foreign subsidiaries and foreign currency cash flows related to third party purchases, product shipments, and foreign-denominated debt. The Company is also exposed to the translation of foreign currency earnings to the U.S. dollar. Management may use foreign currency forward contracts to selectively hedge its foreign currency cash flows exposure and manage risk associated with changes in currency exchange rates. The Company’s principal foreign currency exposure is to the Canadian dollar, and to a lesser extent, the euro.

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

The effects of derivatives designated as hedging instruments, the related changes in AOCI and the gains and losses in income is as follows:

~~Rayonier Advanced Materials Inc.~~

~~Notes to Consolidated Financial Statements - (Unaudited) (Continued)~~


		Three Months Ended March 27, 2021							Three Months Ended June 26, 2021
Derivatives Designated as Hedging Instruments	Derivatives Designated as Hedging Instruments	Gain (Loss) Recognized in OCI on Derivative		Gain (Loss) Reclassified from AOCI into Income		Location on Statement of Income		Derivatives Designated as Hedging Instruments	Gain (Loss) Recognized in OCI on Derivative		Gain (Loss) Reclassified from AOCI into Income		Location on Statement of Income
Interest rate swaps		$	0	$	0	Interest expense
Foreign exchange forward contracts		$	0	$	0	Other operating income (expense), net

Foreign exchange forward contracts	Foreign exchange forward contracts	$	0	$	1,828	Cost of sales		Foreign exchange forward contracts	$	0	$	2,260	Cost of sales
Foreign exchange forward contracts	Foreign exchange forward contracts	$	0	$	(100)	Interest income and other, net		Foreign exchange forward contracts	$	0	$	(102)	Interest income and other, net

		Three Months Ended March 28, 2020							Three Months Ended June 27, 2020
		Gain (Loss) Recognized in OCI on Derivative		Gain (Loss) Reclassified from AOCI into Income		Location on Statement of Income			Gain (Loss) Recognized in OCI on Derivative		Gain (Loss) Reclassified from AOCI into Income		Location on Statement of Income
Interest rate swaps	Interest rate swaps	$	(1,757)	$	(120)	Interest expense		Interest rate swaps	$	(225)	$	(716)	Interest expense
Foreign exchange forward contracts	Foreign exchange forward contracts	$	(26,532)	$	(1,361)	Other operating income (expense), net		Foreign exchange forward contracts	$	5,914	$	367	Other operating income (expense), net
Foreign exchange forward contracts	Foreign exchange forward contracts	$	(394)	$	394	Cost of sales		Foreign exchange forward contracts	$	3,863	$	(3,863)	Cost of sales
Foreign exchange forward contracts	Foreign exchange forward contracts	$	(6,902)	$	(6,732)	Interest income and other, net		Foreign exchange forward contracts	$	2,192	$	2,135	Interest income and other, net

							Six Months Ended June 26, 2021
Derivatives Designated as Hedging Instruments								Derivatives Designated as Hedging Instruments	Gain (Loss) Recognized in OCI on Derivative		Gain (Loss) Reclassified from AOCI into Income		Location on Statement of Income

Foreign exchange forward contracts								Foreign exchange forward contracts	$	0	$	4,088	Cost of sales
Foreign exchange forward contracts								Foreign exchange forward contracts	$	0	$	(202)	Interest income and other, net

									Six Months Ended June 27, 2020

Derivatives Designated as Hedging Instruments								Derivatives Designated as Hedging Instruments	Gain (Loss) Recognized in OCI on Derivative		Gain (Loss) Reclassified from AOCI into Income		Location on Statement of Income
Interest rate swaps								Interest rate swaps	$	(1,982)	$	(836)	Interest expense
Foreign exchange forward contracts								Foreign exchange forward contracts	$	(20,618)	$	(994)	Other operating income (expense), net
Foreign exchange forward contracts								Foreign exchange forward contracts	$	3,469	$	(3,469)	Cost of sales
Foreign exchange forward contracts								Foreign exchange forward contracts	$	(4,710)	$	(4,597)	Interest income and other, net

The effects of derivative instruments not designated as hedging instruments on the consolidated statement of income were as follows:

Three Months Ended

Six Months Ended

Derivatives Not Designated as Hedging Instruments

Location of Gain (Loss) Recognized in Income on Derivative

March 27, 2021

March 28, 2020

Derivatives Not Designated as Hedging Instruments

Location of Gain (Loss) Recognized in Income on Derivative

June 26, 2021

June 27, 2020

June 26, 2021

June 27, 2020

Foreign exchange forward contracts

Other operating income (expense), net

(721)

Foreign exchange forward contracts

Other operating income (expense), net

(703)

The after-tax amounts of unrealized gains (losses) in AOCI related to hedge derivatives are presented below:

March 27, 2021 December 31, 2020
Foreign exchange cash flow hedges $ 566 $ 1,834


	June 26, 2021		December 31, 2020

Foreign exchange cash flow hedges	$	(1,019)	$	1,834

The amount of future reclassifications from AOCI will fluctuate with movements in the underlying markets.

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

10. Fair Value Measurements

The following table presents the carrying amount, estimated fair values and categorization under the fair value hierarchy for financial instruments held by the Company, using market information and what management believes to be appropriate valuation methodologies:


		March 27, 2021						December 31, 2020						June 26, 2021									December 31, 2020
		Carrying Amount		Fair Value				Carrying Amount		Fair Value				Carrying Amount				Fair Value					Carrying Amount		Fair Value
Assets:	Assets:			Level 1		Level 2				Level 1		Level 2			Assets:		Carrying Amount		Level 1		Level 2			Carrying Amount			Level 1			Level 2
Cash and cash equivalents	Cash and cash equivalents	$	106,750	$	106,750	$	0	$	93,653	$	93,653	$	0			Cash and cash equivalents			$	214,739	$	0					$	93,653		$	0

Liabilities (a):	Liabilities (a):															Liabilities (a):

Fixed-rate long-term debt	Fixed-rate long-term debt	1,075,734		0		1,104,025		1,076,359		0		1,050,287				Fixed-rate long-term debt		1,074,705		0		1,093,500				1,076,359			0			1,050,287

(a) Liabilities exclude finance lease obligation.

~~Rayonier Advanced Materials Inc.~~

~~Notes to Consolidated Financial Statements - (Unaudited) (Continued)~~

The Company uses the following methods and assumptions in estimating the fair value of its financial instruments:

Cash and cash equivalents — The carrying amount is equal to fair market value.

Debt — The fair value of fixed rate debt is based upon quoted market prices for debt with similar terms and maturities.

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

11. Accumulated Other Comprehensive Income (Loss)

The components of AOCI are as follows:


		Three Months Ended					Six Months Ended
		March 27, 2021		March 28, 2020			June 26, 2021		June 27, 2020
Unrecognized components of employee benefit plans, net of tax:	Unrecognized components of employee benefit plans, net of tax:					Unrecognized components of employee benefit plans, net of tax:
Balance, beginning of year	Balance, beginning of year	$	(146,614)	$	(126,638)	Balance, beginning of year	$	(146,614)	$	(126,638)
Other comprehensive gain (loss) before reclassifications	Other comprehensive gain (loss) before reclassifications	0		4,781		Other comprehensive gain (loss) before reclassifications	0		4,781
Income tax on other comprehensive loss	Income tax on other comprehensive loss	0		(1,238)		Income tax on other comprehensive loss	0		(1,238)
Reclassifications to earnings: (a)	Reclassifications to earnings: (a)					Reclassifications to earnings: (a)
Pension settlement loss						Pension settlement loss	111		0
Amortization of losses	Amortization of losses	4,082		3,393		Amortization of losses	8,169		6,764
Amortization of prior service costs	Amortization of prior service costs	138		141		Amortization of prior service costs	276		280

Income tax on reclassifications	Income tax on reclassifications	(918)		(504)		Income tax on reclassifications	(1,892)		(1,274)
Foreign currency adjustments		0		0

Net comprehensive gain (loss) on employee benefit plans, net of tax	Net comprehensive gain (loss) on employee benefit plans, net of tax	3,302		6,573		Net comprehensive gain (loss) on employee benefit plans, net of tax	6,664		9,313
Balance, end of quarter		(143,312)		(120,065)
Balance, end of period						Balance, end of period	(139,950)		(117,325)

Unrealized gain (loss) on derivative instruments, net of tax:	Unrealized gain (loss) on derivative instruments, net of tax:					Unrealized gain (loss) on derivative instruments, net of tax:
Balance, beginning of year	Balance, beginning of year	1,834		1,290		Balance, beginning of year	1,834		1,290
Other comprehensive gain (loss) before reclassifications	Other comprehensive gain (loss) before reclassifications	0		(35,585)		Other comprehensive gain (loss) before reclassifications	0		(23,841)
Income tax on other comprehensive income	Income tax on other comprehensive income	0		8,255		Income tax on other comprehensive income	0		5,487
Reclassifications to earnings: (b)	Reclassifications to earnings: (b)					Reclassifications to earnings: (b)
Interest rate contracts	Interest rate contracts	0		120		Interest rate contracts	0		836
Foreign exchange contracts	Foreign exchange contracts	(1,728)		7,699		Foreign exchange contracts	(3,886)		9,060
Income tax on reclassifications	Income tax on reclassifications	460		(1,149)		Income tax on reclassifications	1,033		(2,072)
Net comprehensive gain (loss) on derivative instruments, net of tax	Net comprehensive gain (loss) on derivative instruments, net of tax	(1,268)		(20,660)		Net comprehensive gain (loss) on derivative instruments, net of tax	(2,853)		(10,530)
Balance, end of quarter		566		(19,370)
Balance, end of period						Balance, end of period	(1,019)		(9,240)

Foreign currency translation adjustments:	Foreign currency translation adjustments:					Foreign currency translation adjustments:
Balance, beginning of year	Balance, beginning of year	11,145		(13,879)		Balance, beginning of year	11,145		(13,879)
Foreign currency translation adjustment, net of tax of $0 and $0	Foreign currency translation adjustment, net of tax of $0 and $0	(9,268)		(6,471)		Foreign currency translation adjustment, net of tax of $0 and $0	(6,221)		(583)
Balance, end of quarter		1,877		(20,350)
Balance, end of period						Balance, end of period	4,924		(14,462)

Accumulated other comprehensive income (loss), end of quarter	Accumulated other comprehensive income (loss), end of quarter	$	(140,869)	$	(159,785)	Accumulated other comprehensive income (loss), end of quarter	$	(136,045)	$	(141,027)

(a)The AOCI components for defined benefit pension and post-retirement plans are included in the computation of net periodic benefit cost. See Note 15— Employee Benefit Plans for additional information.

(b)Reclassifications of interest rate contracts are recorded in interest expense. Reclassifications of foreign currency exchange contracts are recorded in cost of sales, other operating income or non-operating income as appropriate. See Note 9 —Derivative Instruments for additional information.

1214

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

12. Stockholders' Equity

An analysis of stockholders’ equity is shown below (share amounts not in thousands):


		Common Stock			Additional Paid in Capital	Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Common Stock									Additional Paid in Capital	Retained Earnings	Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
		Shares	Par Value												Shares			Par Value									Total Stockholders’ Equity
For the six months ended June 26, 2021																For the six months ended June 26, 2021
Balance, January 1, 2021																Balance, January 1, 2021	63,359,839		$	633			$	405,161	$	422,928		$	(133,635)	$	695,087
Net income (loss)																Net income (loss)	—		—				—		95,201			—		95,201
Other comprehensive income (loss), net of tax																Other comprehensive income (loss), net of tax	—		—				—		—			(2,410)		(2,410)
Issuance of common stock under incentive stock plans																Issuance of common stock under incentive stock plans	509,713		5				(5)		—			—		0
Stock-based compensation																Stock-based compensation	—		—				385		—			—		385
Repurchase of common shares (a)																Repurchase of common shares (a)	(132,196)		(1)				(1,421)		—			—		(1,422)
Balance June 26, 2021																Balance June 26, 2021	63,737,356		$	637			$	404,120	$	518,129		$	(136,045)	$	786,841

For the three months ended March 27, 2021
Balance, January 1, 2021		63,359,839	$	633		$	405,161	$	422,928	$	(133,635)		$	695,087
For the three months ended June 26, 2021																For the three months ended June 26, 2021
Balance March 27, 2021																Balance March 27, 2021	63,597,356		$	636			$	403,086	$	395,901		$	(140,869)	$	658,754
Net income (loss)	Net income (loss)	—	—			—		(27,027)		—			(27,027)			Net income (loss)	—		—				—		122,228			—		122,228
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	—	—			—		—		(7,234)			(7,234)			Other comprehensive income (loss), net of tax	—		—				—		—			4,824		4,824

Issuance of common stock under incentive stock plans	Issuance of common stock under incentive stock plans	369,713	4			(4)		—		—			0			Issuance of common stock under incentive stock plans	140,000		1				(1)		—			—		0
Stock-based compensation	Stock-based compensation	—	—			(653)		—		—			(653)			Stock-based compensation	—		—				1,038		—			—		1,038
Repurchase of common shares (a)	Repurchase of common shares (a)	(132,196)	(1)			(1,418)		—		—			(1,419)			Repurchase of common shares (a)	—		—				(3)		—			—		(3)

Balance, March 27, 2021		63,597,356	$	636		$	403,086	$	395,901	$	(140,869)		$	658,754
Balance, June 26, 2021																Balance, June 26, 2021	63,737,356		$	637			$	404,120	$	518,129		$	(136,045)	$	786,841

For the three months ended March 28, 2020
For the six months ended June 27, 2020																For the six months ended June 27, 2020
Balance, January 1, 2020	Balance, January 1, 2020	63,136,129	$	632		$	399,020	$	422,373	$	(139,227)		$	682,798		Balance, January 1, 2020	63,136,129		$	632			$	399,020	$	422,373		$	(139,227)	$	682,798
Net income (loss)	Net income (loss)	—	—			—		(24,127)		—			(24,127)			Net income (loss)	—		—				—		(36,990)			—		(36,990)
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax	—	—			—		—		(20,558)			(20,558)			Other comprehensive income (loss), net of tax	—		—				—		—			(1,800)		(1,800)

Issuance of common stock under incentive stock plans	Issuance of common stock under incentive stock plans	290,689	3			(3)		—		—			0			Issuance of common stock under incentive stock plans	396,753		3				(4)		—			—		(1)
Stock-based compensation	Stock-based compensation	—	—			1,943		—		—			1,943			Stock-based compensation	—		—				5,157		—			—		5,157
Repurchase of common shares (a)	Repurchase of common shares (a)	(179,951)	(3)			(435)		—		—			(438)			Repurchase of common shares (a)	(185,556)		(2)				(436)		—			—		(438)

Balance June 27, 2020																Balance June 27, 2020	63,347,326		$	633			$	403,737	$	385,383		$	(141,027)	$	648,726

For the three months ended June 27, 2020																For the three months ended June 27, 2020
Balance, March 28, 2020	Balance, March 28, 2020	63,246,867	$	632		$	400,525	$	398,246	$	(159,785)		$	639,618		Balance, March 28, 2020	63,246,867		$	632			$	400,525	$	398,246		$	(159,785)	$	639,618
Net income (loss)																Net income (loss)	—		—				—		(12,863)			—		(12,863)
Other comprehensive income (loss), net of tax																Other comprehensive income (loss), net of tax	—		—				—		—			18,758		18,758

Issuance of common stock under incentive stock plans																Issuance of common stock under incentive stock plans	106,064		1				(2)		—			—		(1)
Stock-based compensation																Stock-based compensation	—		—				3,214		—			—		3,214
Repurchase of common shares (a)																Repurchase of common shares (a)	(5,605)		—				—		—			—		0

Balance, June 27, 2020																Balance, June 27, 2020	63,347,326		$	633			$	403,737	$	385,383		$	(141,027)	$	648,726

(a) Repurchased to satisfy the tax withholding requirements related to the issuance of stock under the Rayonier Advanced Materials Incentive Stock Plan.

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

Common Stock Buyback

On January 29, 2018, the Board of Directors authorized a share buyback program pursuant to which the Company may, from time to time, purchase shares of its common stock with an aggregate purchase price of up to $100 million. During the three months ended ~~March 27,~~June 26, 2021 and ~~March 28,~~June 27, 2020, the Company did not repurchase any common shares under this buyback program. As of ~~March 27,~~June 26, 2021, there was approximately $60 million of share repurchase authorization remaining under the program. The Company does not expect to utilize any further authorization in the near future.

~~Rayonier Advanced Materials Inc.~~

~~Notes to Consolidated Financial Statements - (Unaudited) (Continued)~~

13. Earnings Per Share of Common Stock

The following table provides details of the calculations of basic and diluted earnings per share:


		Three Months Ended			Three Months Ended						Six Months Ended
			March 27, 2021			March 28, 2020			June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020
Income (loss) from continuing operations	Income (loss) from continuing operations		$	(27,027)		$	(24,835)	Income (loss) from continuing operations	$	8,297	$	(3,505)	$	(7,913)	$	(21,493)

Income (loss) from discontinued operations	Income (loss) from discontinued operations		0			708		Income (loss) from discontinued operations	113,931		(9,358)		103,114		(15,497)
Net income (loss) available for common stockholders	Net income (loss) available for common stockholders		$	(27,027)		$	(24,127)	Net income (loss) available for common stockholders	$	122,228	$	(12,863)	$	95,201	$	(36,990)

Shares used for determining basic earnings per share of common stock	Shares used for determining basic earnings per share of common stock		63,430,601			62,982,735		Shares used for determining basic earnings per share of common stock	63,654,278		63,235,151		63,545,599		63,111,058
Dilutive effect of:	Dilutive effect of:							Dilutive effect of:
Stock options	Stock options		0			0		Stock options	0		0		0		0
Performance and restricted stock	Performance and restricted stock		0			0		Performance and restricted stock	1,159,735		0		0		0
Preferred stock			0			0

Shares used for determining diluted earnings per share of common stock	Shares used for determining diluted earnings per share of common stock		63,430,601			62,982,735		Shares used for determining diluted earnings per share of common stock	64,814,013		63,235,151		63,545,599		63,111,058

Basic per share amounts	Basic per share amounts							Basic per share amounts
Income (loss) from continuing operations	Income (loss) from continuing operations		$	(0.43)		$	(0.39)	Income (loss) from continuing operations	$	0.13	$	(0.05)	$	(0.12)	$	(0.34)
Income (loss) from discontinued operations	Income (loss) from discontinued operations		0			0.01		Income (loss) from discontinued operations	1.79		(0.15)		1.62		(0.25)
Net income (loss)	Net income (loss)		$	(0.43)		$	(0.38)	Net income (loss)	$	1.92	$	(0.20)	$	1.50	$	(0.59)
Diluted per share amounts	Diluted per share amounts							Diluted per share amounts
Income (loss) from continuing operations	Income (loss) from continuing operations		$	(0.43)		$	(0.39)	Income (loss) from continuing operations	$	0.13	$	(0.05)	$	(0.12)	$	(0.34)
Income (loss) from discontinued operations	Income (loss) from discontinued operations		0			0.01		Income (loss) from discontinued operations	1.76		(0.15)		1.62		(0.25)
Net income (loss)	Net income (loss)		$	(0.43)		$	(0.38)	Net income (loss)	$	1.89	$	(0.20)	$	1.50	$	(0.59)

Anti-dilutive instruments excluded from the computation of diluted earnings per share:


		Three Months Ended		Three Months Ended				Six Months Ended
			March 27, 2021		March 28, 2020		June 26, 2021	June 27, 2020	June 26, 2021	June 27, 2020
Stock options	Stock options		122,525		157,033	Stock options	122,525	153,977	122,525	153,977
Performance and restricted stock	Performance and restricted stock		2,338,111		448,812	Performance and restricted stock	655,540	2,691,362	2,286,865	2,691,362

Total anti-dilutive instruments	Total anti-dilutive instruments		2,460,636		605,845	Total anti-dilutive instruments	778,065	2,845,339	2,409,390	2,845,339

14. Incentive Stock Plans

The Company’s total stock-based compensation expense for the three months ended ~~March 27,~~June 26, 2021 and ~~March 28,~~June 27, 2020 was ~~a benefit of~~ $1 million and ~~expense of $2~~$3 million, respectively. Stock-based compensation expense for the six months ended June 26, 2021 and June 27, 2020 was $385 thousand and $5 million, respectively.

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

The Company made new grants of restricted stock units and performance-based stock units to certain employees during the first ~~three~~six months of 2021. The 2021 restricted stock unit awards cliff vest after three years. The 2021 performance-based stock unit awards measure total shareholder return (“TSR”) on an absolute basis and relative to peers. Participants can earn between 0 and 200 percent of the target award. Performance below the threshold for the absolute TSR would result in a 0 payout for the TSR metric. There is a performance-based stock award and cash unit stock award that will be measured using the same objectives but paid and accounted for separately. As required by Accounting Standards Codification 718, Compensation-Stock Compensation, the portion of the award to be settled in cash is classified as a liability and remeasured to fair value at the end of each reporting period until settlement.

~~Rayonier Advanced Materials Inc.~~

~~Notes to Consolidated Financial Statements - (Unaudited) (Continued)~~

In March 2021, the performance-based share units granted in 2018 were settled at an average of 60 percent of the performance-based stock units awarded, resulting in the issuance of 182,811 shares of common stock.

The following table summarizes the activity on the Company’s incentive stock awards for the ~~three~~six months ended ~~March 27,~~June 26, 2021:


		Stock Options			Restricted Stock and Stock Units			Performance-Based Stock Units			Stock Options			Restricted Stock Units			Performance-Based Stock Units
		Options	Weighted Average Exercise Price		Awards	Weighted Average Grant Date Fair Value		Awards	Weighted Average Grant Date Fair Value				Options	Weighted Average Exercise Price		Awards	Weighted Average Grant Date Fair Value		Awards	Weighted Average Grant Date Fair Value
Outstanding at January 1, 2021	Outstanding at January 1, 2021	152,281	$	38.26	828,955	$	10.27	1,821,402	$	8.77		Outstanding at January 1, 2021	152,281	$	38.26	828,955	$	10.27	1,821,402	$	8.77
Granted	Granted	0	0		409,912	10.46		135,699	17.61			Granted	0	0		551,476	9.76		136,061	17.61
Forfeited	Forfeited	0	0		(71,647)	14.11		(296,864)	9.01			Forfeited	0	0		(108,986)	11.68		(312,697)	8.92
Exercised or settled	Exercised or settled	0	0		(186,830)	22.21		(302,516)	22.76			Exercised or settled	0	0		(326,830)	13.50		(302,516)	22.76
Expired or cancelled	Expired or cancelled	(29,756)	33.39		0	0		0	0			Expired or cancelled	(29,756)	33.39		0	0		0	0
Outstanding at March 27, 2021		122,525	$	39.44	980,390	$	7.79	1,357,721	$	6.49
Outstanding at June 26, 2021												Outstanding at June 26, 2021	122,525	$	39.44	944,615	$	8.69	1,342,250	$	6.48

15. Employee Benefit Plans

The Company has defined benefit pension and other long-term and postretirement benefit plans covering certain union and non-union employees, primarily in the U.S., Canada and France. The defined benefit pension plans are closed to new participants. The liabilities for these plans are calculated using actuarial estimates and management assumptions. These estimates are based on historical information, along with certain assumptions about future events.

During 2019, the Company settled certain Canadian pension liabilities through the purchase of annuity contracts with an insurance company. The settlement resulted in the recognition of a $1 million loss during the three and six months ended June 26, 2021. The settlement was recognized in “Other components of net periodic benefit costs” in our Consolidated Statement of Income and Comprehensive Income for the three and six months ended June 26, 2021.

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

The components of net periodic benefit costs from these plans that have been recorded are shown in the following table:


		Pension						Postretirement						Pension				Postretirement
		Three Months Ended						Three Months Ended						Three Months Ended				Three Months Ended
Components of Net Periodic Benefit Cost	Components of Net Periodic Benefit Cost	March 27, 2021		March 28, 2020				March 27, 2021		March 28, 2020			Components of Net Periodic Benefit Cost	June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020
Service cost	Service cost	$	3,083	$	2,667			$	370	$	363		Service cost	$	2,600	$	2,207	$	363	$	316
Interest cost	Interest cost	4,806		6,340				207		318			Interest cost	4,446		5,844		176		149
Expected return on plan assets	Expected return on plan assets	(10,436)		(10,545)				0		0			Expected return on plan assets	(9,673)		(9,246)		0		0
Amortization of prior service cost	Amortization of prior service cost	176		179				(38)		(38)			Amortization of prior service cost	177		178		(38)		(38)
Amortization of losses	Amortization of losses	4,079		3,427				3		(34)			Amortization of losses	4,086		3,427		2		(57)

Pension settlement loss (gain)													Pension settlement loss (gain)	890		0		0		0
Total net periodic benefit cost	Total net periodic benefit cost	$	1,708	$	2,068			$	542	$	609		Total net periodic benefit cost	$	2,526	$	2,410	$	503	$	370

						Pension						Postretirement
							Six Months Ended							Six Months Ended

Components of Net Periodic Benefit Cost													Components of Net Periodic Benefit Cost	June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020
Service cost													Service cost	$	5,181	$	4,482	$	725	$	674
Interest cost													Interest cost	8,851		11,748		351		428
Expected return on plan assets													Expected return on plan assets	(19,279)		(18,612)		0		0
Amortization of prior service cost													Amortization of prior service cost	352		357		(76)		(77)
Amortization of losses													Amortization of losses	8,163		6,854		6		(91)
Pension settlement loss (gain)													Pension settlement loss (gain)	890		0		0		0
Total net periodic benefit cost													Total net periodic benefit cost	$	4,158	$	4,829	$	1,006	$	934

Service cost is included in cost of sales and selling, general and administrative expenses in the statements of income, as appropriate. Interest cost, expected return on plan assets, amortization of prior service cost and amortization of losses are included in other components of pension and OPEB, excluding service cost on the consolidated statement of income.

16. Income Taxes

The Company’s effective tax benefit rate from continuing operations for the three and six months ended ~~March 27,~~June 26, 2021 was ~~an expense of 172~~153 percent and 77 percent, respectively, compared with a benefit rate of 683 percent and 47 percent for the three and six months ended ~~March 28, 2020.~~June 27, 2020, respectively.

The current quarter ~~March 27,~~and year to date June 26, 2021 effective rate differs from the federal statutory rate of 21 percent primarily due to ~~Global Intangible Low Taxed Income (“GILTI”), disallowed interest deductions in~~a tax benefit recognized by remeasuring the ~~U.S., and different~~Company’s Canadian deferred tax assets at a higher Canadian blended statutory tax ~~rates of foreign operations.~~rate. The ~~application of GILTI effectively results in double book taxation of the majority of the Company’s high Canadian earnings. The Company currently expects minimal cash taxes to be paid in 2021 or 2022~~statutory tax rate is higher as a result of ~~2021 earnings. The~~changing the allocation of income between the Canadian provinces once the sale of FPG and Newsprint is completed.Other factors impacting the effective benefit rate are return to accrual adjustments and tax ~~rate benefit for the three months ended March 28, 2020 differs from the federal statutory rate primarily due to~~credits, partially offset by nondeductible interest expense in the U.S. and lower tax deductions on vested stock ~~compensation, partially offset by~~compensation.

The effective tax rate benefit for the period ended June 27, 2020 differs from the federal statutory rate primarily due to the release of certain valuation allowances related to nondeductible interest expense, benefits from the CARES Act, ~~(see below).~~

~~On March 27, 2020, the United States Congress passed the CARES Act~~return to ~~provide taxpayer protection against the economic impacts of COVID-19. As part of the CARES Act, the Company is able to carry 2019~~accrual adjustments and ~~2020~~ tax ~~net operating losses back to tax years when~~credits, partially offset by nondeductible interest expense in the U.S. ~~Federal Statutory rate was 35 percent compared with~~, taxable income generated from the ~~current 21 percent. To date,~~2020 credit agreement amendment, increases to uncertain tax position reserves, nondeductible executive compensation, and lower tax deductions on vested stock compensation.

There has been no material change to the balance of unrecognized tax benefits reported at December 31, 2020.

1518

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

Company has recorded a $33 million current receivable related the 2019 loss carryback which is expected to be received in 2021 and a $9 million non-current receivable related to the 2020 loss carryback expected to be filed in the second quarter of 2021. Separately, the Company has a $22 million receivable related to tax years under examination by the IRS, $17 million of which is expected to be received within the next twelve months.

~~There have been no material changes to the balance of unrecognized tax benefits reported at December 31, 2020.~~

17. Segment and Geographical Information

~~The~~As a result of the announced sale of the Company’s lumber and newsprint assets, the Company ~~currently~~ operates in the following 5 business segments: High Purity Cellulose, ~~Forest Products,~~ Paperboard, High-Yield Pulp ~~& Newsprint~~ and Corporate. ~~All prior period amounts presented herein have been reclassified to conform to this segment structure.~~ The Corporate operations consist primarily of senior management, accounting, information systems, human resources, treasury, tax and legal administrative functions that provide support services to the operating business units. The Company allocates a portion of the cost of maintaining these support functions to its operating units.

The Company evaluates the performance of its segments based on operating income. Intersegment sales consist primarily of ~~wood chips~~High-Yield Pulp sales ~~from Forest Products to High Purity Cellulose, Paperboard and Pulp & Newsprint segments and high-yield pulp sales from Pulp & Newsprint~~ to Paperboard. Intersegment sales prices are at rates that approximate market for the respective operating area.

Net sales, disaggregated by product-line, was comprised of the following:


		Three Months Ended			Three Months Ended						Six Months Ended
			March 27, 2021			March 28, 2020			June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020
High Purity Cellulose	High Purity Cellulose							High Purity Cellulose
Cellulose Specialties	Cellulose Specialties		$	167,837		$	160,235	Cellulose Specialties	$	167,576	$	161,075	$	335,413	$	321,310
Commodity Products	Commodity Products		58,933			66,524		Commodity Products	62,384		75,428		121,317		141,951
Other sales (a)	Other sales (a)		22,991			22,819		Other sales (a)	24,639		18,552		47,630		41,371
Total High Purity Cellulose	Total High Purity Cellulose		249,761			249,578		Total High Purity Cellulose	254,599		255,055		504,360		504,632
Forest Products
Lumber			127,711			60,549
Other sales (b)			19,060			21,750
Total Forest Products			146,771			82,299
Paperboard	Paperboard							Paperboard
Paperboard	Paperboard		47,849			50,486		Paperboard	56,762		43,144		104,611		93,630
Pulp & Newsprint
Pulp			27,544			29,975
Newsprint			11,491			16,703
Total Pulp & Newsprint			39,035			46,678
High-Yield Pulp								High-Yield Pulp
High-Yield Pulp								High-Yield Pulp	36,786		31,847		64,330		61,822

Eliminations	Eliminations		(18,275)			(19,233)		Eliminations	(7,128)		(5,876)		(13,604)		(11,439)
Total net sales	Total net sales		$	465,141		$	409,808	Total net sales	$	341,019	$	324,170	$	659,697	$	648,645
(a) Other sales include sales of electricity, lignin and other by-products to third-parties	(a) Other sales include sales of electricity, lignin and other by-products to third-parties		(a) Other sales include sales of electricity, lignin and other by-products to third-parties
(b) Other sales include sales of logs, wood chips and other by-products to other Company segments and third-parties

Operating income (loss) by segment was comprised of the following:


	Three Months Ended				Six Months Ended
	June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020
High Purity Cellulose	$	10,623	$	6,721	$	17,051	$	1,863

Paperboard	2,441		6,261		8,196		10,936
High-Yield Pulp	1,079		570		538		(476)
Corporate	(12,766)		(19,713)		(24,882)		(24,650)
Total operating income (loss)	$	1,377	$	(6,161)	$	903	$	(12,327)

Identifiable assets by segment were as follows:


	June 26, 2021		December 31, 2020
High Purity Cellulose	$	1,540,743	$	1,528,929

Paperboard	120,125		129,871
High-Yield Pulp	38,985		33,259
Corporate and other (a)	702,806		624,541
Assets Held for Sale	245,643		213,265
Total identifiable assets	$	2,648,302	$	2,529,865

1619

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

~~Operating income (loss) by segment was comprised~~(a) Includes the remaining assets of the ~~following:~~

Three Months Ended
March 27, 2021 March 28, 2020
High Purity Cellulose $ 6,427 $ (4,858)
Forest Products 60,750 (1,311)
Paperboard 5,755 4,674
Pulp & Newsprint (5,900) (5,876)
Corporate (12,236) (4,637)
Total operating income (loss) $ 54,796 $ (12,008)

~~Identifiable assets by segment were as follows:~~

March 27, 2021 December 31, 2020
High Purity Cellulose $ 1,511,465 $ 1,528,929
Forest Products 235,996 186,321
Paperboard 127,525 129,871
Pulp & Newsprint 100,844 99,374
Corporate 539,445 585,370
Total identifiable assets $ 2,515,275 $ 2,529,865
lumber and newsprint operations excluded from the GreenFirst sale.

18. Commitments and Contingencies

Commitments

The Company has no material changes to the purchase obligations presented in Note 22 — Commitments and Contingencies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on March 1, 2021, that are outside the normal course of business for the three months ended ~~March 27,~~June 26, 2021. The Company’s purchase obligations continue to primarily consist of commitments for the purchase of natural gas, steam energy and electricity contracts entered into within the normal course of business.

The Company leases certain buildings, machinery and equipment under various operating leases. See Note 5 — Leases, for additional information.

Litigation and Contingencies

Final Settlement Reached in Dispute with IESO Relating to Investigation of the Kapuskasing Newsprint Facility. From the period from 2014 to early 2021, the Market Assessment and Compliance Division (“MACD”) branch of the Independent Electricity System Operator (“IESO”), the governmental agency responsible for operating the wholesale electricity market and directing the operation of the bulk electrical system in the province of Ontario, Canada, had been engaged in reviewing the Company's compliance with the published rules that govern the operation of the wholesale electricity market in Ontario, Canada. The inquiry was focused primarily on payments made by IESO to the Company between 2010 and 2019 under market rules in connection with multiple planned, extended and unplanned forced outages that caused extensive downtime, in full or in part, of the Company’s Kapuskasing, Ontario newsprint facility.

In May 2020, MACD finalized two of its four investigations into the Company’s electricity management practices at its Kapuskasing newsprint facility and issued orders asserting penalties of CAD $25 million. These orders called for the Company to pay penalties of CAD $3 million immediately and CAD $12 million over a 10 year period, with the remaining CAD $10 million to be deferred and ultimately forgiven assuming the Company otherwise complied with the orders’ remaining terms. The Company, which maintained it had complied in all material respects with the published rules, vigorously contested IESO’s orders, including through the filing of judicial review proceedings with the divisional Court (Superior Court of Justice) of Ontario seeking invalidation of the orders. At the time these orders were issued, the remaining two investigations remained open, subjecting the Company to the risk that MACD may in the future issue additional orders upon finalization of these additional investigations.

~~Rayonier Advanced Materials Inc.~~

~~Notes to Consolidated Financial Statements - (Unaudited) (Continued)~~

On April 19, 2021, the Company and IESO entered into Minutes of Settlement (“MOS”) pursuant to which the parties agreed to fully and finally settle all claims relating to all four of the investigations (whether completed or not) and related orders, the judicial review proceedings and underlying disputes. As part of the settlement, the Company agreed to a fixed obligation to pay a sum of CAD $12 million over a period of 5 years comprised of a CAD $4.5 million up-front payment and a CAD $7.5 million payment to be spread (on a front-weighted basis) over the next 5 anniversaries of the MOS, without interest. In addition to the foregoing, the MOS provides that a “suspended” sum of CAD $10.4 million would become due and payable in the event the Company fails to comply with any of the terms and conditions of the MOS or commits an event of default, as defined under the applicable market rules, unless such breach or event of default is remedied on a timely basis. This contingent “suspended” sum decreases annually as the scheduled fixed, or non-contingent, payments are made under the MOS. Assuming no uncured event of default or breach occurs during the repayment period, upon full payment of the CAD $12 million, the entire "suspended" sum shall be extinguished and RYAM shall be released from any payment obligation with respect thereto.

Given the parties’ finalization of and entry into the MOS, the Company considers this matter concluded (subject only to the parties’ obligations yet to be performed under the MOS).

Duties on Canadian softwood lumber sold to the U.S. The Company ~~operates~~has operated 6 softwood lumber mills in Ontario and Quebec, Canada and ~~exports~~has exported softwood lumber into the United States from Canada. In 2017, anti-dumping and countervailing duties were assessed by the United States Department of Commerce (“USDOC”) on lumber exported into the United States, with the Company being assigned an anti-dumping duty rate of 6 percent and a countervailing duty rate of 14 percent. In December 2020, following its administrative review of the period of April 28, 2017 through December 31, 2018, USDOC determined revised rates for anti-dumping and countervailing duties, and the Company is now subject to an anti-dumping duty rate of approximately 1.6 percent and a countervailing duty rate of approximately 7.4 percent. The reduced rates will be applied by the Company for lumber sold into the U.S. in the future. Canada’s legal challenge to the USDOC’s assessment of duties continues in spite of the recent revision in rates.

Rayonier Advanced Materials Inc.

Notes to Consolidated Financial Statements - (Unaudited) (Continued)

The Company has paid approximately ~~$98~~$108 million in lumber duties to date, recorded as expense in the periods incurred. The Company currently has a $21 million long-term receivable associated with the December 2020 determination of the revised rates for the 2017 and 2018 periods. Cash is not expected to return to the Company until final resolution of the softwood lumber dispute, which remains subject to legal challenges and to USDOC further administrative review processes covering periods after December 31, 2018. As part of the sale of its lumber assets, the Company retains all rights and obligations to softwood lumber duties, generated or incurred through the closing date of the transaction.

Other. In addition to the above, the Company is engaged in various legal and regulatory actions and proceedings, and has been named as a defendant in various lawsuits and claims arising in the ordinary course of its business. While the Company has procured reasonable and customary insurance covering risks normally occurring in connection with its businesses, the Company has in certain cases retained some risk through the operation of self-insurance, primarily in the areas of workers’ compensation, property insurance and general liability. These other lawsuits and claims, either individually or in aggregate, are not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Guarantees and Other

The Company provides financial guarantees as required by creditors, insurance programs and various governmental agencies. As of ~~March 27,~~June 26, 2021, the Company had net exposure of ~~$44~~$41 million from various standby letters of credit, primarily for financial assurance relating to environmental remediation, credit support for natural gas and electricity purchases, and guarantees related to foreign retirement plan obligations. These standby letters of credit represent a contingent liability. The Company would only be liable upon its default on the related payment obligations. The letters of credit have various expiration dates and will be renewed as required.

The Company had surety bonds of ~~$85~~$86 million as of ~~March 27,~~June 26, 2021, primarily to comply with financial assurance requirements relating to environmental remediation and post closure care, to provide collateral for the Company’s workers’ compensation program, and to guarantee taxes and duties for products shipped internationally. These surety bonds expire at various dates and are expected to be renewed annually as required.

LignoTech Florida (“LTF”) is a venture in which the Company owns 45 percent and its partner Borregaard ASA owns 55 percent. The Company is a guarantor of LTF’s financing agreements and, in the event of default, expects it would only be liable for its proportional share of any repayment under the agreements. The Company’s proportion of the LTF financing agreement guarantee was $33 million at ~~March 27,~~June 26, 2021.

The Company has not recorded any liabilities for these financial guarantees in its consolidated balance sheets, either because the Company has recorded the underlying liability associated with the guarantee or the guarantee is dependent on the

~~Rayonier Advanced Materials Inc.~~

~~Notes to Consolidated Financial Statements - (Unaudited) (Continued)~~

Company’s own performance and, therefore, is not subject to the measurement requirements or because the Company has calculated the estimated fair value of the guarantee and determined it to be immaterial based upon the current facts and circumstances that would trigger a payment obligation.

It is not possible to determine the maximum potential amount of the liability under these potential obligations due to the unique set of facts and circumstances likely to be involved with each provision.

As of ~~March 27,~~June 26, 2021, ~~all of~~ the ~~Company’s~~Company is working to reach agreements for certain expired collective bargaining agreements covering unionized employees in Canada working in the lumber and newsprint operations. All other collective bargaining agreements covering its unionized employees are current. See Note 2 —Discontinued Operations for additional information.

19. Supplemental Disclosures of Cash Flow Information

Supplemental disclosures of cash flows information were comprised of the following for the ~~three~~six months ended:


		March 27, 2021		March 28, 2020			June 26, 2021		June 27, 2020

Interest paid	Interest paid	$	851	$	8,115	Interest paid	$	13,394	$	24,916
Income taxes paid (received)	Income taxes paid (received)	$	54	$	(390)	Income taxes paid (received)	$	(21,032)	$	633
Capital assets purchased on account	Capital assets purchased on account	$	12,848	$	7,622	Capital assets purchased on account	$	15,704	$	11,136
Assets acquired under operating leases	Assets acquired under operating leases	$	1,768	$	119	Assets acquired under operating leases	$	624	$	658

1921

Table of Contents


Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations

When we refer to “we,” “us,” “our” or “the Company,” we mean Rayonier Advanced Materials Inc. and its consolidated subsidiaries. References herein to “Notes to Consolidated Financial Statements” refer to the Notes to the Consolidated Financial Statements of Rayonier Advanced Materials Inc. included in Item 1 of this Quarterly Report on Form 10-Q (the “Report.”)

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our consolidated financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity and certain other factors which may affect future results. This MD&A should be read in conjunction with our 2020 Annual Report on Form 10-K and information contained in our subsequent Forms 8-K and other reports to the U.S. Securities and Exchange Commission (the “SEC”).

As a result of the announced sale of the lumber and newsprint assets in April 2021, these operations have been presented as discontinued operations and we have reclassified certain prior year amounts to conform to this presentation. Unless otherwise stated, information in this MD&A relates to continuing operations. We present businesses that represent components as discontinued operations when they meet the criteria for held for sale or are sold, and their disposal represents a strategic shift that has, or will have, a major effect on our operations and financial results. See Note 2 —Discontinued Operationsfor additional information on the upcoming sale.

As a result of reclassifying the lumber and newsprint operations to discontinued operations as discussed above, we operate in the following business segments: High Purity Cellulose, Paperboard, High-Yield Pulp and Corporate.

Note About Forward-Looking Statements

Certain statements in this Report regarding anticipated financial, business, legal or other outcomes including business and market conditions, outlook and other similar statements relating to Rayonier Advanced Materials’ (“the Company” ) future events, developments, or financial or operational performance or results, are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are identified by the use of words such as “may,” “will,” “should,” “expect,” “estimate,” “believe,” “intend,” “forecast,” “anticipate” “guidance” and other similar language. However, the absence of these or similar words or expressions does not mean a statement is not forward-looking. While we believe these forward-looking statements are reasonable when made, forward-looking statements are not guarantees of future performance or events and undue reliance should not be placed on these statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance these expectations will be attained, and it is possible actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties. The following risk factors and those contained in Item 1A — Risk Factors, among others, could cause actual results or events to differ materially from the Company’s historical experience and those expressed in forward-looking statements made in this document.

Amounts contained in this Report may not always add due to rounding.

Our operations are subject to a number of risks and uncertainties including, but not limited to, those listed below. When considering an investment in our securities, you should carefully read and consider these risks, together with all other information in our Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the SEC and our other filings and submissions to the SEC, which provide much more information and detail on the risks described below. If any of the events described in the following risk factors actually occur, our business, financial condition or operating results, as well as the market price of our securities, could be materially adversely affected. These risks and events include, without limitation:

Table of Contents

Epidemics and Pandemic Risks

•We are subject to risks associated with epidemics and pandemics, including the COVID-19 pandemic and related impacts. The nature and extent of ongoing and future impacts of the pandemic are highly uncertain and unpredictable.

Macroeconomic and Industry Risks

•The businesses we operate are highly competitive and many of them are cyclical, which may result in fluctuations in pricing and volume that can adversely affect our business, financial condition and results of operations.

•Changes in raw material and energy availability and prices could have a material adverse effect on our business, results of operations and financial condition..

•We are subject to risks associated with doing business outside of the United States.

•Currency fluctuations may have a negative impact on our business, financial condition and results of operations.

•Restrictions on trade through tariffs, countervailing and anti-dumping duties, quotas and other trade barriers, in the United States and internationally, could materially adversely affect our ability to access certain markets.

Business and Operating Risks

•Our ten largest customers represent approximately 31 percent of our 2020 revenue, and the loss of all or a substantial portion of our revenue from these large customers could have a material adverse effect on our business.

~~Table of Contents~~

•A material disruption at one of our major manufacturing facilities could prevent us from meeting customer demand, reduce our sales and profitability, increase our cost of production and capital needs, or otherwise materially adversely affect our business, financial condition and results of operation.

•The availability of, and prices for, wood fiber may have a material adverse impact on our business, results of operations and financial condition.

•Our operations require substantial capital.

•We depend on third parties for transportation services and increases in costs and the availability of transportation could materially adversely affect our business.

•Our failure to maintain satisfactory labor relations could have a material adverse effect on our business.

•We are dependent upon attracting and retaining key personnel, the loss of whom could materially adversely affect our business.

•Failure to develop new products or discover new applications for our existing products, or our inability to protect the intellectual property underlying such new products or applications, could have a material negative impact on our business.

•The risk of loss of the Company’s intellectual property and sensitive data, or disruption of its manufacturing operations, in each case due to cyberattacks or cybersecurity breaches, could materially adversely impact the Company.

Regulatory 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.

•The potential longer-term impacts of climate related risks remain uncertain at this time.

•The Company considers and evaluates climate-related risks in three general categories; Regulatory, Transition to a low-carbon economy, and Physical risks related to climate-change.

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 debt obligations that could materially adversely affect our business and our ability to meet our obligations.

•The phase-out of the London Inter Bank Office Rate (“LIBOR”) as an interest rate benchmark in 2023 may impact our borrowing costs.

•Challenges in the commercial and credit environments may materially adversely affect our future access to capital.

•We may need additional financing in the future to meet our capital needs or to make acquisitions, and such financing may not be available on favorable terms, if at all, and may be dilutive to existing stockholders.

Table of Contents

Company’s Common Stock and Certain Corporate Matters Risks

•Your percentage of ownership in the Company may be diluted in the future.

•Certain provisions in our amended and restated certificate of incorporation and bylaws, and of Delaware law, could prevent or delay an acquisition of the Company, which could decrease the price of our common stock.

Merger and Acquisition Risks

•Failure to consummate the closing of the sale of the lumber and newsprint facilities and related assets to GreenFirst as contemplated under the binding asset purchase agreement could negatively impact the Company’s future earnings volatility and ability to reduce its leverage and invest in its core business.

•Fifteen percent (15%) of the purchase price for the GreenFirst transaction is payable in the common shares of the capital of GreenFirst (to be held by the Company for a minimum of six (6) months following the transaction closing) and the Company’s ability to ultimately realize the benefit of this consideration is subject to market conditions and GreenFirst’s future performance.

Forward-looking statements are only as of the date they are made, and the Company undertakes no duty to update its forward-looking statements except as required by law. You are advised, however, to review any further disclosures we have made or may make in our filings and other submissions to the U.S. Securities and Exchange Commission (the “SEC”), including those on Forms 10-Q, 10-K, 8-K and other reports. Details on each of the above risk factors are more specifically described in Item 1A - Risk Factors.

Note About Non-GAAP Financial Measures

A “non-GAAP financial measure” is generally defined as a numerical measure of a company’s historical or future performance that excludes or includes amounts, or is subject to adjustments, so as to be different from the most directly comparable measure calculated and presented in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). This Report contains certain non-GAAP financial measures, including Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), adjusted EBITDA, and adjusted free cash flows. These non-GAAP measures are reconciled to each of their respective most directly comparable GAAP financial measures in Item 72 — Management’s Discussion and Analysis of Financial Condition and Results of Operations.

We believe these non-GAAP measures provide useful information to our Board of Directors, management and investors regarding certain trends relating to our financial condition and results of operations. Our management uses these non-GAAP

~~Table of Contents~~

measures to compare our performance to that of prior periods for trend analyses, purposes of determining management incentive compensation and budgeting, forecasting and planning purposes.

We do not consider non-GAAP measures an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is they may exclude significant expense and income items that are required by GAAP to be recognized in our consolidated financial statements. In addition, they reflect the exercise of management’s judgment about which expense and income items are excluded or included in determining these non-GAAP financial measures. In order to compensate for these limitations, reconciliations of the non-GAAP financial measures we use to their most directly comparable GAAP measures are provided. Non-GAAP financial measures should not be relied upon, in whole or part, in evaluating the financial condition, results of operations or future prospects of the Company.

Business

We are a global leader of cellulose-based technologies, which comprise a broad offering of high purity cellulose specialties, a natural polymer commonly used in the production of specialty chemicals and polymers for use in producing LCD displays, filters, fibers, performance additives for pharmaceutical, food and other industrial applications. Starting from a tree and building upon more than 90 years of experience in cellulose chemistry, we provide high quality high-purity cellulose pulp products that make up the essential building blocks for our customers’ products while providing exceptional service and value. In addition, we produce lumber, paperboard, newsprint and high-yield pulp for use in consumer products. In connection with the announced sale of the lumber and newsprint assets (see below), expected to close on August 28, 2021, we will cease to manufacture lumber and newsprint products.

Recent developments

CEWS

Table of Contents

As previously disclosed, in January 2021, our Canadian subsidiaries applied for the Canada Emergency Wage Subsidy (“CEWS”) in the amount of CAD $25 million for periods between March 2020 and August 2020. Through June 26, 2021, we had received cash of CAD $6 million and subsequently has received the remaining CAD $19 million. All CEWS claims are subject to mandatory audit. We will recognize amounts from these claims in income at the time that there is sufficient evidence that we will not be required to repay such amounts.

Sale of lumber and newsprint assets

On April 12, 2021, we announced the sale of our lumber and newsprint assets located in Ontario and Québec Canada to GreenFirst, for approximately $214 million, including an assumed $74 million associated with finished goods, work-in-process and raw materials inventory value, which is subject to fluctuation until closing. The purchase price, to be adjusted at closing by changes in the value of the inventory, will be paid 85% in cash and the remainder in common shares of GreenFirst. In addition, a credit note will be issued to us by GreenFirst in the amount of CDN$8 million, which may be offset against amounts owed by us to GreenFirst in the future for wood chip purchases, equally over the next 5 years. The closing of the transaction, which is expected to occur ~~in the second half of~~on August 28, 2021, ~~but not before July 31,~~ is subject to customary closing conditions, including receipt of regulatory approvals, the transfer of forestry licenses and the approval of the TSX Venture Exchange. See Note 12 —~~Basis of Presentation and New Accounting Pronouncements~~Discontinued Operations for additional information.

~~In 2020, the assets generated approximately $439 million of revenue and $55 million of operating income and $51 million of Adjusted EBITDA.~~

Final Settlement Reached in Dispute with IESO Relating to Investigation of the Kapuskasing Newsprint Facility

We had previously been engaged in litigation with the Market Assessment and Compliance Division (“MACD”) branch of the Independent Electricity System Operator (“IESO”) regarding their investigations into the Company's compliance with the published rules that govern the operation of the wholesale electricity market in Ontario, Canada. On April 19, 2021, we and the IESO entered into Minutes of Settlement (“MOS”) pursuant to which the parties agreed to fully and finally settle all claims relating to their investigations. As part of the settlement, the Company agreed to a fixed obligation to pay a sum of CAD $12 million over a period of 5 years comprised of a CAD $4.5 million up-front payment and a CAD $7.5 payment to be spread (on a front-weighted basis) over the next 5 anniversaries of the MOS, without interest. In addition to the foregoing, the MOS provides that a “suspended” sum of CAD $10.4 million would become due and payable in the event the Company fails to comply with any of the terms and conditions of the MOS or commits an event of default, as defined under the applicable market rules, unless such breach or event of default is remedied on a timely basis. See Note 18 —~~Commitments and Contingencies~~ ~~for additional information.~~

We consider this matter concluded (subject only to the parties’ obligations yet to be performed under the MOS). See Note 18 —Commitments and Contingencies for additional information.

Coronavirus-Update

Our businesses were significantly impacted by the coronavirus ("COVID-19") pandemic in 2020. While market demand and pricing for certain of our products began to recover towards the end of the year and continued to improve throughout the first ~~quarter~~half of 2021, our operations remain vulnerable to a reversal of these trends or other continuing negative effects caused by COVID-19.

~~Table of Contents~~

In our operating facilities and work spaces, we continue to maintain protocols previously implemented to reduce the potential spread of COVID-19 and ensure the safety of our employees and continuity of operations.

Due to the financial impacts of COVID-19, we have actively monitored the recoverability of the carrying value of our long-term assets. During the three months ended March 27, 2021 and the year ended December 31, 2020, we did not recognize any impairment charges related to long-lived assets held for use. We will continue to evaluate the recoverability of these and other assets as necessary.

Market Assessment

The market assessment represents our best current estimate of each business in this environment.

High Purity Cellulose

Pricing levels for our commodity products increased significantly during the ~~first~~second quarter and ~~are forecasted~~we expect this upward trend to ~~increase further in~~continue into the ~~second~~third quarter. Prices for cellulose specialties ~~declined slightly and~~are in line with expectations for the full year. ~~Total High Purity~~ Cellulose specialties volumes are expected to ~~remain stable~~be well above prior year due to strong demand while total segment volumes will decline slightly for the full year ~~however, we expect a more favorable mix towards~~mainly due to the length of extended planned maintenance outages. Volumes for both cellulose ~~specialties. The annual maintenance outage at the Jesup facility~~specialties and commodity products are expected to increase significantly in the second ~~quarter is currently ongoing.~~ half of 2021 from first half levels.

Key costs ~~including energy and commodity chemical prices have increased rapidly during the first quarter and remain~~are difficult to predict. Prices for energy, wood and commodity chemicals as well as logistics costs, have continued to increase during the second quarter and are expected to escalate in the back half of the year. Further, logistic and shipping constraints may negatively impact operating and sales results through the end of the year.

With current market conditions, including strong demand for cellulose specialties products, specifically in construction, automotive and plastics end markets, and elevated pricing for commodity viscose and fluff products, we believe we are well positioned to maintain or improve cellulose specialties margins in 2022 in spite of inflationary pressures. We also remain committed to investing in ~~this~~our core business to reduce costs, improve reliability, optimize performance and provide new platforms for growth. ~~The sale of the lumber and newsprint assets discussed below will provide us with a key opportunity to reinvest in our core high purity cellulose business and our BioFuture.~~

~~Forest Products~~

Prices for lumber continue to strengthen to record levels driven by the exceptional demand in the U.S housing market and high levels of repair and remodel activity. Housing starts in March 2021 reached 1.7 million units, seasonally adjusted, while building permits reached 1.8 million. We are focused on ensuring reliable operations and capturing the benefit of high lumber prices through completion of the sale, which is expected in the second half of 2021.

Paperboard

Paperboard prices ~~have increased 5 percent from fourth quarter and are expected~~continued to increase ~~further,~~in the second quarter as expected, due to strong demand in both commercial printing and packaging segments, helping offset increases in raw material ~~cost.~~costs. Paperboard prices are expected to increase further as demand for our products continues to strengthen, and additionally supported by industry supply disruptions.

Table of Contents

High-Yield Pulp ~~& Newsprint~~

High-yield pulp ~~and newsprint~~ markets ~~have~~ experienced additional price increases during the ~~first~~second quarter ~~and additional price increases are expected~~that we will recognize in the ~~near-term. Additionally, we continue~~third quarter due to ~~manage production at~~ the ~~newsprint facility~~typical sales lag. However, pulp market prices are forecasted to ~~minimize costs and improve sales mix while experiencing early success~~decrease later in the ~~expansion~~year. Logistics constraints and higher costs may negatively impact operating results through the end of the ~~Envirosmart™ food service bag, which targets the quick service restaurant end-market and used for items such as sandwiches and to-go orders.~~year.

Growing RYAM’s BioFuture

Upon the ~~consummation~~completion of the sale of the lumber and newsprint assets, we will ~~be focusing~~focus on and ~~investing~~invest in ~~further~~ leveraging our four high purity cellulose plants ~~as biorefineries. We believe we are in a unique position, starting with natural, renewably sourced feedstock,~~ to capitalize on the global demand for more sustainable products with our leading cellulose specialties offerings as alternatives for petroleum-based ~~incumbents and~~incumbents. Not only are these specialized assets capable of creating the world’s leading plant-based high purity cellulose, they are also ideally suited for generating green fuels, ~~electricity~~bioelectricity and other ~~biomaterials.~~biomaterials such as lignins and tall oils. We have executed on several high return projects to enhance the value of these assets, including ~~recent~~ investments in green energy in Tartas, ~~France. Additionally,~~France, in TemSilk™~~, a new product being produced in Temiscaming, Quebec, is~~ pulp, a critical input in the production of Lyocell, a more sustainable ~~textile. We are also a lead investor~~textile, and in Anomera, Inc. ~~(“Anomera”)~~, a ~~Canadian start-up corporation headquartered in Montreal, Quebec. Anomera~~company that manufactures ~~Carboxylated Cellulose Nanocrystals~~carboxylated cellulose nanocrystals (CNC), a patented, biodegradable product ~~with uses~~for use in cosmetics and a wide variety of industrial applications. The Tartas green energy project is fully operational in the ~~cosmetics industry~~second quarter and ~~various other industrial applications, including concrete, inks~~we anticipate realizing $10 million in annualized benefits from this investment. We will also leverage our world-class R&D facilities to work with new and pigments, polymer composites, coatings and adhesives industries. The investment in Anomera provides a new platform for cellulose specialties as we leverage the combined knowledge of cellulose chemistryexisting customers to develop ~~new markets for cellulose.~~ natural-based solutions.

We will seek further opportunities to leverage our core knowledge of creating the remarkable from the renewable to drive incremental value in our BioFuture.

Critical Accounting Policies and Use of Estimates

The preparation of financial statements requires us to make estimates, assumptions and judgments that affect our assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. We base these estimates and assumptions

~~Table of Contents~~

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.

For a full description of our critical accounting policies, see Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2020 Annual Report on Form 10-K. For recent accounting pronouncements see Item 1 of Part I, Financial Statements — Note 1 —Basis of Presentation and New Accounting Pronouncements for additional information.

2426

Table of Contents

Results of Operations


Financial Information	Financial Information	Three Months Ended				%			Financial Information	Three Months Ended						%			Six Months Ended				%
(in millions, except percentages)	(in millions, except percentages)		March 27, 2021			March 28, 2020					Change	(in millions, except percentages)	June 26, 2021			June 27, 2020			Change	June 26, 2021			June 27, 2020			Change
Net Sales	Net Sales		$	465		$	410				13%	Net Sales	$	341		$	324		5%	$	660		$	649		2%
Cost of Sales	Cost of Sales		(381)			(399)						Cost of Sales	(319)			(301)				(617)			(618)
Gross Margin	Gross Margin		84			11					664%	Gross Margin	22			23			(1)%	43			31			39%

Selling, general and administrative expenses	Selling, general and administrative expenses		(18)			(20)						Selling, general and administrative expenses	(18)			(20)				(34)			(39)
Duties			(7)			(6)

Foreign exchange gains (losses)	Foreign exchange gains (losses)		(1)			6						Foreign exchange gains (losses)	(2)			(5)				(3)			1
Other operating income (expense), net	Other operating income (expense), net		(4)			(2)						Other operating income (expense), net	(1)			(4)				(5)			(5)
Operating Income (Loss)	Operating Income (Loss)		55			(12)					558%	Operating Income (Loss)	1			(6)			123%	1			(12)			108%
Interest expense	Interest expense		(18)			(15)						Interest expense	(16)			(14)				(32)			(27)
Interest income and other, net	Interest income and other, net		(1)			—						Interest income and other, net	(2)			(1)				(2)			(1)

Net periodic pension and OPEB income (expense), excluding service costs	Net periodic pension and OPEB income (expense), excluding service costs		1			—						Net periodic pension and OPEB income (expense), excluding service costs	—			—				1			—

Income (Loss) From Continuing Operations Before Income Taxes	Income (Loss) From Continuing Operations Before Income Taxes		37			(27)					237%	Income (Loss) From Continuing Operations Before Income Taxes	(17)			(21)			19%	(32)			(40)			20%
Income tax benefit (expense)	Income tax benefit (expense)		(64)			2						Income tax benefit (expense)	25			17				25			19
Equity in income (loss) of equity method investment	Equity in income (loss) of equity method investment		$	—		$	—					Equity in income (loss) of equity method investment	—			$	—			$	(1)		$	—
Income (Loss) from Continuing Operations	Income (Loss) from Continuing Operations		$	(27)		$	(25)				(8)%	Income (Loss) from Continuing Operations	$	8		$	(4)		300%	$	(8)		$	(21)		62%
Income (loss) from discontinued operations, net of taxes	Income (loss) from discontinued operations, net of taxes		—			1						Income (loss) from discontinued operations, net of taxes	114			(9)				103			(16)
Net Income (Loss)	Net Income (Loss)		$	(27)		$	(24)					Net Income (Loss)	$	122		$	(13)			$	95		$	(37)

Gross Margin %	Gross Margin %		18		%	3		%				Gross Margin %	7		%	7		%		6		%	5		%
Operating Margin %	Operating Margin %		12		%	(3)		%				Operating Margin %	—		%	(2)		%		—		%	(2)		%
Effective Tax Rate %	Effective Tax Rate %		(172)		%	(6)		%				Effective Tax Rate %	153		%	83		%		77		%	47		%

Net sales by segment were as follows:


		Three Months Ended			Three Months Ended						Six Months Ended
Net sales (in millions)	Net sales (in millions)		March 27, 2021			March 28, 2020		Net sales (in millions)	June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020
High Purity Cellulose	High Purity Cellulose		$	250		$	250	High Purity Cellulose	$	255	$	255	$	504	$	505
Forest Products			147			82
Paperboard	Paperboard		48			50		Paperboard	57		43		105		94
Pulp & Newsprint			39			47
High-Yield Pulp								High-Yield Pulp	37		32		64		62

Eliminations	Eliminations		(19)			(19)		Eliminations	(8)		(6)		(13)		(12)
Total net sales	Total net sales		$	465		$	410	Total net sales	$	341	$	324	$	660	$	649

Net sales increased by ~~$55~~$17 million and $11 million during the three and six months ended ~~March 27,~~June 26, 2021 when compared to the ~~three months~~same prior periods ended ~~March 28,~~June 27, 2020, respectively, primarily driven by higher ~~lumber and~~ High Purity Cellulose commodity sales prices along with stronger cellulose specialties sales ~~volumes.~~volumes, in addition to increased Paperboard sales volumes and prices. The increases were partially offset by lower High Purity Cellulose commodity product sales volumes. For further discussion, see Operating Results by Segment.

2527

Table of Contents

Operating income (loss) by segment was as follows:


		Three Months Ended			Three Months Ended						Six Months Ended
Operating income (loss) (in millions)	Operating income (loss) (in millions)		March 27, 2021			March 28, 2020		Operating income (loss) (in millions)	June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020
High Purity Cellulose	High Purity Cellulose		$	6		$	(5)	High Purity Cellulose	$	11	$	7	$	17	$	2
Forest Products			61			(1)
Paperboard	Paperboard		6			5		Paperboard	2		6		8		11
Pulp & Newsprint			(6)			(6)
High-Yield Pulp								High-Yield Pulp	1		1		1		—
Corporate	Corporate		(12)			(5)		Corporate	(13)		(20)		(25)		(25)
Total operating income (loss)	Total operating income (loss)		$	55		$	(12)	Total operating income (loss)	$	1	$	(6)	$	1	$	(12)

The operating results for the three and six month ~~period~~periods ended ~~March 27,~~June 26, 2021 improved by ~~$67~~$7 million ~~to operating income of $55~~and $13 million, respectively, when compared to the same prior year ~~period~~periods ended June 27, 2020. The three months ended June 26, 2021 was primarily due to ~~strong lumber prices, lower operating costs,~~ higher High Purity Cellulose commodity prices and ~~increased~~Paperboard sales volumes, partially offset by lower commodity volumes. The improvements during the six months ended June 26, 2021 were primarily driven by higher High Purity Cellulose commodity prices and cellulose specialties sales prices, partly offset by lower commodity sales volumes.

Non-operating Expenses

Interest expense increased $3$2 million and $5 million to ~~$18~~$16 million ~~for~~and $32 million during the three and six months ended ~~March 27,~~June 26, 2021, respectively, when compared to the same prior year ~~period.~~periods. The ~~increase was~~increases were principally driven by the higher interest rate and additional amortization of debt issuance costs related to the December 2020 refinancing of certain debt instruments. See Note 7 — Debt and Finance Leases for further information.

Income Tax Benefit (Expense)

The effective tax rate ~~expense~~ for the ~~first~~second quarter of 2021 was ~~172~~a benefit of 153 percent compared to a benefit ~~rate~~ of 683 percent in the same ~~period~~quarter of 2020. The effective tax rate for the six months ended June 26, 2021 was a benefit of 77 percent compared to a benefit of 47 percent for the comparable prior year period. The 2021 effective tax ~~rate differs~~rates differ from the statutory rate of 21 percent primarily due to a tax benefit recognized by remeasuring the Company’s Canadian deferred tax assets at a higher blended statutory tax rate in Canada. The statutory tax rate is higher as a result of changing the allocation of income between the Canadian provinces once the sale of the lumber and newsprint assets is completed. See Note 16 — Income Taxes for additional information.

Discontinued Operations

Income from discontinued operations, net of taxes, for the three months ended June 26, 2021 was $114 million compared to a loss of $9 million for the comparable prior period ended June 27, 2020. The improvement was driven by an increase in prices for lumber of 213 percent and higher volumes by 10 percent partially offset by higher operational and residual stumpage costs as well as the impact of Global Intangible Low Taxed Income (“GILTI”) on foreign ~~earnings, disallowed interest deductions in the U.S., and different statutory tax rates of foreign operations.~~earnings. The application of GILTI effectively results in double book taxation of the majority of the Company’s high Canadian earnings.

Table of Contents

Income from discontinued operations net of taxes, during the six months ended June 26, 2021 was $103 million compared to a loss of $16 million for the same prior year period ended June 27, 2020. The ~~Company currently expects~~improvement was driven by an increase in prices for lumber of 166 percent and higher volumes by 3 percent partially offset by higher operational and residual stumpage costs as well as the impact of GILTI on foreign earnings.

We expect minimal cash taxes to be paid in 2021 or 2022 as a result of 2021 ~~earnings. See Note 16 —~~ ~~Income Taxes~~ ~~for additional information~~.

~~Discontinued Operations~~

~~The Company has presented the operating results for~~earnings associated with its ~~Matane operations that was sold in November 2019 as~~ discontinued operations. ~~The Company had an after tax benefit of $1 million as a result of the working capital adjustments as required by the sale agreement for the three months ended March 28, 2020.~~

Operating Results by Segment

High Purity Cellulose

Three Months Ended
(in millions) March 27, 2021 March 28, 2020
Net Sales $ 250 $ 250
Operating income (loss) $ 6 $ (5)
Average Sales Prices ($ per metric ton):
High Purity Cellulose $ 1,046 963
Sales Volumes (thousands of metric tons):
High Purity Cellulose 217 235

~~Table of Contents~~


	Three Months Ended				Six Months Ended
(in millions)	June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020
Net Sales	$	255	$	255	$	504	$	505
Operating income (loss)	$	11	$	7	$	17	$	2
Average Sales Prices ($ per metric ton):
High Purity Cellulose	$	1,128	$	966	$	1,086	$	965
Sales Volumes (thousands of metric tons):
High Purity Cellulose	204		245		421		480

Changes in High Purity Cellulose net sales are as follows:

Three Months Ended Changes Attributable to:
Net Sales (in millions)
March 28, 2020 Price Volume/Mix/Other March 27, 2021
Cellulose Specialties $ 160 $ (2) $ 10 $ 168
Commodity Products 67 8 (16) 59
Other sales (a) 23 — — 23
Total Net Sales $ 250 $ 6 $ (6) $ 250
(a) Other sales consist of electricity, lignin and other by-products to third-parties.


Three Months Ended			Changes Attributable to:
Net Sales (in millions)	June 27, 2020		Price		Volume/Mix/Other		June 26, 2021



Total Net Sales (a)	$	255	$	14	$	(14)	$	255
(a) includes other sales consisting of electricity, lignin and other by-products to third-parties.

Total sales for the three months ended June 26, 2021 were flat when compared to the same prior year quarter. Cellulose specialties sales volumes increased 6 percent driven by improved demand, while sales prices declined slightly during the three months ended June 26, 2021. Commodity product prices rose 37 percent whiles commodity product sales volumes decreased 40 percent due to a more favorable mix of cellulose specialties, logistics constraints and the extended planned maintenance outage at the Jesup, Georgia facility.


Six Months Ended			Changes Attributable to:
Net Sales (in millions)	June 27, 2020		Price		Volume/Mix/Other		June 26, 2021



Total Net Sales (a)	$	505	$	19	$	(20)	$	504
(a) includes other sales consisting of electricity, lignin and other by-products to third-parties.

Table of Contents

Total net sales for the ~~three~~six months ended ~~March 27,~~June 26, 2021 were ~~comparable~~down slightly when compared to the same prior year period at ~~$250~~$504 million. Cellulose specialties volumes improved by 6 percent due to increased demand, while sales prices declined slightly by 1 percent during the ~~quarter~~year to date ended ~~March 27,~~June 26, 2021. Commodity product sales prices increased 1525 percent during the first ~~quarter~~six months of 2021, however sales volumes decreased by ~~23 percent.~~32 percent due to a more favorable mix of cellulose specialties, logistics constraints and the extended planned maintenance outage at the Jesup, Georgia facility.

Changes in High Purity Cellulose operating income are as follows


Three Months Ended	Three Months Ended				Gross Margin Changes Attributable to (a):															Three Months Ended				Gross Margin Changes Attributable to (a):
(in millions)	(in millions)	March 28, 2020			Sales Price			Sales Volume/Mix/Other			Cost			SG&A and other			March 27, 2021			(in millions)	June 27, 2020			Sales Price			Sales Volume/Mix/Other			Cost			SG&A and other			June 26, 2021
Operating income (loss)		$	(5)		$	6		$	(1)		$	5		$	1		$	6
Operating income																				Operating income	$	7		$	14		$	(1)		$	(10)		$	1		$	11
Operating margin %	Operating margin %	(2.0)		%	2.4		%	(0.4)		%	2.0		%	0.4		%	2.4		%	Operating margin %	2.7		%	5.1		%	—		%	(3.9)		%	0.4		%	4.3		%
(a) Sales Volume computed based on contribution margin.

Operating results improved by ~~$11~~$4 million during the three months ended ~~March 27,~~June 26, 2021 to operating income of $6$11 million when compared to the same prior year quarter. Sales prices for the segment increased 17 percent during the current quarter driven by higher commodity prices. Compared to the prior year, sales volumes declined 17 percent during the current quarter driven by lower commodities volumes, shipping constraints and planned maintenance shutdowns, partially offset by higher cellulose specialties sales volumes. Additionally, costs increased during the second quarter of 2021 primarily due to the impact of inflation on key input costs and higher maintenance and logistic expenses.


Six Months Ended				Gross Margin Changes Attributable to (a):
(in millions)	June 27, 2020			Sales Price			Sales Volume/Mix/Other			Cost			SG&A and other			June 26, 2021
Operating income (loss)	$	2		$	19		$	(2)		$	(4)		$	2		$	17
Operating margin %	0.4		%	3.6		%	(0.2)		%	(0.8)		%	0.4		%	3.4		%
(a) Sales Volume computed based on contribution margin.

Operating results improved by $15 million during the six months ended June 26, 2021 to operating income of $17 million when compared to the same prior year period. Sales prices for the segment increased 913 percent during the ~~current three-month~~year to date period driven by higher commodity prices ~~and~~from increased ~~cellulose specialties sales when compared to the same prior year period.~~demand. Compared to the prior year, sales volumes for the segment were impacted by shipping constraints and planned maintenance outages. Volumes declined 812 percent during the current ~~three-month~~six-month period driven by lower commodities volumes, partially offset by higher cellulose specialties sales ~~volumes driven by improved demand.~~volumes. Additionally, ~~better productivity and~~costs increased during the year to date period ended June 26, 2021 primarily due to due to the impact of ~~shutdowns improved operational costs.~~inflation on key input costs and higher maintenance and logistic expenses.

~~Forest Products~~Paperboard

Three Months Ended
(in millions) March 27, 2021 March 28, 2020
Net Sales $ 147 $ 82
Operating income (loss) $ 61 $ (1)
Average Sales Prices ($ per thousand board feet):
Lumber $ 888 $ 407
Sales Volumes (millions of board feet):
Lumber 144 149


	Three Months Ended				Six Months Ended
(in millions)	June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020
Net Sales	$	57	$	43	$	105	$	94
Operating income	$	2	$	6	$	8	$	11
Average Sales Prices ($ per metric tons):
Paperboard	$	1,150	$	1,091	$	1,132	$	1,100
Sales Volumes (in thousands of metric tons):
Paperboard	49		40		92		85

2730

Table of Contents

Changes in ~~Forest Products~~Paperboard net sales are as follows:

Three Months Ended March 28, 2020 Changes Attributable to: March 27, 2021
Net Sales
(in millions)
Price Volume/Mix/Other
Lumber $ 61 $ 70 $ (3) $ 128
Other sales (a) 21 — (2) 19
Total Net Sales $ 82 $ 70 $ (5) $ 147
(a) Other sales consist of sales of logs, wood chips, and other by-products to other segments and third-parties


Three Months Ended	June 27, 2020		Changes Attributable to:				June 26, 2021
Net Sales (in millions)	June 27, 2020		Price		Volume/Mix		June 26, 2021
Paperboard	$	43	$	3	$	11	$	57

~~Total net sales~~Sales for the three months ended ~~March 27,~~June 26, 2021 increased ~~$65~~$14 million ~~or 78~~compared to the three months ended June 26, 2020. During the second quarter ended June 26, 2021, sales volumes increased 23 percent while sales prices were up 5 percent when compared to the same prior year period ended 2020. The improvement is due to a 118 percent increase in lumber prices. Sales volumes were slightly lower than in the prior year resulting from timing of shipments and logistic constraints.period.

~~Changes in Forest Products operating income are as follows:~~

Three Months Ended Gross Margin Changes Attributable to (a)

(in millions)
March 28, 2020 Sales Price Sales Volume/Mix/Other Cost SG&A and other March 27, 2021
Operating income (loss) $ (1) $ 70 $ (5) $ (3) $ — $ 61
Operating margin % (1.2) % 46.6 % (1.9) % (2.0) % — % 41.5 %
(a) Sales Volume computed based on contribution margin.

Operating results improved by $62 million during the three months ended March 27, 2021 to an operating income of $61 million. The favorable results were driven by higher lumber prices partly offset by lower sales volumes discussed above and the impact of higher residual stumpage costs. The Company deposited $7 million and $6 million of softwood lumber duties in the quarter ended March 27, 2021 and 2020, respectively. While the Company benefits from the December 2020 rate reduction from 20% to 9%, the increase in lumber prices resulted in an increase to the total value of the duties paid.

~~Paperboard~~

Three Months Ended
(in millions) March 27, 2021 March 28, 2020
Net Sales $ 48 $ 50
Operating income $ 6 $ 5
Average Sales Prices ($ per metric tons):
Paperboard $ 1,111 $ 1,107
Sales Volumes (in thousands of metric tons):
Paperboard 43 46

~~Changes in Paperboard net sales are as follows:~~

Three Months Ended March 28, 2020 Changes Attributable to: March 27, 2021
Net Sales
(in millions)
Price Volume/Mix
Paperboard $ 50 $ — $ (2) $ 48

~~Table of Contents~~


Six Months Ended	June 27, 2020		Changes Attributable to:				June 26, 2021
Net Sales (in millions)	June 27, 2020		Price		Volume/Mix		June 26, 2021
Paperboard	$	94	$	3	$	8	$	105

Sales for the ~~three~~six months ended ~~March 27,~~June 26, 2021 ~~decreased $2~~increased $11 million as sales volumes ~~declined 7 percent driven~~and prices improved by ~~timing of sales compared to the prior year.~~

Three Months Ended Gross Margin Changes Attributable to (a):

(in millions)
March 28, 2020 Sales Price Sales Volume/Mix Cost SG&A and other March 27, 2021
Operating income (loss) $ 5 $ — $ (1) $ 2 $ — $ 6
Operating margin % 10.0 % — % (1.7) % 4.2 % — % 12.5 %
(a) Computed based on contribution margin.

~~Operating results improved by$1 million during the three months ended March 27, 2021 to operating income of $6 million. The improvement was primarily due to lower operational costs.~~

~~Pulp and Newsprint~~

Three Months Ended
(in millions) March 27, 2021 March 28, 2020
Net Sales $ 39 $ 47
Operating income (loss) $ (6) $ (6)
Average Sales Prices ($ per metric ton):
Pulp (a) $ 474 $ 463
Newsprint $ 468 $ 417
Sales Volumes (in metric tons):
Pulp (a) 44 52
Newsprint 25 40
(a) Average sales prices and volumes for external sales only. For the three month period ended March 27, 2021 and March 28, 2020, the Pulp & Newsprint segment sold approximately 17,000 metric tons and 16,000 metric tons of high-yield pulp for $7 million and $6 million, respectively, to the Paperboard segment.

~~Changes in Pulp & Newsprint net sales are as follows:~~

Three Months Ended March 28, 2020 Changes Attributable to: March 27, 2021
Net Sales
(in millions)
Price Volume/Mix
Pulp $ 30 $ 1 $ (4) $ 28
Newsprint 17 1 (6) 11
Total Net Sales $ 47 $ 2 $ (10) $ 39

~~Table of Contents~~

Total sales for the three months ended March 27, 2021 were down $8 million or 16 percent when compared to the same three months ended March 28, 2020. High-yield pulp and newsprint sales prices were up 28 percent and 123 percent, respectively, while high-yield pulp and newsprint sales volumes decreased 15 percent and 38 percent, respectively. Declines in newsprint volumes were due to continued weak demand stemming from the COVID-19 pandemic and management’s decision to produce on only one of its newsprint two operating lines.

~~Changes in Pulp & Newsprint operating income are as follows:~~

Three Months Ended Gross Margin Changes Attributable to (a):

(in millions)
March 28, 2020 Sales Price Sales Volume/Mix Cost SG&A and other March 27, 2021
Operating income (loss) $ (6) $ 2 $ (4) $ 2 $ — $ (6)
Operating margin % (12.8) % 4.6 % (12.3) % 5.1 % — % (15.4) %
(a) Sales Volume computed based on contribution margin.

~~Operating results for the three months ended March 27, 2021 remained flat~~ when compared to the same prior year period. ~~Lower newsprint~~The increased volumes and ~~high-yield pulp sales volumes~~prices were ~~offset~~driven by ~~improvements~~improved market demand.

Changes in ~~high-yield pulp and newsprint sales prices. Declines in high-yield pulp volumes were impacted by the timing of shipments and logistics constraints.~~Paperboard operating income are as follows:

~~Corporate~~


Three Months Ended				Gross Margin Changes Attributable to (a):
(in millions)	June 27, 2020			Sales Price			Sales Volume/Mix			Cost			SG&A and other			June 26, 2021
Operating income (loss)	$	6		$	3		$	5		$	(12)		$	—		$	2
Operating margin %	13.6		%	5.5		%	5.4		%	(21.1)		%	—		%	3.5		%
(a) Computed based on contribution margin.

Three Months Ended
Operating Income (Loss)
(in millions)
March 27, 2021 March 28, 2020
Operating loss $ (12) $ (5)

~~The operating loss~~Operating income for the three months ended ~~March 27,~~June 26, 2021 ~~increased $7~~declined $4 million when compared to the same prior year period primarily due to higher raw material input costs and higher operational costs partially offset by improvements in sales prices and volumes.


Six Months Ended				Gross Margin Changes Attributable to (a):
(in millions)	June 27, 2020			Sales Price			Sales Volume/Mix			Cost			SG&A and other			June 26, 2021
Operating income (loss)	$	11		$	3		$	4		$	(10)		$	—		$	8
Operating margin %	11.7		%	2.7		%	2.7		%	(9.5)		%	—		%	7.6		%
(a) Computed based on contribution margin.

Table of Contents

Operating results declined by$3 million during the three months ended June 26, 2021 to operating income of $8 million. The decrease was primarily due to higher raw material input costs and higher operational costs partially offset by improvements in sales prices and volumes.

High-Yield Pulp


	Three Months Ended				Six Months Ended
(in millions)	June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020
Net Sales	$	37	$	32	$	64	$	62
Operating income (loss)	$	1	$	1	$	1	$	—
Average Sales Prices ($ per metric ton):
High-Yield Pulp (a)	$	539	$	493	$	510	$	478
Sales Volumes (in metric tons):
High-Yield Pulp (a)	55		53		99		105
(a) Average sales prices and volumes for external sales only. For the three month period ended June 26, 2021 and June 27, 2020, the High-Yield Pulp segment sold 17,000 metric tons and 17,000 metric tons of high-yield pulp for $7 million and $6 million, respectively, to the Paperboard segment. For the six months ended June 26, 2021 and June 27, 2020, the High-Yield Pulp segment sold 34,000 metric tons and 33,000 metric tons of high-yield pulp for $14 million and $12 million, respectively, to the Paperboard segment.

Table of Contents

Changes in High-Yield Pulp net sales are as follows:


Three Months Ended	June 27, 2020		Changes Attributable to:				June 26, 2021
Net Sales (in millions)			Price		Volume/Mix
High-Yield Pulp Net Sales	$	32	$	4	$	1	$	37

High-yield pulp sales prices and volumes increased 9 percent and 4 percent, respectively, during the three months ended June 26, 2021 when compared to the same prior year period. The increases were primarily driven by market demand improvements.


Six Months Ended	June 27, 2020		Changes Attributable to:				June 26, 2021
Net Sales (in millions)	June 27, 2020		Price		Volume/Mix		June 26, 2021
High-Yield Pulp Net Sales	$	62	$	5	$	(3)	$	64

Total sales for the six months ended June 26, 2021 were up $2 million or 4 percent when compared to the comparable period in 2020. High-yield pulp sales prices were up 7 percent while high-yield pulp sales volumes decreased 6 percent during the period ended June 26, 2021.

Changes in High-Yield Pulp operating income are as follows:


Three Months Ended				Gross Margin Changes Attributable to (a):
(in millions)	June 27, 2020			Sales Price			Sales Volume/Mix			Cost			SG&A and other			June 26, 2021
Operating income (loss)	$	1		$	4		$	—		$	(4)		$	—		$	1
Operating margin %	3.1		%	10.8		%	(0.4)		%	(10.8)		%	—		%	2.7		%
(a) Sales Volume computed based on contribution margin.

Operating results for the second quarter ended June 26, 2021 remained flat when compared to the same prior year period. Higher high-yield pulp sales prices were partly offset by higher operational costs.


Six Months Ended				Gross Margin Changes Attributable to (a):
(in millions)	June 27, 2020			Sales Price			Sales Volume/Mix			Cost			SG&A and other			June 26, 2021
Operating income (loss)	$	—		$	5		$	(1)		$	(3)		$	—		$	1
Operating margin %	—		%	7.5		%	(1.2)		%	(4.7)		%	—		%	1.6		%
(a) Sales Volume computed based on contribution margin.

Operating results for the six months ended June 26, 2021 improved by $1 million when compared to the same prior year period. Higher high-yield pulp sales prices were partly offset by lower volumes impacted by logistics constraints and higher operational costs.

Corporate


	Three Months Ended				Six Months Ended
Operating Income (Loss) (in millions)	June 26, 2021		June 27, 2020		June 26, 2021		June 27, 2020
Operating loss	$	(13)	$	(20)	$	(25)	$	(25)

The operating loss for the three-month period ended June 26, 2021 improved by $7 million to $13 million, when compared to the same prior year period primarily due to favorable foreign currency impacts and lower variable compensation costs. The operating loss for the six-month period ended June 26, 2021, remained unchanged at $25 million when compared to the same prior year period as unfavorable foreign exchange impacts ~~and an increased reserve associated with the dispute settlement discussed above.~~were offset by lower variable compensation costs.

3033

Table of Contents

Liquidity and Capital Resources

Cash flows from operations, primarily driven by operating results, have historically been our primary source of liquidity and capital resources. However, our operating cash flows have been volatile in recent years due to decreases in market prices for our commodity products as well as the impact on demand driven by the COVID-19 pandemic. In response, we maintain a key focus on cash, managing working capital closely and optimizing the timing and level of our capital expenditures.

As of ~~March 27,~~June 26, 2021, we are in compliance with all financial and other customary covenants. We believe our future cash flows from operations and availability under our ABL Credit Facility, as well as 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.

The non-guarantor subsidiaries had assets of ~~$719~~$758 million, year-to-date revenue of ~~$54~~$112 million, covenant EBITDA for the last twelve months is a ~~$33~~$41 million loss and liabilities of ~~$285~~$277 million as of ~~March 27,~~June 26, 2021.

On September 6, 2019, our Board of Directors suspended our quarterly common stock dividend. No dividends have been declared since. The declaration and payment of future common stock dividends, if any, will be at the discretion of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements and other factors the Board of Directors deem relevant. In addition, our debt facilities place limitations on the declaration and payment of future dividends.

On January 29, 2018, our Board of Directors authorized a $100 million common stock share buyback program. For the three and six months ended ~~March 27,~~June 26, 2021 and ~~March 28,~~June 27, 2020, we did not repurchase any common shares under this buyback program. We do not expect to utilize any further authorization in the near future.

A summary of liquidity and capital resources is shown below (in millions of dollars):


		March 27, 2021			December 31, 2020				June 26, 2021			December 31, 2020
Cash and cash equivalents (a)	Cash and cash equivalents (a)	$	107		$	94		Cash and cash equivalents (a)	$	215		$	94
Availability under the ABL Credit Facility (b)	Availability under the ABL Credit Facility (b)	142			102			Availability under the ABL Credit Facility (b)	124			102
Total debt (c)	Total debt (c)	1,083			1,084			Total debt (c)	1,081			1,084
Stockholders’ equity	Stockholders’ equity	659			695			Stockholders’ equity	787			695
Total capitalization (total debt plus equity)	Total capitalization (total debt plus equity)	$	1,742		$	1,779		Total capitalization (total debt plus equity)	$	1,868		$	1,779
Debt to capital ratio	Debt to capital ratio	62		%	61		%	Debt to capital ratio	58		%	61		%

(a) Cash and cash equivalents 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 ~~March 27,~~June 26, 2021, we had ~~$186~~$165 million of gross availability and net available borrowings of ~~$142~~$124 million after taking into account standby letters of credit of approximately ~~$44~~$41 million. Subsequent to the sale of the lumber and newsprint assets, we expect net availability under the ABL Credit Facility will decrease by $30 million to $40 million. In addition to the availability under the ABL Credit Facility, we have ~~$19~~$20 million available under an accounts receivable factoring line of credit in France.

Cash Flows (in millions of dollars)

The following table summarizes our cash flows from operating, investing and financing activities for the ~~three~~six months ended:


Cash Flows Provided by (Used for):	Cash Flows Provided by (Used for):	March 27, 2021		March 28, 2020		Cash Flows Provided by (Used for):	June 26, 2021		June 27, 2020
Operating activities		$	38	$	(13)
Investing activities		$	(21)	$	(13)
Operating activities-continuing operations						Operating activities-continuing operations	$	46	$	23
Operating activities-discontinued operations						Operating activities-discontinued operations	$	141	$	(12)
Investing activities-continuing operations						Investing activities-continuing operations	$	(51)	$	(19)
Investing activities-discontinued operations						Investing activities-discontinued operations	$	(6)	$	(3)
Financing activities	Financing activities	$	(3)	$	5	Financing activities	$	(8)	$	(4)

Table of Contents

Cash flows provided by operating activities of continuing operations improved ~~$51~~$23 million during the ~~three~~six months ended ~~March 27,~~June 26, 2021 to ~~$38~~$46 million when compared to the same prior year period due to favorable operating results driven from higher ~~lumber and~~ High Purity Cellulose prices ~~and lower operating costs~~in addition to $21 million of total income tax cash refunds received in the current period, partially offset by ~~seasonal working capital increases.~~higher operational costs. Higher non-cash ~~expenses~~benefits primarily related to deferred tax expense were partly offset by ~~unfavorable changes to~~favorable working ~~capital.~~capital and other balance sheet changes. The ~~three~~

~~Table of Contents~~

six months ended ~~March 28,~~June 27, 2020 included a ~~$20~~$24 million increase to the U.S. income tax receivable from the passage of the CARES Act in March of 2020.

Cash provided by operating activities of discontinued operations during the six months ended June 26, 2021 improved by $152 million when compared to the same prior year period primarily driven by the increase in lumber sales prices. In addition, newsprint operations improved with sales price increases and lower operational costs during the six months ended June 26, 2021.

Cash flows used for investing activities of continuing operations increased $8$32 million during the ~~three~~six months ended ~~March 27,~~June 26, 2021 when compared to the same prior year period primarily from increased capital spending. The increase also includes a $1$4 million ~~non-voting~~ investment in Anomera, Inc.

Cash ~~flows from financing activities changed by $8 million during the three months ended March 27, 2021 to cash~~ used for investing activities of $3discontinued operations increased $2 million to $6 million during the six months ended June 26, 2021 compared to the same prior year period ended. The increase is driven by higher capital expenditures.

Cash flows used for financing activities increased by $4 million during the six months ended June 26, 2021 to $8 million when compared to the same prior year period. The ~~decline~~increase is primarily from ~~a decrease in~~lower borrowings ~~net of payments,~~partly offset by lower repayments, during the ~~three~~six months ended ~~March 27, 2021, partially offset by cash paid for~~June 26, 2021. Cash used to repurchase common stock ~~repurchased~~ in lieu of income taxes from the vesting of incentive stock grants ~~which~~ was $1 million higher during the current period. In addition, the six months ended June 27, 2020 had $3 million of higher debt issuance costs when compared to the current period. See Note 7 — Debt and Finance Leases and Note 12 — Stockholders' Equity, to our consolidated financial statements for additional information.

Performance and Liquidity Indicators

The discussion below is presented to enhance the reader’s understanding of our operating performance, liquidity, ability to generate cash and satisfy rating agency and creditor requirements. This information includes the following measures of financial results: EBITDA, adjusted EBITDA and adjusted free cash flows. These measures are not defined by U.S. Generally Accepted Accounting Principles (“GAAP”) and the discussion of EBITDA, adjusted EBITDA and adjusted free cash flows is not intended to conflict with or change any of the GAAP disclosures described above. Our management uses these non-GAAP measures to compare our performance to that of prior periods for trend analyses, purposes of determining management incentive compensation and budgeting, forecasting and planning purposes. Our management considers these measures, in addition to operating income, to be important to estimate the enterprise and stockholder values of the Company, and for making strategic and operating decisions. In addition, analysts, investors and creditors use these measures when analyzing our operating performance, financial condition and cash generating ability. Our management uses EBITDA and adjusted EBITDA as performance measures and adjusted free cash flows as a liquidity measure. See “Note about Non-GAAP Financial Measures” on page 21 for limitations associated with non-GAAP measures.

EBITDA is defined by SEC rules as earnings before interest, taxes, depreciation and amortization. EBITDA is not necessarily indicative of results that may be generated in future periods.

Table of Contents

Below is a reconciliation of Income (Loss) from Continuing Operations to EBITDA from continuing operations by segment (in millions of dollars):

Three Months Ended Forest Products Paperboard Pulp & Newsprint (a) High Purity Cellulose Corporate & Other Total
March 27, 2021
Newsprint Pulp
Income (loss) from continuing operations $ 61 $ 6 $ (5) $ — $ 7 $ (96) $ (27)
Depreciation and amortization 2 4 1 — 28 1 36
Interest expense, net — — — — — 18 18
Income tax expense (benefit) — — — — — 64 64
EBITDA $ 63 $ 10 $ (4) $ — $ 35 $ (13) $ 91
March 28, 2020
Income (loss) from continuing operations $ (1) $ 5 $ (4) $ (1) $ (5) $ (19) $ (25)
Depreciation and amortization 2 4 — 1 30 — 38
Interest expense, net — — — — — 15 15
Income tax expense (benefit) — — — — — (2) (2)
EBITDA $ 1 $ 9 $ (4) $ — $ 26 $ (5) $ 27

~~(a) Due to the announced sale of our lumber and newsprint assets, we are providing a break out of EBITDA for the Pulp & Newsprint segment.~~


Three Months Ended:	High Purity Cellulose		Paperboard		High-Yield Pulp		Corporate & Other		Total
June 26, 2021
Income (loss) from continuing operations	$	11	$	3	$	1	$	(7)	$	8
Depreciation and amortization	27		4		1		1		33
Interest expense, net	—		—		—		16		16
Income tax expense (benefit)	—		—		—		(25)		(25)
EBITDA from continuing operations	$	38	$	6	$	2	$	(15)	$	32
Pension settlement (gain) loss	—		—		—		1		1




Adjusted EBITDA from continuing operations	$	38	$	6	$	2	$	(14)	$	33

June 27, 2020
Income (loss) from continuing operations	$	5	$	6	$	1	$	(16)	$	(4)
Depreciation and amortization	26		4		1		1		32
Interest expense, net	—		—		—		14		14
Income tax expense (benefit)	—		—		—		(17)		(17)
EBITDA from continuing operations	$	31	$	10	$	2	$	(18)	$	25





Six Months Ended:	High Purity Cellulose		Paperboard		High-Yield Pulp		Corporate & Other		Total
June 26, 2021

Income (loss) from continuing operations	$	18	$	9	$	1	$	(36)	$	(8)
Depreciation and amortization	55		8		1		2		66
Interest expense, net	—		—		—		32		32
Income tax expense (benefit)	—		—		—		(25)		(25)
EBITDA form continuing operations	$	73	$	17	$	2	$	(27)	$	65
Pension settlement (gain) loss	—		—		—		1		1



Adjusted EBITDA from continuing operations	$	73	$	17	$	2	$	(26)	$	66

June 27, 2020
Income (loss) from continuing operations	$	—	$	11	$	—	$	(32)	$	(21)
Depreciation and amortization	57		8		1		1		67
Interest expense, net	—		—		—		27		27
Income tax expense (benefit)	—		—		—		(19)		(19)
EBITDA from continuing operations	$	57	$	19	$	1	$	(23)	$	54

~~Table of Contents~~

EBITDA from continuing operations for the three and six months ended ~~March 27,~~June 26, 2021 improved by ~~$64~~$8 million and $12 million, respectively, when compared to the quarter ended ~~March 28,~~June 27, 2020, primarily from favorable operating results driven by higher ~~lumber and~~ High Purity Cellulose prices, ~~and lower~~partially offset by higher operational costs. For the full discussion of changes to operating income, see Management’s Discussion of Results of Operations.

Adjusted free cash flows is defined as cash provided by operating activities of continuing operations adjusted for capital expenditures, net of proceeds from sale of assets, excluding strategic capital expenditures. Adjusted free cash flows, as defined by the Company, is a non-GAAP measure of cash generated during a period which is available for debt reduction, strategic

Table of Contents

capital expenditures and acquisitions and repurchase of the Company’s common stock. Adjusted free cash flows is not necessarily indicative of the adjusted free cash flows that may be generated in future periods.

Below is a reconciliation of cash flows from operations of continuing operations to adjusted free cash flows of continuing operations for the respective periods (in millions of dollars):


		Three Months Ended					Six Months Ended
Cash Flows from Operations to Adjusted Free Cash Flows Reconciliation	Cash Flows from Operations to Adjusted Free Cash Flows Reconciliation	March 27, 2021		March 28, 2020		Cash Flows from Operations to Adjusted Free Cash Flows Reconciliation	June 26, 2021		June 27, 2020
Cash provided by (used for) operating activities - continuing operations	Cash provided by (used for) operating activities - continuing operations	$	38	$	(13)	Cash provided by (used for) operating activities - continuing operations	$	46	$	23
Capital expenditures (a)	Capital expenditures (a)	(17)		(10)		Capital expenditures (a)	(43)		(15)
Adjusted Free Cash Flows	Adjusted Free Cash Flows	$	21	$	(23)	Adjusted Free Cash Flows	$	3	$	8

(a) Capital expenditures exclude strategic capital expenditures which are deemed discretionary by management. Strategic expenditures for the first ~~three~~six months of 2021 were approximately $2$4 million. Strategic capital expenditures for the same period of 2020 were approximately $2$4 million.

Adjusted free cash flows ~~improved~~of continuing operations declined primarily due to ~~favorable operating results primarily from higher lumber and High Purity Cellulose prices partly offset by~~ higher capital ~~expenditure requirements.~~expenditures. For the full discussion of operating cash flows, see Management’s Discussion and Analysis of Cash Flows.

Contractual Financial Obligations and Off-Balance Sheet Arrangements

We have no material changes outside the ordinary course of business to the Contractual Financial Obligations table as presented in Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2020 Annual Report on Form 10-K.

See Note 18 — Commitments and Contingencies for details on our letters of credit and surety bonds as of ~~March 27,~~June 26, 2021.


Item 3.			Quantitative and Qualitative Disclosures About Market Risk

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 Audit Committee of our Board of Directors. Derivatives are managed by a senior executive committee whose responsibilities include initiating, managing and monitoring resulting exposures. See Note 9 — Derivative Instruments for additional information.

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.

The prices, sales volumes and margins of the commodity products of our High Purity Cellulose segment and all the products of the ~~Forest Products and~~High-Yield Pulp ~~& Newsprint segments~~segment have historically been cyclically affected by economic and market shifts, fluctuations in capacity, and changes in foreign currency exchange rates. In general, these products are commodities that are widely available from other producers; because these products have few distinguishing qualities from producer to producer, competition is based primarily on price, which is determined by 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. While these prices are not directly correlated to commodity dissolving wood pulp and paper pulp prices, changes in commodity dissolving wood pulp and paper pulp prices may impact competitors' actions

~~Table of Contents~~

which can lead to an impact in prices for cellulose specialties products. In addition, approximately half of our cellulose specialties contracted volumes are under multi-year contracts that expire between 2021 and 2023.

As of ~~March 27,~~June 26, 2021, we had $4 million of variable rate debt which is subject to interest rate risk. At this borrowing level, a hypothetical one-percentage point increase/decrease in interest rates would result in an immaterial increase/decrease in interest payments and expense over a 12-month period.

Table of Contents

The fair market value of our long-term fixed interest rate debt is also subject to interest rate risk. However, we intend to hold most of our debt until maturity. The estimated fair value of our fixed-rate debt at ~~March 27,~~June 26, 2021 was ~~$1,104~~$1,093 million compared to the ~~$1,076~~$1,075 million carrying value of principal amount. 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.

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 which are derivative instruments are reported in the consolidated balance sheets at their fair values, unless they qualify for the normal purchase normal sale ("NPNS") exception and such exception has been elected. If the NPNS exception is elected, the fair values of such contracts are not recognized on the balance sheet.


Item 4.			Controls and Procedures

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 Securities Exchange Act of 1934 (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 ~~March 27,~~June 26, 2021.

During the quarter ended ~~March 27,~~June 26, 2021, based upon the evaluation required by paragraph (d) of SEC Rule 13a-15, 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.

3438

Table of Contents


Part II.			Other Information


Item 1.			Legal Proceedings

The Company is engaged in various legal and regulatory actions and proceedings, and has been named as a defendant in various lawsuits and claims arising in the ordinary course of its business. While the Company has procured reasonable and customary insurance covering risks normally occurring in connection with its businesses, the Company has in certain cases retained some risk through the operation of self-insurance, primarily in the areas of workers’ compensation, property insurance, business interruption and general liability. While there can be no assurance, the ultimate outcome of these actions, either individually or in the aggregate, is not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows, except as may be noted below.

Final Settlement Reached in Dispute with IESO Relating to Investigation of the Kapuskasing Newsprint Facility

From the period from 2014 to early 2021, the Market Assessment and Compliance Division (“MACD”) branch of the Independent Electricity System Operator (“IESO”), the governmental agency responsible for operating the wholesale electricity market and directing the operation of the bulk electrical system in the province of Ontario, Canada, had been engaged in reviewing the Company's compliance with the published rules that govern the operation of the wholesale electricity market in Ontario, Canada. The inquiry was focused primarily on payments made by IESO to the Company between 2010 and 2019 under market rules in connection with multiple planned, extended and unplanned forced outages that caused extensive downtime, in full or in part, of the Company’s Kapuskasing, Ontario newsprint facility.

In May 2020, MACD finalized two of its four investigations into the Company’s electricity management practices at its Kapuskasing newsprint facility and issued orders asserting penalties of CAD $25 million. These orders called for the Company to pay penalties of CAD $3 million immediately and CAD $12 million over a 10-year period, with the remaining CAD $10 million to be deferred and ultimately forgiven assuming the Company otherwise complied with the orders’ remaining terms. The Company, which maintained it had complied in all material respects with the published rules, vigorously contested IESO’s orders, including through the filing of judicial review proceedings with the divisional Court (Superior Court of Justice) of Ontario seeking invalidation of the orders. At the time these orders were issued, the remaining two investigations remained open, subjecting the Company to the risk that MACD may in the future issue additional orders upon finalization of these additional investigations.

On April 19, 2021, the Company and IESO entered into Minutes of Settlement (“MOS”) pursuant to which the parties agreed to fully and finally settle all claims relating to all four of the investigations (whether completed or not) and related orders, the judicial review proceedings and underlying disputes. As part of the settlement, the Company agreed to a fixed obligation to pay a sum of CAD $12 million over a period of 5 years comprised of a CAD $4.5 million up-front payment and a CAD $7.5 payment to be spread (on a front-weighted basis) over the next 5 anniversaries of the MOS, without interest. In addition to the foregoing, the MOS provides that a “suspended” sum of CAD $10.4 million would become due and payable in the event the Company fails to comply with any of the terms and conditions of the MOS or commits an event of default, as defined under the applicable market rules, unless such breach or event of default is remedied on a timely basis. This contingent “suspended” sum decreases annually as the scheduled fixed, or non-contingent, payments are made under the MOS. Assuming no uncured event of default or breach occurs during the repayment period, upon full payment of the CAD $12 million, the entire "suspended" sum shall be extinguished and RYAM shall be released from any payment obligation with respect thereto.

Given the parties’ finalization of and entry into the MOS, the Company considers this matter concluded (subject only to the parties’ obligations yet to be performed under the MOS).


Item 1A.			Risk Factors

~~There have been no material changes~~

In addition to the risk factors previously disclosed in ~~Part I, Item 1A, of~~ our 2020 Annual Report on Form 10-K, ~~during~~ the ~~period covered by this report.~~following risk factors are hereby added:

Merger and Acquisition Risks

3539

Table of Contents

•Fifteen percent (15%) of the purchase price for the GreenFirst transaction is payable in the common shares of the capital of GreenFirst (to be held by the Company for a minimum of six (6) months following transaction closing), and the Company’s ability to ultimately realize the benefit of this consideration is subject to market conditions and GreenFirst’s future performance.


Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table provides information regarding our purchases of Rayonier Advanced Materials common stock during the quarter ended ~~March 27,~~June 26, 2021:

Period Total Number of Shares Purchased (b) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (a)
January 1 to January 30 — $ — — $ 60,294,000
January 31 to February 27 3,828 $ 12.04 — $ 60,294,000
February 28 to March 27 127,801 $ 10.70 — $ 60,294,000
Total 131,629 —


Period	Total Number of Shares Purchased (b)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (a)
March 28 to April 1	—	$	—	—	$	60,294,000
April 2 to May 29	—	$	—	—	$	60,294,000
May 30 to June 26	—	$	—	—	$	60,294,000
Total	—			—

(a) As of ~~March 27,~~June 26, 2021, approximately $60 million of share repurchase authorization remains under the authorization declared by the Board of Directors on January 29, 2018.

(b) Repurchased to satisfy the tax withholding requirements related to the issuance of stock under the Rayonier Advanced Materials Incentive Stock Plan.

3640

Table of Contents


Item 6.			Exhibits


3.1	Amended and Restated Certificate of Incorporation of Rayonier Advanced Materials Inc.	Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed on June 30, 2014
3.2	Certificate of Designations of 8.00% Series A Mandatory Convertible Preferred Stock of Rayonier Advanced Materials Inc., filed with the Secretary of State of the State of Delaware and effective August 10, 2016	Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed on August 10, 2016
3.3	Amended and Restated Bylaws of Rayonier Advanced Materials Inc	Incorporated herein by reference to Exhibit 3.2 to the Registrant’s Form 8-K filed on June 30, 2014
10.1	~~Asset Purchase Agreement by and between 9437-6001 Quebec Inc., as purchaser and GreenFirst Forest Products Inc., as Purchaser guarantor, and~~ Rayonier ~~A.M. Canada G.P. and Rayonier A.M. Canada Industries~~Advanced Materials Inc.~~, collectively the Seller, dated as of April 10, 2021¹~~ 2021 Incentive Stock Plan*	Incorporated herein by reference to Appendix B to the Registrant’s Proxy Statement filed on April 2, 2021
10.2	Description of Rayonier Advanced Materials Inc. 2021 Performance Share Award Program*#	Filed herewith
31.1	Chief Executive Officer’s Certification Pursuant to Rule 13a-14(a)/15d-14(a) and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
31.2	Chief Financial Officer’s Certification Pursuant to Rule 13a-14(a)/15d-14(a) and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
32	Certification of Periodic Financial Reports Under Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith
101	The following financial information from our Quarterly Report on Form 10-Q for the three and six months ended ~~March 27,~~June 26, 2021 formatted in Extensible Business Reporting Language (“XBRL”), includes: (i) the Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the Three ~~Month~~and Six Months Ended ~~March 27,~~June 26, 2021 and ~~March 28,~~June 27, 2020; (ii) the Condensed Consolidated Balance Sheets as of ~~March 27,~~June 26, 2021 and December 31, 2020; (iii) the Condensed Consolidated Statements of Cash Flows for the ~~Three~~Six Months Ended ~~March 27,~~June 26, 2021 and ~~March 28,~~June 27, 2020; and (iv) the Notes to Condensed Consolidated Financial Statements	Filed herewith
104	Cover Page Interactive Data File - formatted as Inline XBRL and contained in Exhibit 101

~~¹ Certain~~*Management contract or compensatory plan.

#Certain confidential portions of this exhibit were omitted by means of marking such portions with asterisks because the identified confidential portions (i) are not material and (ii) would be competitively harmful if publicly disclosed.

3741

Table of Contents

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


						Rayonier Advanced Materials Inc.
						(Registrant)

			By:			/s/ MARCUS J. MOELTNER
						Marcus J. Moeltner Chief Financial Officer and Senior Vice President, Finance (Duly Authorized Officer and Principal Financial Officer)

Date: ~~May 6,~~August 5, 2021

3842