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What changed in RAYONIER ADVANCED MATERIALS INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of RAYONIER ADVANCED MATERIALS INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+286 added−258 removedSource: 10-K (2024-02-29) vs 10-K (2023-03-01)

Top changes in RAYONIER ADVANCED MATERIALS INC.'s 2023 10-K

286 paragraphs added · 258 removed · 200 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWith production anticipated to begin in 2024, we expect to be among the first in France to produce wood-based 2G bioethanol fuel, a product that should help petrochemical companies improve the climate profile of their energy offerings in the European market.
Biggest changeWith production expected to begin in the first quarter of 2024, we will be among the first in France to produce wood-based 2G bioethanol fuel, a product that is noncompetitive to the human food supply and is expected to help petrochemical companies improve the climate profile of their energy offerings in the European market; • Production of 2G bioethanol fuel at our Fernandina facility, a multi-year project expected to have similar carbon impacts as our Tartas bioethanol facility and may be used in additional market segments, including as a feedstock for sustainable aviation fuel; and • Our involvement with Altamaha Green Energy, a start-up entity bidding on an annual contract with Georgia Power to sell green electricity from a new plant to be constructed adjacent to our Jesup facility.
Water is also necessary for steam and on-site power generation, air emissions control, process cooling and equipment cleaning. Each gallon of water gets used and reused multiple times in our process and 98 out every 100 gallons we use are treated and returned to natural water sources in keeping with stringent government-issued permit limitations.
Water is also necessary for steam and on-site power generation, air emissions control, process cooling and equipment cleaning. Each gallon of water gets used and reused multiple times in our process and 98 out of every 100 gallons we use are treated and returned to natural water sources in keeping with stringent government-issued permit limitations.
Our paperboard is used for production in the commercial printing, lottery ticket and high-end packaging sectors. Our high-yield pulp is used by paperboard producers, as well as in traditional printing, writing and specialty paper manufacturing. We focus our strategic investments in projects that optimize and align our assets to meet the ever-growing demand for renewable products.
Our paperboard is used for production in the commercial printing, lottery ticket and high-end packaging sectors. Our high-yield pulp is used by paperboard producers, as well as in traditional printing, writing and specialty paper manufacturing. Strategic Growth Investments We focus our strategic investments in projects that optimize and align our assets to meet the ever-growing demand for renewable products.
We own patents, trademarks and trade secrets, and have developed significant expertise, particularly in the production of high purity cellulose, but also in the production of paperboard, which we deem vital to our operations.
We own patents, trademarks and trade secrets, and have developed significant expertise, particularly in the production of high purity cellulose, which we deem vital to our operations, and also in the production of paperboard.
Chemicals Chemicals, which include caustic soda (sodium hydroxide), sulfuric acid, ammonia, sodium chlorate and various specialty chemicals, are purchased under negotiated supply agreements with third parties. The prices for these chemicals are impacted by various factors including supply and demand, environmental regulation, energy prices and overall economic conditions.
Chemicals Chemicals, which include caustic soda (sodium hydroxide), sulfuric acid, ammonia, sodium chlorate and various specialty chemicals, are purchased under negotiated supply agreements with third parties. The price for these chemicals is impacted by various factors, including supply and demand, environmental regulation, energy prices and overall economic conditions.
The remaining 2 gallons are either captured in the final product or evaporated during manufacturing. Our facilities are designed to minimize waste. We recycle our pulping chemicals, produce environmentally friendly co-products from the material extracted from the trees and generate energy from biomass residuals.
The remaining two gallons are either captured in the final product or evaporated during manufacturing. Waste Our facilities are designed to minimize waste. We recycle our pulping chemicals, produce environmentally friendly co-products from the material extracted from the trees and generate energy from biomass residuals.
Product performance is determined based on the physical attributes of the products in a customer’s manufacturing processes. To a lesser extent, quality and service are also competitive determinants. Significant paperboard competitors include WestRock, Graphic Packaging, Metsa Group, Clearwater Paper and Sappi. High-Yield Pulp We manufacture and market high-yield pulp produced in our Temiscaming plant in Quebec, Canada.
Product performance is determined based on the physical attributes of the products in a customer’s manufacturing processes. To a lesser extent, quality and service are also competitive determinants. Our major paperboard competitors include WestRock, Graphic Packaging, Clearwater Paper, Sappi, Metsa Group and Billerud. High-Yield Pulp We manufacture and market high-yield pulp produced in our Temiscaming plant in Quebec, Canada.
We believe end-use market diversity reduces our exposure to a potential global recession. In addition to cellulose specialties, a significant portion of our production capacity is dedicated to manufacturing high-purity commodity products for absorbent materials and viscose applications.
We believe end-use market diversity reduces our exposure to a potential global recession. 3 Table of Contents In addition to cellulose specialties, a significant portion of our production capacity is dedicated to manufacturing high-purity commodity products for absorbent materials and viscose applications.
All reports we file with or furnish to the SEC are also available free of charge on the SEC’s website https://www.sec.gov . Our corporate governance guidelines, including the Standard of Ethics and Code of Corporate Conduct, and charters of all committees of our Board of Directors are also available on our website.
All reports we file with or furnish to the SEC are also available free of charge on the SEC’s website http://www.sec.gov . Our corporate governance guidelines, including the Standard of Ethics and Code of Corporate Conduct, and charters of all standing committees of our Board of Directors are also available on our website.
Wood We procure wood chips for our high purity cellulose and high-yield pulp plants through the purchase of chips from lumber producers or the production for chips from roundwood at our own wood chipping facilities. Prices for wood are impacted by various factors, including supply and demand, weather events, transportation costs for delivery and overall economic conditions.
Wood We procure wood chips for our high purity cellulose and high-yield pulp plants through the purchase of chips from lumber producers or the production for chips from roundwood at our own wood chipping facilities. The price for wood is impacted by various factors, including supply and demand, weather events, transportation costs for delivery and overall economic conditions.
Human Capital Employees We have production facilities in the U.S., Canada, and France and sales offices in the U.S., Canada, France, United Kingdom, Japan and China. Of our approximately 2,500 employees, 71 percent belong to labor unions, as all of our manufacturing sites are represented by various local and national unions.
Human Capital Employees We have production facilities in the U.S., Canada and France and sales offices in the U.S., Canada, France, United Kingdom, Japan and China. Of our approximately 2,800 employees, 61 percent belong to labor unions, as all of our manufacturing sites are represented by various local and national unions.
See Note 3 — Discontinued Operations to our Financial Statements for further information. 2 Table of Contents We currently operate the following business segments, to which all prior period disclosures have been conformed: • High Purity Cellulose • Paperboard • High-Yield Pulp See Note 20 — Segment and Geographical Information to our Financial Statements for further information.
See Note 3—Discontinued Operations to our Financial Statements for further information. We currently operate the following business segments, to which all prior period disclosures have been conformed: • High Purity Cellulose • Paperboard • High-Yield Pulp See Note 20—Segment and Geographical Information to our Financial Statements for further information.
Our website and the information posted thereon are not incorporated into this 2022 Form 10-K or any current or other periodic report that we file with or furnish to the SEC. 8 Table of Contents
Our website and the information posted thereon are not incorporated into this 2023 Form 10-K or any current or other periodic report that we file with or furnish to the SEC.
Commitment to Human Rights To reinforce and strengthen our commitment to socially responsible business practices, we have a Human Rights Policy that specifically addresses the following fundamental human rights principles: • Safe and healthy workplaces • Environmentally responsible operations • No forced or child labor • Anti-corruption and bribery compliance • Freedom of association and the right to collective bargaining if legally elected • Fair compensation and working hours • Diversity and inclusion • Harassment and discrimination free workplace • Community and stakeholder engagement Code of Conduct Within the framework of our core values of Integrity, Accountability, Quality and People, the Rayonier Advanced Materials Standard of Ethics and Code of Corporate Conduct is our guide to the lawful and ethical performance of our duties.
In addition, we provide our employees with training and education opportunities such as financial services and retirement planning workshops. 8 Table of Contents Commitment to Human Rights To reinforce and strengthen our commitment to socially responsible business practices, we have a Human Rights Policy that specifically addresses the following fundamental human rights principles: • Safe and healthy workplaces • Environmentally responsible operations • No forced or child labor • Anti-corruption and bribery compliance • Freedom of association and the right to collective bargaining if legally elected • Fair compensation and working hours • Diversity and inclusion • Harassment and discrimination free workplace • Community and stakeholder engagement Code of Conduct Within the framework of our core values of Integrity, Accountability, Quality and People, the Rayonier Advanced Materials Standard of Ethics and Code of Corporate Conduct is our guide to the lawful and ethical performance of our duties.
Our R&D efforts are directed at further developing products and technologies, improving the quality of cellulose fiber grades, improving manufacturing efficiency and environmental controls and reducing fossil fuel consumption. We continue to focus our R&D activities to develop and market additional new products and applications.
Our R&D efforts are directed at further developing products and technologies, improving the quality of cellulose fiber grades, improving manufacturing efficiency and environmental controls and reducing fossil fuel consumption. We also focus our R&D activities on the development and marketing of new products and applications.
While no injury is acceptable, our company-wide injury rate decreased eight percent from 2020 to 2021, and decreased an additional five percent in 2022. We drive towards our vision of injury-free operations by focusing on five leading safety metrics: housekeeping, leadership engagement, corrective action closure, gas emissions and life safety programs.
While no injury is acceptable, our company-wide injury rate decreased 8 percent, 5 percent and 17 percent in 2021, 2022 and 2023, respectively. We drive towards our vision of injury-free operations by focusing on five leading safety metrics: housekeeping, leadership engagement, corrective action closure, gas emissions and life safety programs.
Our Temiscaming plant has an annual production capacity of 290,000 MTs of high-yield pulp, approximately 65,000 MTs of which are used internally to produce paperboard. 5 Table of Contents Wood fiber, chemicals and energy represent approximately 40 percent of our per MT cost of sales.
Our Temiscaming plant has an annual production capacity of 290,000 MTs of high-yield pulp, approximately 65,000 MTs of which are used internally to produce paperboard. Wood fiber, chemicals and energy represent approximately 40 percent of our per MT cost of sales. Labor, manufacturing and maintenance supplies, depreciation, manufacturing overhead and transportation costs represent our remaining cost of sales.
Our operating lines fluctuate production of cellulose specialties and commodity products based on market conditions and to generate the most attractive margins. Absorbent materials, or fluff fibers, are typically used in consumer products such as baby diapers. These fibers provide a medium for fluid acquisition, distribution and retention in the products in which they are incorporated.
Our operating lines fluctuate production of cellulose specialties and commodity products based on market conditions and to generate the most attractive margins. Absorbent materials, or fluff fibers, are typically used in consumer products such as baby diapers.
Typically, product pricing is set annually in the fourth quarter for the following year based on discussions with customers and the terms of contractual arrangements. 4 Table of Contents We compete with both domestic and foreign producers in cellulose specialties. Our major competitors include GP Cellulose, Borregaard, Bracell, Sappi, Nippon, Cosmo Specialty Fibers, AustroCel and Aditya Birla Group.
Typically, product pricing is set annually in the fourth quarter for the following year based on discussions with customers and the terms of contractual arrangements. We compete with both domestic and foreign producers in cellulose specialties. Our major competitors include Bracell and Borregaard.
Pricing for high-yield pulp is typically referenced to published indices marketed through our internal sales team and is impacted by the balance between supply and demand, as affected by global economic conditions, changes in consumption and capacity, the level of customer and producer inventories and fluctuations in currency exchange rates.
Pricing for high-yield pulp is typically referenced to published indices marketed through our internal sales team and is impacted by the balance between supply and demand, as affected by global economic conditions, changes in consumption and capacity, the level of customer and producer inventories and fluctuations in currency exchange rates. 6 Table of Contents Our major high-yield pulp competitors include Winstone Pulp, Sappi, Millar Western, West Fraser, Paper Excellence, SCA and Estonia Cell.
These chemical compounds can be utilized to produce sustainable biomaterials. For example, we currently generate and sell lignosulfonates and tall oil soap using these compounds. Lignosulfonates are used to produce a variety of products, including construction materials, dispersants, plant nutrients, leather tanning and fungicides, and tall oil soap is used as feedstock for producing crude tall oil.
We currently generate and sell lignosulfonates and tall oil soap using these compounds. Lignosulfonates are used to produce a variety of products, including construction materials, dispersants, plant nutrients, leather tanning and fungicides, and tall oil soap is used as feedstock for producing crude tall oil. We also produce bio-generated electricity utilizing renewable biomass.
Environmental Matters Our manufacturing operations are subject to stringent federal, state, provincial and local environmental laws and regulations concerning air emissions, wastewater discharges, waste handling and disposal, and assessment and remediation of environmental contamination, which impact our current ongoing operations and approximately 20 former operating facilities or third party-owned sites classified as disposed operations.
During the years ended December 31, 2023, 2022 and 2021, our R&D spend totaled $6 million, $7 million and $7 million, respectively. 7 Table of Contents Environmental Matters Our manufacturing operations are subject to stringent federal, state, provincial and local environmental laws and regulations concerning air emissions, wastewater discharges, waste handling and disposal and assessment and remediation of environmental contamination, which impact our current ongoing operations and approximately 20 former operating facilities and third party-owned sites classified as disposed operations.
For commodity viscose pulp, many competitors derive their commodity viscose pulp from either wood or cotton. However, in recent years, commodity viscose pulp from wood has supplanted cotton as the preferred raw material input for viscose staple fiber production. Although cellulose specialties can generally be sold to meet commodity viscose demand, the reverse is not typically true.
However, in recent years, commodity viscose pulp from wood has supplanted cotton as the preferred raw material input for viscose staple fiber production. Although cellulose specialties can generally be sold to meet commodity viscose demand, the reverse is not typically true. Our major competitors for commodity viscose pulp include April/Bracell, Sappi, Lenzing, Aditya Birla Group and Sun Paper.
Additionally, our High Purity Cellulose and High-Yield Pulp segments’ manufacturing processes require significant amounts of chemicals. These raw materials and input costs are subject to significant changes in prices as a result of weather conditions, supply and demand. To control cost, we continually pursue reductions in usage and costs of key supplies, services and raw materials.
These raw materials and input costs are subject to significant changes in price as a result of weather conditions, supply and demand. To control cost, we continually pursue reductions in usage and cost of key supplies, services and raw materials.
One customer in the High Purity Cellulose segment represented 10 percent of total sales for the year ended December 31, 2020. Research and Development Our R&D capabilities and activities are primarily focused on our High Purity Cellulose segment.
No single customer accounted for 10 percent or more of total sales during the years ended December 31, 2022 and 2021. Research and Development Our R&D capabilities and activities are primarily focused on our High Purity Cellulose segment.
We do not harvest living trees directly for energy production, but rather use production process biomass residuals or waste to generate energy in our facilities. The remaining energy consumed is primarily sourced from natural gas.
We do not harvest living trees directly for energy production, but rather use production process biomass residuals or waste to generate energy in our facilities. The remaining energy consumed is primarily sourced from natural gas. Water Water is utilized during various stages of our production cycle, including wood chip digestion, pulp washing and screening and fiber handling and transportation.
Significant high-yield pulp competitors include Millar Western, West Fraser, Paper Excellence, Estonia Cell, Sappi and Winstone Pulp. Raw Materials and Input Costs All of our manufacturing operations require significant amounts of wood fiber, in the form of logs or wood chips, as a raw material and energy to produce our products.
Raw Materials and Input Costs All of our manufacturing operations require significant amounts of wood fiber, in the form of logs or wood chips, as a raw material and energy to produce our products. Additionally, our High Purity Cellulose and High-Yield Pulp segments’ manufacturing processes require significant amounts of chemicals.
High-yield pulp is used by paper manufacturers to produce paperboard, packaging, printing and writing papers and a variety of other paper products. Competition The principal method of competition in the High-Yield Pulp segment is price, however a better quality (i.e., higher bulk) can sometimes command a premium price.
Competition The principal method of competition in the High-Yield Pulp segment is price, however a better quality (i.e., higher bulk) can sometimes command a premium price.
We previously announced a goal of at least 40% reduction in overall Scope 1 and Scope 2 (aggregated) GHG emissions, on both an absolute and intensity basis, by 2030, using 2020 as a baseline. We are on track to achieve this objective and routinely monitor other opportunities.
In 2021, we set an ambitious goal of achieving at least a 40 percent reduction in overall Scope 1 and Scope 2 GHG emissions, on both an absolute and intensity basis, by 2030, using 2020 as a baseline.
Products Products in the Paperboard business include packaging, printing documents, brochures, promotional materials, paperback book and catalog covers, file folders, tags and lottery tickets. We are the only multi-ply paperboard producer in North America, with our competition producing single ply solid bleached sulfite paperboard. Competition The principal method of competition in our Paperboard segment is price and product performance.
We are the only multi-ply paperboard producer in North America, with our competition producing single ply solid bleached sulfite paperboard. Competition The principal method of competition in our Paperboard segment is price and product performance.
Additionally, variability in cotton linter supply and increasing environmental concerns about cotton production have resulted in viscose staple producers shifting volume away from cotton linter pulp to wood-based dissolving pulp, absent other pricing factors. Biomaterials We are uniquely positioned to meet the rapidly growing demand for renewable materials and sustainable products.
Shifts in fashion styles and textile fiber blending have increased demand for viscose staple fibers. Additionally, variability in cotton linter supply and increasing environmental concerns about cotton production have resulted in viscose staple producers shifting volume away from cotton linter pulp to wood-based dissolving pulp, absent other pricing factors.
Competition Cellulose Specialties Significant intellectual property, capital investment and technical expertise are needed to design and manufacture customized cellulose specialties fibers to exacting customer specifications. The product must be formulated to achieve the desired characteristics, including parameters for purity, viscosity, brightness, reactivity and other physical properties. Product qualification time can be lengthy, extending six to 24 months.
The product must be formulated to achieve the desired characteristics, including parameters for purity, viscosity, brightness, reactivity and other physical properties. Product qualification time can be lengthy, extending six to 24 months.
Seasonality Our operating results may be materially affected by seasonal changes and the related impact on energy prices. 6 Table of Contents Customers No single customer accounted for 10 percent or more of total sales for the years ended December 31, 2022 and 2021.
Seasonality Our operating results may be materially affected by seasonal changes and the related impact on energy prices. Customers One customer in the High Purity Cellulose segment represented 10 percent of total sales for the year ended December 31, 2023.
To meet this demand, our products are custom-engineered and manufactured to each customer’s unique specifications and undergo a stringent qualification process, resulting in the quality and consistency that allow our customers to operate more efficiently and cost-effectively. 3 Table of Contents One of our key competitive advantages is our unique ability to leverage our global manufacturing asset base to provide our customers greater supply chain security for cellulose specialties fibers.
To meet this demand, our products are custom-engineered and manufactured to each customer’s unique specifications and undergo a stringent qualification process, resulting in the quality and consistency that allow our customers to operate more efficiently and cost-effectively.
Our major competitors for commodity viscose pulp include Sappi, AustroCel and Bracell. For absorbent materials, our major competitors include GP Cellulose, Domtar, International Paper, Klabin and Suzano. Biomaterials Competition in this space is limited, driven by capital investment, technical expertise and sustainable feedstock that are needed to produce these materials.
For absorbent materials, our major competitors include International Paper, GP Cellulose, Paper Excellence Group, Klabin and Stora Enso. 5 Table of Contents Biomaterials Competition in this space is limited, driven by capital investment, technical expertise and sustainable feedstock that are needed to produce these materials. Each biomaterial product has its own unique market drivers.
These projects include renewable energy projects at our Temiscaming facility in Quebec, Canada and our Tartas, France facility; Anomera, a manufacturer of CNC, a patented, biodegradable product used as an ingredient in cosmetics and various industrial materials; and our most recent investment at our Tartas facility to produce 2G bioethanol, intended to help meet the demand for Europe’s fast-growing biofuels market and further improve the sustainability of our operating model.
Our ongoing projects include: • Our investment in Anomera, who manufactures CNC, a patented, biodegradable product used as an ingredient in cosmetics and various industrial materials, at our Temiscaming facility; • Development of a prebiotic for enhanced gut health in poultry and swine at our Jesup facility, which is expected to support sustainable poultry and swine farming and provide a healthy alternative nutrient to enhance gut health; • Production of 2G bioethanol fuel at our Tartas facility, intended to help meet the demand for Europe’s fast-growing biofuels market and further improve the sustainability of our operating model.
Commodity Products The principal method of competition in commodity products is price, as purity and uniformity are less critical differentiators. Pricing for commodity products is typically referenced to published indices or based on publicly available spot market prices. We compete with both domestic and foreign producers of commodity products.
Pricing for commodity products is typically referenced to published indices or based on publicly available spot market prices. We compete with both domestic and foreign producers of commodity products. For commodity viscose pulp, many competitors derive their commodity viscose pulp from either wood or cotton.
Commodity viscose pulp is primarily sold to producers of viscose staple fibers, which in turn are used to manufacture rayon fibers, which are widely used in the clothing and textile industries. Shifts in fashion styles and textile fiber blending have increased demand for viscose staple fibers.
These fibers provide a medium for fluid acquisition, distribution and retention in the products in which they are incorporated. 4 Table of Contents Commodity viscose pulp is primarily sold to producers of viscose staple fibers, which in turn are used to manufacture rayon fibers, which are widely used in the clothing and textile industries.
Some of our competitors use both wood and cotton linter fibers as a source of cellulose fibers. Our multiple manufacturing lines, processes and intellectual property allow us to compete in more segments of the cellulose specialties market than any of our competitors.
Our multiple manufacturing lines, processes and intellectual property allow us to compete in more segments of the cellulose specialties market than any of our competitors. Commodity Products The principal method of competition in commodity products is price, as purity and uniformity are less critical differentiators.
Our 2G bioethanol project, for example, will capture residual sugars from our existing pulp process, which we will then use in the production of wood-based 2G bioethanol fuel. Commercial sales of this 2G bioethanol are targeted to begin in 2024 under a long-term offtake agreement with a large international petrochemicals company.
Our 2G bioethanol project, for example, will capture residual sugars from our existing pulp process, which we will then use in the production of wood-based 2G bioethanol fuel. Our Tartas bioethanol facility is expected to be operational in the first quarter of 2024.
Labor, manufacturing and maintenance supplies, depreciation, manufacturing overhead and transportation costs represent our remaining cost of sales. Products We produce our high-yield pulp primarily from hardwood aspen, maple and birch species. This unique fiber supply produces a highly sought-after bulky high-yield pulp product.
Products We produce our high-yield pulp primarily from hardwood aspen, maple and birch species. This unique fiber supply produces a highly sought-after bulky high-yield pulp product. High-yield pulp is used by paper manufacturers to produce paperboard, packaging, printing and writing papers and a variety of other paper products.
We continuously track and measure our progress against these metrics and have safety subcommittees, composed of leaders from across our company, that are accountable for each respective metric and report to an overall safety steering team chaired by our CEO. 7 Table of Contents Employee Engagement Attracting, retaining and developing employees is vital to our success.
We continuously track and measure our progress against these metrics at the individual plant level, with each plant accountable for their respective metrics and reporting to the Safety Steering Committee chaired by our CEO. Employee Engagement Attracting, retaining and developing employees is vital to our success.
We also produce bio-generated electricity utilizing renewable biomass. Finally, we are also making good progress on our Tartas bioethanol facility. When complete, this facility will produce second-generation bioethanol, a non-food-based ethanol to be utilized as an environmentally friendly fuel blend supporting transport decarbonization.
Our Tartas bioethanol facility is expected to be operational in the first quarter of 2024. When complete, this facility will produce 2G bioethanol, a non-food-based ethanol to be utilized as an environmentally-friendly fuel blend supporting transport decarbonization.
Our Sustainability Profile We have four production facilities, located in the U.S., Canada and France. Our facilities are energy intensive; however, over 75 percent of the energy consumed by them is derived from renewable sources, primarily biomass.
We continue to actively monitor and pursue additional opportunities for sustainability. Our 2023 results are pending confirmation. 2 Table of Contents Energy Our facilities are energy intensive; however, over 75 percent of the energy consumed by them is derived from renewable sources, primarily biomass.
Pricing for biomaterials that we currently produce is based on the market dynamics of supply and demand. We supply Renewable Energy Directive II bioethanol, which is produced with nonhuman food chain inputs and trades at a premium in Europe. Significant biomaterials competitors in the lignosulfonates market include Borregaard and Domsjö Aditya Birla.
Pricing for biomaterials that we currently produce is based on the market dynamics of supply and demand. The 2G bioethanol that we expect to supply beginning in the first quarter of 2024 trades at a premium in Europe.
Fully unlocking the capabilities of our biorefineries and the sustainably harvested trees we use as our primary feedstock is a core priority. Generally, a tree’s mass is comprised of 50 percent water and 50 percent “dry solids.” Dry solids are comprised of roughly 40 percent cellulose and 60 percent other chemical compounds, including hemicellulose, lignin, sugars and other extractives.
Generally, a tree’s mass is comprised of 50 percent water and 50 percent “dry solids.” Dry solids are comprised of roughly 40 percent cellulose and 60 percent other chemical compounds, including hemicellulose, lignin, sugars and other extractives. These chemical compounds can be utilized to produce sustainable biomaterials, including lignosulfonates, biofuels, prebiotics, crude tall oil, turpentine and bioelectricity.
Paperboard We manufacture paperboard in the Temiscaming plant in Quebec, Canada. Our production facility has an annual production capacity of 180,000 MTs of paperboard. Wood pulp, chemicals and energy represent approximately 80 percent of our per MT cost of sales. Labor, manufacturing and maintenance supplies, depreciation, manufacturing overhead and transportation costs represent our remaining cost of sales.
Wood pulp, chemicals and energy represent approximately 80 percent of our per MT cost of sales. Labor, manufacturing and maintenance supplies, depreciation, manufacturing overhead and transportation costs represent our remaining cost of sales. Products Products in the Paperboard business include packaging, printing documents, brochures, promotional materials, paperback book and catalog covers, file folders, tags and lottery tickets.
High Purity Cellulose The High Purity Cellulose segment, and in particular, cellulose specialties products, is the primary driver of our profitability.
The process is ongoing for this strategic review, which is consistent with our commitment to align our portfolio with our long-term growth strategy and providing flexibility to pay down debt, reduce leverage and minimize earnings volatility. High Purity Cellulose Our High Purity Cellulose segment, and in particular, cellulose specialties products, is the primary driver of our profitability.
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We are also developing a prebiotic for enhanced gut health in poultry and swine, which is expected to support sustainable poultry and swine farming and provide a healthy alternative nutrient to enhance gut health. Our strategic investment approach unlocks the capabilities of our facilities and capitalizes on the sustainably harvested trees that we use as our primary feedstock.
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Our portfolio is aligned with sustainability drivers, including the European Union Green Deal for the Renewable Energy Directive II.
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External verification of our 2021 results confirmed an 8% reduction in absolute and a 5% reduction in intensity emissions. Our 2022 results have not yet been confirmed. Water is utilized during various stages of our production cycle, including wood chip digestion, pulp washing and screening and fiber handling and transportation.
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The multi-year project offers significant potential long-term benefits to RYAM. Our strategic investment approach unlocks the capabilities of our facilities and capitalizes on the sustainably harvested trees that we use as our primary feedstock. Our Sustainability Profile We operate four production facilities strategically located in the U.S., Canada and France.
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We spent $7 million on R&D during each of the years ended December 31, 2022, 2021 and 2020.
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Our Fernandina Beach and Tartas facilities are ISCC PLUS and ISCC EU certified, respectively, underscoring our commitment to independently audited sustainability standards and processes within our supply chain. Moreover, all our production facilities hold certification in both the Forest Stewardship Council and Programme for the Endorsement of Forest Certification Chain of Custody standards.
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In addition, we provide our employees with training and education opportunities such as financial services and retirement planning workshops.
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We believe this dual certification reinforces our dedication to responsible and sustainable forestry practices throughout our manufacturing processes. Our fluff pulp, produced at our Jesup facility, carries the distinction of being certified as an “Inspected Raw Material” by Nordic Swan Ecolabeling.
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This label signifies adherence to rigorous environmental requirements at every stage of manufacturing, assuring consumers and commercial buyers of our product’s sustainable and environmentally friendly nature.
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We are on track to meet this objective, with external verification confirming total reductions of 15 percent and 10 percent in absolute and intensity emissions, respectively, for 2021 and 2022. This translates to an aggregate goal achievement for absolute and intensity emissions of approximately 40 percent and 25 percent, respectively.
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In October 2023, we announced that we engaged a financial advisor to explore the potential sale of our Paperboard and High-Yield Pulp assets located at our Temiscaming site.
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One of our key competitive advantages is our unique ability to leverage our global manufacturing asset base to provide our customers greater supply chain security for cellulose specialties fibers.
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Biomaterials We are uniquely positioned to meet the rapidly growing demand for renewable materials and sustainable products. Fully unlocking the capabilities of our biorefineries and the sustainably harvested trees we use as our primary feedstock is a core priority.
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Commercial sales of this 2G bioethanol are targeted to begin in the first quarter of 2024 under a long-term offtake agreement with a large international petrochemicals company. Competition Cellulose Specialties Significant intellectual property, capital investment and technical expertise are needed to design and manufacture customized cellulose specialties fibers to exacting customer specifications.
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Our major biomaterials competitors in the lignosulfonates market include Borregaard and Domsjö Aditya Birla and in the bioethanol market include Borregaard and AustroCel Hallein. Paperboard We manufacture paperboard in the Temiscaming plant in Quebec, Canada. Our production facility has an annual production capacity of 180,000 MTs of paperboard.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn particular, our high-yield pulp business has been the subject of temporary curtailments at various points in recent years in reaction to market conditions. Our paperboard business has a blend of long- and short-term contracts and generally is more stable than our high-yield pulp business due to strong ties to and steady demand of the lottery and packaging sectors.
Biggest changeOur paperboard business has a blend of long- and short-term contracts and has generally been more stable than our high-yield pulp business due to strong ties to and steady demand of the lottery and packaging sectors. 10 Table of Contents Changes in the availability and price of raw materials and energy and continued inflationary pressure could have a material adverse effect on our business, financial condition and results of operations.
The risks associated with our business outside the U.S. include: • maintaining and governing international subsidiaries and managing international operations; • complying with changes in and reinterpretations of the laws, regulations and enforcement priorities of the countries in which we manufacture and sell our products; • complying with anti-bribery laws, such as the U.S.
The risks associated with our business operations outside the U.S. include: • maintaining and governing international subsidiaries and managing international operations; • complying with changes in and reinterpretations of the laws, regulations and enforcement priorities of the countries in which we manufacture and sell our products; • complying with anti-bribery laws, such as the U.S.
The loss of all or a substantial portion of sales to any of our largest customers, or significant, unfavorable changes to pricing or terms contained in contracts with them, could materially adversely affect our business, financial condition and results of operations. We are also subject to credit risk associated with these customers.
The loss of all or a substantial portion of sales of any of our largest customers, or significant, unfavorable changes to pricing or terms contained in contracts with them, could materially adversely affect our business, financial condition and results of operations. We are also subject to credit risk associated with these customers.
We experienced such reliability issues during the first quarter of 2019 at our Temiscaming, Quebec plant and during the third quarter of 2021 at our Jesup, Georgia plant; • prolonged power interruptions or failures; • explosion of boilers or other pressure vessels; • interruptions in the supply of raw materials, including chemicals and wood fiber; • disruptions to or failures of the transportation infrastructure, such as roads, bridges, railroad tracks and tunnels, as well as lack of availability of rail, trucking and ocean shipping equipment and service from third party transportation providers; • interruption or material reduction of water supply; • a chemical spill or release or other event causing impacts to the environment or human health and safety; • information technology system failures and cybersecurity incidents causing systems to be inaccessible or unusable; • natural disasters (including those as a result of climate change), including fires, floods, windstorms, earthquakes, hurricanes or other similar catastrophes; • labor interruptions, including strikes and short duration walk-outs, such as the walk-outs in 2019 and 2021 at our plant in Tartas, France; • terrorism or threats of terrorism; • new climate change or other environmental regulations, compliance with which may require significant capital expenditures to address modifications to our facilities, supply chain or other infrastructure; and • other operational issues resulting from these and other risks.
We experienced significant reliability issues during the first quarter of 2019 at our Temiscaming, Quebec plant and during the third quarter of 2021 at our Jesup, Georgia plant; • prolonged power interruptions or failures; • explosion of boilers or other pressure vessels; • interruptions in the supply of raw materials, including chemicals and wood fiber; • disruptions to or failures in the transportation infrastructure, such as roads, bridges, railroad tracks and tunnels, as well as lack of availability of rail, trucking and ocean shipping equipment and service from third party transportation providers; • interruption or material reduction of water supply; • a chemical spill or release or other event causing impacts to the environment or human health and safety; • information technology system failures and cybersecurity incidents causing systems to be inaccessible or unusable; • natural disasters (including those as a result of climate change), including fires, floods, windstorms, earthquakes, hurricanes or other similar catastrophes; • labor interruptions, including strikes and short duration walk-outs, such as the walk-outs in 2019 and 2021 at our plant in Tartas, France; • terrorism or threats of terrorism; • new climate change or other environmental regulations, compliance with which may require significant capital expenditures to address modifications to our facilities, supply chain or other infrastructure; and • other operational issues resulting from these and other risks.
For example, in March 2014, litigation was commenced in federal court by the Altamaha Riverkeeper alleging violations of federal and state environmental laws relating to permitted wastewater discharges from our plant in Jesup, Georgia (although it was dismissed by the court on summary judgment in 2015), and in January of 2016 the same group brought an action against the EPD in opposition to the EPD’s issuance of a renewed wastewater treatment permit for our Jesup plant.
For example, in March 2014, litigation was commenced in federal court by the Altamaha Riverkeeper alleging violations of federal and state environmental laws relating to permitted wastewater discharges from our plant in Jesup, Georgia (although it was dismissed by the court on summary judgment in 2015), and in January of 2016 the same group brought an action against the Georgia EPD in opposition to the Georgia EPD’s issuance of a renewed wastewater treatment permit for our Jesup plant.
Although we believe we currently have adequate liabilities recorded, legal requirements relating to assessment and remediation of contaminated properties continue to become more stringent and there can be no assurance that actual expenditures will not exceed current liabilities and forecasts, or that other presently unknown liabilities will not be discovered in the future.
Although we believe we have adequate liabilities recorded, legal requirements relating to assessment and remediation of contaminated properties continue to become more stringent and there can be no assurance that actual expenditures will not exceed current liabilities and forecasts or that other presently unknown liabilities will not be discovered in the future.
While these proceedings have, to date, been decided largely in our favor, we would expect similar attempts at legal intervention to be made in the future. We currently own and may acquire properties that require environmental remediation or otherwise are subject to environmental and other liabilities.
While these proceedings have, to date, been decided largely in our favor, we expect similar attempts at legal intervention to be made in the future. We currently own and may acquire properties that require environmental remediation or otherwise are subject to environmental and other liabilities.
We expect that compliance-related capital and operating costs will likely increase over time as environmental laws, regulations and permit conditions become more strict, and as the expectations of the communities in which we operate become more demanding. Environmental laws, regulations and permits are constantly changing and are generally becoming more restrictive.
We expect that compliance-related capital expenditures and operating costs will likely increase over time as environmental laws, regulations and permit conditions become more strict, and as the expectations of the communities in which we operate become more demanding. Environmental laws, regulations and permits are constantly changing and are generally becoming more restrictive.
Substantial capital is required to maintain our facilities, and the cost to repair or replace equipment, as well as the associated downtime, could materially adversely affect our business. We operate capital intensive businesses and require substantial capital for ongoing maintenance, repair and replacement of existing facilities and equipment.
Substantial capital is required to maintain our production facilities, and the cost to repair or replace equipment, as well as the associated downtime, could materially adversely affect our business. We operate capital intensive businesses and require substantial capital for ongoing maintenance, repair and replacement of existing facilities and equipment.
Volatility in the world financial markets could increase borrowing or other costs of capital or affect our ability to gain access to the capital markets, which could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows. 18 Table of Contents We may require additional financing in the future to meet our capital needs or to make acquisitions, and such financing may not be available on favorable terms, if at all, and may be dilutive to existing stockholders.
Volatility in the world financial markets could increase borrowing or other costs of capital or affect our ability to gain access to the capital markets, which could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows. 19 Table of Contents We may require additional financing in the future to meet our capital needs or to make acquisitions, and such financing may not be available on favorable terms, if at all, and may be dilutive to existing stockholders.
Fiber for our U.S. and French facilities is primarily harvested from privately-held lands, while fiber for our Canadian facilities is primarily harvested from lands owned or controlled by the governments of the provinces of Ontario and Quebec, referred to as “Crown lands.” In connection with the sale of our lumber and newsprint assets in August 2021, we transferred agreements with provincial authorities, which granted timber “tenures” for terms varying from five to 20 years, to a third party.
Fiber for our U.S. and France facilities is primarily harvested from privately-held lands, while fiber for our Canadian facilities is primarily harvested from lands owned or controlled by the governments of the provinces of Ontario and Quebec, referred to as “Crown Lands.” In connection with the sale of our lumber and newsprint assets in August 2021, we transferred agreements with provincial authorities, which granted timber “tenures” for terms varying from five to 20 years, to a third party.
Concurrent with the transaction, we entered into a 20-year wood chip and residual fiber supply agreement with the buyer of those assets, securing supply for our operations at the Temiscaming plant.
Concurrent with the transaction, we entered into a 20-year assignable wood chip and residual fiber supply agreement with the buyer of those assets, securing supply for our operations at the Temiscaming plant.
Any of our major manufacturing facilities, or a significant portion of any of these facilities, could cease operations unexpectedly or suffer a material disruption to all or a portion of its operations due to a number of material adverse events, including: • unscheduled outages or downtime due to the need for unexpected maintenance or equipment failure, including boilers and turbines that produce steam and electricity, pollution control equipment and equipment directly used to manufacture our products.
Any of our manufacturing facilities, or a significant portion of any of our facilities, could cease operations unexpectedly or suffer a material disruption to all or a portion of its operations due to a number of material adverse events, including: • unscheduled outages or downtime due to the need for unexpected maintenance or equipment failure, including boilers and turbines that produce steam and electricity, pollution control equipment and equipment directly used to manufacture our products.
Similarly, the price of oil and natural gas and their pipeline transportation has historically experienced significant fluctuations based on market demand and other factors.
Similarly, the price of oil and natural gas and their pipeline transportation has historically experienced significant fluctuations based on weather and market demand and other factors.
Environmental regulatory authorities have pursued a number of initiatives which, if implemented, could impose additional obligations and constraints on our operations, especially in the area of air emissions, wastewater and storm water control. See Item 1 — Business — Environmental Matters of this 2022 Form 10-K for further information.
Environmental regulatory authorities have pursued a number of initiatives which, if implemented, could impose additional obligations and constraints on our operations, especially in the area of air emissions, wastewater and storm water control. See Item 1—Business—Environmental Matters of this 2023 Form 10-K for further information.
For example, we experienced significant price volatility in various chemicals we use during 2021 and 2022 driven by weather events in the southeastern U.S. which substantially impacted supply. Caustic soda, a key manufacturing input in our high purity cellulose business, has historically had significant price volatility.
For example, we experienced significant price volatility in various chemicals we use during 2021 and 2022 driven by weather events in the southeastern U.S. that substantially impacted supply. Caustic soda, a key manufacturing input in our high purity cellulose business, has historically had significant price volatility.
As a result, we are required to negotiate the wages, benefits and other terms of employment with these employees collectively. Our financial results could be materially adversely affected if labor negotiations result in substantially higher compensation costs or materially restrict how we are able to run our operations.
We are required to negotiate the wages, benefits and other terms of employment with these employees collectively. Our financial results could be materially adversely affected if labor negotiations result in substantially higher compensation costs or materially restrict how we are able to run our operations.
While we are not dependent on any single customer or group of customers and we continue to strive to broaden and diversify our customer base, our ten largest customers accounted for a significant portion, approximately 40 percent , of our 2022 revenue.
While we are not dependent on any single customer or group of customers and we continue to strive to broaden and diversify our customer base, our ten largest customers accounted for a significant portion, approximately 40 percent , of our 2023 revenue.
Given broader inflation in the economy, we are monitoring the risk that inflation presents to active and future contracts. In contracts for certain of our products, pricing is set annually or is otherwise not subject to change for a contractually agreed upon period of time. In these cases, we may have limited ability to pass along fluctuations in input costs.
Given inflation in the broader economy, we monitor the risk that inflation presents to our active and future contracts. In contracts for certain of our products, pricing is set annually or is otherwise not subject to change for a contractually agreed-upon period of time. In these cases, we may have limited ability to pass along fluctuations in input costs.
We continue to explore additional climate-friendly applications for existing products and pursue projects to develop new sustainable products from renewable resources, including our 2G bioethanol project in Tartas, France, however, these opportunities, as well as their attendant risks, are not fully known or understood at this time. Physical.
We continue to explore additional climate-friendly applications for existing products and pursue projects to develop new sustainable products from renewable resources, including our 2G bioethanol project in Tartas, France; however, these opportunities, as well as their attendant risks, are not fully known or understood at this time. Physical risks associated with climate change.
Our high-yield pulp business is cyclical and influenced by a variety of factors, including periods of excess product supply due to industry capacity increases, periods of decreased demand due to reduced economic activity or market conditions, inventory de-stocking by customers, reduced market prices, scarcity of economically viable fiber in Canada and fluctuations in currency exchange rates.
Our high-yield pulp business is cyclical and influenced by a variety of factors, including periods of excess product supply due to industry capacity increases, periods of decreased demand due to reduced economic activity or market conditions, inventory destocking by customers, reduced market prices, scarcity of economically viable fiber in Canada and fluctuations in currency exchange rates.
When considering an investment in our securities, you should carefully read and consider these risks, together with all other information in this 2022 Form 10-K and our other filings and submissions to the SEC.
When considering an investment in our securities, you should carefully read and consider these risks, together with all other information in this 2023 Form 10-K and our other filings and submissions to the SEC.
Business and Operational Risks Our ten largest customers represented approximately 40 percent of our 2022 revenue, and the loss of all or a substantial portion of our revenue from these customers could have a material adverse effect on our business.
Business and Operational Risks Our ten largest customers represented approximately 40 percent of our 2023 revenue and the loss of all or a substantial portion of our revenue from these customers could have a material adverse effect on our business.
Additionally, increased use of e-cigarettes, electronically heated tobacco products and smokeless tobacco products may affect demand for traditional cigarettes. 9 Table of Contents In addition, some of the industries in which our end-use customers participate, such as publishing, packaging, automotive and textiles, are cyclical in nature, thus posing risks to us which are beyond our control.
Additionally, increased use of e-cigarettes, electronically heated tobacco products and smokeless tobacco products may affect demand for traditional cigarettes. In addition, some of the industries in which our end-use customers participate, such as publishing, packaging, automotive and textiles, are cyclical in nature, thus posing risks to us which are beyond our control.
We anticipate that our compensation committee will continue to grant stock options or other stock-based awards to our employees under our employee benefit plans. Such awards will have a dilutive effect on our earnings per share, which could adversely affect the market price of our common stock.
We anticipate that our compensation committee will continue to grant stock options or other stock-based awards to our employees under our employee benefit plans. Such awards and other issuances would have a dilutive effect on our earnings per share, which could adversely affect the market price of our common stock.
Such an event could have a material adverse impact on our financial condition and results of operations. 15 Table of Contents Regulatory and Environmental Risks Our business is subject to extensive environmental laws, regulations and permits that may materially restrict or adversely affect how we conduct business and our financial results.
Such an event could have a material adverse impact on our financial condition and results of operations. Regulatory and Environmental Risks Our business is subject to extensive environmental laws, regulations and permits that may materially restrict or adversely affect how we conduct business and our financial results.
Quebec has a cap-and-trade program for GHGs that meets the minimum criteria, and our Temiscaming, Quebec plant was a net purchaser of credits under this program in 2022.
Quebec has a cap-and-trade program for GHGs that meets the minimum criteria, and our Temiscaming, Quebec plant was a net purchaser of credits under this program in 2023.
Environmental laws and regulations will likely continue to become more restrictive and over time could materially adversely affect our business, financial condition and results of operations. Environmental groups, Indigenous communities and interested individuals may seek to delay or prevent a variety of our operations .
Environmental laws and regulations will likely continue to become more restrictive and over time could materially adversely affect our business, financial condition and results of operations. 16 Table of Contents Environmental groups, Indigenous communities and interested individuals may seek to delay or prevent a variety of our operations .
These and other risks of doing business outside of the U.S. could materially adversely affect our business, financial condition and results of operations. Foreign currency exchange fluctuations may have a material adverse impact on our business, financial condition and results of operations.
These and other risks of doing business outside of the U.S. could materially adversely affect our business, financial condition and results of operations. 11 Table of Contents Foreign currency exchange fluctuations may have a material adverse impact on our business, financial condition and results of operations.
See Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Use of Estimates and Note 17 – Employee Benefit Plans to our Financial Statements for additional information about these plans. We have debt obligations that could materially adversely affect our business and our ability to meet our obligations.
See Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations —Critical Accounting Estimates and Note 17—Employee Benefit Plans to our Financial Statements for additional information about these plans. 18 Table of Contents We have debt obligations that could materially adversely affect our business and our ability to meet our obligations.
Finally, if the port system that we rely on for international shipping suffers work stoppages, slowdowns or strikes, our business could be materially adversely impacted. Failure to maintain satisfactory labor relations could have a material adverse effect on our business. As of December 31, 2022, 71 percent of our global work force is unionized.
Finally, if the port system that we rely on for international shipping suffers work stoppages, slowdowns or strikes, our business could be materially adversely impacted. Failure to maintain satisfactory labor relations could have a material adverse effect on our business. As of December 31, 2023, 61 percent of our global work force was unionized.
Further escalation of geopolitical tensions could result in, among other things, natural gas shortages in Europe and disruptions of operations for us, our customers and our suppliers, an increase in cyberattacks, lower consumer demand and changes to foreign currency exchange rates and financial markets, any of which would adversely affect our business.
Escalation of geopolitical tensions could result in, among other things, natural gas shortages, disruptions of operations for us, our customers and our suppliers, an increase in cyber intrusion attempts, lower consumer demand and changes to foreign currency exchange rates and financial markets, any of which would adversely affect our business.
Canada has filed an appeal under Chapter 10 of the United States-Mexico-Canada Agreement on Trade to contest these revised duties. The USDOC has completed administrative reviews in 2020, 2021 and 2022 for the 2017, 2018, 2019 and 2020 periods and reduced rates applicable to us to a combined anti-dumping and countervailing duty rate of less than 9 percent.
Canada has filed an appeal under Chapter 10 of the United States-Mexico-Canada Agreement on Trade to contest these revised duties. The USDOC has completed administrative reviews of the 2017, 2018, 2019, 2020 and 2021 periods and reduced rates applicable to us to a combined anti-dumping and countervailing duty rate of approximately 8 percent.
While we do not expect any labor interruptions of significant duration, if our unionized employees were to engage in a strike or other work stoppage, such as the short-duration walk-outs in 2019 and 2021 at our plant in Tartas, France, at one or more of our major facilities, we could experience a significant disruption of our operations, which could materially adversely affect our business, financial condition and results of operations. 14 Table of Contents We are dependent upon attracting and retaining key personnel, the loss of whom could materially adversely affect our business.
While we do not expect any labor interruptions of significant duration, if our unionized employees were to engage in a strike or other work stoppage, such as the short-duration walk-outs in 2019 and 2021 at our plant in Tartas, France, at one or more of our major facilities, we could experience a significant disruption of our operations, which could materially adversely affect our business, financial condition and results of operations.
The manufacture and sale of our products in non-U.S. markets results in risks that are inherent to conducting business under international laws, regulations and customs. We expect international sales will continue to contribute significantly to our results of operations and future growth.
Sales to customers outside of the U.S. made up 67 percent of our revenue in 2023. The manufacture and sale of our products in non-U.S. markets results in risks that are inherent to conducting business under international laws, regulations and customs. We expect international sales will continue to contribute significantly to our results of operations and future growth.
For example, in the market for our cellulose specialties product line, increased cellulose specialties production capacity from our competitors, some of whom have lower raw material, wood and production costs than we do, combined with demand weakness, have collectively contributed to substantially lower cellulose specialties sales prices over the past several years.
For example, in the market for our cellulose specialties product line, increased cellulose specialties production capacity from our competitors, some of whom have lower raw material, wood and production costs than we do, combined with demand weakness, can collectively contribute to lower cellulose specialties sales prices over periods of time.
Our global operations expose us to risks associated with public health crises, including epidemics and pandemics, such as the COVID-19 pandemic, which has generated, and may continue to generate, significant volatility, uncertainty and economic disruption in many markets in which we or our customers do business.
Our global operations expose us to risks associated with public health crises, including epidemics and pandemics, which may generate significant volatility, uncertainty and economic disruption in many markets in which we or our customers do business.
Similarly, the repurchase or redemption rights or liquidation preferences we could assign to holders of preferred stock could affect the residual value of the common stock.
Similarly, the repurchase or redemption rights or liquidation preferences we could assign to holders of preferred stock could affect the residual value of the common stock. Item 1B. Unresolved Staff Comments None.
Likewise, certain cellulose specialty grade volumes have declined meaningfully in recent years due to these factors. The COVID-19 pandemic exacerbated these dynamics and may continue to do so. Our high-purity commodity products for viscose and absorbent materials applications were also at extremely low pricing levels in 2019 and 2020.
Likewise, certain cellulose specialty grade volumes have declined meaningfully in recent years due to these factors. Our high-purity commodity products for viscose and absorbent materials applications were also at extremely low pricing levels in 2019 and 2020 and later rebounded.
Over the past year, we have seen broad-based increases in costs from inflation that are material to our business as a whole, including with respect to key product inputs such as wood, energy, chemicals and transportation.
For example, in 2022, we saw broad-based increases in costs from inflation that are material to our business as a whole, including with respect to key product inputs such as wood, energy, chemicals and transportation.
Trade barriers such as tariffs, countervailing and anti-dumping duties, quotas and other similar restrictions on trade have in the past resulted in, and may in the future result in, a material reduction in revenues and profitability.
Trade barriers such as tariffs, countervailing and anti-dumping duties, quotas and other similar restrictions on trade have in the past resulted in, and may in the future result in, a material reduction in revenues and profitability. The effects of such restrictions on trade on our business in China and Canada are set forth below.
We have large manufacturing operations in Canada and France, and a significant portion of our sales are to customers located outside of the U.S., including China, the European Union, Japan, South Korea, Canada and other international markets. Sales to customers outside of the U.S. made up 67 percent of our revenue in 2022.
We are subject to material risks associated with doing business outside of the U.S. We have large manufacturing operations in Canada and France and a significant portion of our sales are to customers located outside of the U.S., including China, the European Union, Japan, Canada, South Korea and other international markets.
Our business depends on transportation services provided by third parties, both domestically and internationally. We rely on these providers for transportation of the products we manufacture as well as delivery of raw materials to our manufacturing facilities. A significant portion of the products we manufacture and raw materials we use are transported by railroad or trucks, and by ship.
We rely on these providers for transportation of the products we manufacture as well as delivery of raw materials to our manufacturing facilities. A significant portion of the products we manufacture and raw materials we use are transported by railroad, truck and ship.
Further, our cellulose specialty products are natural polymers that can be used as an effective, more climate-friendly substitute for certain applications that currently use fossil fuel-based products.
The primary input of all our products is wood, a renewable, natural raw material. Further, our cellulose specialty products are natural polymers that can be used as an effective, more climate-friendly substitute for certain applications that currently use fossil fuel-based products.
Mitigation of inflationary impacts to some extent through cost surcharges may not be sufficient and continued inflationary pressure could materially adversely affect our profits and margins under our customer contracts.
Mitigation of inflationary impacts to some extent through cost surcharges may not be sufficient and continued inflationary pressure could materially adversely affect our profits and margins under our customer contracts. The impact of raw material and energy pricing increases could materially adversely affect our business, financial condition and results of operations.
However, there can be no assurance this program will be successful, either from a product development or commercialization perspective, or that any particular invention, product or development, or the program as a whole, will lead to significant revenue or profit generation.
We have an active R&D program to develop new products and applications for our existing products. However, there can be no assurance this program will be successful, either from a product development or commercialization perspective, or that any particular invention, product or development, or the program as a whole, will lead to significant revenue or profit generation.
To date, the cost of GHG credits under cap-and-trade programs purchased by our business and incorporated into the overall cost of our purchased wood fiber has not been material, although no assurances can be given that they will not substantially increase in the future, as the future regulatory state and the cost of GHG credits in applicable jurisdictions is currently unknown.
To date, the cost of GHG credits under cap-and-trade programs purchased by our business and incorporated into the overall cost of our purchased wood fiber has not been material, although no assurances can be given that they will not substantially increase in the future, as the future regulatory state and the cost of GHG credits in applicable jurisdictions is currently unknown. 17 Table of Contents As regulators increasingly focus on climate change and other sustainability issues, we have and may become subject to new disclosure frameworks and regulations.
We currently own and may acquire properties that require environmental remediation or otherwise are subject to environmental and other liabilities. We currently own, and may acquire in the future, properties which are subject to environmental liabilities, such as remediation of soil, sediment and groundwater contamination and other liabilities.
We currently own, and may acquire in the future, properties which are subject to environmental liabilities, such as remediation of soil, sediment and groundwater contamination and other liabilities. In addition, we may have such liabilities at properties, such as formerly operated manufacturing facilities, that we no longer own.
Canada has filed an appeal under Chapter 10 of the United States-Mexico-Canada Agreement on Trade to contest these revised duties. We paid approximately $112 million in lumber duties through the date of the sale of our lumber assets, recorded as an expense in the periods incurred.
Canada has filed an appeal under Chapter 10 of the United States-Mexico-Canada Agreement on Trade to contest these revised duties. 12 Table of Contents We paid approximately $112 million of softwood lumber duties between 2017 and the August 2021 sale of our lumber assets, including $1 million of ancillary fees, which were recorded as expense in the periods incurred.
In Canada, for example, future legislation and policy changes, litigation advanced by environmental groups and Indigenous communities concerning rights and limitations on harvesting and use of timberlands, the protection of endangered species, the promotion of forest diversity, control over insect and disease infestations, and the response to and prevention of wildfires could also affect wood fiber supply, pricing and availability. 13 Table of Contents In addition, much of the wood fiber we use is sourced by or from third party contractors who harvest, chip and/or transport the wood fiber to our manufacturing facilities, either as logs for lumber and chipping or as chips.
In Canada, for example, future legislation and policy changes, litigation advanced by environmental groups and Indigenous communities concerning rights and limitations on harvesting and use of timberlands, the protection of endangered species, the promotion of forest diversity, control over insect and disease infestations, and the response to and prevention of wildfires could also affect wood fiber supply, pricing and availability.
Unfavorable changes in the availability of, and prices for, wood fiber may have a material adverse impact on our business, financial condition and results of operations. Wood fiber is the largest raw material used in the manufacturing process for virtually all of our products. Many factors can impact its availability and pricing.
Wood fiber is the largest volume of raw material used in the manufacturing process for virtually all of our products. Many factors can impact its availability and pricing.
If any of the events described in the following risk factors actually occur, our business, financial condition, operating results and cash flows, as well as the market price of our securities, could be materially adversely affected.
If any of the events described in the following risk factors occur, our business, financial condition, operating results and cash flows, as well as the market price of our securities, could be materially adversely affected. 9 Table of Contents Macroeconomic and Industry Risks Our business, financial condition and results of operations could be adversely affected by disruptions in the global economy caused by geopolitical conflicts and related impacts.
Over the past three years, COVID-19 has adversely impacted our business and financial condition in various ways, including increased operating costs due to social distancing and other strict health and safety protocols implemented at our facilities to protect employees and contractors, reductions and unpredictable fluctuations in demand and reduced supply chain reliability due to international shipping congestion associated with global demand fluctuations and empty container imbalances.
Over the past several years, COVID-19 adversely impacted our business and financial condition in various ways, including increased operating costs due to social distancing and other strict health and safety protocols implemented at our facilities to protect employees and contractors, reductions and unpredictable fluctuations in demand and reduced supply chain reliability due to international shipping congestion and the pandemic’s adverse impact on our suppliers, vendors and other global supply chain partners, which impaired our ability to timely and efficiently move our products through the various steps in the global supply chain process to our end customers.
Our failure to develop and retain key personnel and recruit and develop qualified replacements for retiring and other departing employees could materially adversely affect our business, financial condition and results of operations, as well as our ability to succeed in our human capital goals and priorities.
Our failure to develop and retain key personnel and recruit and develop qualified replacements for retiring and other departing employees could materially adversely affect our business, financial condition and results of operations, as well as our ability to succeed in our human capital goals and priorities. 15 Table of Contents Failure to develop new products or discover new applications for our existing products, or our inability to protect the intellectual property underlying new products or applications, could have a material adverse impact on our business.
No assurances can be given that the duties will be overturned or repaid through the legal process or a negotiated settlement, or that lumber pricing will be sufficient to substantially offset their impact.
Cash is not expected to return to us until final resolution of the softwood lumber dispute, which remains subject to legal challenges. No assurances can be given that the duties will be overturned or repaid through the legal process or a negotiated settlement, or that lumber pricing will be sufficient to substantially offset their impact.
See Item 1 — Business — Environmental Matters and Note 10 — Environmental Liabilities to our Financial Statements for additional information. 16 Table of Contents The potential longer-term impacts of climate-related risks remain uncertain at this time.
See Item 1—Business—Environmental Matters and Note 10—Environmental Liabilities to our Financial Statements for additional information. The potential longer-term impacts of climate-related risks remain uncertain at this time. Climate change and its impacts on people and our planet continue to be a topic of significant focus and attention of our customers, investors and various other stakeholders.
Trade tensions and trade-related actions, such as tariffs and duties, between China and the U.S. have previously impacted our business and our customers’ businesses and could do so in the future.
China In 2023, we had product sales of $474 million shipped to customers in China and, of this amount, $352 million were products manufactured in the U.S. Trade tensions and trade-related actions, such as tariffs and duties, between China and the U.S. have previously impacted our business and our customers’ businesses and could do so in the future.
Notwithstanding the foregoing, while we have not experienced an information security breach within the past three years (or to the best of our knowledge, any material information security breach prior to that), there can be no assurance that a cyberattack will not be successful or that such a cybersecurity breach will not occur in the future.
While we have not experienced any material information security breaches within the periods being reported (or to the best of our knowledge, any material information security breach prior to that), there can be no assurance that our third party service providers’ security efforts and programs will be successful and/or that a successful cybersecurity incident will not otherwise occur in the future.
If one or more of our ten largest customers were to become bankrupt, insolvent or otherwise were unable to pay for our products, we may incur significant write-offs that may have a material adverse effect on our business, financial condition and results of operations. 12 Table of Contents A material disruption at any 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 operations.
If one or more of our ten largest customers were to become bankrupt, insolvent or otherwise were unable to pay for our products, we may incur significant write-offs that may have a material adverse effect on our business, financial condition and results of operations.
See Note 9 — Debt and Finance Leases to our Financial Statements for further information regarding our debt obligations. Challenges in the commercial and credit environments may materially adversely affect our future access to capital.
See Note 9—Debt and Finance Leases to our Financial Statements for further information regarding our debt obligations.
No assurance can be given that the increased costs associated with compliance of future GHG-related requirements will not have a material adverse effect on our business, financial condition and results of operations. 17 Table of Contents 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.
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.
Furthermore, some of our facilities are in relatively remote locations, which can challenge our ability to recruit and retain employees.
Changing demographics and labor work force trends may result in the loss of knowledge and skills as experienced workers retire. Furthermore, some of our facilities are in relatively remote locations, which can challenge our ability to recruit and retain employees.
However, our inability to provide for our operating cash requirements on reasonable economic terms could materially adversely affect our business, financial condition and results of operations. We depend on third parties for transportation services and unfavorable changes in the cost and availability of transportation could materially adversely affect our business.
We depend on third parties for transportation services and unfavorable changes in the cost and availability of transportation could materially adversely affect our business. Our business depends on transportation services provided by third parties, both domestically and internationally.
We are subject to risks associated with epidemics and pandemics, including the COVID-19 pandemic, which has had, and may continue to have, a material adverse impact on our business, financial condition, results of operations and cash flows.
In addition, the effects of any geopolitical conflict could heighten many of the other known risks described in this Item 1A—Risk Factors. We are subject to risks associated with epidemics and pandemics, which could have a material adverse impact on our business, financial condition, results of operations and cash flows.
While these levels began to slowly rebound during the latter part of 2020 and increased throughout 2021 and 2022, there can be no assurance as to the timing and extent of the rebound or that elevated levels will be sustained over a significant period of time.
There can be no assurance as to the duration and magnitude of a rebound or whether elevated levels during any one period can be sustained over a significant period of time.
Changes in raw material and energy availability and prices, and continued inflationary pressure, could have a material adverse effect on our business, financial condition and results of operations. Raw material and energy costs, such as chemicals, oil, natural gas and electricity, are a significant operating expense for us.
Raw material and energy costs, such as chemicals, oil, natural gas and electricity, are a significant operating expense for us.
In addition, we may have such liabilities at properties, such as formerly operated manufacturing facilities, that we no longer own. The cost of assessment and remediation of contaminated properties could be substantial and materially adversely affect our financial results.
The cost of assessment and remediation of contaminated properties could be substantial and materially adversely affect our financial results.
As of December 31, 2022, our total combined indebtedness was approximately $1 billion.
As of December 31, 2023, our total indebtedness was $777 million.
Transition. The transition to a low carbon economy, as predicted by many investors and other stakeholders, poses both risk and opportunity for us that are, as yet, not able to be quantified. Similar to other manufacturers in our industry, we use biomass, natural gas, liquid fossil fuels and purchased electricity to power our plants.
We are closely monitoring these rules and regulations and their potential impact on us. Transition risks associated with climate change. The transition to a low carbon economy, as predicted by many investors and other stakeholders, poses both risk and opportunity for us that are, as yet, not able to be quantified.
These factors may cause significant price changes over a short period, such as fluctuations experienced over the past three years during the COVID-19 pandemic. To address these factors, we have in the past, and may in the future, elect to schedule production curtailments and shutdowns.
These factors may cause significant price changes over a short period. To address these factors, we have in the past, and may in the future, elect to schedule production curtailments and shutdowns. In particular, our high-yield pulp business has been the subject of temporary curtailments at various points in recent years in reaction to market conditions.
Moreover, some of our new products and new applications may not contain intellectual property that can be protected under intellectual property laws. Failure to generate meaningful revenue and profit from our R&D efforts could materially adversely affect our business, financial condition and results of operations.
Failure to generate meaningful revenue and profit from our R&D efforts could materially adversely affect our business, financial condition and results of operations. Loss of our intellectual property and sensitive data or disruption of our manufacturing operations due to a cybersecurity incident could materially adversely impact our business.
Cyberattacks or cybersecurity breaches could compromise our intellectual property and confidential business information, cause a disruption to our operations or harm our reputation.
Cyber intrusions targeting our business systems, operational tools and external vendor software could compromise our intellectual property and confidential business data, cause a disruption to our operations or damage our reputation.
While we have no direct operations in Russia or Ukraine, we have significant operations in Europe, which have experienced shortages in key input materials and increased costs for transportation, energy and raw materials as a result of this conflict.
Geopolitical conflicts and related effects may negatively impact the global economy and our business. While historically we have not had direct operations in geographic areas under conflict, we have significant operations and customers in Europe and Asia and have experienced shortages in key input materials and increased costs for transportation, energy and raw materials as a result of various conflicts.
Regulatory measures to address climate change may materially restrict how we conduct business or adversely affect our financial results . Regulatory risks associated with climate change. There are numerous international, federal and state-level initiatives and proposals to address domestic and global climate issues.
We can give no assurance that climate-related issues or associated expenditures will not exceed current expectations and increase in future years. Regulatory measures to address climate change may materially restrict how we conduct business or adversely affect our financial results . Regulatory risks associated with climate change.
We believe our success depends, to a significant extent, upon our ability to attract and retain key senior management and operations management personnel. Changing demographics and labor work force trends may result in the loss of knowledge and skills as experienced workers retire.
We are dependent upon attracting and retaining key personnel, the loss of whom could materially adversely affect our business. We believe our success depends, to a significant extent, upon our ability to attract and retain key senior management and operations management personnel.
Some of these matters are discussed in more detail in other sections of this Item 1A — Risk Factors. Depending on the nature, magnitude and duration of any operational interruption, the event could materially adversely affect our business, financial condition and results of operations.
Depending on the nature, magnitude and duration of any operational interruption, the event could materially adversely affect our business, financial condition and results of operations. 13 Table of Contents Unfavorable changes in the availability of, and prices for, wood fiber may have a material adverse impact on our business, financial condition and results of operations.
This role includes equipment, parts and raw material purchasing and fulfillment, inventory management, management of the processes we use to produce finished products, the reporting of financial results, facilitation of internal and external communications, administration of human capital functions and other process support necessary to manage our business. We have implemented and maintain cybersecurity policies, programs, controls and systems.
Functions that serve an important role in the efficient operation of our business include purchasing and fulfillment, inventory and manufacturing process management, the reporting of financial results and various other business process support. We have established and maintain cybersecurity policies, programs, controls and systems.
Changes in policy, regulation or technology related to fuels that we, or our electricity providers, use could materially increase our costs. Additionally, customers continue to express a desire for certified material and improvements in sustainable performance. The primary input of all our products is wood, a renewable, natural raw material.
Similar to other manufacturers in our industry, we use biomass, natural gas, liquid fossil fuels and purchased electricity to power our plants. Changes in policy, regulation or technology related to fuels that we, or our electricity providers, use could materially increase our costs.
Loss of our intellectual property and sensitive data or disruption of our manufacturing operations due to cyberattacks or cybersecurity breaches could materially adversely impact our business. Like most companies, we have been, and expect to continue to be, subject to attempted cyberattacks. Such attacks could include, for example, the increasingly prevalent practice of cyber extortion through the deployment of ransomware.
Like most companies, we have been, and expect to continue to be, subject to attempted cyber intrusions. One form of intrusion that has become increasingly prevalent is the practice of cyber extortion, particularly through the use of ransomware.
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Macroeconomic and Industry Risks Our business, financial condition and results of operations could be adversely affected by disruptions in the global economy caused by the ongoing conflict between Russia and Ukraine or other geopolitical conflicts.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur manufacturing facilities are maintained through ongoing capital investments, regular maintenance and equipment upgrades. As a result, production capacities may vary from the amounts listed above. These facilities, warehouses, machinery and equipment that we owned or leased as of December 31, 2022 are in good operating condition and in regular use.
Biggest changeActual production is impacted by overall equipment effectiveness and market circumstances. Our manufacturing facilities are maintained through ongoing capital investments, regular maintenance and equipment upgrades. As a result, production capacities may vary from the amounts listed above.
Properties The following table details the material properties we owned or leased at December 31, 2022: Location by Segment Annual Production Capacity (a) Owned/Leased High Purity Cellulose Facilities: Jesup, Georgia, United States 330,000 MTs of cellulose specialties or commodity products 270,000 MTs of commodity products Owned Fernandina Beach, Florida, United States 155,000 MTs of cellulose specialties or commodity products Owned Temiscaming, Quebec, Canada 150,000 MTs of cellulose specialties or commodity products Owned Tartas, France 140,000 MTs of cellulose specialties or commodity products Owned Paperboard Facilities: Temiscaming, Quebec, Canada 180,000 MTs of paperboard Owned High-Yield Pulp Facilities: Temiscaming, Quebec, Canada 290,000 MTs of high-yield pulp Owned Corporate and Other: Jacksonville, Florida, United States Corporate Headquarters Leased —————————————— (a) Based on historic average production and not adjusted for potential market-related downtime and/or reliability issues.
Properties The following table details the material properties we owned or leased at December 31, 2023: Location by Segment Annual Production Capacity (a) Owned/Leased High Purity Cellulose Facilities Jesup, Georgia, United States 330,000 MTs of cellulose specialties or commodity products 270,000 MTs of commodity products Owned Fernandina Beach, Florida, United States 155,000 MTs of cellulose specialties or commodity products Owned Temiscaming, Quebec, Canada 150,000 MTs of cellulose specialties or commodity products Owned Tartas, France 140,000 MTs of cellulose specialties or commodity products Owned Paperboard Facilities Temiscaming, Quebec, Canada 180,000 MTs of paperboard Owned High-Yield Pulp Facilities Temiscaming, Quebec, Canada 290,000 MTs of high-yield pulp Owned Corporate and Other Jacksonville, Florida, United States Corporate Headquarters Leased (a) Based on the facility equipment operating under average production conditions.
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These facilities, warehouses, machinery and equipment that we owned or leased as of December 31, 2023 are in good operating condition and in regular use.
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We recently began efforts towards a realignment of our High Purity Cellulose assets to optimize production mix, including the consolidation of commodity viscose production into the Temiscaming plant and fluff production into the Jesup plant’s C Line. See Note 7—Property, Plant and Equipment, Net for further details of this realignment. 21 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings As disclosed in Note 21 — Commitments and Contingencies to our Financial Statements, we are engaged in certain legal proceedings and the disclosures set forth in Note 21 relating to legal proceedings are incorporated herein by reference. 20 Table of Contents Part II
Biggest changeItem 3. Legal Proceedings As disclosed in Note 21—Commitments and Contingencies to our Financial Statements, we are engaged in certain legal proceedings and the disclosures set forth in Note 21 relating to legal proceedings are incorporated herein by reference. 22 Table of Contents Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities The following table provides information regarding our purchases of RYAM common stock during the quarter ended December 31, 2022: Total Number of Shares Purchased (a) 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 (b) September 25 to October 29 — $ — — $ 60,294,000 October 30 to November 26 — $ — — $ 60,294,000 November 27 to December 31 15,964 $ 8.11 — $ 60,294,000 Total 15,964 — —————————————— (a) Represents shares repurchased to satisfy tax withholding requirements related to the issuance of stock under our stock incentive plans.
Biggest changeIssuer Purchases of Equity Securities The following table provides information regarding our purchases of RYAM common stock during the quarter ended December 31, 2023: Total Number of Shares Purchased (a) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (b) October 1 to November 4 — $ — — $ 60,294,000 November 5 to December 2 — $ — — $ 60,294,000 December 3 to December 31 15,964 $ 3.48 — $ 60,294,000 Total 15,964 — (a) Represents shares repurchased to satisfy tax withholding requirements related to the issuance of stock under our stock incentive plans.
Securities Authorized for Issuance under Equity Compensation Plans See Item 12 — Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters for information relating to our equity compensation plans. 21 Table of Contents Stock Performance Graph The following graph compares the performance of a $100 investment in our common stock, assuming reinvestment of dividends, with the same investment in a broad-based market index, the S&P Small Cap 600, and an industry-specific index, the S&P 500 Materials, over the five-year period beginning December 31, 2017.
Securities Authorized for Issuance under Equity Compensation Plans See Item 12 — Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters for information relating to our equity compensation plans. 23 Table of Contents Stock Performance Graph The following graph compares the performance of a $100 investment in our common stock, assuming reinvestment of dividends, with the same investment in a broad-based market index, the S&P Small Cap 600, and an industry-specific index, the S&P 500 Materials, over the five-year period beginning December 31, 2018.
(a) In January 2018, our Board of Directors authorized a share buyback program pursuant to which we may, from time to time, purchase shares of our common stock with an aggregate purchase price of up to $100 million. As of December 31, 2022, the remaining unused authorization under our share buyback program was $60 million .
(b) In January 2018, our Board of Directors authorized a share buyback program pursuant to which we may, from time to time, purchase shares of our common stock with an aggregate purchase price of up to $100 million. As of December 31, 2023, the remaining unused authorization under the share buyback program was $60 million.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the New York Stock Exchange under the trading symbol “RYAM.” Holders The number of record holders of our common stock at February 27, 2023 was 3,450.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the New York Stock Exchange under the trading symbol “RYAM.” Holders The number of record holders of our common stock at February 27, 2024 was 3,116.
The table and related information shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.
The graph shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.
See Note 16 — Incentive Stock Plans to our Financial Statements for further information.
See Note 13—Stockholders’ Equity to our Financial Statements for further information.
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The data in the following table was used to create the previous graph: 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 RYAM $ 100 $ 53 $ 19 $ 33 $ 29 $ 48 S&P Small Cap 600 100 91 112 125 158 133 S&P 500 Materials 100 85 106 128 163 143 Recent Sales of Unregistered Securities We did not issue or sell any unregistered equity securities in 2022. 22 Table of Contents
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Recent Sales of Unregistered Securities We did not issue or sell any unregistered equity securities in 2023. 24 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe project is expected to provide $9 million to $11 million of annual incremental EBITDA beginning in 2024. 24 Table of Contents Results of Operations: Year Ended December 31, 2022 versus December 31, 2021 Year Ended December 31, (in millions, except percentages) 2022 2021 Net sales $ 1,717 $ 1,408 Cost of sales (1,594) (1,333) Gross margin 123 75 Selling, general and administrative expenses (91) (76) Other operating expense, net (6) (9) Operating income (loss) 26 (10) Interest expense (66) (66) Interest income and other, net 6 — Other components of net periodic benefit (expense) 5 (4) Gain (loss) on GreenFirst equity securities 5 (4) Gain on debt extinguishment — 1 Loss from continuing operations before income taxes (24) (83) Income tax (expense) benefit (1) 35 Equity in loss of equity method investment (2) (2) Loss from continuing operations (27) (50) Income from discontinued operations, net of taxes 12 116 Net income (loss) $ (15) $ 66 Gross Margin % 7.2 % 5.3 % Operating Margin % 1.5 % (0.7) % Effective Tax Rate % (3.8) % 41.9 % Net Sales Year Ended December 31, (in millions) 2022 2021 High Purity Cellulose $ 1,336 $ 1,091 Paperboard 250 208 High-Yield Pulp 160 136 Eliminations (29) (27) Net sales $ 1,717 $ 1,408 Net sales increased by $309 million or 22 percent, in 2022 compared to 2021, driven primarily by higher sales prices across all segments.
Biggest changeResults of Operations: Year Ended December 31, 2023 versus December 31, 2022 Year Ended December 31, (in millions, except percentages) 2023 2022 Net sales $ 1,643 $ 1,717 Cost of sales (1,555) (1,594) Gross margin 88 123 Selling, general and administrative expenses (76) (91) Foreign exchange gain (loss) (3) 4 Asset impairment (62) — Other operating expense, net (12) (10) Operating income (loss) (65) 26 Interest expense (74) (66) Components of pension and OPEB, excluding service costs — 5 Gain on GreenFirst equity securities — 5 Other income, net 7 6 Loss from continuing operations before income tax (132) (24) Income tax (expense) benefit 32 (1) Equity in loss of equity method investment (2) (2) Loss from continuing operations (102) (27) Income from discontinued operations, net of tax — 12 Net loss $ (102) $ (15) Gross margin % 5.4 % 7.2 % Operating margin % (4.0) % 1.5 % Effective tax rate 24.4 % (3.8) % Net Sales Year Ended December 31, (in millions) 2023 2022 High Purity Cellulose $ 1,313 $ 1,336 Paperboard 219 250 High-Yield Pulp 136 160 Eliminations (25) (29) Net sales $ 1,643 $ 1,717 27 Table of Contents Net sales decreased $74 million in 2023 compared to 2022 driven by lower sales prices in commodity products and our High-Yield Pulp segment and lower sales volumes in cellulose specialties and our Paperboard and High-Yield Pulp segments, partially offset by higher sales prices in cellulose specialties and our Paperboard segment and higher commodity sales volumes.
No dividends have been declared since. The declaration and payment of future common stock dividends, if any, will be at the discretion of our Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements and other factors that the Board of Directors deems relevant.
No dividends have been declared since. The declaration and payment of future common stock dividends, if any, will be at the discretion of our Board of Directors and dependent upon our financial condition, results of operations, capital requirements and other factors that the Board of Directors deems relevant.
If the review of evidence indicates the realizability may be less than likely, then a valuation allowance is recorded, with the exception of DTAs for suspended U.S. interest deductions, which do not have a full valuation allowance in accordance with specific AICPA guidance. See Note 19 — Income Taxes to our Financial Statements for further information.
If the review of evidence indicates the realizability may be less than likely, then a valuation allowance is recorded, with the exception of recorded DTAs for suspended U.S. interest deductions, which do not have a full valuation allowance in accordance with specific AICPA guidance. See Note 19—Income Taxes to our Financial Statements for further information.
See Results of Operations for additional discussion of the changes in our operating results. Adjusted Free Cash Flows Adjusted free cash flows is defined as cash provided by operating activities of continuing operations adjusted for capital expenditures, net of proceeds from the sale of assets and excluding strategic capital expenditures deemed discretionary by management.
See Results of Operations above for additional discussion of the changes in our operating results. Adjusted Free Cash Flows Adjusted free cash flows is defined as cash provided by operating activities of continuing operations adjusted for capital expenditures, net of proceeds from the sale of assets and excluding strategic capital expenditures deemed discretionary by management.
Significant and unanticipated changes to these assumptions could require a provision for impairment in a future period. Property, plant and equipment are grouped for purposes of evaluating recoverability at the combined plant level, the lowest level for which independent cash flows are identifiable.
Significant and unanticipated changes to these assumptions could require a provision for impairment in a future period. Property, plant and equipment are primarily grouped for purposes of evaluating recoverability at the combined plant level, the lowest level for which independent cash flows are identifiable.
The second step evaluates future projected Canadian earnings from continuing operations to confirm the Canadian operations are more-likely-than-not to be profitable in future years, inclusive of depreciation. This second step establishes that the NOLs are not realized due solely to the suspension of Canadian tax depreciation.
The second step evaluates future projected Canadian earnings from continuing operations to confirm the Canadian operations are more-likely-than-not to be profitable in future years, inclusive of deductible depreciation. This second step establishes that the NOLs are not realized due solely to the suspension of Canadian tax depreciation.
For a discussion of year-over-year comparisons between 2021 and 2020 and other financial information related to 2020 that is not included in this 2022 Form 10-K, refer to Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 1, 2022.
For a discussion of year-over-year comparisons between 2022 and 2021 and other financial information related to 2021 that is not included in this 2023 Form 10-K, refer to Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 1, 2023.
This information includes the non-GAAP financial measures of EBITDA, adjusted EBITDA and adjusted free cash flows. These measures are not defined by GAAP and our discussion of them is not intended to conflict with or change any of our GAAP disclosures provided in this 2022 Form 10-K.
This information includes the non-GAAP financial measures of EBITDA, adjusted EBITDA and adjusted free cash flows. These measures are not defined by GAAP and our discussion of them is not intended to conflict with or change any of our GAAP disclosures provided in this 2023 Form 10-K.
The following discussion includes forward-looking statements that involve certain risks and uncertainties. See Forward-Looking Statements and Item 1A — Risk Factors in this 2022 Form 10-K. This section primarily discusses 2022 and 2021 items and comparisons between these years.
The following discussion includes forward-looking statements that involve certain risks and uncertainties. See Forward-Looking Statements and Item 1A — Risk Factors in this 2023 Form 10-K. This section primarily discusses 2023 and 2022 items and comparisons between these years.
As part of our ongoing operations, we also periodically issue guarantees to third parties. Our primary purchase obligation payments relate to natural gas, steam energy and wood chips purchase contracts. As of December 31, 2022, our noncancellable unconditional purchase obligations totaled $894 million. See Note 21 — Commitments and Contingencies to our Financial Statements for further information.
As part of our ongoing operations, we also periodically issue guarantees to third parties. Our primary purchase obligation payments relate to natural gas, steam energy and wood chips purchase contracts. As of December 31, 2023, our noncancellable unconditional purchase obligations totaled $728 million. See Note 21—Commitments and Contingencies to our Financial Statements for further information.
Future pension expense will be impacted by many factors including actual investment performance, changes in discount rates, timing of contributions and other employee related matters. See Note 17 — Employee Benefit Plans to our Financial Statements for further information. In 2022, we made mandatory contributions and benefit payments to plan participants of $8 million.
Future pension expense will be impacted by many factors including actual investment performance, changes in discount rates, timing of contributions and other employee related matters. See Note 17—Employee Benefit Plans to our Financial Statements for further information. In 2023, we made mandatory contributions and benefit payments to plan participants of $10 million.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Financial Statements, the notes thereto, and the other financial information appearing elsewhere in this 2022 Form 10-K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Financial Statements, the notes thereto, and the financial information appearing elsewhere in this 2023 Form 10-K.
The use of different assumptions and judgments in the calculation of depreciation, especially those involving useful lives, would likely result in significantly different net book values and results of operations. 32 Table of Contents Asset Impairment Long-lived assets are reviewed annually for impairment or whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.
The use of different assumptions and judgments in the calculation of depreciation, especially those involving useful lives, would likely result in significantly different net book values and results of operations. Asset Impairment Long-lived assets are reviewed annually for impairment or when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.
Income Taxes The effective tax rate on the loss from continuing operations for 2022 was an expense of 4 percent.
The effective tax rate on the loss from continuing operations for 2022 was an expense of 4 percent.
The vast majority of our DTAs are in Canada, including $505 million of NOLs subject to expiration after 20 years and other DTAs which can be carried forward indefinitely. We evaluate the realizability of these Canadian DTAs in two steps. The first step determines the realizability of the Canadian NOLs prior to expiration.
The vast majority of our DTAs are in Canada, including $477 million of NOLs subject to expiration after 20 years and other DTAs which can be carried forward indefinitely. We evaluate the realizability of these Canadian DTAs in two steps. 36 Table of Contents The first step determines the realizability of the Canadian NOLs prior to expiration.
Adjusted free cash flows, as defined by us, is a non-GAAP financial measure of cash generated during a period which is available for debt reduction, strategic capital expenditures, acquisitions and repurchases of our common stock.
Adjusted free cash flows is a non-GAAP financial measure of cash generated during a period, which is available for debt reduction, strategic capital expenditures, acquisitions and repurchases of our common stock.
The actuarial rates are developed by models which incorporate high-quality (AA rated), long-term corporate bond rates into their calculations. The weighted average discount rate increased from 2.82 percent at December 31, 2021 to 4.95 percent at December 31, 2022. Our defined pension plans were underfunded by $87 million at December 31, 2022.
The actuarial rates are developed by models which incorporate high-quality (AA rated), long-term corporate bond rates into their calculations. The weighted average discount rate decreased from 4.95 percent at December 31, 2022 to 4.71 percent at December 31, 2023. Our defined pension plans were underfunded by $83 million at December 31, 2023.
(b) Amounts available under the ABL Credit Facility fluctuate based on eligible accounts receivable and inventory levels. At December 31, 2022, we had $166 million of gross availability and net available borrowings of $130 million after taking into account outstanding letters of credit of $36 million.
(b) Amounts available under the ABL Credit Facility fluctuate based on eligible accounts receivable and inventory levels. At December 31, 2023, we had $151 million of gross availability and net available borrowings of $118 million after taking into account outstanding letters of credit of $33 million.
In order to compensate for these limitations, reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measures are provided below. Non-GAAP financial measures should not be relied upon, in whole or part, in evaluating our financial condition, results of operations or future prospects.
To compensate for these limitations, reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measures are provided below. Non-GAAP financial measures are not necessarily indicative of results that may be generated in future periods and should not be relied upon, in whole or part, in evaluating our financial condition, results of operations or future prospects.
The liabilities for unrecognized tax benefits are adjusted in the period in which it is determined the issue is settled with the taxing authorities, the statute of limitations expires for the relevant taxing authority to examine the tax position or when new facts or information become available.
The liabilities for unrecognized tax benefits are adjusted in the period in which it is determined the issue is settled with the taxing authorities, the statute of limitations expires for the relevant taxing authority to examine the tax position or when new facts or information become available. See Note 19—Income Taxes to our Financial Statements for further information.
During the years ended December 31, 2022 and 2021, the High-Yield Pulp segment sold 66,000 MTs and 68,000 MTs of high-yield pulp for $29 million and $28 million, respectively, to the Paperboard segment.
During the years ended December 31, 2023 and 2022, the High-Yield Pulp segment sold 60,000 MTs and 66,000 MTs of high-yield pulp for $25 million and $29 million, respectively, to the Paperboard segment.
Pension and Other Postretirement Benefit Assets and Liabilities Our defined benefit pension and postretirement plans for employees in the U.S. and Canada require numerous estimates and assumptions to determine the proper amount of pension and postretirement liabilities and annual expense to record in our Financial Statements.
See Note 10—Environmental Liabilities to our Financial Statements for further information. 35 Table of Contents Pension and Other Postretirement Benefit Assets and Liabilities Our defined benefit pension and postretirement plans for employees in the U.S. and Canada require numerous estimates and assumptions to determine the proper amount of pension and postretirement liabilities and annual expense to record in our Financial Statements.
Strategic capital expenditures were $34 million and $16 million for the years ended December 31, 2022 and 2021, respectively. Adjusted free cash flows of continuing operations declined due to changes in working capital and other items and higher capital expenditures. See Liquidity and Capital Resources — Cash Flows for additional discussion of our operating cash flows.
Strategic capital expenditures were $45 million and $34 million for the years ended December 31, 2023 and 2022, respectively. Adjusted free cash flows of continuing operations increased primarily due to changes in working capital and lower capital expenditures. See Liquidity and Capital Resources—Cash Flows for additional discussion of our operating cash flows.
Operating Income Year Ended December 31, 2021 Gross Margin Changes Attributable to: Year Ended December 31, 2022 (in millions, except percentages) Sales Price Sales Volume/Mix (a) Cost SG&A and other Operating income $ 7 $ 28 $ (2) $ (17) $ — $ 16 Operating margin % 5.1 % 16.2 % (0.7) % (10.6) % — % 10.0 % —————————————— (a) Computed based on contribution margin.
Operating Income Year Ended December 31, 2022 Gross Margin Changes Attributable to: Year Ended December 31, 2023 (in millions, except percentages) Sales Price Sales Volume/ Mix (a) Cost SG&A and other Operating income $ 37 $ 2 $ (13) $ 11 $ — $ 37 Operating margin % 14.8 % 0.7 % (3.6) % 5.0 % — % 16.9 % (a) Computed based on contribution margin.
High-Yield Pulp Year Ended December 31, (in millions) 2022 2021 Net sales $ 160 $ 136 Operating income $ 16 $ 7 Average sales prices ($ per MT) (a) $ 685 $ 546 Sales volumes (thousands of MTs) (a) 191 197 —————————————— (a) Average sales prices and sales volumes for external sales only.
High-Yield Pulp Year Ended December 31, (in millions, unless otherwise stated) 2023 2022 Net sales $ 136 $ 160 Operating income (loss) $ (3) $ 16 Average sales prices ($ per MT) (a) $ 606 $ 685 Sales volumes (thousands of MTs) (a) 182 191 (a) Average sales prices and sales volumes for external sales only.
Future mandatory contribution requirements will vary depending on actual investment performance, changes in valuation assumptions, interest rates and legal requirements to maintain a certain funding status. 33 Table of Contents The sensitivity of pension expense and projected benefit obligation related to our pension plans to changes in economic assumptions is presented below: (in millions) Increase (Decrease) in 2023 Pension Expense Increase (Decrease) in December 31, 2022 Projected Benefit Obligation Change in Assumption 50 bp decrease in discount rate $1 $32 50 bp increase in discount rate $— $(29) 50 bp decrease in long-term return on assets $3 n/a 50 bp increase in long-term return on assets $(3) n/a Realizability of Recorded and Unrecorded Tax Assets and Liabilities Our income tax expense, deferred tax assets and liabilities and reserves for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid.
The sensitivity of pension expense and projected benefit obligation related to our pension plans to changes in economic assumptions is presented below: (in millions) Increase (Decrease) in 2024 Pension Expense Increase (Decrease) in December 31, 2023 Projected Benefit Obligation Change in Assumption 50 bp decrease in discount rate $(1) $33 50 bp increase in discount rate $— $(30) 50 bp decrease in long-term return on assets $3 n/a 50 bp increase in long-term return on assets $(3) n/a Realizability of Recorded and Unrecorded Tax Assets and Liabilities Our income tax expense, deferred tax assets and liabilities and reserves for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid.
In addition to the availability under the ABL Credit Facility, we have $19 million available under our accounts receivable factoring line of credit in France. See Note 9 — Debt and Finance Leases to our Financial Statements for further information. (c) See Note 9 — Debt and Finance Leases to our Financial Statements for further information.
In addition to the availability under the ABL Credit Facility, we have $5 million available under our accounts receivable factoring line of credit in France. (c) See Note 9—Debt and Finance Leases to our Financial Statements for further information. Cash Requirements Contractual Commitments Our principal contractual commitments include standby letters of credit, surety bonds, guarantees, purchase obligations and leases.
Operating Income Year Ended December 31, 2021 Gross Margin Changes Attributable to: Year Ended December 31, 2022 (in millions, except percentages) Sales Price Sales Volume/Mix/Other (a) Cost SG&A and other Operating income $ 20 $ 201 $ 30 $ (215) $ (5) $ 31 Operating margin % 1.8 % 15.3 % 1.7 % (16.1) % (0.4) % 2.3 % —————————————— (a) Computed based on contribution margin.
Operating Income (Loss) Year Ended December 31, 2022 Gross Margin Changes Attributable to: Year Ended December 31, 2023 (in millions, except percentages) Sales Price Sales Volume/Mix/Other (a) Cost SG&A and other Operating income (loss) $ 31 $ 27 $ (31) $ (11) $ (58) $ (42) Operating margin % 2.3 % 1.9 % (2.2) % (0.8) % (4.4) % (3.2) % (a) Computed based on contribution margin.
We did not repurchase any shares under this program during the years ended December 31, 2022 and 2021, and do not expect to utilize any of the remaining $60 million in unused authorization in the near future. As of December 31, 2022, we were in compliance with all financial and other customary covenants under our credit arrangements.
We did not repurchase any shares under this program during the years ended December 31, 2023, 2022 and 2021, and do not expect to utilize any of the remaining $60 million in unused authorization in the future.
The most significant items creating a difference between the 2022 effective tax rate and the statutory rate of 21 percent were changes in the valuation allowance on disallowed U.S. interest deductions, nondeductible executive compensation, U.S. tax credits and tax return-to-accrual adjustments on filed returns. The effective tax rate on continuing operations for 2021 was a benefit of 42 percent.
The most significant items creating a difference between the 2022 effective tax rate and the statutory rate of 21 percent were changes in the valuation allowance on disallowed interest deductions, nondeductible executive compensation, U.S. tax credits, tax return-to-accrual adjustments on filed returns and interest received from tax overpayments. See Note 19—Income Taxes to our Financial Statements for further information.
Adjusted free cash flows is not necessarily indicative of the adjusted free cash flows that may be generated in future periods. 31 Table of Contents Cash flows of operating activities of continuing operations is reconciled to adjusted free cash flows as follows: Year Ended December 31, (in millions) 2022 2021 Cash provided by operating activities-continuing operations $ 69 $ 74 Capital expenditures, net (a) (104) (76) Adjusted free cash flows-continuing operations $ (35) $ (2) —————————————— (a) Net of proceeds from the sale of assets and excluding strategic capital expenditures.
Cash flows of operating activities of continuing operations is reconciled to adjusted free cash flows as follows: Year Ended December 31, (in millions) 2023 2022 Cash provided by operating activities-continuing operations $ 136 $ 69 Capital expenditures, net (a) (83) (104) Adjusted free cash flows-continuing operations $ 53 $ (35) (a) Net of proceeds from the sale of assets and excluding strategic capital expenditures.
Property, Plant & Equipmen t Depreciation Depreciation expense is computed using the units-of-production method for our high purity cellulose, paperboard and high-yield pulp plant and equipment and the straight-line method for all other property, plant and equipment over the useful economic lives of the assets involved.
These estimated rebates are included in the transaction price as a reduction to net sales. 34 Table of Contents Property, Plant & Equipmen t Depreciation Depreciation expense is computed using the units-of-production method for our high purity cellulose, paperboard and high-yield pulp plant and equipment and the straight-line method for all other property, plant and equipment over the useful economic lives of the assets involved.
A significant change in any of these estimates could have a material effect on our results of operations and financial condition. See Note 10 — Environmental Liabilities to our Financial Statements for further information.
A significant change in any of these estimates could have a material effect on our results of operations and financial condition.
Our production facility, located in Canada, has an annual production capacity of 180,000 MTs of paperboard. Wood pulp, chemicals and energy represent approximately 80 percent of our per MT cost of sales. Labor, manufacturing and maintenance supplies, depreciation, manufacturing overhead and transportation costs represent our remaining cost of sales.
Wood pulp, chemicals and energy represent approximately 80 percent of our per MT cost of sales. Labor, manufacturing and maintenance supplies, depreciation, manufacturing overhead and transportation costs represent our remaining cost of sales.
Pricing for our cellulose specialties products is typically set by contract for a duration of at least one year, based on discussions with customers. Our commodity products primarily consist of commodity viscose and absorbent materials. Commodity viscose pulp is a raw material required for the manufacture of viscose staple fibers which are used in woven and non-woven applications.
We are the leading global producer of cellulose specialties, which are primarily used in dissolving chemical applications that require a highly purified form of cellulose. Pricing for our cellulose specialties products is typically set by contract for a duration of at least one year, based on discussions with customers. Our commodity products primarily consist of commodity viscose and absorbent materials.
Labor, manufacturing and maintenance supplies, depreciation, manufacturing overhead and transportation costs represented our remaining cost of sales. Paperboard We manufacture paperboard that is used for packaging, printing documents, brochures, promotional materials, paperback book and catalog covers, file folders, tags and lottery tickets. Pricing for paperboard is typically referenced to published indices and marketed through our internal sales team.
Paperboard We manufacture paperboard that is used for packaging, printing documents, brochures, promotional materials, paperback book and catalog covers, file folders, tags and lottery tickets. Pricing for paperboard is typically referenced to published indices and marketed through our internal sales team. Our production facility, located in Canada, has an annual production capacity of 180,000 MTs of paperboard.
Absorbent materials, typically referred to as fluff fibers, are used as an absorbent medium in consumer products. Pricing for commodity products is typically referenced to published indices or based on publicly available spot market prices. Sales of chemicals and energy, a majority of which are by-products of our manufacturing processes, are included in the High Purity Cellulose segment.
Commodity viscose pulp is a raw material required for the manufacture of viscose staple fibers which are used in woven and non-woven applications. Absorbent materials, typically referred to as fluff fibers, are used as an absorbent medium in consumer products. Pricing for commodity products is typically referenced to published indices or based on publicly available spot market prices.
Our liquidity and capital resources are summarized below: December 31, (in millions, except ratios) 2022 2021 Cash and cash equivalents (a) $ 152 $ 253 Availability under the ABL Credit Facility (b) 130 103 Total debt (c) 853 929 Stockholders’ equity 829 814 Total capitalization (total debt plus stockholders’ equity) 1,682 1,743 Debt to capital ratio 51 % 53 % —————————————— (a) Cash and cash equivalents consisted of cash, money market deposits and time deposits with original maturities of 90 days or less.
Our non-guarantor subsidiaries had assets of $470 million, liabilities of $408 million, year-to-date revenue of $164 million and a trailing twelve month ABL Credit Facility covenant EBITDA for continuing operations of $17 million as of December 31, 2023. 31 Table of Contents Our liquidity and capital resources are summarized below: December 31, (in millions, except ratios) 2023 2022 Cash and cash equivalents (a) $ 76 $ 152 Availability under the ABL Credit Facility (b)(c) 118 130 Total debt (c) 777 853 Stockholders’ equity 747 829 Total capitalization (total debt plus stockholders’ equity) 1,524 1,682 Debt to capital ratio 51 % 51 % (a) Consisted of cash, money market deposits and time deposits with original maturities of 90 days or less.
Operating income of our High-Yield Pulp segment increased $9 million in 2022 when compared to 2021, driven by higher sales prices, partially offset by higher chemicals and logistics costs and lower sales volumes.
Operating results of our High-Yield Pulp segment declined $19 million in 2023 compared to 2022 driven by the lower sales prices and sales volumes and increased wood costs.
Environmental Liabilities At December 31, 2022, we had $171 million of accrued liabilities for environmental costs relating to disposed operations. Numerous price, quantity, cost and probability assumptions are used in estimating these obligations.
See Note 7—Property, Plant and Equipment, Net to our Financial Statements for further information regarding this asset realignment and impairment. Environmental Liabilities At December 31, 2023, we had $170 million of accrued liabilities for environmental costs relating to disposed operations. Numerous price, quantity, cost and probability assumptions are used in estimating these obligations.
Operating Results by Segment High Purity Cellulose Year Ended December 31, (in millions) 2022 2021 Net sales $ 1,336 $ 1,091 Operating income $ 31 $ 20 Average sales prices ($ per MT) $ 1,330 $ 1,122 Sales volumes (thousands of MTs) 918 884 26 Table of Contents Net Sales Year Ended December 31, 2021 Changes Attributable to: Year Ended December 31, 2022 (in millions) Price Volume/Mix/Other Cellulose specialties $ 712 $ 139 $ 15 $ 866 Commodity products 279 62 14 355 Other sales (a) 100 — 15 115 Net sales $ 1,091 $ 201 $ 44 $ 1,336 —————————————— (a) Includes sales of bioelectricity, lignosulfonates and other by-products to third parties.
Operating Results by Segment High Purity Cellulose Year Ended December 31, (in millions, unless otherwise stated) 2023 2022 Net sales $ 1,313 $ 1,336 Operating income (loss) $ (42) $ 31 Average sales prices ($ per MT) $ 1,273 $ 1,330 Sales volumes (thousands of MTs) 955 918 Net Sales Year Ended December 31, 2022 Changes Attributable to: Year Ended December 31, 2023 (in millions) Price Volume/Mix/Other Cellulose specialties $ 866 $ 75 $ (158) $ 783 Commodity products 355 (48) 125 432 Other sales (a) 115 — (17) 98 Net sales $ 1,336 $ 27 $ (50) $ 1,313 (a) Includes sales of bioelectricity, lignosulfonates and other by-products to third parties.
Loss from Continuing Operations is reconciled to EBITDA and adjusted EBITDA as follows: Year Ended December 31, (in millions) 2022 2021 Loss from continuing operations $ (27) $ (50) Depreciation and amortization 135 139 Interest expense, net 64 66 Income tax expense (benefit) 1 (35) EBITDA-continuing operations 173 120 Pension settlement loss 1 8 Severance 4 — Gain on debt extinguishment (1) (1) Adjusted EBITDA-continuing operations $ 177 $ 127 EBITDA and adjusted EBITDA from continuing operations increased $53 million and $50 million, respectively, compared to 2021, primarily driven by higher sales prices across all segments, partially offset by higher key input and logistics costs.
Loss from continuing operations is reconciled to EBITDA and adjusted EBITDA as follows: Year Ended December 31, (in millions) 2023 2022 Loss from continuing operations $ (102) $ (27) Depreciation and amortization 140 135 Interest expense, net 69 64 Income tax expense (benefit) (32) 1 EBITDA-continuing operations 75 173 Asset impairment 62 — Pension settlement loss 2 1 Severance — 4 Gain on debt extinguishment — (1) Adjusted EBITDA-continuing operations $ 139 $ 177 33 Table of Contents EBITDA from continuing operations decreased $98 million, primarily driven by the $62 million non-cash asset impairment recorded on certain High Purity Cellulose assets in the fourth quarter of 2023, the decrease in net sales across all segments and increased labor and wood costs in our High Purity Cellulose and High-Yield Pulp segments, respectively, partially offset by lower key input and logistics costs in our High Purity Cellulose and Paperboard segments.
Our four production facilities, located in the U.S., Canada and France, have a combined annual production capacity of 1,045,000 MTs of cellulose specialties and commodity products. Of our total annual capacity, we dedicate 270,000 MTs of annual production to commodity products, primarily absorbent materials. Wood fiber, chemicals and energy represent approximately 50 percent of our per MT cost of sales.
Of our total annual capacity, we dedicate 270,000 MTs of annual production to commodity products, primarily absorbent materials. Wood fiber, chemicals and energy represent approximately 50 percent of our per MT cost of sales. Labor, manufacturing and maintenance supplies, depreciation, manufacturing overhead and transportation costs represent our remaining cost of sales.
The underfunded status decreased by $39 million in 2022, primarily due to actuarial gains as a result of increased discount rates. In 2023, pension expense is expected to increase slightly as lower amortization of actuarial losses is offset by higher interest cost.
The underfunded status decreased by $4 million in 2023, primarily due to actuarial losses as a result of decreased discount rates, offset by returns on plan assets. In 2024, pension expense is expected to be flat compared to 2023.
Commodity products sales prices and volumes increased 19 percent and 7 percent, respectively, driven by higher demand. Included within net sales for 2022 was $115 million of other sales, primarily from bio-based energy and lignosulfonates.
Included within net sales for 2023 and 2022 were $98 million and $115 million, respectively, of other sales primarily from bio-based energy and lignosulfonates.
Overview We are a diversified global leader of cellulose-based technologies that operates in the following business segments: • High Purity Cellulose • Paperboard • High-Yield Pulp Our High Purity Cellulose business has leading positions in the cellulose specialties markets. In addition, our other business segments provide a more diversified earnings stream.
Overview of Operations We are a diversified global leader of cellulose-based technologies that operates in the following business segments: • High Purity Cellulose • Paperboard • High-Yield Pulp High Purity Cellulose We manufacture and market high purity cellulose, which is sold as either cellulose specialties or commodity products.
Paperboard Year Ended December 31, (in millions) 2022 2021 Net sales $ 250 $ 208 Operating income $ 37 $ 13 Average sales prices ($ per MT) $ 1,478 $ 1,165 Sales volumes (thousands of MTs) 169 179 Net Sales Year Ended December 31, 2021 Changes Attributable to: Year Ended December 31, 2022 (in millions) Price Volume/Mix Net sales $ 208 $ 53 $ (11) $ 250 Net sales of our Paperboard segment increased $42 million in 2022 when compared to 2021, due to a 27 percent increase in sales prices, driven by strong demand, partially offset by a 6 percent decrease in sales volumes driven by the timing of sales and lower productivity. 27 Table of Contents Operating Income Year Ended December 31, 2021 Gross Margin Changes Attributable to: Year Ended December 31, 2022 (in millions, except percentages) Sales Price Sales Volume/ Mix (a) Cost SG&A and other Operating income $ 13 $ 53 $ (4) $ (26) $ 1 $ 37 Operating margin % 6.3 % 19.0 % (0.5) % (10.4) % 0.4 % 14.8 % —————————————— (a) Computed based on contribution margin.
Net Sales Year Ended December 31, 2022 Changes Attributable to: Year Ended December 31, 2023 (in millions) Price Volume/Mix Net sales $ 160 $ (15) $ (9) $ 136 Net sales of our High-Yield Pulp segment decreased $24 million in 2023 compared to 2022 driven by 12 percent and 5 percent decreases in sales prices and sales volumes, respectively, due to lower demand. 30 Table of Contents Operating Income (Loss) Year Ended December 31, 2022 Gross Margin Changes Attributable to: Year Ended December 31, 2023 (in millions, except percentages) Sales Price Sales Volume/Mix (a) Cost SG&A and other Operating income (loss) $ 16 $ (15) $ (3) $ (1) $ — $ (3) Operating margin % 10.0 % (9.3) % (2.2) % (0.7) % — % (2.2) % (a) Computed based on contribution margin.
Senior Notes During the year ended December 31, 2022, we repurchased $47 million of our Senior Notes through open-market transactions and retired the notes for cash of $47 million. Our next significant debt maturity is in June 2024.
Debt In March 2023, we repurchased $5 million of our 2024 Notes through open-market transactions and retired the notes for cash of $5 million. In April 2023, we repurchased $10 million of our 2026 Notes through open-market transactions and retired the notes for cash of $9 million.
Operating income of our Paperboard segment increased $24 million in 2022 when compared to 2021, due to higher sales prices, partially offset by higher logistics, raw material pulp and chemicals costs and lower sales volumes.
Operating income of our Paperboard segment was flat in 2023 compared to 2022 as lower purchased pulp, maintenance and logistics costs and the impact of maintenance and market-driven shutdowns were offset by the lower sales volumes.
A loss of $4 million was recognized on these shares during the year ended December 31, 2021. See Note 12 — Fair Value Measurements to our Financial Statements for further information. Included in non-operating expenses for 2021 was $8 million in pension settlement losses.
Included in non-operating other income in the year ended December 31, 2022 was a $5 million net gain associated with the monetization of the GreenFirst common shares received in connection with the sale of our lumber and newsprint assets in 2021. See Note 3—Discontinued Operations to our Financial Statements for further information.
Cash used in financing activities decreased by $84 million during 2022 when compared to 2021, primarily due to a decrease in repayments of long-term debt. 30 Table of Contents Performance and Liquidity Indicators The discussion below is presented to enhance the reader’s understanding of our operating performance, liquidity and ability to generate cash and satisfy rating agency and creditor requirements.
These outflows were partially offset by the net proceeds received from the 2027 Term Loan issuance and borrowings under the ABL Credit Facility. Performance and Liquidity Indicators The discussion below is presented to enhance the reader’s understanding of our operating performance, liquidity and ability to generate cash and satisfy rating agency and creditor requirements.
Operating Income (Loss) Year Ended December 31, (in millions) 2022 2021 High Purity Cellulose $ 31 $ 20 Paperboard 37 13 High-Yield Pulp 16 7 Corporate (58) (50) Operating income (loss) $ 26 $ (10) Operating results for 2022 improved by $36 million when compared to 2021 due to higher sales prices across all segments, partially offset by increased costs resulting from inflation on chemicals, wood fiber, energy and logistics costs. 25 Table of Contents Non-operating Expenses Included in non-operating expenses for 2022 was a $5 million gain associated with the GreenFirst shares received in connection with the sale of lumber and newsprint assets in August 2021.
Operating Income (Loss) Year Ended December 31, (in millions) 2023 2022 High Purity Cellulose $ (42) $ 31 Paperboard 37 37 High-Yield Pulp (3) 16 Corporate (57) (58) Operating income (loss) $ (65) $ 26 Operating results for 2023 declined $91 million compared to 2022 primarily driven by a $62 million High Purity Cellulose non-cash asset impairment recorded in the fourth quarter of 2023 and the decrease in net sales across all segments due to the lower sales prices and sales volumes discussed above.
Partially offsetting higher energy costs in both 2022 and 2021 were $12 million of sales of excess emission allowances related to our operations in Tartas, France. Additionally, 2022 included $8 million of sales of certificates of energy savings associated with Tartas operations.
Also contributing to the decline in operating results were $8 million of energy cost offsets in 2022 from sales of energy savings certificates associated with our Tartas operations, compared to only $1 million in 2023.
Cash used in investing activities of continuing operations increased $41 million during 2022 when compared to 2021, due to increased capital spending related to the planned maintenance outages in the current year. Cash provided by investing activities of discontinued operations decreased $139 million during 2022 when compared to 2021.
Cash provided by investing activities of discontinued operations of $44 million in 2022 related to the proceeds from the sale of GreenFirst equity securities.
Corporate Year Ended December 31, (in millions) 2022 2021 Operating loss $ (58) $ (50) The operating loss of our Corporate segment increased $8 million in 2022 when compared to 2021, driven by an increase in severance and variable stock-based compensation costs, partially offset by favorable foreign currency exchange impacts. 28 Table of Contents Liquidity and Capital Resources Overview Cash flows from operations, primarily driven by operating results, have historically been our primary source of liquidity and capital resources.
Corporate Year Ended December 31, (in millions) 2023 2022 Operating loss $ (57) $ (58) Our Corporate operating loss decreased $1 million in 2023 compared to 2022 driven by lower variable compensation and other benefit costs and one-time severance costs incurred in 2022, largely offset by unfavorable foreign exchange rates in 2023 as compared to favorable rates in 2022.
Average sales prices for cellulose specialties in 2023 are expected to be high single-digit percent higher than average 2022 sales prices. Commodity sales prices are expected to decline versus 2022 levels, in line with industry forecasts for fluff and viscose cellulose pricing. Commodity sales volumes are expected to increase as production and logistics constraints improve.
High Purity Cellulose Average sales prices for cellulose specialties in 2024 are expected to increase by a low single-digit percentage as compared to average sales prices in 2023.
Cash Flows Year Ended December 31, (in millions) 2022 2021 Cash flows provided by (used in): Operating activities-continuing operations $ 69 $ 74 Operating activities-discontinued operations — 159 Investing activities-continuing operations (138) (97) Investing activities-discontinued operations 44 183 Financing activities (73) (157) Cash provided by operating activities of continuing operations decreased $5 million during 2022 when compared to 2021.
Cash Flows Year Ended December 31, (in millions) 2023 2022 Cash flows provided by (used in): Operating activities $ 136 $ 69 Investing activities-continuing operations (128) (138) Investing activities-discontinued operations 1 44 Financing activities (87) (73) Cash provided by operating activities increased $67 million primarily due to increased cash inflows from working capital, partially offset by payments on deferred energy liabilities associated with our Tartas facility operations, net tax payments of $7 million in 2023 and the receipt of net tax refunds of $15 million in 2022. 32 Table of Contents Cash used in investing activities of continuing operations decreased $10 million primarily due to lower capital spending.
Removed
High Purity Cellulose We manufacture and market high purity cellulose, which is sold as either cellulose specialties or commodity products. We are the leading global producer of cellulose specialties, which are primarily used in dissolving chemical applications that require a highly purified form of cellulose.
Added
Sales of chemicals and energy, a majority of which are by-products of our manufacturing processes, are included in the High Purity Cellulose segment. Our four production facilities, located in the U.S., Canada and France, have a combined annual production capacity of 1,045,000 MTs of cellulose specialties and commodity products.
Removed
Labor, manufacturing and maintenance supplies, depreciation, manufacturing overhead and transportation costs represent our remaining cost of sales. 23 Table of Contents Recent Business Developments • During the second, third and fourth quarters of 2022, we repurchased a total $47 million of our Senior Notes through open-market transactions and retired the notes for $47 million in cash. • During the third and fourth quarters of 2022, we repaid CAD fixed interest rate term loans in the total amount of CAD $24 million (USD $18 million). • During the second quarter of 2022, we sold the 28.7 million shares of GreenFirst common stock we received in connection with the August 2021 sale of our lumber and newsprint assets for $43 million.
Added
Labor, manufacturing and maintenance supplies, depreciation, manufacturing overhead and transportation costs represent our remaining cost of sales. 25 Table of Contents Recent Business Developments • In January 2024, we amended our 2027 Term Loan agreement to increase the maximum consolidated secured net leverage ratio that we must maintain in the fourth quarter of 2023 and through fiscal year 2024.
Removed
The shares sale agreement contains a purchase price protection clause whereby we are entitled to participate in further stock price appreciation under certain circumstances until December 2023. • During 2022, our business experienced a significant increase in the costs for wood, chemicals, energy and supply chain.
Added
In addition, should we exceed the maximum ratio established by the original agreement during this period, we will incur a fee of 0.25% of the principal balance outstanding at the end of the applicable quarter. • In the fourth quarter of 2023, we recorded a non-cash impairment of $62 million related to certain assets at our Temiscaming and Jesup plants in conjunction with the optimization and realignment of our High Purity Cellulose assets.
Removed
In response, we implemented a $146 per MT cost surcharge applicable to all shipments of our cellulose specialties, effective starting with shipments made on April 1, 2022 and later.
Added
This realignment reflects a strategic decision expected to reduce commodity exposure and earnings volatility and allow us to better manage excess capacity of cellulose specialties by operating assets based on current demand for each end market.
Removed
In connection with contract negotiations, the cost surcharge was phased out in early 2023. • As of March 2022, our fluff pulp qualifies as an “Inspected Raw Material” by Nordic Swan Ecolabelling. The Nordic Swan Ecolabel sets strict environmental requirements in all phases of manufacturing, including requirements for eco-friendly chemicals used in ecolabeled products.
Added
See Note 7—Property, Plant and Equipment, Net to our Financial Statements for further information. • In July 2023, we secured term loan financing of $250 million in aggregate principal amount, the proceeds of which were used, together with cash on hand, to redeem the $318 million principal balance of the 2024 Notes in August 2023. • In April 2023, we repurchased $10 million of our 2026 Notes through open-market transactions and retired the notes for cash of $9 million. • In March 2023, we repurchased $5 million of our 2024 Notes through open-market transactions and retired the notes for cash of $5 million.
Removed
The status will appear on products made with our fluff pulp and indicates to consumers and commercial buyers that the product is sustainably produced and environmentally friendly. • On March 21, 2022, our Board of Directors adopted a stockholder rights plan and declared a dividend of one preferred share purchase right for each outstanding share of our common stock, par value $0.01 per share.
Added
See Note 9—Debt and Finance Leases to our Financial Statements for further information on debt-related items. 2024 Outlook In October 2023, we announced that we engaged a financial advisor to explore the potential sale of our Paperboard and High-Yield Pulp assets located at our Temiscaming site.
Removed
See Note 13 — Stockholders’ Equity to our Financial Statements for further information. Market Assessment This market assessment represents our best current estimate of our business segments’ future performance. High Purity Cellulose Demand for cellulose specialties and commodity products is mixed.
Added
The process is ongoing for this strategic review, which is consistent with our commitment to align our portfolio with our long-term growth strategy and provide flexibility to pay down debt, reduce leverage and minimize earnings volatility. The following market assessment represents our current outlook of our business segments’ future performance.
Removed
Strength in acetate, casings, filtration and nitrocellulose end markets are offsetting softness for construction ethers, food additives in microcrystalline cellulose and tire cord. Fluff market demand remains resilient but at lower prices than fourth quarter levels. Viscose markets started the year soft, with signs of improvement as China’s economy reopens.
Added
Sales volumes for cellulose specialties are expected to remain flat compared to 2023 as increased volumes from the closure of a competitor’s plant are offset by a favorable change in customer contract terms in the first quarter of 2023 that is not expected to repeat in 2024. Demand for RYAM cellulose specialties will be mixed.
Removed
Raw material prices are expected to remain elevated, offset by benefits expected from prior strategic capital investments. Paperboard Paperboard prices for 2023 are expected to continue to increase from 2022 levels, driven by strong demand in both the packaging and commercial printing end markets.
Added
Acetate is expected to experience moderate destocking. Ethers volumes are anticipated to improve albeit at lower than historical levels. Other cellulose specialties volumes will benefit from the closure of a competitor’s facility.
Removed
Sales volumes are expected to increase slightly, driven by improved logistics, while raw material prices reduce as pulp markets decline. High-Yield Pulp High-yield pulp markets have declined as global economic demand slows, impacting sales price. The reopening of the Chinese economy may provide catalyst for more stable pricing.
Added
Demand for RYAM commodity products remains resilient with fluff and viscose prices expected to improve from the fourth quarter of 2023, however not to the level of realized prices in early 2023.
Removed
Sales volumes are expected to improve slightly in 2023, primarily due to improved productivity and logistics. A Sustainable Future For over 95 years, we have invested in renewable product offerings and our biorefinery model provides a platform to grow existing and new products to address the needs of the changing economy.
Added
Commodity sales volumes are expected to increase in 2024 as we focus on improving productivity, with fluff volume expected to improve due to higher demand and both viscose and paper pulp sales volume expected to decrease. Raw material input and logistics costs are expected to be lower in 2024.
Removed
We continue to focus on growing our bio-based product offering. In 2022, other sales in our High Purity Cellulose segment were $115 million, primarily related to sales of bioelectricity and lignosulfonates. We expect to grow these sales and increase overall margins over time. Our bioethanol facility at our Tartas, France facility is anticipated to be operational in 2024.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+2 added−0 removed5 unchanged
Biggest changeWe may use derivatives in accordance with policies and procedures approved by the Finance & Strategic Planning 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 11 — Derivative Instruments to our Financial Statements for further information.
Biggest changeWe may use derivatives in accordance with policies and procedures approved by the Finance & Strategic Planning Committee of our Board of Directors. See Note 11—Derivative Instruments to our Financial Statements for further information. Foreign Currency We manage our foreign currency exposures by balancing certain assets and liabilities denominated in foreign currencies.
The estimated fair value of our fixed-rate debt at December 31, 2022 and 2021 was $839 million and $964 million, respectively, compared to the respective $854 million and $928 million principal amounts. We use quoted market prices to estimate the fair value of our fixed-rate debt.
The estimated fair value of our fixed-rate debt at December 31, 2023 and 2022 was $498 million and $839 million, respectively, compared to their respective $540 million and $854 million principal amounts. We use quoted market prices to estimate the fair value of our fixed-rate debt.
We do not utilize financial instruments for trading or other speculative purposes. Prices The prices, sales volumes and margins of the commodity products of our High Purity Cellulose segment and all the products of the High-Yield Pulp segment have historically been cyclically affected by economic and market shifts, fluctuations in capacity and changes in foreign currency exchange rates.
Prices The prices, sales volumes and margins of the commodity products of our High Purity Cellulose segment and all the products of the High-Yield Pulp segment have historically been cyclically affected by economic and market shifts, fluctuations in capacity and changes in foreign currency exchange rates.
Variable Interest Rates As of December 31, 2022 and 2021, we had $4 million and $7 million, respectively, of variable rate debt subject to interest rate risk. At these borrowing levels, a hypothetical one percent change in interest rates would have resulted in an immaterial change in interest expense for the respective periods.
At December 31, 2022, we had $4 million of variable rate debt subject to interest rate risk, for which a hypothetical one percent change in rates would have resulted in an immaterial change in interest expense for the period.
The fair market value of our long-term fixed interest rate debt is also subject to interest rate risk. However, we intend to hold most of our debt until maturity.
The fair market value of our long-term fixed interest rate debt is also subject to interest rate risk when the debt becomes due or if we do not hold the debt until maturity.
Forward contracts that are derivative instruments are reported in our consolidated balance sheets at their fair values, unless they qualify for the normal purchase normal sale exception and such exception has been elected, in which case the fair values of such contracts are not recognized in the balance sheet.
Forward contracts that are derivative instruments are reported in our consolidated balance sheets at their fair values, unless they qualify for the normal purchase normal sale exception and such exception has been elected, in which case the fair values of such contracts are not recognized in the balance sheet. 37 Table of Contents Variable Interest Rates As of December 31, 2023, we had $255 million of variable rate debt subject to interest rate risk.
Foreign Currency We manage our foreign currency exposures by balancing certain assets and liabilities denominated in foreign currencies. We may also use foreign currency forward contracts to manage these exposures. The principal objective of such contracts is to minimize the potential volatility and financial impact of changes in foreign currency exchange rates.
We 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.
Added
In the third quarter of 2023 we issued variable rate term loan financing of $250 million, which was used with cash on hand to redeem the $318 million outstanding principal balance of our fixed rate 2024 Notes.
Added
At this borrowing level, a hypothetical one percent change in interest rates would have resulted in a $2 million annual change in interest expense.

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