Sylvamo Corp

Previous wording

First quarter 2024 net income was $43 million ($1.02 per diluted share) compared with $97 million ($2.25 per diluted share) for the first quarter of 2023. Net sales were $905 million in the current quarter compared with $941 million in the prior year. Cash from operations was $27 million compared to $63 million in the first quarter of last year. Adjusted EBITDA was $118 million and our adjusted EBITDA margin was 13% compared to $208 million and an adjusted EBITDA margin of 22% in the first quarter of 2023. Free cash flow was $(33) million compared to $2 million in the first quarter of 2023.

Current wording

Second quarter 2024 net income was $83 million ($1.98 per diluted share) compared with $43 million ($1.02 per diluted share) for the first quarter of 2024. Net sales were $933 million in the current quarter compared with $905 million in the prior quarter. Cash from operations was $115 million compared to $27 million in the prior quarter. Adjusted EBITDA was $164 million and our adjusted EBITDA margin was 18% compared to $118 million and an adjusted EBITDA margin of 13%. Free cash flow was $62 million compared to $(33) million in the prior quarter.

Previous wording

Looking ahead to the second quarter of 2024, we expect price and mix to be favorable reflecting the realization of prior price increases in all regions and favorable mix in Latin America. Volume is expected to improve, reflecting seasonally stronger demand in Latin America plus continued momentum in Europe and North America. Operations and costs are expected to improve due to lower costs in Europe and North America as well as lower economic downtime in North America. Additionally, we expect input and transportation costs to be flat as better transportation and energy costs in North America will be largely offset by unfavorable fiber costs in Latin America. Lastly, we expect planned maintenance outage costs to increase slightly from the first quarter as we will spend about three quarters of our total annual planned maintenance costs in the first half of the year.

Current wording

Looking ahead to the third quarter of 2024, we expect price and mix to be slightly unfavorable due to mix. Volume is expected to improve driven by Latin America and North America. Operations and costs are expected to increase due to higher unabsorbed fixed costs from economic downtime in North America and Europe as we continue to manage our production to our customer demand. Additionally, we expect input and transportation costs to be higher due to unfavorable fiber costs in Latin America and energy costs in North America. Lastly, we expect planned maintenance outage costs to improve significantly as we have no major planned outages during the third quarter.

Previous wording

(b) Net special items represent income or expenses that are incurred periodically, rather than on a regular basis. Net special items in the periods presented primarily include integration costs related to the Nymölla acquisition, professional and legal fees related to negotiations resulting in a shareholder cooperation agreement, the impact of the step-up of acquired Nymölla inventory sold during the first quarter of 2023 and other charges.

Current wording

(b) Net special items represent income or expenses that are incurred periodically, rather than on a regular basis. Net special items in the periods presented primarily include integration costs related to the Nymölla acquisition, professional and legal fees related to negotiations resulting in a shareholder cooperation agreement in 2023, the impact of the step-up of acquired Nymölla inventory sold during the first quarter of 2023 and other charges.

Previous wording

Europe operating profit was $27 million lower than the same period in 2023, driven primarily by lower sales prices and less favorable product mix ($46 million) and higher operating costs ($1 million) which more than offset the impacts of lower input costs, primarily for chemicals ($8 million), higher volumes ($7 million) and lower unabsorbed costs due to economic downtime ($5 million).

Current wording

Europe operating profit was $19 million higher than the same period in 2023, driven primarily by lower outage costs ($20 million), lower input costs ($8 million), primarily for purchased chemicals, lower unabsorbed costs due to economic downtime ($8 million) and higher volumes ($3 million) which more than offset lower sales prices and less favorable product mix ($18 million) and higher operating costs ($2 million).

Previous wording

Our Europe business segment net sales decreased $23 million, compared to the same period in 2023, primarily due to lower sales price and mix ($46 million) which more than offset higher volumes ($26 million).

Current wording

Our Europe business segment net sales decreased $27 million, compared to the same period in 2023, primarily due to lower sales price and mix ($64 million) which more than offset higher volumes ($46 million).

Previous wording

Our Latin America business segment net sales decreased $6 million, compared to the same period in 2023, primarily driven by a decrease in sales price and mix ($34 million) which more than offset higher volumes ($25 million).

Current wording

Our Latin America business segment net sales decreased $5 million, compared to the same period in 2023, primarily driven by a decrease in sales price and mix ($18 million) which more than offset higher volumes ($16 million).

Previous wording

Operating profit for Latin America was $32 million lower than the same period in 2023, as lower sales prices and less favorable product mix ($34 million), along with higher operating costs ($14 million) and higher outage costs ($11 million) more than offset higher volumes ($5 million) and lower input costs ($22 million), primarily for purchased pulp, chemicals and energy.

Current wording

Operating profit for Latin America was $11 million lower than the same period in 2023, as lower sales prices and less favorable product mix ($18 million), along with higher operating costs ($6 million) and higher outage costs ($2 million) more than offset higher volumes ($6 million) and lower input costs ($9 million), primarily for purchased chemicals and pulp.

Previous wording

Our North America business segment net sales decreased $15 million, compared to the same period in 2023, as decreased sales prices and less favorable product mix ($35 million) more than offset higher volumes ($16 million).

Current wording

Our North America business segment net sales increased $4 million, compared to the same period in 2023, as higher volumes ($50 million) more than offset decreased sales prices and less favorable product mix ($47 million).

Previous wording

Operating profit for North America was $35 million lower than the same period in 2023, primarily due to decreased sales prices and less favorable product mix ($35 million), higher outage costs ($14 million) and operating costs ($17 million) which more than offset higher volumes ($5 million), lower unabsorbed costs due to economic downtime ($6 million) and lower input costs ($20 million) primarily for wood, energy and chemicals, as well as lower distribution costs.

Current wording

Operating profit for North America was $3 million lower than the same period in 2023, primarily due to decreased sales prices and less favorable product mix ($47 million), higher outage costs ($3 million) and operating costs ($13 million) which more than offset higher volumes ($16 million), lower unabsorbed costs due to economic downtime ($23 million) and lower input costs ($21 million) primarily for purchased wood, energy and chemicals, as well as lower distribution costs.

Previous wording

Management provides Adjusted EBITDA, a non-GAAP financial measure, to supplement our GAAP financial information, and it should be considered in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Management uses this measure in managing the operating performance of our business and believes that Adjusted EBITDA provide investors and analysts meaningful insights into our operating performance and is a relevant metric for the third-party debt. Adjusted EBITDA is reconciled to Net income, the most directly comparable GAAP measure. Adjusted EBITDA may be determined or calculated differently by other companies and therefore may not be comparable among companies.

Current wording

Management provides Adjusted EBITDA, a non-GAAP financial measure, to supplement our GAAP financial information, and it should be considered in addition to, but not instead of, the financial statements prepared in accordance with GAAP. Management uses this measure in managing the operating performance of our business and believes that Adjusted EBITDA provides investors and analysts meaningful insights into our operating performance and is a relevant metric for the third-party debt. Adjusted EBITDA is reconciled to Net income, the most directly comparable GAAP measure. Adjusted EBITDA may be determined or calculated differently by other companies and therefore may not be comparable among companies.

Previous wording

(a) Net special items represent income or expenses that are incurred periodically, rather than on a regular basis. Net special items in the periods presented primarily include integration costs related to the Nymölla acquisition, professional and legal fees related to negotiations resulting in a shareholder cooperation agreement, the impact of the step-up of acquired Nymölla inventory sold during the first quarter of 2023 and other charges.

Current wording

(a) Net special items represent income or expenses that are incurred periodically, rather than on a regular basis. Net special items in the periods presented primarily include integration costs related to the Nymölla acquisition, professional and legal fees related to negotiations resulting in a shareholder cooperation agreement in 2023, the impact of the step-up of acquired Nymölla inventory sold during the first quarter of 2023 and other charges.

Previous wording

Cash provided by operating activities totaled $27 million for the three months ended March 31, 2024, compared with cash provided by operating activities of $63 million for the three months ended March 31, 2023. The decrease in cash provided by operating activities in 2024 relates primarily to lower net income offset by changes in working capital.

Current wording

Cash provided by operating activities totaled $142 million for the six months ended June 30, 2024, compared with cash provided by operating activities of $140 million for the six months ended June 30, 2023. The increase in cash provided by operating activities in 2024 relates primarily to timing of cash flows related to working capital.

Previous wording

Cash used for working capital components (accounts and notes receivable, inventories, accounts payable and accrued liabilities, and other) was $64 million for the three months ended March 31, 2024, compared with cash used for working capital components of $81 million for the three months ended March 31, 2023. The three months ended March 31, 2024 working capital components primarily reflect $8 million of cash provided by our accounts and notes receivable balance, offset by $5 million, $45 million and $22 million of cash used for our inventories, accounts payable and accrued liabilities balances, and other operating activities, respectively. The three months ended March 31, 2023 working capital components primarily reflect $82 million and $18 million of cash provided by our accounts and notes receivable and other operating activities, respectively, offset by $81 million and $100 million of cash used for our inventories and accounts payable and accrued liabilities balances, respectively.

Current wording

Cash used for working capital components (accounts and notes receivable, inventories, accounts payable and accrued liabilities, and other) was $72 million for the six months ended June 30, 2024, compared with cash used for working capital components of $94 million for the six months ended June 30, 2023. The six months ended June 30, 2024 working capital components primarily reflect $7 million, $20 million, $26 million and $19 million of cash used for our accounts and notes receivable, inventories, accounts payable and accrued liabilities balances, and other operating activities, respectively. The six months ended June 30, 2023 working capital components primarily reflect $91 million and $22 million of cash provided by our accounts and notes receivable and other operating activities, respectively, offset by $60 million and $147 million of cash used for our inventories and accounts payable and accrued liabilities balances, respectively.

Previous wording

The total cash used for investing activities for the three months ended March 31, 2024 decreased from the three months ended March 31, 2023, primarily due to the purchase of the Nymölla mill which occurred in the prior year.

Current wording

The total cash used for investing activities for the six months ended June 30, 2024 decreased from the six months ended June 30, 2023, primarily due to the purchase of the Nymölla mill which occurred in the prior year.

Previous wording

Cash used for financing activities for the three months ended March 31, 2024 primarily reflects the payments of $6 million, $7 million, and $4 million on our outstanding principal debt balances for the AR Securitization, Term Loan F, and Term Loan A, respectively. These amounts are primarily offset by a draw on our AR Securitization of $6 million. During the three months ended March 31, 2024 the Company also paid $12 million in dividends and repurchased $5 million of our shares pursuant to our share repurchase program. Cash used for financing activities for the three months ended March 31, 2023 primarily reflects the payments of $30 million, $10 million, and $7 million on our outstanding principal debt balances for the AR Securitization, Revolving Credit Facility, and Term Loan F, respectively. Additionally, $360 million was paid to bond holders as part of our tender offer. These amounts are primarily offset by the issuance of Term Loan A, draws on our Revolving Credit Facility, and AR Securitization of $300 million, $70 million, and $60 million, respectively. During the three months ended March 31, 2023 the Company also paid $10 million in dividends and repurchased $10 million of our shares pursuant to our share repurchase program.

Current wording

Cash used for financing activities for the six months ended June 30, 2024 primarily reflects the payments of $23 million, $13 million, $10 million, and $8 million on our outstanding principal debt balances for the AR Securitization, Term Loan F, Revolving Credit Facility, and Term Loan A, respectively. These amounts are primarily offset by draws on our Revolving Credit Facility of $10 million and our AR Securitization of $6 million. During the six months ended June 30, 2024 the Company also paid $25 million in dividends and repurchased $30 million of our shares pursuant to our share repurchase program. Cash used for financing activities for the six months ended June 30, 2023 primarily reflects the payments of $35 million, $30 million, $13 million, and $4 million on our outstanding principal debt balances for the Revolving Credit Facility, AR Securitization, Term Loan F, and Term Loan A, respectively. Additionally, $360 million was paid to bond holders as part of our tender offer. These amounts are primarily offset by the issuance of Term Loan A, draws on our Revolving Credit Facility, and AR Securitization of $300 million, $70 million, and $70 million, respectively. During the six months ended June 30, 2023 the Company also paid $21 million in dividends and repurchased $40 million of our shares pursuant to our share repurchase program.

Previous wording

For the three months ended March 31, 2024, we have invested approximately $60 million, or 6.6% of net sales, in total capital expenditures. Over that period, we spent approximately $56 million, or 6.2% of net sales, in maintenance, regulatory and reforestation capital expenditures, and approximately $4 million, or 0.4% of net sales, in high-return capital projects. Our annual maintenance, regulatory and reforestation capital expenditures are expected to be in the range of approximately $175 to $190 million per year (before inflation) for the next several years, which we believe will be sufficient to maintain our operations and productivity. In addition, we expect to spend approximately $30 million to $35 million on high-return projects in 2024.

Current wording

For the six months ended June 30, 2024, we have invested approximately $113 million, or 6.1% of net sales, in total capital expenditures. Over that period, we spent approximately $102 million, or 5.5% of net sales, in maintenance, regulatory and reforestation capital expenditures, and approximately $11 million, or 0.6% of net sales, in high-return capital projects. Our annual maintenance, regulatory and reforestation capital expenditures are expected to be in the range of approximately $175 to $190 million per year (before inflation) for the next several years, which we believe will be sufficient to maintain our operations and productivity. In addition, we expect to spend approximately $30 million to $35 million on high-return projects in 2024.

Previous wording

The Company has included in the Form 10-K a discussion of these critical accounting policies, which are important to the portrayal of the Company’s financial condition and results of operations and require management’s judgments. The Company has not made any changes in these critical accounting policies during the first three months of 2024.

Current wording

The Company has included in the 2023 Form 10-K a discussion of these critical accounting policies, which are important to the portrayal of the Company’s financial condition and results of operations and require management’s judgments. The Company has not made any changes in these critical accounting policies during the first six months of 2024.

Previous wording

Although it is not possible to identify all of these risks, uncertainties and other factors, the impact of the following factors, among others, on us or on our suppliers or customers, could cause our actual results to differ from those in the forward-looking statements: deterioration of global and regional economic and political conditions, including the impact of wars and other conflicts in Ukraine and the Middle East; physical, financial and reputational risks associated with climate change; public health crises that could have impacts similar to those experienced as a result of the COVID-19 pandemic; increased costs or reduced availability of the raw materials, energy, transportation (truck, rail and ocean) and labor needed to manufacture and deliver our products; reduced demand for our products due to industry-wide declines in demand for paper, the cyclical nature of the paper industry or competition from other businesses; a material disruption at any of our manufacturing facilities; information technology risks including potential cybersecurity breaches; extensive environmental laws and regulations, as well as tax and other laws, in the United States, Brazil and other jurisdictions to which we are subject, including our compliance costs and risk of violations and liability; our reliance on a small number of customers; a failure by us to attract and retain senior management and other key and skilled employees; loss of our commercial agreements with International Paper; our indebtedness having a material adverse effect on our financial condition, or our inability to generate sufficient cash to service our indebtedness; and the factors disclosed in Item 1 A. Risk Factors, as such disclosures may be amended, supplemented or superseded from time to time by other reports we file with the U.S. Securities and Exchange Commission (the “SEC”), including subsequent annual reports on Form 10-K and quarterly reports on Form 10-Q.

Current wording

Although it is not possible to identify all of these risks, uncertainties and other factors, the impact of the following factors, among others, on us or on our suppliers or customers, could cause our actual results to differ from those in the forward-looking statements: deterioration of global and regional economic and political conditions, including the impact of wars and other conflicts in Ukraine and the Middle East; physical, financial and reputational risks associated with climate change; public health crises that could have impacts similar to those experienced as a result of the COVID-19 pandemic; increased costs or reduced availability of the raw materials, energy, transportation (truck, rail and ocean) and labor needed to manufacture and deliver our products; reduced demand for our products due to industry-wide declines in demand for paper, the cyclical nature of the paper industry or competition from other businesses; a material disruption at any of our manufacturing facilities; information technology risks including potential cybersecurity breaches affecting us or third parties with which we do business; extensive environmental laws and regulations, as well as tax and other laws, in the United States, Brazil and other jurisdictions to which we are subject, including our compliance costs and risk of violations and liability; our reliance on a small number of customers; a failure by us to attract and retain senior management and other key and skilled employees; loss of our commercial agreements with International Paper; our indebtedness having a material adverse effect on our financial condition, or our inability to generate sufficient cash to service our indebtedness; and the factors disclosed in Item 1A. Risk Factors, as such disclosures may be amended, supplemented or superseded from time to time by other reports we file with the U.S. Securities and Exchange Commission (the “SEC”), including subsequent annual reports on Form 10-K and quarterly reports on Form 10-Q.