Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Sylvamo Quarterly Results Meet Guidance By: Sylvamo via Business Wire August 09, 2023 at 07:00 AM EDT Slower Demand Recovery Drives Revised Annual Outlook, Company Remains Committed to $125 Million in Cash Returns Sylvamo (NYSE: SLVM), the world’s paper company, is releasing second quarter 2023 earnings. Financial Highlights – Second Quarter vs. First Quarter Net income from continuing operations of $49 million ($1.14 per diluted share) vs. $97 million ($2.25 per diluted share) Adjusted operating earnings1 (non-GAAP) of $49 million ($1.14 per diluted share) vs. $108 million ($2.51 per diluted share) Adjusted EBITDA2 (non-GAAP) of $124 million (13.5% margin) vs. $208 million (22.1% margin) Cash provided by operating activities from continuing operations of $77 million vs. $63 million Free cash flow3 (non-GAAP) of $33 million vs. $2 million Commercial and Operational Highlights – Second Quarter vs. First Quarter Price and mix decreased by $38 million due primarily to lower paper prices in Europe, less favorable mix in Latin America and North America and lower global pulp prices Volume decreased by $2 million due to lower paper demand in North America and continued channel inventory corrections in Europe and North America, which more than offset seasonally stronger demand in Latin America Operations and other costs increased by $10 million, primarily driven by $15 million in higher unabsorbed fixed costs from increased economic downtime Planned maintenance outage expenses increased by $58 million, in line with guidance, during the heaviest outage quarter of the year Input costs improved by $24 million, driven by favorable energy, chemical and transportation costs Third Quarter Outlook Adjusted EBITDA of $130 million to $150 million Compared to the second quarter: Price and mix are expected to decrease by $60 million to $65 million Volume is projected to improve by $15 million to $20 million, with seasonally stronger volume in Latin America and North America Operations and other costs are expected to increase by $5 million to $10 million, mainly due to unabsorbed fixed costs while matching paper production with Sylvamo customer demand Input and transportation costs are projected to improve by $15 million to $20 million, with favorable trends in fiber and chemicals Total planned maintenance outage expenses are expected to decrease by $54 million Management Summary from Chairman and Chief Executive Officer Jean-Michel Ribiéras We achieved our second quarter earnings per share and adjusted EBITDA objectives. We delivered these results while facing challenging market conditions and during our heaviest planned maintenance outage quarter. Our sales volumes were similar to the first quarter. The expected seasonal increase in volume did not materialize due to continued inventory corrections in Europe and North America, decreased demand due to Europe’s slowing economies and economic uncertainty in North America. Consequently, during the second quarter in Europe and North America, we took approximately 120,000 tons of economic downtime, roughly double the first quarter level. We also conducted extensive annual maintenance outages, which we executed safely and efficiently. With respect to paper demand, we believe that our customers have completed the majority of their inventory corrections. We are now seeing very early indications that global advertising may be starting to rebound and we would expect demand in Europe and North America to begin to improve. In the second quarter, we returned $41 million of cash to shareowners through dividends and share repurchases for a total of $61 million in cash returns in the first half of 2023. Our board of directors declared a quarterly dividend of $0.25 per share for the third quarter, which we paid July 6. We remain committed to returning a total of $125 million in cash to shareowners this year. We now project adjusted EBITDA of $560 million to $600 million (formerly $720 million to $770 million) for 2023, reflecting lower paper demand and inventory channel corrections in Europe and North America, updated views on pulp and paper price and mix as well as higher unabsorbed fixed costs. These more than offset favorable input, transportation and operation cost trends. We continue to focus on free cash flow generation and now project free cash flow of $220 million to $250 million (formerly $250 million to $280 million.) We will continue implementing our three-pronged strategy of commercial excellence, operational excellence and financial discipline. We expect to reduce costs and working capital to maximize earnings and free cash flow in the second half of the year. We will also continue to reinvest in our company to exit the downturn in an even stronger competitive position. 1 Adjusted Operating Earnings (non-GAAP) are net income (loss) (GAAP) excluding discontinued operations, net of tax and net special items. Management uses this measure to focus on ongoing operations and believes it is useful to investors because it enables them to perform meaningful comparisons of past and present combined operating results. The Company believes that using this information, along with net income (loss), provides for a more complete analysis of the results of operations. Net income (loss) is the most directly comparable GAAP measure. For more information regarding net special items, see the information under the heading Effects of Net Special Items and the Condensed Consolidated Statement of Operations and related notes included later in this release. 2 Adjusted EBITDA (non-GAAP) is net income (loss) (GAAP) excluding discontinued operations, net of tax, plus the sum of income taxes, net interest expense (income), depreciation, amortization and cost of timber harvested, transition service agreement expense, stock-based compensation, and, when applicable for the periods reported, net special items. Management uses this measure in managing the operating performance of our business and believes that Adjusted EBITDA and Adjusted EBITDA Margin provide investors and analysts meaningful insights into our operating performance and Adjusted EBITDA is a relevant metric for the third-party debt. The Company believes that using this information, along with net income (loss), provides for a more complete analysis of the results of its operations. Net income (loss) is the most directly comparable GAAP measure. For more information regarding net special items, see the information under the heading Effects of Net Special Items and the Condensed Consolidated Statement of Operations and related notes included later in this release. 3 Free Cash Flow is a non-GAAP measure and the most directly comparable GAAP measure is cash provided by operating activities from continuing operations. Management utilizes this measure in connection with managing our business and believes that Free Cash Flow is useful to investors as a liquidity measure because it measures the amount of cash generated that is available, after reinvesting in the business, to maintain a strong balance sheet and service debt, and return cash to shareowners. It should not be inferred that the entire Free Cash Flow amount is available for discretionary expenditures. Free Cash Flow also enables investors to perform meaningful comparisons between past and present periods. Select Financial Measures (In millions) Second Quarter 2023 First Quarter 2023 Second Quarter 2022 Net Sales $ 919 $ 941 * $ 912 Net Income from Continuing Operations 49 97 84 Net Income 49 97 (59 ) Business Segment Operating Profit 82 166 142 Adjusted Operating Earnings 49 108 90 Adjusted EBITDA 124 208 189 Cash Provided By Operating Activities From Continuing Operations 77 63 76 Free Cash Flow 33 2 39 *Includes adjustment to eliminate intra-segment sales in Europe Segment Information Sylvamo uses business segment operating profit to measure the earnings performance of its businesses and is calculated as set forth in footnote (f) under the "Sales and Earnings by Business Segment" table (page 8). Second quarter 2023 net sales by business segment and operating profit by business segment compared with the first quarter of 2023 and the second quarter of 2023 are as follows: Business Segment Results (In millions) Second Quarter 2023 First Quarter 2023 Second Quarter 2022 Net Sales by Business Segment Europe $ 210 $ 230 * $ 135 Latin America 250 222 249 North America 474 505 549 Inter-segment Sales (15 ) (16 ) (21 ) Net Sales $ 919 $ 941 $ 912 Operating Profit by Business Segment Europe $ (11 ) $ 23 $ 17 Latin America 48 46 59 North America 45 97 66 Business Segment Operating Profit $ 82 $ 166 $ 142 *Includes adjustment to eliminate intra-segment sales in Europe Operating profits in the second quarter of 2023: Europe - $(11) million compared with $23 million in the first quarter of 2023. Earnings were lower as lower operating and input costs were more than offset by lower price and mix, higher planned maintenance outages, higher unabsorbed costs due to economic downtime and lower operating profit contributed by Nymolla. Latin America - $48 million compared with $46 million in the first quarter of 2023. Earnings were slightly higher as higher volumes and lower operating and input costs more than offset lower price and mix and higher planned maintenance outages. North America - $45 million compared with $97 million in the first quarter of 2023. Earnings were lower as lower input costs were more than offset by lower price and mix, lower volumes, higher planned maintenance outages and higher unabsorbed costs due to economic downtime. Effective Tax Rate The reported effective tax rate for continuing operations for the second quarter of 2023 was 30%, compared to 31% for the first quarter of 2023. The lower rate for the second quarter was due to the mix of earnings in our regions. Excluding net special items, the effective tax rate for the second quarter of 2023 was 30%, compared with 30% for the first quarter of 2023. The effective tax rate excluding net special items is a non-GAAP financial measure and is calculated by adjusting the income tax provision from continuing operations and rate to exclude the tax effect of net special items. Management believes that this presentation provides useful information to investors by providing a more meaningful comparison of the income tax rate between past and present periods. Effects of Net Special Items Net special items related to continuing operations in the second quarter of 2023 amounted to a net after-tax charge of $0 million ($0.00 per diluted share) compared with net after-tax income of $11 million ($0.26 per diluted share) in the first quarter of 2023. Earnings Webcast The company will host an audio webcast at 10 a.m. EDT / 9 a.m. CDT. All interested parties are invited to listen at investors.sylvamo.com. Parties who wish to participate should call +1-877-336-4440 (U.S.) or +1-409-207-6984 (international) and use access code 763504. Participants should call in no later than 9:45 a.m. EDT / 8:45 a.m. CDT. Replays are available at investors.sylvamo.com for one year and by phone for 90 days, beginning at approximately 2 p.m. EDT / 1 p.m. CDT the day of the call. To listen to the replay by phone, call +1-866-207-1041 (U.S.) or +1-402-970-0847 (international) and use access code 3453720. About Sylvamo Sylvamo Corporation (NYSE: SLVM) is the world's paper company with mills in Europe, Latin America and North America. Our vision is to be the employer, supplier and investment of choice. We transform renewable resources into papers that people depend on for education, communication and entertainment. Headquartered in Memphis, Tennessee, we employ more than 6,500 colleagues. Net sales for 2022 were $3.6 billion. For more information, please visit Sylvamo.com. Forward-Looking Statements This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including the information under the headings "Third Quarter Outlook" and "Management Summary from Chairman and Chief Executive Officer Jean-Michel Ribiéras." Any or all forward-looking statements may turn out to be incorrect, and our actual actions and results could differ materially from what they express or imply, because they involve known and unknown risks, uncertainties and other factors, many of which are beyond our control. These risks, uncertainties, and other factors include those disclosed in the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended Dec. 31, 2022, filed with the U.S. Securities and Exchange Commission (SEC) and in our subsequent filings with the SEC, available on our website, Sylvamo.com. These forward-looking statements reflect our current expectations, and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. SYLVAMO CORPORATION Condensed Consolidated Statement of Operations Preliminary and Unaudited (In millions, except per share amounts) Three Months Ended June 30, Three Months Ended March 31, 2023 Six Months Ended June 30, 2023 2022 2023 2022 Net Sales $ 919 $ 912 $ 941 * $ 1,860 $ 1,733 Costs and Expenses Cost of products sold 721 659 (g) 670 *(d) 1,390 (a) 1,279 (g) Selling and administrative expenses 76 81 (h) 82 (e) 159 (b) 147 (h) Depreciation, amortization and cost of timber harvested 34 32 35 69 63 Taxes other than payroll and income taxes 6 6 6 12 12 Interest expense (income), net 12 17 7 (f) 19 (c) 34 Income From Continuing Operations Before Income Taxes 70 117 141 211 198 Income tax provision 21 33 44 65 59 Net Income From Continuing Operations 49 84 97 146 139 Discontinued operations, net of tax — (143 ) (i) — — (172 ) (j) Net Income (Loss) $ 49 $ (59 ) $ 97 $ 146 $ (33 ) Basic Earnings Per Share Income from continuing operations $ 1.16 $ 1.90 $ 2.28 $ 3.44 $ 3.15 Discontinued operations, net of taxes — (3.24 ) — — (3.90 ) Net earnings (loss) $ 1.16 $ (1.34 ) $ 2.28 $ 3.44 $ (0.75 ) Diluted Earnings Per Share Income from continuing operations $ 1.14 $ 1.89 $ 2.25 $ 3.40 $ 3.13 Discontinued operations, net of taxes — (3.22 ) — — (3.87 ) Net earnings (loss) $ 1.14 $ (1.33 ) $ 2.25 $ 3.40 $ (0.74 ) Average Shares of Common Stock Outstanding - Diluted 43 44 43 43 44 The accompanying notes are an integral part of this condensed consolidated statement of operations. *Includes adjustment to eliminate intra-segment sales in Europe Six Months Ended June 30, 2023 (a) Includes incremental expense of $9 million ($7 million after taxes) related to the impact of the step-up of acquired Nymölla inventory sold during the first quarter. (b) Includes a pre-tax loss of $4 million ($3 million after taxes) for transaction costs related to the Nymölla acquisition and a pre-tax loss of $4 million ($3 million after taxes) for professional and legal fees related to negotiations resulting in a shareholder cooperation agreement. (c) Includes $9 million ($6 million after taxes) of interest income related to tax settlements and a pre-tax loss of $5 million ($4 million after taxes) related to debt extinguishment costs. Three Months Ended March 31, 2023 (d) Includes incremental expense of $9 million ($7 million after taxes) related to the impact of the step-up of acquired Nymölla inventory sold during the quarter. (e) Includes a pre-tax loss of $4 million ($3 million after taxes) for transaction costs related to the Nymölla acquisition and pre-tax loss of $4 million ($3 million after taxes) for professional and legal fees related to negotiations resulting in a shareholder cooperation agreement. (f) Includes $9 million ($6 million after taxes) of interest income related to tax settlements and a pre-tax loss of $5 million ($4 million after taxes) related to debt extinguishment costs. Three Months and Six Months Ended June 30, 2022 (g) Includes pre-tax gain of $1 million ($1 million after taxes) for the three months ended June 30, 2022, and a pre-tax loss of $1 million ($1 million after taxes) for the six months ended June 30, 2022, for one-time costs associated with the spin-off. (h) Includes pre-tax loss of $9 million ($7 million after taxes) for the three months ended June 30, 2022, and a pre-tax loss of $12 million ($9 million after taxes) for the six months ended June 30, 2022, for one-time costs associated with the spin-off. (i) Includes a pre-tax charge of $156 million ($156 million after taxes) to reserve for the elimination of the cumulative foreign currency translation loss related to our Russian operations. (j) Includes a pre-tax charge of $156 million ($156 million after taxes) to reserve for the elimination of the cumulative foreign currency translation loss related to our Russian operations and a pre-tax charge of $68 million ($57 million after taxes) related to the impairment of our Russian fixed assets. SYLVAMO CORPORATION Reconciliation of Net Income to Adjusted Operating Earnings Preliminary and Unaudited (In millions, except per share amounts) Three Months Ended June 30, Three Months Ended March 31, 2023 Six Months Ended June 30, 2023 2022 2023 2022 Net Income (Loss) $ 49 $ (59 ) $ 97 $ 146 $ (33 ) Less: Discontinued operations, net of tax — (143 ) — — (172 ) Net income From Continuing Operations 49 84 97 146 139 Add back: Net special items expense (income) — 6 11 11 10 Adjusted Operating Earnings $ 49 $ 90 $ 108 $ 157 $ 149 Three Months Ended June 30, Three Months Ended March 31, 2023 Six Months Ended June 30, 2023 2022 2023 2022 Diluted Earnings (Loss) Per Common Share as Reported $ 1.14 $ (1.33 ) $ 2.25 $ 3.40 $ (0.74 ) Less: Discontinued operations, net of tax — (3.22 ) — — (3.87 ) Continuing Operations 1.14 1.89 2.25 3.40 3.13 Add back: Net special items expense (income) — 0.13 0.26 0.25 0.23 Adjusted Operating Earnings Per Share $ 1.14 $ 2.02 $ 2.51 $ 3.65 $ 3.36 SYLVAMO CORPORATION Sales and Earnings by Business Segment Preliminary and Unaudited (In millions) Net Sales by Business Segment Three Months Ended June 30, Three Months Ended March 31, 2023 Six Months Ended June 30, 2023 2022 2023 2022 Europe $ 210 $ 135 $ 230 * $ 440 $ 252 Latin America 250 249 222 472 464 North America 474 549 505 979 1,057 Inter-segment Sales (15 ) (21 ) (16 ) (31 ) (40 ) Net Sales $ 919 $ 912 $ 941 $ 1,860 $ 1,733 *Includes adjustment to eliminate intra-segment sales in Europe Operating Profit by Business Segment Three Months Ended June 30, Three Months Ended March 31, 2023 Six Months Ended June 30, 2023 2022 2023 2022 Europe $ (11 ) $ 17 $ 23 $ 12 $ 19 Latin America 48 59 46 94 98 North America 45 66 97 142 128 Business Segment Operating Profit $ 82 $ 142 $ 166 $ 248 $ 245 Income from Continuing Operations Before Income Taxes $ 70 $ 117 $ 141 $ 211 $ 198 Interest expense (income), net 12 17 7 (c) 19 (a) 34 Net special items expense (income) — 8 (e) 18 (d) 18 (b) 13 (e) Business Segment Operating Profit (f) $ 82 $ 142 $ 166 $ 248 $ 245 Six Months Ended June 30, 2023 (a) Includes $9 million ($6 million after taxes) of interest income related to tax settlements and a pre-tax loss of $5 million ($4 million after taxes) related to debt extinguishment costs. (b) Includes a pre-tax loss of $4 million ($3 million after taxes) for transaction costs related to the Nymölla acquisition, a pre-tax loss of $4 million ($3 million after taxes) for professional and legal fees related to negotiations resulting in a shareholder cooperation agreement and incremental expense of $9 million ($7 million after taxes) related to the impact of the step-up of acquired Nymölla inventory sold during the first quarter. Three Months Ended March 31, 2023 (c) Includes $9 million ($6 million after taxes) of interest income related to tax settlements and a pre-tax loss of $5 million ($4 million after taxes) related to debt extinguishment costs. (d) Includes a pre-tax loss of $4 million ($3 million after taxes) for transaction costs related to the Nymölla acquisition, a pre-tax loss of $4 million ($3 million after taxes) for professional and legal fees related to negotiations resulting in a shareholder cooperation agreement and incremental expense of $9 million ($7 million after taxes) related to the impact of the step-up of acquired Nymölla inventory sold during the quarter. Three Months Ended and Six Months Ended June 30, 2022 (e) Includes pre-tax loss of $8 million ($6 million after taxes) for the three months ended June 30, 2022, and a pre-tax loss of $13 million ($10 million after taxes) for the six months ended June 30, 2022, for one-time costs associated with the spin-off. (f) As set forth in the chart above, business segment operating profit is defined as income from continuing operations before income taxes, but excluding net interest expense (income) and net special items. Business segment operating profit is a measure reported to our management for purposes of making decisions about allocating resources to our business segments and assessing the performance of our business segments. Reconciliation of Net Income to Adjusted EBITDA and Adjusted EBITDA Margin Preliminary and Unaudited (In millions) Three Months Ended June 30, Three Months Ended March 31, 2023 Six Months Ended June 30, 2023 2022 2023 2022 Net Income (Loss) $ 49 $ (59 ) $ 97 $ 146 $ (33 ) Less: Discontinued operations, net of tax — (143 ) — — (172 ) Net Income From Continuing Operations 49 84 97 146 139 Adjustments: Income tax provision 21 33 44 65 59 Interest expense (income), net 12 17 7 19 34 Depreciation, amortization and cost of timber harvested 34 32 35 69 63 Stock-based compensation 8 7 7 15 11 Transition service agreement expense — 8 — — 16 Net special items expense (income) — 8 18 18 13 Adjusted EBITDA $ 124 $ 189 $ 208 $ 332 $ 335 Net Sales $ 919 $ 912 $ 941 * $ 1,860 $ 1,733 Adjusted EBITDA Margin 13.5 % 20.7 % 22.1 % 17.8 % 19.3 % *Includes adjustment to eliminate intra-segment sales in Europe Adjusted EBITDA and Adjusted EBITDA Margin by Business Segment Three Months Ended June 30, Three Months Ended March 31, 2023 Six Months Ended June 30, 2023 2022 2023 2022 Adjusted EBITDA Europe $ (3 ) $ 22 $ 31 $ 28 $ 30 Latin America 67 79 63 130 135 North America 60 88 114 174 170 Total Business Segment Adjusted EBITDA $ 124 $ 189 $ 208 $ 332 $ 335 Net Sales (excluding discontinued operations and inter-segment sales eliminations) Europe $ 210 $ 135 $ 230 * $ 440 $ 252 Latin America 250 249 222 472 464 North America 474 549 505 979 1,057 Total Business Segment Net Sales $ 934 $ 933 $ 957 $ 1,891 $ 1,773 Adjusted EBITDA Margin Europe (1 )% 16 % 13 % 6 % 12 % Latin America 27 % 32 % 28 % 28 % 29 % North America 13 % 16 % 23 % 18 % 16 % *Includes adjustment to eliminate intra-segment sales in Europe SYLVAMO CORPORATION Condensed Consolidated Balance Sheet Preliminary and Unaudited (In millions) June 30, 2023 December 31, 2022 Assets Current Assets Cash and temporary investments $ 164 $ 360 Accounts and notes receivable, net 440 450 Contract assets 32 30 Inventories 486 364 Other current assets 39 39 Total Current Assets 1,161 1,243 Plants, Properties and Equipment, Net 960 817 Forestlands 360 322 Goodwill 140 128 Right of Use Assets 43 35 Deferred Charges and Other Assets 159 165 Total Assets $ 2,823 $ 2,710 Liabilities and Equity Current Liabilities Accounts payable $ 391 $ 453 Notes payable and current maturities of long-term debt 79 29 Accrued payroll and benefits 50 81 Other current liabilities 147 165 Total Current Liabilities 667 728 Long-Term Debt 954 1,003 Deferred Income Taxes 212 183 Other Liabilities 128 118 Equity Common stock, $1 par value, 200.0 shares authorized, 44.5 shares and 44.2 shares issued and 41.9 shares and 42.6 shares outstanding at June 30, 2023 and December 31, 2022, respectively 45 44 Paid-In Capital 39 25 Retained Earnings 2,153 2,029 Accumulated Other Comprehensive Loss (1,248 ) (1,338 ) 989 760 Less: Common stock held in treasury, at cost, 2.6 shares and 1.6 shares at June 30, 2023 and December 31, 2022, respectively (127 ) (82 ) Total Equity 862 678 Total Liabilities and Equity $ 2,823 $ 2,710 Condensed Consolidated Statement of Cash Flows Preliminary and Unaudited (In millions) Six Months Ended June 30, 2023 2022 Operating Activities Net income from continuing operations $ 146 $ 139 Depreciation, amortization, and cost of timber harvested 69 63 Deferred income tax provision (benefit), net 4 2 Stock-based compensation 15 11 Changes in operating assets and liabilities and other Accounts and notes receivable 91 (58 ) Inventories (60 ) (33 ) Accounts payable and accrued liabilities (147 ) (31 ) Other 22 37 Cash Provided By Operating Activities from Continuing Operations 140 130 Cash Provided By Operating Activities from Discontinued Operations, net — 45 Cash Provided By Operating Activities 140 175 Investment Activities Invested in capital projects (105 ) (59 ) Acquisition of business (167 ) — Cash Provided By (Used for) Investment Activities from Continuing Operations (272 ) (59 ) Cash Provided By (Used for) Investment Activities from Discontinued Operations, net — (5 ) Cash Provided By (Used for) Investment Activities (272 ) (64 ) Financing Activities Dividends paid (21 ) — Issuance of debt 437 — Reduction of debt (443 ) (86 ) Repurchases of common stock (40 ) — Other (6 ) (6 ) Cash Provided By (Used for) Financing Activities from Continuing Operations (73 ) (92 ) Cash Provided By (Used for) Financing Activities from Discontinued Operations, net — — Cash Provided By (Used for) Financing Activities (73 ) (92 ) Effect of Exchange Rate Changes on Cash 9 42 Change in Cash Included in Assets Held for Sale — 63 Change in Cash and Temporary Investments (196 ) (2 ) Cash and Temporary Investments Beginning of the period 360 159 End of the period $ 164 $ 157 SYLVAMO CORPORATION Reconciliation of Cash Provided by Operations to Free Cash Flow Preliminary and Unaudited (In millions) Three Months Ended June 30, Three Months Ended March 31, 2023 Six Months Ended June 30, 2023 2022 2023 2022 Cash Provided By Operating Activities From Continuing Operations $ 77 $ 76 $ 63 $ 140 $ 130 Adjustments: Cash invested in capital projects (44 ) (37 ) (61 ) (105 ) (59 ) Free Cash Flow $ 33 $ 39 $ 2 $ 35 $ 71 Reconciliation of Net Income From Continuing Operations to Adjusted EBITDA - 2023 Outlook Estimates (In millions) Three Months Ended September 30, 2023 Twelve Months Ended December 31, 2023 Net Income From Continuing Operations $47 - $61 $226 - $250 Adjustments: Income tax provision 19 - 25 94 - 105 Interest expense (income), net 12 43 Depreciation, amortization and cost of timber harvested 38 145 Stock-based compensation 7 28 Net Special items expense 7 24 - 29 Adjusted EBITDA $130 - $150 $560 - $600 Reconciliation of Cash Provided by Operations to Free Cash Flow - 2023 Outlook Estimates (In millions) Twelve Months Ended December 31, 2023 Cash Provided By Operating Activities From Continuing Operations $435 - $480 Adjustments: Cash invested in capital projects (215 - 230) Free Cash Flow $220 - $250 The non-GAAP financial measures presented in this release have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of our results calculated in accordance with GAAP. In addition, because not all companies use identical calculations, the Company’s presentation of non-GAAP measures in this release may not be comparable to similarly titled measures disclosed by other companies, including companies in the same industry as Sylvamo. Management believes certain non-U.S. GAAP financial measures, when used in conjunction with information presented in accordance with U.S. GAAP, can facilitate a better understanding of the impact of various factors and trends on the Company’s financial condition and results of operations. Management also uses these non-U.S. GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company’s performance. View source version on businesswire.com: https://www.businesswire.com/news/home/20230809192612/en/Contacts Investor Contact: Hans Bjorkman, 901-519-8030, hans.bjorkman@sylvamo.com Media Contact: Adam Ghassemi, 901-519-8115, adam.ghassemi@sylvamo.com Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
Sylvamo Quarterly Results Meet Guidance By: Sylvamo via Business Wire August 09, 2023 at 07:00 AM EDT Slower Demand Recovery Drives Revised Annual Outlook, Company Remains Committed to $125 Million in Cash Returns Sylvamo (NYSE: SLVM), the world’s paper company, is releasing second quarter 2023 earnings. Financial Highlights – Second Quarter vs. First Quarter Net income from continuing operations of $49 million ($1.14 per diluted share) vs. $97 million ($2.25 per diluted share) Adjusted operating earnings1 (non-GAAP) of $49 million ($1.14 per diluted share) vs. $108 million ($2.51 per diluted share) Adjusted EBITDA2 (non-GAAP) of $124 million (13.5% margin) vs. $208 million (22.1% margin) Cash provided by operating activities from continuing operations of $77 million vs. $63 million Free cash flow3 (non-GAAP) of $33 million vs. $2 million Commercial and Operational Highlights – Second Quarter vs. First Quarter Price and mix decreased by $38 million due primarily to lower paper prices in Europe, less favorable mix in Latin America and North America and lower global pulp prices Volume decreased by $2 million due to lower paper demand in North America and continued channel inventory corrections in Europe and North America, which more than offset seasonally stronger demand in Latin America Operations and other costs increased by $10 million, primarily driven by $15 million in higher unabsorbed fixed costs from increased economic downtime Planned maintenance outage expenses increased by $58 million, in line with guidance, during the heaviest outage quarter of the year Input costs improved by $24 million, driven by favorable energy, chemical and transportation costs Third Quarter Outlook Adjusted EBITDA of $130 million to $150 million Compared to the second quarter: Price and mix are expected to decrease by $60 million to $65 million Volume is projected to improve by $15 million to $20 million, with seasonally stronger volume in Latin America and North America Operations and other costs are expected to increase by $5 million to $10 million, mainly due to unabsorbed fixed costs while matching paper production with Sylvamo customer demand Input and transportation costs are projected to improve by $15 million to $20 million, with favorable trends in fiber and chemicals Total planned maintenance outage expenses are expected to decrease by $54 million Management Summary from Chairman and Chief Executive Officer Jean-Michel Ribiéras We achieved our second quarter earnings per share and adjusted EBITDA objectives. We delivered these results while facing challenging market conditions and during our heaviest planned maintenance outage quarter. Our sales volumes were similar to the first quarter. The expected seasonal increase in volume did not materialize due to continued inventory corrections in Europe and North America, decreased demand due to Europe’s slowing economies and economic uncertainty in North America. Consequently, during the second quarter in Europe and North America, we took approximately 120,000 tons of economic downtime, roughly double the first quarter level. We also conducted extensive annual maintenance outages, which we executed safely and efficiently. With respect to paper demand, we believe that our customers have completed the majority of their inventory corrections. We are now seeing very early indications that global advertising may be starting to rebound and we would expect demand in Europe and North America to begin to improve. In the second quarter, we returned $41 million of cash to shareowners through dividends and share repurchases for a total of $61 million in cash returns in the first half of 2023. Our board of directors declared a quarterly dividend of $0.25 per share for the third quarter, which we paid July 6. We remain committed to returning a total of $125 million in cash to shareowners this year. We now project adjusted EBITDA of $560 million to $600 million (formerly $720 million to $770 million) for 2023, reflecting lower paper demand and inventory channel corrections in Europe and North America, updated views on pulp and paper price and mix as well as higher unabsorbed fixed costs. These more than offset favorable input, transportation and operation cost trends. We continue to focus on free cash flow generation and now project free cash flow of $220 million to $250 million (formerly $250 million to $280 million.) We will continue implementing our three-pronged strategy of commercial excellence, operational excellence and financial discipline. We expect to reduce costs and working capital to maximize earnings and free cash flow in the second half of the year. We will also continue to reinvest in our company to exit the downturn in an even stronger competitive position. 1 Adjusted Operating Earnings (non-GAAP) are net income (loss) (GAAP) excluding discontinued operations, net of tax and net special items. Management uses this measure to focus on ongoing operations and believes it is useful to investors because it enables them to perform meaningful comparisons of past and present combined operating results. The Company believes that using this information, along with net income (loss), provides for a more complete analysis of the results of operations. Net income (loss) is the most directly comparable GAAP measure. For more information regarding net special items, see the information under the heading Effects of Net Special Items and the Condensed Consolidated Statement of Operations and related notes included later in this release. 2 Adjusted EBITDA (non-GAAP) is net income (loss) (GAAP) excluding discontinued operations, net of tax, plus the sum of income taxes, net interest expense (income), depreciation, amortization and cost of timber harvested, transition service agreement expense, stock-based compensation, and, when applicable for the periods reported, net special items. Management uses this measure in managing the operating performance of our business and believes that Adjusted EBITDA and Adjusted EBITDA Margin provide investors and analysts meaningful insights into our operating performance and Adjusted EBITDA is a relevant metric for the third-party debt. The Company believes that using this information, along with net income (loss), provides for a more complete analysis of the results of its operations. Net income (loss) is the most directly comparable GAAP measure. For more information regarding net special items, see the information under the heading Effects of Net Special Items and the Condensed Consolidated Statement of Operations and related notes included later in this release. 3 Free Cash Flow is a non-GAAP measure and the most directly comparable GAAP measure is cash provided by operating activities from continuing operations. Management utilizes this measure in connection with managing our business and believes that Free Cash Flow is useful to investors as a liquidity measure because it measures the amount of cash generated that is available, after reinvesting in the business, to maintain a strong balance sheet and service debt, and return cash to shareowners. It should not be inferred that the entire Free Cash Flow amount is available for discretionary expenditures. Free Cash Flow also enables investors to perform meaningful comparisons between past and present periods. Select Financial Measures (In millions) Second Quarter 2023 First Quarter 2023 Second Quarter 2022 Net Sales $ 919 $ 941 * $ 912 Net Income from Continuing Operations 49 97 84 Net Income 49 97 (59 ) Business Segment Operating Profit 82 166 142 Adjusted Operating Earnings 49 108 90 Adjusted EBITDA 124 208 189 Cash Provided By Operating Activities From Continuing Operations 77 63 76 Free Cash Flow 33 2 39 *Includes adjustment to eliminate intra-segment sales in Europe Segment Information Sylvamo uses business segment operating profit to measure the earnings performance of its businesses and is calculated as set forth in footnote (f) under the "Sales and Earnings by Business Segment" table (page 8). Second quarter 2023 net sales by business segment and operating profit by business segment compared with the first quarter of 2023 and the second quarter of 2023 are as follows: Business Segment Results (In millions) Second Quarter 2023 First Quarter 2023 Second Quarter 2022 Net Sales by Business Segment Europe $ 210 $ 230 * $ 135 Latin America 250 222 249 North America 474 505 549 Inter-segment Sales (15 ) (16 ) (21 ) Net Sales $ 919 $ 941 $ 912 Operating Profit by Business Segment Europe $ (11 ) $ 23 $ 17 Latin America 48 46 59 North America 45 97 66 Business Segment Operating Profit $ 82 $ 166 $ 142 *Includes adjustment to eliminate intra-segment sales in Europe Operating profits in the second quarter of 2023: Europe - $(11) million compared with $23 million in the first quarter of 2023. Earnings were lower as lower operating and input costs were more than offset by lower price and mix, higher planned maintenance outages, higher unabsorbed costs due to economic downtime and lower operating profit contributed by Nymolla. Latin America - $48 million compared with $46 million in the first quarter of 2023. Earnings were slightly higher as higher volumes and lower operating and input costs more than offset lower price and mix and higher planned maintenance outages. North America - $45 million compared with $97 million in the first quarter of 2023. Earnings were lower as lower input costs were more than offset by lower price and mix, lower volumes, higher planned maintenance outages and higher unabsorbed costs due to economic downtime. Effective Tax Rate The reported effective tax rate for continuing operations for the second quarter of 2023 was 30%, compared to 31% for the first quarter of 2023. The lower rate for the second quarter was due to the mix of earnings in our regions. Excluding net special items, the effective tax rate for the second quarter of 2023 was 30%, compared with 30% for the first quarter of 2023. The effective tax rate excluding net special items is a non-GAAP financial measure and is calculated by adjusting the income tax provision from continuing operations and rate to exclude the tax effect of net special items. Management believes that this presentation provides useful information to investors by providing a more meaningful comparison of the income tax rate between past and present periods. Effects of Net Special Items Net special items related to continuing operations in the second quarter of 2023 amounted to a net after-tax charge of $0 million ($0.00 per diluted share) compared with net after-tax income of $11 million ($0.26 per diluted share) in the first quarter of 2023. Earnings Webcast The company will host an audio webcast at 10 a.m. EDT / 9 a.m. CDT. All interested parties are invited to listen at investors.sylvamo.com. Parties who wish to participate should call +1-877-336-4440 (U.S.) or +1-409-207-6984 (international) and use access code 763504. Participants should call in no later than 9:45 a.m. EDT / 8:45 a.m. CDT. Replays are available at investors.sylvamo.com for one year and by phone for 90 days, beginning at approximately 2 p.m. EDT / 1 p.m. CDT the day of the call. To listen to the replay by phone, call +1-866-207-1041 (U.S.) or +1-402-970-0847 (international) and use access code 3453720. About Sylvamo Sylvamo Corporation (NYSE: SLVM) is the world's paper company with mills in Europe, Latin America and North America. Our vision is to be the employer, supplier and investment of choice. We transform renewable resources into papers that people depend on for education, communication and entertainment. Headquartered in Memphis, Tennessee, we employ more than 6,500 colleagues. Net sales for 2022 were $3.6 billion. For more information, please visit Sylvamo.com. Forward-Looking Statements This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including the information under the headings "Third Quarter Outlook" and "Management Summary from Chairman and Chief Executive Officer Jean-Michel Ribiéras." Any or all forward-looking statements may turn out to be incorrect, and our actual actions and results could differ materially from what they express or imply, because they involve known and unknown risks, uncertainties and other factors, many of which are beyond our control. These risks, uncertainties, and other factors include those disclosed in the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended Dec. 31, 2022, filed with the U.S. Securities and Exchange Commission (SEC) and in our subsequent filings with the SEC, available on our website, Sylvamo.com. These forward-looking statements reflect our current expectations, and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. SYLVAMO CORPORATION Condensed Consolidated Statement of Operations Preliminary and Unaudited (In millions, except per share amounts) Three Months Ended June 30, Three Months Ended March 31, 2023 Six Months Ended June 30, 2023 2022 2023 2022 Net Sales $ 919 $ 912 $ 941 * $ 1,860 $ 1,733 Costs and Expenses Cost of products sold 721 659 (g) 670 *(d) 1,390 (a) 1,279 (g) Selling and administrative expenses 76 81 (h) 82 (e) 159 (b) 147 (h) Depreciation, amortization and cost of timber harvested 34 32 35 69 63 Taxes other than payroll and income taxes 6 6 6 12 12 Interest expense (income), net 12 17 7 (f) 19 (c) 34 Income From Continuing Operations Before Income Taxes 70 117 141 211 198 Income tax provision 21 33 44 65 59 Net Income From Continuing Operations 49 84 97 146 139 Discontinued operations, net of tax — (143 ) (i) — — (172 ) (j) Net Income (Loss) $ 49 $ (59 ) $ 97 $ 146 $ (33 ) Basic Earnings Per Share Income from continuing operations $ 1.16 $ 1.90 $ 2.28 $ 3.44 $ 3.15 Discontinued operations, net of taxes — (3.24 ) — — (3.90 ) Net earnings (loss) $ 1.16 $ (1.34 ) $ 2.28 $ 3.44 $ (0.75 ) Diluted Earnings Per Share Income from continuing operations $ 1.14 $ 1.89 $ 2.25 $ 3.40 $ 3.13 Discontinued operations, net of taxes — (3.22 ) — — (3.87 ) Net earnings (loss) $ 1.14 $ (1.33 ) $ 2.25 $ 3.40 $ (0.74 ) Average Shares of Common Stock Outstanding - Diluted 43 44 43 43 44 The accompanying notes are an integral part of this condensed consolidated statement of operations. *Includes adjustment to eliminate intra-segment sales in Europe Six Months Ended June 30, 2023 (a) Includes incremental expense of $9 million ($7 million after taxes) related to the impact of the step-up of acquired Nymölla inventory sold during the first quarter. (b) Includes a pre-tax loss of $4 million ($3 million after taxes) for transaction costs related to the Nymölla acquisition and a pre-tax loss of $4 million ($3 million after taxes) for professional and legal fees related to negotiations resulting in a shareholder cooperation agreement. (c) Includes $9 million ($6 million after taxes) of interest income related to tax settlements and a pre-tax loss of $5 million ($4 million after taxes) related to debt extinguishment costs. Three Months Ended March 31, 2023 (d) Includes incremental expense of $9 million ($7 million after taxes) related to the impact of the step-up of acquired Nymölla inventory sold during the quarter. (e) Includes a pre-tax loss of $4 million ($3 million after taxes) for transaction costs related to the Nymölla acquisition and pre-tax loss of $4 million ($3 million after taxes) for professional and legal fees related to negotiations resulting in a shareholder cooperation agreement. (f) Includes $9 million ($6 million after taxes) of interest income related to tax settlements and a pre-tax loss of $5 million ($4 million after taxes) related to debt extinguishment costs. Three Months and Six Months Ended June 30, 2022 (g) Includes pre-tax gain of $1 million ($1 million after taxes) for the three months ended June 30, 2022, and a pre-tax loss of $1 million ($1 million after taxes) for the six months ended June 30, 2022, for one-time costs associated with the spin-off. (h) Includes pre-tax loss of $9 million ($7 million after taxes) for the three months ended June 30, 2022, and a pre-tax loss of $12 million ($9 million after taxes) for the six months ended June 30, 2022, for one-time costs associated with the spin-off. (i) Includes a pre-tax charge of $156 million ($156 million after taxes) to reserve for the elimination of the cumulative foreign currency translation loss related to our Russian operations. (j) Includes a pre-tax charge of $156 million ($156 million after taxes) to reserve for the elimination of the cumulative foreign currency translation loss related to our Russian operations and a pre-tax charge of $68 million ($57 million after taxes) related to the impairment of our Russian fixed assets. SYLVAMO CORPORATION Reconciliation of Net Income to Adjusted Operating Earnings Preliminary and Unaudited (In millions, except per share amounts) Three Months Ended June 30, Three Months Ended March 31, 2023 Six Months Ended June 30, 2023 2022 2023 2022 Net Income (Loss) $ 49 $ (59 ) $ 97 $ 146 $ (33 ) Less: Discontinued operations, net of tax — (143 ) — — (172 ) Net income From Continuing Operations 49 84 97 146 139 Add back: Net special items expense (income) — 6 11 11 10 Adjusted Operating Earnings $ 49 $ 90 $ 108 $ 157 $ 149 Three Months Ended June 30, Three Months Ended March 31, 2023 Six Months Ended June 30, 2023 2022 2023 2022 Diluted Earnings (Loss) Per Common Share as Reported $ 1.14 $ (1.33 ) $ 2.25 $ 3.40 $ (0.74 ) Less: Discontinued operations, net of tax — (3.22 ) — — (3.87 ) Continuing Operations 1.14 1.89 2.25 3.40 3.13 Add back: Net special items expense (income) — 0.13 0.26 0.25 0.23 Adjusted Operating Earnings Per Share $ 1.14 $ 2.02 $ 2.51 $ 3.65 $ 3.36 SYLVAMO CORPORATION Sales and Earnings by Business Segment Preliminary and Unaudited (In millions) Net Sales by Business Segment Three Months Ended June 30, Three Months Ended March 31, 2023 Six Months Ended June 30, 2023 2022 2023 2022 Europe $ 210 $ 135 $ 230 * $ 440 $ 252 Latin America 250 249 222 472 464 North America 474 549 505 979 1,057 Inter-segment Sales (15 ) (21 ) (16 ) (31 ) (40 ) Net Sales $ 919 $ 912 $ 941 $ 1,860 $ 1,733 *Includes adjustment to eliminate intra-segment sales in Europe Operating Profit by Business Segment Three Months Ended June 30, Three Months Ended March 31, 2023 Six Months Ended June 30, 2023 2022 2023 2022 Europe $ (11 ) $ 17 $ 23 $ 12 $ 19 Latin America 48 59 46 94 98 North America 45 66 97 142 128 Business Segment Operating Profit $ 82 $ 142 $ 166 $ 248 $ 245 Income from Continuing Operations Before Income Taxes $ 70 $ 117 $ 141 $ 211 $ 198 Interest expense (income), net 12 17 7 (c) 19 (a) 34 Net special items expense (income) — 8 (e) 18 (d) 18 (b) 13 (e) Business Segment Operating Profit (f) $ 82 $ 142 $ 166 $ 248 $ 245 Six Months Ended June 30, 2023 (a) Includes $9 million ($6 million after taxes) of interest income related to tax settlements and a pre-tax loss of $5 million ($4 million after taxes) related to debt extinguishment costs. (b) Includes a pre-tax loss of $4 million ($3 million after taxes) for transaction costs related to the Nymölla acquisition, a pre-tax loss of $4 million ($3 million after taxes) for professional and legal fees related to negotiations resulting in a shareholder cooperation agreement and incremental expense of $9 million ($7 million after taxes) related to the impact of the step-up of acquired Nymölla inventory sold during the first quarter. Three Months Ended March 31, 2023 (c) Includes $9 million ($6 million after taxes) of interest income related to tax settlements and a pre-tax loss of $5 million ($4 million after taxes) related to debt extinguishment costs. (d) Includes a pre-tax loss of $4 million ($3 million after taxes) for transaction costs related to the Nymölla acquisition, a pre-tax loss of $4 million ($3 million after taxes) for professional and legal fees related to negotiations resulting in a shareholder cooperation agreement and incremental expense of $9 million ($7 million after taxes) related to the impact of the step-up of acquired Nymölla inventory sold during the quarter. Three Months Ended and Six Months Ended June 30, 2022 (e) Includes pre-tax loss of $8 million ($6 million after taxes) for the three months ended June 30, 2022, and a pre-tax loss of $13 million ($10 million after taxes) for the six months ended June 30, 2022, for one-time costs associated with the spin-off. (f) As set forth in the chart above, business segment operating profit is defined as income from continuing operations before income taxes, but excluding net interest expense (income) and net special items. Business segment operating profit is a measure reported to our management for purposes of making decisions about allocating resources to our business segments and assessing the performance of our business segments. Reconciliation of Net Income to Adjusted EBITDA and Adjusted EBITDA Margin Preliminary and Unaudited (In millions) Three Months Ended June 30, Three Months Ended March 31, 2023 Six Months Ended June 30, 2023 2022 2023 2022 Net Income (Loss) $ 49 $ (59 ) $ 97 $ 146 $ (33 ) Less: Discontinued operations, net of tax — (143 ) — — (172 ) Net Income From Continuing Operations 49 84 97 146 139 Adjustments: Income tax provision 21 33 44 65 59 Interest expense (income), net 12 17 7 19 34 Depreciation, amortization and cost of timber harvested 34 32 35 69 63 Stock-based compensation 8 7 7 15 11 Transition service agreement expense — 8 — — 16 Net special items expense (income) — 8 18 18 13 Adjusted EBITDA $ 124 $ 189 $ 208 $ 332 $ 335 Net Sales $ 919 $ 912 $ 941 * $ 1,860 $ 1,733 Adjusted EBITDA Margin 13.5 % 20.7 % 22.1 % 17.8 % 19.3 % *Includes adjustment to eliminate intra-segment sales in Europe Adjusted EBITDA and Adjusted EBITDA Margin by Business Segment Three Months Ended June 30, Three Months Ended March 31, 2023 Six Months Ended June 30, 2023 2022 2023 2022 Adjusted EBITDA Europe $ (3 ) $ 22 $ 31 $ 28 $ 30 Latin America 67 79 63 130 135 North America 60 88 114 174 170 Total Business Segment Adjusted EBITDA $ 124 $ 189 $ 208 $ 332 $ 335 Net Sales (excluding discontinued operations and inter-segment sales eliminations) Europe $ 210 $ 135 $ 230 * $ 440 $ 252 Latin America 250 249 222 472 464 North America 474 549 505 979 1,057 Total Business Segment Net Sales $ 934 $ 933 $ 957 $ 1,891 $ 1,773 Adjusted EBITDA Margin Europe (1 )% 16 % 13 % 6 % 12 % Latin America 27 % 32 % 28 % 28 % 29 % North America 13 % 16 % 23 % 18 % 16 % *Includes adjustment to eliminate intra-segment sales in Europe SYLVAMO CORPORATION Condensed Consolidated Balance Sheet Preliminary and Unaudited (In millions) June 30, 2023 December 31, 2022 Assets Current Assets Cash and temporary investments $ 164 $ 360 Accounts and notes receivable, net 440 450 Contract assets 32 30 Inventories 486 364 Other current assets 39 39 Total Current Assets 1,161 1,243 Plants, Properties and Equipment, Net 960 817 Forestlands 360 322 Goodwill 140 128 Right of Use Assets 43 35 Deferred Charges and Other Assets 159 165 Total Assets $ 2,823 $ 2,710 Liabilities and Equity Current Liabilities Accounts payable $ 391 $ 453 Notes payable and current maturities of long-term debt 79 29 Accrued payroll and benefits 50 81 Other current liabilities 147 165 Total Current Liabilities 667 728 Long-Term Debt 954 1,003 Deferred Income Taxes 212 183 Other Liabilities 128 118 Equity Common stock, $1 par value, 200.0 shares authorized, 44.5 shares and 44.2 shares issued and 41.9 shares and 42.6 shares outstanding at June 30, 2023 and December 31, 2022, respectively 45 44 Paid-In Capital 39 25 Retained Earnings 2,153 2,029 Accumulated Other Comprehensive Loss (1,248 ) (1,338 ) 989 760 Less: Common stock held in treasury, at cost, 2.6 shares and 1.6 shares at June 30, 2023 and December 31, 2022, respectively (127 ) (82 ) Total Equity 862 678 Total Liabilities and Equity $ 2,823 $ 2,710 Condensed Consolidated Statement of Cash Flows Preliminary and Unaudited (In millions) Six Months Ended June 30, 2023 2022 Operating Activities Net income from continuing operations $ 146 $ 139 Depreciation, amortization, and cost of timber harvested 69 63 Deferred income tax provision (benefit), net 4 2 Stock-based compensation 15 11 Changes in operating assets and liabilities and other Accounts and notes receivable 91 (58 ) Inventories (60 ) (33 ) Accounts payable and accrued liabilities (147 ) (31 ) Other 22 37 Cash Provided By Operating Activities from Continuing Operations 140 130 Cash Provided By Operating Activities from Discontinued Operations, net — 45 Cash Provided By Operating Activities 140 175 Investment Activities Invested in capital projects (105 ) (59 ) Acquisition of business (167 ) — Cash Provided By (Used for) Investment Activities from Continuing Operations (272 ) (59 ) Cash Provided By (Used for) Investment Activities from Discontinued Operations, net — (5 ) Cash Provided By (Used for) Investment Activities (272 ) (64 ) Financing Activities Dividends paid (21 ) — Issuance of debt 437 — Reduction of debt (443 ) (86 ) Repurchases of common stock (40 ) — Other (6 ) (6 ) Cash Provided By (Used for) Financing Activities from Continuing Operations (73 ) (92 ) Cash Provided By (Used for) Financing Activities from Discontinued Operations, net — — Cash Provided By (Used for) Financing Activities (73 ) (92 ) Effect of Exchange Rate Changes on Cash 9 42 Change in Cash Included in Assets Held for Sale — 63 Change in Cash and Temporary Investments (196 ) (2 ) Cash and Temporary Investments Beginning of the period 360 159 End of the period $ 164 $ 157 SYLVAMO CORPORATION Reconciliation of Cash Provided by Operations to Free Cash Flow Preliminary and Unaudited (In millions) Three Months Ended June 30, Three Months Ended March 31, 2023 Six Months Ended June 30, 2023 2022 2023 2022 Cash Provided By Operating Activities From Continuing Operations $ 77 $ 76 $ 63 $ 140 $ 130 Adjustments: Cash invested in capital projects (44 ) (37 ) (61 ) (105 ) (59 ) Free Cash Flow $ 33 $ 39 $ 2 $ 35 $ 71 Reconciliation of Net Income From Continuing Operations to Adjusted EBITDA - 2023 Outlook Estimates (In millions) Three Months Ended September 30, 2023 Twelve Months Ended December 31, 2023 Net Income From Continuing Operations $47 - $61 $226 - $250 Adjustments: Income tax provision 19 - 25 94 - 105 Interest expense (income), net 12 43 Depreciation, amortization and cost of timber harvested 38 145 Stock-based compensation 7 28 Net Special items expense 7 24 - 29 Adjusted EBITDA $130 - $150 $560 - $600 Reconciliation of Cash Provided by Operations to Free Cash Flow - 2023 Outlook Estimates (In millions) Twelve Months Ended December 31, 2023 Cash Provided By Operating Activities From Continuing Operations $435 - $480 Adjustments: Cash invested in capital projects (215 - 230) Free Cash Flow $220 - $250 The non-GAAP financial measures presented in this release have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of our results calculated in accordance with GAAP. In addition, because not all companies use identical calculations, the Company’s presentation of non-GAAP measures in this release may not be comparable to similarly titled measures disclosed by other companies, including companies in the same industry as Sylvamo. Management believes certain non-U.S. GAAP financial measures, when used in conjunction with information presented in accordance with U.S. GAAP, can facilitate a better understanding of the impact of various factors and trends on the Company’s financial condition and results of operations. Management also uses these non-U.S. GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company’s performance. View source version on businesswire.com: https://www.businesswire.com/news/home/20230809192612/en/Contacts Investor Contact: Hans Bjorkman, 901-519-8030, hans.bjorkman@sylvamo.com Media Contact: Adam Ghassemi, 901-519-8115, adam.ghassemi@sylvamo.com
Slower Demand Recovery Drives Revised Annual Outlook, Company Remains Committed to $125 Million in Cash Returns
Sylvamo (NYSE: SLVM), the world’s paper company, is releasing second quarter 2023 earnings. Financial Highlights – Second Quarter vs. First Quarter Net income from continuing operations of $49 million ($1.14 per diluted share) vs. $97 million ($2.25 per diluted share) Adjusted operating earnings1 (non-GAAP) of $49 million ($1.14 per diluted share) vs. $108 million ($2.51 per diluted share) Adjusted EBITDA2 (non-GAAP) of $124 million (13.5% margin) vs. $208 million (22.1% margin) Cash provided by operating activities from continuing operations of $77 million vs. $63 million Free cash flow3 (non-GAAP) of $33 million vs. $2 million Commercial and Operational Highlights – Second Quarter vs. First Quarter Price and mix decreased by $38 million due primarily to lower paper prices in Europe, less favorable mix in Latin America and North America and lower global pulp prices Volume decreased by $2 million due to lower paper demand in North America and continued channel inventory corrections in Europe and North America, which more than offset seasonally stronger demand in Latin America Operations and other costs increased by $10 million, primarily driven by $15 million in higher unabsorbed fixed costs from increased economic downtime Planned maintenance outage expenses increased by $58 million, in line with guidance, during the heaviest outage quarter of the year Input costs improved by $24 million, driven by favorable energy, chemical and transportation costs Third Quarter Outlook Adjusted EBITDA of $130 million to $150 million Compared to the second quarter: Price and mix are expected to decrease by $60 million to $65 million Volume is projected to improve by $15 million to $20 million, with seasonally stronger volume in Latin America and North America Operations and other costs are expected to increase by $5 million to $10 million, mainly due to unabsorbed fixed costs while matching paper production with Sylvamo customer demand Input and transportation costs are projected to improve by $15 million to $20 million, with favorable trends in fiber and chemicals Total planned maintenance outage expenses are expected to decrease by $54 million Management Summary from Chairman and Chief Executive Officer Jean-Michel Ribiéras We achieved our second quarter earnings per share and adjusted EBITDA objectives. We delivered these results while facing challenging market conditions and during our heaviest planned maintenance outage quarter. Our sales volumes were similar to the first quarter. The expected seasonal increase in volume did not materialize due to continued inventory corrections in Europe and North America, decreased demand due to Europe’s slowing economies and economic uncertainty in North America. Consequently, during the second quarter in Europe and North America, we took approximately 120,000 tons of economic downtime, roughly double the first quarter level. We also conducted extensive annual maintenance outages, which we executed safely and efficiently. With respect to paper demand, we believe that our customers have completed the majority of their inventory corrections. We are now seeing very early indications that global advertising may be starting to rebound and we would expect demand in Europe and North America to begin to improve. In the second quarter, we returned $41 million of cash to shareowners through dividends and share repurchases for a total of $61 million in cash returns in the first half of 2023. Our board of directors declared a quarterly dividend of $0.25 per share for the third quarter, which we paid July 6. We remain committed to returning a total of $125 million in cash to shareowners this year. We now project adjusted EBITDA of $560 million to $600 million (formerly $720 million to $770 million) for 2023, reflecting lower paper demand and inventory channel corrections in Europe and North America, updated views on pulp and paper price and mix as well as higher unabsorbed fixed costs. These more than offset favorable input, transportation and operation cost trends. We continue to focus on free cash flow generation and now project free cash flow of $220 million to $250 million (formerly $250 million to $280 million.) We will continue implementing our three-pronged strategy of commercial excellence, operational excellence and financial discipline. We expect to reduce costs and working capital to maximize earnings and free cash flow in the second half of the year. We will also continue to reinvest in our company to exit the downturn in an even stronger competitive position. 1 Adjusted Operating Earnings (non-GAAP) are net income (loss) (GAAP) excluding discontinued operations, net of tax and net special items. Management uses this measure to focus on ongoing operations and believes it is useful to investors because it enables them to perform meaningful comparisons of past and present combined operating results. The Company believes that using this information, along with net income (loss), provides for a more complete analysis of the results of operations. Net income (loss) is the most directly comparable GAAP measure. For more information regarding net special items, see the information under the heading Effects of Net Special Items and the Condensed Consolidated Statement of Operations and related notes included later in this release. 2 Adjusted EBITDA (non-GAAP) is net income (loss) (GAAP) excluding discontinued operations, net of tax, plus the sum of income taxes, net interest expense (income), depreciation, amortization and cost of timber harvested, transition service agreement expense, stock-based compensation, and, when applicable for the periods reported, net special items. Management uses this measure in managing the operating performance of our business and believes that Adjusted EBITDA and Adjusted EBITDA Margin provide investors and analysts meaningful insights into our operating performance and Adjusted EBITDA is a relevant metric for the third-party debt. The Company believes that using this information, along with net income (loss), provides for a more complete analysis of the results of its operations. Net income (loss) is the most directly comparable GAAP measure. For more information regarding net special items, see the information under the heading Effects of Net Special Items and the Condensed Consolidated Statement of Operations and related notes included later in this release. 3 Free Cash Flow is a non-GAAP measure and the most directly comparable GAAP measure is cash provided by operating activities from continuing operations. Management utilizes this measure in connection with managing our business and believes that Free Cash Flow is useful to investors as a liquidity measure because it measures the amount of cash generated that is available, after reinvesting in the business, to maintain a strong balance sheet and service debt, and return cash to shareowners. It should not be inferred that the entire Free Cash Flow amount is available for discretionary expenditures. Free Cash Flow also enables investors to perform meaningful comparisons between past and present periods. Select Financial Measures (In millions) Second Quarter 2023 First Quarter 2023 Second Quarter 2022 Net Sales $ 919 $ 941 * $ 912 Net Income from Continuing Operations 49 97 84 Net Income 49 97 (59 ) Business Segment Operating Profit 82 166 142 Adjusted Operating Earnings 49 108 90 Adjusted EBITDA 124 208 189 Cash Provided By Operating Activities From Continuing Operations 77 63 76 Free Cash Flow 33 2 39 *Includes adjustment to eliminate intra-segment sales in Europe Segment Information Sylvamo uses business segment operating profit to measure the earnings performance of its businesses and is calculated as set forth in footnote (f) under the "Sales and Earnings by Business Segment" table (page 8). Second quarter 2023 net sales by business segment and operating profit by business segment compared with the first quarter of 2023 and the second quarter of 2023 are as follows: Business Segment Results (In millions) Second Quarter 2023 First Quarter 2023 Second Quarter 2022 Net Sales by Business Segment Europe $ 210 $ 230 * $ 135 Latin America 250 222 249 North America 474 505 549 Inter-segment Sales (15 ) (16 ) (21 ) Net Sales $ 919 $ 941 $ 912 Operating Profit by Business Segment Europe $ (11 ) $ 23 $ 17 Latin America 48 46 59 North America 45 97 66 Business Segment Operating Profit $ 82 $ 166 $ 142 *Includes adjustment to eliminate intra-segment sales in Europe Operating profits in the second quarter of 2023: Europe - $(11) million compared with $23 million in the first quarter of 2023. Earnings were lower as lower operating and input costs were more than offset by lower price and mix, higher planned maintenance outages, higher unabsorbed costs due to economic downtime and lower operating profit contributed by Nymolla. Latin America - $48 million compared with $46 million in the first quarter of 2023. Earnings were slightly higher as higher volumes and lower operating and input costs more than offset lower price and mix and higher planned maintenance outages. North America - $45 million compared with $97 million in the first quarter of 2023. Earnings were lower as lower input costs were more than offset by lower price and mix, lower volumes, higher planned maintenance outages and higher unabsorbed costs due to economic downtime. Effective Tax Rate The reported effective tax rate for continuing operations for the second quarter of 2023 was 30%, compared to 31% for the first quarter of 2023. The lower rate for the second quarter was due to the mix of earnings in our regions. Excluding net special items, the effective tax rate for the second quarter of 2023 was 30%, compared with 30% for the first quarter of 2023. The effective tax rate excluding net special items is a non-GAAP financial measure and is calculated by adjusting the income tax provision from continuing operations and rate to exclude the tax effect of net special items. Management believes that this presentation provides useful information to investors by providing a more meaningful comparison of the income tax rate between past and present periods. Effects of Net Special Items Net special items related to continuing operations in the second quarter of 2023 amounted to a net after-tax charge of $0 million ($0.00 per diluted share) compared with net after-tax income of $11 million ($0.26 per diluted share) in the first quarter of 2023. Earnings Webcast The company will host an audio webcast at 10 a.m. EDT / 9 a.m. CDT. All interested parties are invited to listen at investors.sylvamo.com. Parties who wish to participate should call +1-877-336-4440 (U.S.) or +1-409-207-6984 (international) and use access code 763504. Participants should call in no later than 9:45 a.m. EDT / 8:45 a.m. CDT. Replays are available at investors.sylvamo.com for one year and by phone for 90 days, beginning at approximately 2 p.m. EDT / 1 p.m. CDT the day of the call. To listen to the replay by phone, call +1-866-207-1041 (U.S.) or +1-402-970-0847 (international) and use access code 3453720. About Sylvamo Sylvamo Corporation (NYSE: SLVM) is the world's paper company with mills in Europe, Latin America and North America. Our vision is to be the employer, supplier and investment of choice. We transform renewable resources into papers that people depend on for education, communication and entertainment. Headquartered in Memphis, Tennessee, we employ more than 6,500 colleagues. Net sales for 2022 were $3.6 billion. For more information, please visit Sylvamo.com. Forward-Looking Statements This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including the information under the headings "Third Quarter Outlook" and "Management Summary from Chairman and Chief Executive Officer Jean-Michel Ribiéras." Any or all forward-looking statements may turn out to be incorrect, and our actual actions and results could differ materially from what they express or imply, because they involve known and unknown risks, uncertainties and other factors, many of which are beyond our control. These risks, uncertainties, and other factors include those disclosed in the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended Dec. 31, 2022, filed with the U.S. Securities and Exchange Commission (SEC) and in our subsequent filings with the SEC, available on our website, Sylvamo.com. These forward-looking statements reflect our current expectations, and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. SYLVAMO CORPORATION Condensed Consolidated Statement of Operations Preliminary and Unaudited (In millions, except per share amounts) Three Months Ended June 30, Three Months Ended March 31, 2023 Six Months Ended June 30, 2023 2022 2023 2022 Net Sales $ 919 $ 912 $ 941 * $ 1,860 $ 1,733 Costs and Expenses Cost of products sold 721 659 (g) 670 *(d) 1,390 (a) 1,279 (g) Selling and administrative expenses 76 81 (h) 82 (e) 159 (b) 147 (h) Depreciation, amortization and cost of timber harvested 34 32 35 69 63 Taxes other than payroll and income taxes 6 6 6 12 12 Interest expense (income), net 12 17 7 (f) 19 (c) 34 Income From Continuing Operations Before Income Taxes 70 117 141 211 198 Income tax provision 21 33 44 65 59 Net Income From Continuing Operations 49 84 97 146 139 Discontinued operations, net of tax — (143 ) (i) — — (172 ) (j) Net Income (Loss) $ 49 $ (59 ) $ 97 $ 146 $ (33 ) Basic Earnings Per Share Income from continuing operations $ 1.16 $ 1.90 $ 2.28 $ 3.44 $ 3.15 Discontinued operations, net of taxes — (3.24 ) — — (3.90 ) Net earnings (loss) $ 1.16 $ (1.34 ) $ 2.28 $ 3.44 $ (0.75 ) Diluted Earnings Per Share Income from continuing operations $ 1.14 $ 1.89 $ 2.25 $ 3.40 $ 3.13 Discontinued operations, net of taxes — (3.22 ) — — (3.87 ) Net earnings (loss) $ 1.14 $ (1.33 ) $ 2.25 $ 3.40 $ (0.74 ) Average Shares of Common Stock Outstanding - Diluted 43 44 43 43 44 The accompanying notes are an integral part of this condensed consolidated statement of operations. *Includes adjustment to eliminate intra-segment sales in Europe Six Months Ended June 30, 2023 (a) Includes incremental expense of $9 million ($7 million after taxes) related to the impact of the step-up of acquired Nymölla inventory sold during the first quarter. (b) Includes a pre-tax loss of $4 million ($3 million after taxes) for transaction costs related to the Nymölla acquisition and a pre-tax loss of $4 million ($3 million after taxes) for professional and legal fees related to negotiations resulting in a shareholder cooperation agreement. (c) Includes $9 million ($6 million after taxes) of interest income related to tax settlements and a pre-tax loss of $5 million ($4 million after taxes) related to debt extinguishment costs. Three Months Ended March 31, 2023 (d) Includes incremental expense of $9 million ($7 million after taxes) related to the impact of the step-up of acquired Nymölla inventory sold during the quarter. (e) Includes a pre-tax loss of $4 million ($3 million after taxes) for transaction costs related to the Nymölla acquisition and pre-tax loss of $4 million ($3 million after taxes) for professional and legal fees related to negotiations resulting in a shareholder cooperation agreement. (f) Includes $9 million ($6 million after taxes) of interest income related to tax settlements and a pre-tax loss of $5 million ($4 million after taxes) related to debt extinguishment costs. Three Months and Six Months Ended June 30, 2022 (g) Includes pre-tax gain of $1 million ($1 million after taxes) for the three months ended June 30, 2022, and a pre-tax loss of $1 million ($1 million after taxes) for the six months ended June 30, 2022, for one-time costs associated with the spin-off. (h) Includes pre-tax loss of $9 million ($7 million after taxes) for the three months ended June 30, 2022, and a pre-tax loss of $12 million ($9 million after taxes) for the six months ended June 30, 2022, for one-time costs associated with the spin-off. (i) Includes a pre-tax charge of $156 million ($156 million after taxes) to reserve for the elimination of the cumulative foreign currency translation loss related to our Russian operations. (j) Includes a pre-tax charge of $156 million ($156 million after taxes) to reserve for the elimination of the cumulative foreign currency translation loss related to our Russian operations and a pre-tax charge of $68 million ($57 million after taxes) related to the impairment of our Russian fixed assets. SYLVAMO CORPORATION Reconciliation of Net Income to Adjusted Operating Earnings Preliminary and Unaudited (In millions, except per share amounts) Three Months Ended June 30, Three Months Ended March 31, 2023 Six Months Ended June 30, 2023 2022 2023 2022 Net Income (Loss) $ 49 $ (59 ) $ 97 $ 146 $ (33 ) Less: Discontinued operations, net of tax — (143 ) — — (172 ) Net income From Continuing Operations 49 84 97 146 139 Add back: Net special items expense (income) — 6 11 11 10 Adjusted Operating Earnings $ 49 $ 90 $ 108 $ 157 $ 149 Three Months Ended June 30, Three Months Ended March 31, 2023 Six Months Ended June 30, 2023 2022 2023 2022 Diluted Earnings (Loss) Per Common Share as Reported $ 1.14 $ (1.33 ) $ 2.25 $ 3.40 $ (0.74 ) Less: Discontinued operations, net of tax — (3.22 ) — — (3.87 ) Continuing Operations 1.14 1.89 2.25 3.40 3.13 Add back: Net special items expense (income) — 0.13 0.26 0.25 0.23 Adjusted Operating Earnings Per Share $ 1.14 $ 2.02 $ 2.51 $ 3.65 $ 3.36 SYLVAMO CORPORATION Sales and Earnings by Business Segment Preliminary and Unaudited (In millions) Net Sales by Business Segment Three Months Ended June 30, Three Months Ended March 31, 2023 Six Months Ended June 30, 2023 2022 2023 2022 Europe $ 210 $ 135 $ 230 * $ 440 $ 252 Latin America 250 249 222 472 464 North America 474 549 505 979 1,057 Inter-segment Sales (15 ) (21 ) (16 ) (31 ) (40 ) Net Sales $ 919 $ 912 $ 941 $ 1,860 $ 1,733 *Includes adjustment to eliminate intra-segment sales in Europe Operating Profit by Business Segment Three Months Ended June 30, Three Months Ended March 31, 2023 Six Months Ended June 30, 2023 2022 2023 2022 Europe $ (11 ) $ 17 $ 23 $ 12 $ 19 Latin America 48 59 46 94 98 North America 45 66 97 142 128 Business Segment Operating Profit $ 82 $ 142 $ 166 $ 248 $ 245 Income from Continuing Operations Before Income Taxes $ 70 $ 117 $ 141 $ 211 $ 198 Interest expense (income), net 12 17 7 (c) 19 (a) 34 Net special items expense (income) — 8 (e) 18 (d) 18 (b) 13 (e) Business Segment Operating Profit (f) $ 82 $ 142 $ 166 $ 248 $ 245 Six Months Ended June 30, 2023 (a) Includes $9 million ($6 million after taxes) of interest income related to tax settlements and a pre-tax loss of $5 million ($4 million after taxes) related to debt extinguishment costs. (b) Includes a pre-tax loss of $4 million ($3 million after taxes) for transaction costs related to the Nymölla acquisition, a pre-tax loss of $4 million ($3 million after taxes) for professional and legal fees related to negotiations resulting in a shareholder cooperation agreement and incremental expense of $9 million ($7 million after taxes) related to the impact of the step-up of acquired Nymölla inventory sold during the first quarter. Three Months Ended March 31, 2023 (c) Includes $9 million ($6 million after taxes) of interest income related to tax settlements and a pre-tax loss of $5 million ($4 million after taxes) related to debt extinguishment costs. (d) Includes a pre-tax loss of $4 million ($3 million after taxes) for transaction costs related to the Nymölla acquisition, a pre-tax loss of $4 million ($3 million after taxes) for professional and legal fees related to negotiations resulting in a shareholder cooperation agreement and incremental expense of $9 million ($7 million after taxes) related to the impact of the step-up of acquired Nymölla inventory sold during the quarter. Three Months Ended and Six Months Ended June 30, 2022 (e) Includes pre-tax loss of $8 million ($6 million after taxes) for the three months ended June 30, 2022, and a pre-tax loss of $13 million ($10 million after taxes) for the six months ended June 30, 2022, for one-time costs associated with the spin-off. (f) As set forth in the chart above, business segment operating profit is defined as income from continuing operations before income taxes, but excluding net interest expense (income) and net special items. Business segment operating profit is a measure reported to our management for purposes of making decisions about allocating resources to our business segments and assessing the performance of our business segments. Reconciliation of Net Income to Adjusted EBITDA and Adjusted EBITDA Margin Preliminary and Unaudited (In millions) Three Months Ended June 30, Three Months Ended March 31, 2023 Six Months Ended June 30, 2023 2022 2023 2022 Net Income (Loss) $ 49 $ (59 ) $ 97 $ 146 $ (33 ) Less: Discontinued operations, net of tax — (143 ) — — (172 ) Net Income From Continuing Operations 49 84 97 146 139 Adjustments: Income tax provision 21 33 44 65 59 Interest expense (income), net 12 17 7 19 34 Depreciation, amortization and cost of timber harvested 34 32 35 69 63 Stock-based compensation 8 7 7 15 11 Transition service agreement expense — 8 — — 16 Net special items expense (income) — 8 18 18 13 Adjusted EBITDA $ 124 $ 189 $ 208 $ 332 $ 335 Net Sales $ 919 $ 912 $ 941 * $ 1,860 $ 1,733 Adjusted EBITDA Margin 13.5 % 20.7 % 22.1 % 17.8 % 19.3 % *Includes adjustment to eliminate intra-segment sales in Europe Adjusted EBITDA and Adjusted EBITDA Margin by Business Segment Three Months Ended June 30, Three Months Ended March 31, 2023 Six Months Ended June 30, 2023 2022 2023 2022 Adjusted EBITDA Europe $ (3 ) $ 22 $ 31 $ 28 $ 30 Latin America 67 79 63 130 135 North America 60 88 114 174 170 Total Business Segment Adjusted EBITDA $ 124 $ 189 $ 208 $ 332 $ 335 Net Sales (excluding discontinued operations and inter-segment sales eliminations) Europe $ 210 $ 135 $ 230 * $ 440 $ 252 Latin America 250 249 222 472 464 North America 474 549 505 979 1,057 Total Business Segment Net Sales $ 934 $ 933 $ 957 $ 1,891 $ 1,773 Adjusted EBITDA Margin Europe (1 )% 16 % 13 % 6 % 12 % Latin America 27 % 32 % 28 % 28 % 29 % North America 13 % 16 % 23 % 18 % 16 % *Includes adjustment to eliminate intra-segment sales in Europe SYLVAMO CORPORATION Condensed Consolidated Balance Sheet Preliminary and Unaudited (In millions) June 30, 2023 December 31, 2022 Assets Current Assets Cash and temporary investments $ 164 $ 360 Accounts and notes receivable, net 440 450 Contract assets 32 30 Inventories 486 364 Other current assets 39 39 Total Current Assets 1,161 1,243 Plants, Properties and Equipment, Net 960 817 Forestlands 360 322 Goodwill 140 128 Right of Use Assets 43 35 Deferred Charges and Other Assets 159 165 Total Assets $ 2,823 $ 2,710 Liabilities and Equity Current Liabilities Accounts payable $ 391 $ 453 Notes payable and current maturities of long-term debt 79 29 Accrued payroll and benefits 50 81 Other current liabilities 147 165 Total Current Liabilities 667 728 Long-Term Debt 954 1,003 Deferred Income Taxes 212 183 Other Liabilities 128 118 Equity Common stock, $1 par value, 200.0 shares authorized, 44.5 shares and 44.2 shares issued and 41.9 shares and 42.6 shares outstanding at June 30, 2023 and December 31, 2022, respectively 45 44 Paid-In Capital 39 25 Retained Earnings 2,153 2,029 Accumulated Other Comprehensive Loss (1,248 ) (1,338 ) 989 760 Less: Common stock held in treasury, at cost, 2.6 shares and 1.6 shares at June 30, 2023 and December 31, 2022, respectively (127 ) (82 ) Total Equity 862 678 Total Liabilities and Equity $ 2,823 $ 2,710 Condensed Consolidated Statement of Cash Flows Preliminary and Unaudited (In millions) Six Months Ended June 30, 2023 2022 Operating Activities Net income from continuing operations $ 146 $ 139 Depreciation, amortization, and cost of timber harvested 69 63 Deferred income tax provision (benefit), net 4 2 Stock-based compensation 15 11 Changes in operating assets and liabilities and other Accounts and notes receivable 91 (58 ) Inventories (60 ) (33 ) Accounts payable and accrued liabilities (147 ) (31 ) Other 22 37 Cash Provided By Operating Activities from Continuing Operations 140 130 Cash Provided By Operating Activities from Discontinued Operations, net — 45 Cash Provided By Operating Activities 140 175 Investment Activities Invested in capital projects (105 ) (59 ) Acquisition of business (167 ) — Cash Provided By (Used for) Investment Activities from Continuing Operations (272 ) (59 ) Cash Provided By (Used for) Investment Activities from Discontinued Operations, net — (5 ) Cash Provided By (Used for) Investment Activities (272 ) (64 ) Financing Activities Dividends paid (21 ) — Issuance of debt 437 — Reduction of debt (443 ) (86 ) Repurchases of common stock (40 ) — Other (6 ) (6 ) Cash Provided By (Used for) Financing Activities from Continuing Operations (73 ) (92 ) Cash Provided By (Used for) Financing Activities from Discontinued Operations, net — — Cash Provided By (Used for) Financing Activities (73 ) (92 ) Effect of Exchange Rate Changes on Cash 9 42 Change in Cash Included in Assets Held for Sale — 63 Change in Cash and Temporary Investments (196 ) (2 ) Cash and Temporary Investments Beginning of the period 360 159 End of the period $ 164 $ 157 SYLVAMO CORPORATION Reconciliation of Cash Provided by Operations to Free Cash Flow Preliminary and Unaudited (In millions) Three Months Ended June 30, Three Months Ended March 31, 2023 Six Months Ended June 30, 2023 2022 2023 2022 Cash Provided By Operating Activities From Continuing Operations $ 77 $ 76 $ 63 $ 140 $ 130 Adjustments: Cash invested in capital projects (44 ) (37 ) (61 ) (105 ) (59 ) Free Cash Flow $ 33 $ 39 $ 2 $ 35 $ 71 Reconciliation of Net Income From Continuing Operations to Adjusted EBITDA - 2023 Outlook Estimates (In millions) Three Months Ended September 30, 2023 Twelve Months Ended December 31, 2023 Net Income From Continuing Operations $47 - $61 $226 - $250 Adjustments: Income tax provision 19 - 25 94 - 105 Interest expense (income), net 12 43 Depreciation, amortization and cost of timber harvested 38 145 Stock-based compensation 7 28 Net Special items expense 7 24 - 29 Adjusted EBITDA $130 - $150 $560 - $600 Reconciliation of Cash Provided by Operations to Free Cash Flow - 2023 Outlook Estimates (In millions) Twelve Months Ended December 31, 2023 Cash Provided By Operating Activities From Continuing Operations $435 - $480 Adjustments: Cash invested in capital projects (215 - 230) Free Cash Flow $220 - $250 The non-GAAP financial measures presented in this release have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of our results calculated in accordance with GAAP. In addition, because not all companies use identical calculations, the Company’s presentation of non-GAAP measures in this release may not be comparable to similarly titled measures disclosed by other companies, including companies in the same industry as Sylvamo. Management believes certain non-U.S. GAAP financial measures, when used in conjunction with information presented in accordance with U.S. GAAP, can facilitate a better understanding of the impact of various factors and trends on the Company’s financial condition and results of operations. Management also uses these non-U.S. GAAP financial measures in making financial, operating and planning decisions and in evaluating the Company’s performance. View source version on businesswire.com: https://www.businesswire.com/news/home/20230809192612/en/
Investor Contact: Hans Bjorkman, 901-519-8030, hans.bjorkman@sylvamo.com Media Contact: Adam Ghassemi, 901-519-8115, adam.ghassemi@sylvamo.com