Sylvamo Delivers Strong Results, Fortifies Financial Position and Increases Quarterly Dividend

Sylvamo (NYSE: SLVM), the world’s paper company, is releasing third quarter 2022 earnings.

Message from the Chairman and Chief Executive Officer

  • "We generated strong earnings and free cash flow in the third quarter. In October, we also achieved several milestones, including selling our Russian operations, reaching our gross debt target ahead of schedule and exiting our transition services agreement. I'm also pleased our board of directors approved increasing our quarterly dividend to 25 cents per share," said Jean-Michel Ribiéras. "We continue to implement our three-pronged strategy of commercial excellence, operational excellence and financial discipline, which enabled us to remain the supplier of choice and strengthen our balance sheet."

Third Quarter Highlights

  • Net income from continuing operations of $109 million ($2.44 per diluted share) compared with $84 million ($1.89 per diluted share) in the second quarter of 2022
  • Adjusted operating earnings1 (non-GAAP) of $112 million ($2.51 per diluted share) compared with $90 million ($2.02 per diluted share) in the second quarter of 2022
  • Adjusted EBITDA2 (non-GAAP) of $216 million (22.3% margin) compared with $189 million (20.7% margin) in the second quarter of 2022
  • Free cash flow3 (non-GAAP) of $114 million compared with $39 million in the second quarter of 2022
  • Announced an agreement to acquire an uncoated freesheet mill in Nymolla, Sweden, for an attractive price of 150 million euros (approximately $150 million)

Third Quarter Commercial and Operational Highlights

  • Price and mix improved by $60 million versus the prior quarter, outpacing energy and input cost inflation
  • Operations and costs increased $3 million this quarter, while total planned maintenance outage expenses improved by $14 million
  • Input costs grew by $46 million versus the prior quarter, reflecting energy and input cost inflation
  • Adjusted EBITDA margins for Europe, Latin America and North America were 18%, 27% and 20%, respectively

Milestones Subsequent to the Third Quarter

  • Completed the sale of our Russian operations for $420 million, receiving approximately $390 million in cash proceeds after foreign currency exchange rates and transaction fees
  • Strengthened our financial position by reducing gross debt to less than $1 billion, equal to a gross debt-to-adjusted EBITDA ratio of less than 1.5x for the last 12 months ending Sept. 30, 2022
  • Sylvamo's board of directors declared a quarterly dividend of $0.25 per share for the period of Jan. 1, 2023, to March 31, 2023. The dividend is payable Jan. 25, 2023, to holders of record at the close of business Jan. 4, 2023.

Fourth Quarter Outlook

  • Adjusted EBITDA is expected to be $180 million to $190 million
  • Compared to the third quarter of 2022:
    • Price and mix are expected to improve by $30 million to $35 million, reflecting continued realization of prior increases in all regions
    • Volume is expected to be flat to decreasing by up to $5 million, with seasonally weaker volume in Europe and North America
    • Operations and costs are expected to increase by $35 million to $40 million; seasonally higher in Europe and North America, plus foreign exchange impacts and other costs
    • Input and transportation costs are projected to be flat to increasing up to $5 million, primarily due to higher energy and input cost inflation
    • Total maintenance outage expenses are projected to increase by $21 million

Management Summary

Sylvamo celebrated its first year as an independent, publicly traded company Oct. 1. After a successful third quarter, the world's paper company achieved important milestones making it financially and strategically stronger than one year ago.

Milestones include repaying all of Term Loan B, achieving less than $1 billion in gross debt and exiting the spinoff transition services agreement. Our board of directors also declared a quarterly dividend of $0.1125 per share, which we paid in October.

We completed the sale of our Russian operations Oct. 6 for $420 million after reaching an agreement with Pulp Invest Limited Liability Company. After transaction and bank fees, as well as foreign currency impacts, we received approximately $390 million in cash proceeds.

The sale of our Russian operations allowed us to repay debt, avoid a $220 million boiler capital project at the Svetogorsk mill, reduce our exposure to the more cyclical market pulp segment by 30% and reduce geopolitical risk and uncertainty.

On Sept. 15, we announced an agreement to acquire an uncoated freesheet mill in Nymolla, Sweden, for an attractive price of approximately $150 million. The strategic bolt-on acquisition has the capacity to produce approximately 500,000 short tons of uncoated freesheet, generates 85% of its energy needs from carbon-neutral, renewable biomass residuals and includes iconic brands like Multicopy. The transaction is expected to be immediately accretive to our earnings per share and free cash flow while offering the potential to generate more than $20 million in synergies.

The Nymolla mill will strengthen Sylvamo's uncoated freesheet product mix with cutsize, business forms, digital papers and offset, enabling us to serve European and global customers more effectively. We expect the transaction to close in the first quarter of 2023, subject to customary closing conditions, including receiving the required regulatory approvals.

After achieving our debt target, we updated our investment thesis. Importantly, Sylvamo remains a cash flow story. We will leverage our strengths to drive high returns on invested capital and generate free cash flow. We will use that cash to increase shareowner value: maintain a strong financial position, return cash to shareowners and reinvest in our business.

These accomplishments reflect Sylvamo's strategy of commercial excellence, operational excellence and financial discipline. Our 6,000 team members contribute to this success by working safely, caring for one another and taking care of our customers. We are grateful for each colleague's contributions to help Sylvamo be the employer, supplier and investment of choice.

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 by quarter. 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 and Combined 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 (income) expense, 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 and Combined 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 in the future. 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)

Third

Quarter

2022

 

Second

Quarter

2022

 

Third

Quarter

2021

Net Sales

$

968

 

$

912

 

 

$

731

Net Income from Continuing Operations

 

109

 

 

84

 

 

 

59

Net Income (Loss)

 

57

 

 

(59

)

 

 

92

Business Segment Operating Profit

 

175

 

 

142

 

 

 

95

Adjusted Operating Earnings

 

112

 

 

90

 

 

 

67

Adjusted EBITDA

 

216

 

 

189

 

 

 

131

Cash Provided By Operating Activities From Continuing Operations

 

146

 

 

76

 

 

 

137

Free Cash Flow

 

114

 

 

39

 

 

 

117

Segment Information

Sylvamo uses business segment operating profit to measure the earnings performance of its businesses and is calculated as set forth in footnote (e) under the "Sales and Earnings by Business Segment" table (page 10). Third quarter 2022 net sales by business segment and operating profit by business segment compared with the second quarter of 2022 and the third quarter of 2021 are as follows:

Business Segment Results

 

(In millions)

Third

Quarter

2022

 

Second

Quarter

2022

 

Third

Quarter

2021

Net Sales by Business Segment

 

 

 

 

 

Europe

$

130

 

 

$

135

 

 

$

85

 

Latin America

 

270

 

 

 

249

 

 

 

200

 

North America

 

589

 

 

 

549

 

 

 

447

 

Inter-segment Sales

 

(21

)

 

 

(21

)

 

 

(1

)

Net Sales

$

968

 

 

$

912

 

 

$

731

 

Operating Profit by Business Segment

 

 

 

 

 

Europe

$

19

 

 

$

17

 

 

$

(1

)

Latin America

 

58

 

 

 

59

 

 

 

44

 

North America

 

98

 

 

 

66

 

 

 

52

 

Business Segment Operating Profit

$

175

 

 

$

142

 

 

$

95

 

Operating profits in the third quarter of 2022:

Europe - $19 million compared with $17 million in the second quarter of 2022. Earnings were higher as higher average sales prices more than offset lower volumes, higher operating costs and higher input costs.

Latin America - $58 million compared with $59 million in the second quarter of 2022. Earnings were slightly lower as higher average sales prices and higher volumes were offset by higher operating costs, higher maintenance outages and higher input costs.

North America - $98 million compared with $66 million in the second quarter of 2022. Earnings were higher as higher average sales prices, higher volumes, lower operating costs and lower maintenance outages more than offset higher input costs.

Earnings Webcast

The company will host an audio webcast at 11 a.m. EST / 10 a.m. CST. All interested parties are invited to listen at investors.sylvamo.com.

Parties who wish to participate should call +1-844-291-4185 (U.S.) or +1-409-207-6997 (international) and use access code 9303285. Participants should call in no later than 10:45 a.m. EST / 9:45 a.m. CST.

Replays are available at investors.sylvamo.com for one year and by phone for 90 days, beginning at approximately 1 p.m. CST 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 7919332.

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 6,000 colleagues. Net sales for 2021 were $2.8 billion. For more information, please visit Sylvamo.com.

Effective Tax Rate

The reported effective tax rate for continuing operations for the third quarter of 2022 was 26%, compared to 28% for the second quarter of 2022. The lower rate for the third quarter was due the mix of earnings in our regions.

Excluding net special items, the operational effective tax rate for the third quarter of 2022 was 28%, compared with 28% for the second quarter of 2022.

Effects of Net Special Items

Net special items related to continuing operations in the third quarter of 2022 amount to a net after-tax charge of $3 million ($0.07 per diluted share) compared with a net after-tax charge of $6 million ($0.13 per diluted share) in the second quarter of 2022.

Net special items related to discontinued operations include net after-tax charges of $78 million and $156 million to reserve for the elimination of the cumulative foreign currency translation loss related to our Russian operations during the third quarter and second quarter of 2022, respectively, and a net after-tax charge of $57 million related to the impairment of our Russian fixed assets during the first quarter of 2022. For more information see the information under the Condensed Consolidated and Combined Statement of Operations and related notes included later in this release.

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 heading "Fourth Quarter Outlook" and the statements about our plans, expectations, and impact on us of the Nymolla mill acquisition under the heading "Management Summary." 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 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 and Combined Statement of Operations

Preliminary and Unaudited

(In millions)

 

 

Three Months Ended

September 30,

 

Three Months

Ended

June 30,

2022

 

Nine Months Ended

September 30,

 

 

2022

 

2021

 

 

2022

 

2021

 

Net Sales

$

968

 

 

$

731

 

$

912

 

 

$

2,701

 

 

$

2,050

 

 

Costs and Expenses

 

 

 

 

 

 

 

 

 

 

Cost of products sold

 

687

 

(a)

 

556

(i)

 

659

 

(f)

 

1,965

 

(a)

 

1,540

 

(i)

Selling and administrative expenses

 

80

 

(b)

 

46

 

 

81

 

(g)

 

227

 

(b)

 

142

 

 

Depreciation, amortization and cost of timber harvested

 

30

 

 

 

33

 

 

32

 

 

 

94

 

 

 

95

 

 

Taxes other than payroll and income taxes

 

6

 

 

 

8

 

 

6

 

 

 

18

 

 

 

21

 

 

Interest (income) expense, net

 

18

 

 

 

10

(j)

 

17

 

 

 

52

 

 

 

(19

)

(j)

Income From Continuing Operations Before Income Taxes

 

147

 

 

 

78

 

 

117

 

 

 

345

 

 

 

271

 

 

Income tax provision

 

38

 

(c)

 

19

(k)

 

33

 

 

 

97

 

(c)

 

73

 

(k)

Net Income From Continuing Operations

 

109

 

 

 

59

 

 

84

 

 

 

248

 

 

 

198

 

 

Discontinued operations, net of tax

 

(52

)

(d)

 

33

 

 

(143

)

(h)

 

(224

)

(e)

 

71

 

 

Net Income (Loss)

$

57

 

 

$

92

 

$

(59

)

 

$

24

 

 

$

269

 

 

Basic Earnings Per Share

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

$

2.47

 

 

$

1.34

 

$

1.90

 

 

$

5.62

 

 

$

4.50

 

 

Discontinued operations, net of taxes

 

(1.18

)

 

 

0.75

 

 

(3.24

)

 

 

(5.08

)

 

 

1.60

 

 

Net earnings (loss)

$

1.29

 

 

$

2.09

 

$

(1.34

)

 

$

0.54

 

 

$

6.10

 

 

Diluted Earnings Per Share

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

$

2.44

 

 

$

1.34

 

$

1.89

 

 

$

5.58

 

 

$

4.50

 

 

Discontinued operations, net of taxes

 

(1.16

)

 

 

0.75

 

 

(3.22

)

 

 

(5.04

)

 

 

1.60

 

 

Net earnings (loss)

$

1.28

 

 

$

2.09

 

$

(1.33

)

 

$

0.54

 

 

$

6.10

 

 

Average Shares of Common Stock Outstanding - Diluted

 

45

 

 

 

44

 

 

44

 

 

 

44

 

 

 

44

 

 

 

 

The accompanying notes are an integral part of this condensed consolidated and combined statement of operations.

 

Three Months and Nine Months Ended September 30, 2022

 

 

(a)

Includes pre-tax loss of $3 million ($2 million after taxes) for the three months ended September 30, 2022, and a pre-tax loss of $4 million ($3 million after taxes) for the nine months ended September 30, 2022, for one-time costs associated with the spin-off.

 

 

(b)

Includes pre-tax loss of $7 million ($5 million after taxes) for the three months ended September 30, 2022, and a pre-tax loss of $19 million ($14 million after taxes) for the nine months ended September 30, 2022, for one-time costs associated with the spin-off.

 

 

(c)

Includes a $4 million tax benefit related to the reversal of a valuation allowance on France deferred tax assets.

 

 

(d)

Includes a pre-tax charge of $78 million ($78 million after taxes) to reserve for the elimination of the cumulative foreign currency translation loss related to our Russian operations.

 

 

(e)

Includes a pre-tax charge of $234 million ($234 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.

 

 

Three Months Ended June 30, 2022

 

 

(f)

Includes pre-tax gain of $1 million ($1 million after taxes) for one-time costs associated with the spin-off.

 

 

(g)

Includes pre-tax loss of $9 million ($7 million after taxes) for one-time costs associated with the spin-off.

 

 

(h)

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.

 

 

Three Months and Nine Months Ended September 30, 2021

 

 

(i)

Includes pre-tax loss of $7 million ($5 million after taxes) for the three months ended September 30, 2021, and net pre-tax income of $35 million ($23 million after taxes) for the nine months ended September 30, 2021, for the accrual of a foreign value-added tax refund in Brazil.

 

 

(j)

Includes pre-tax loss of $8 million ($5 million after taxes) for the three months ended September 30, 2021, and net pre-tax income of $20 million ($14 million after taxes) for the nine months ended September 30, 2021, for interest income associated with the accrual of a foreign value-added tax refund in Brazil.

 

 

(k)

Includes a net $2 million tax benefit for three months and nine months ended September 30, 2021 associated with a favorable Brazil court ruling that certain interest income is nontaxable.

 

 

 

 

At the date of distribution of Sylvamo common shares by International Paper to its shareholders on Oct. 1, 2021, Sylvamo had 43,949,277 total common shares outstanding. The calculation of earnings per share utilizes the number of shares of common stock outstanding at the date of distribution as the basis for the calculation of the weighted average number of shares of common stock outstanding for periods presented prior to the spinoff because, at that time, Sylvamo did not operate as a separate, stand-alone entity, and no shares or equity-based awards were outstanding prior to the date of distribution.

SYLVAMO CORPORATION

Reconciliation of Net Income to Adjusted Operating Earnings

Preliminary and Unaudited

(In millions, except per share amounts)

 

 

Three Months Ended

September 30,

 

Three Months

Ended

June 30,

2022

 

Nine Months Ended

September 30,

 

2022

 

2021

 

 

2022

 

2021

Net Income (Loss)

$

57

 

 

$

92

 

$

(59

)

 

$

24

 

 

$

269

 

Less: Discontinued operations, net of tax

 

(52

)

 

 

33

 

 

(143

)

 

 

(224

)

 

 

71

 

Net income From Continuing Operations

 

109

 

 

 

59

 

 

84

 

 

 

248

 

 

 

198

 

Add back: Net special items expense (income)

 

3

 

 

 

8

 

 

6

 

 

 

13

 

 

 

(39

)

Adjusted Operating Earnings

$

112

 

 

$

67

 

$

90

 

 

$

261

 

 

$

159

 

 

Three Months Ended

September 30,

 

Three Months

Ended

June 30,

2022

 

Nine Months Ended

September 30,

 

2022

 

2021

 

 

2022

 

2021

Diluted Earnings (Loss) Per Common Share as Reported

$

1.28

 

 

$

2.09

 

$

(1.33

)

 

$

0.54

 

 

$

6.10

 

Less: Discontinued operations, net of tax

 

(1.16

)

 

 

0.75

 

 

(3.22

)

 

 

(5.04

)

 

 

1.60

 

Continuing Operations

 

2.44

 

 

 

1.34

 

 

1.89

 

 

 

5.58

 

 

 

4.50

 

Add back: Net special items expense (income)

 

0.07

 

 

 

0.18

 

 

0.13

 

 

 

0.29

 

 

 

(0.88

)

Adjusted Operating Earnings Per Share

$

2.51

 

 

$

1.52

 

$

2.02

 

 

$

5.87

 

 

$

3.62

 

Reconciliation of Net Income to Adjusted EBITDA and Adjusted EBITDA Margin

Preliminary and Unaudited

(In millions)

 

 

Three Months Ended

September 30,

 

Three Months

Ended

June 30,

2022

 

Nine Months Ended

September 30,

 

2022

 

2021

 

 

2022

 

2021

Net Income (Loss)

$

57

 

 

$

92

 

 

$

(59

)

 

$

24

 

 

$

269

 

Less: Discontinued operations, net of tax

 

(52

)

 

 

33

 

 

 

(143

)

 

 

(224

)

 

 

71

 

Net Income From Continuing Operations

 

109

 

 

 

59

 

 

 

84

 

 

 

248

 

 

 

198

 

Adjustments:

 

 

 

 

 

 

 

 

 

Income tax provision

 

38

 

 

 

19

 

 

 

33

 

 

 

97

 

 

 

73

 

Interest (income) expense, net

 

18

 

 

 

10

 

 

 

17

 

 

 

52

 

 

 

(19

)

Depreciation, amortization and cost of timber harvested

 

30

 

 

 

33

 

 

 

32

 

 

 

94

 

 

 

95

 

Stock-based compensation

 

5

 

 

 

3

 

 

 

7

 

 

 

16

 

 

 

10

 

Transition service agreement expense

 

6

 

 

 

 

 

 

8

 

 

 

21

 

 

 

 

Net special items expense (income)

 

10

 

 

 

7

 

 

 

8

 

 

 

23

 

 

 

(35

)

Adjusted EBITDA

$

216

 

 

$

131

 

 

$

189

 

 

$

551

 

 

$

322

 

Net Sales

$

968

 

 

$

731

 

 

$

912

 

 

$

2,701

 

 

$

2,050

 

Adjusted EBITDA Margin

 

22.3

%

 

 

17.9

%

 

 

20.7

%

 

 

20.4

%

 

 

15.7

%

Adjusted EBITDA and Adjusted EBITDA Margin by Business Segment

 

Three Months Ended

September 30,

 

Three Months

Ended

June 30,

2022

 

Nine Months Ended

September 30,

 

2022

 

2021

 

 

2022

 

2021

Adjusted EBITDA

 

 

 

 

 

 

 

 

 

Europe

$

24

 

 

$

4

 

 

$

22

 

 

$

54

 

 

$

9

 

Latin America

 

74

 

 

 

59

 

 

 

79

 

 

 

209

 

 

 

174

 

North America

 

118

 

 

 

68

 

 

 

88

 

 

 

288

 

 

 

139

 

Total Business Segment Adjusted EBITDA

$

216

 

 

$

131

 

 

$

189

 

 

$

551

 

 

$

322

 

Net Sales (excluding discontinued operations and inter-segment sales eliminations)

 

 

 

 

 

 

 

 

 

Europe

$

130

 

 

$

85

 

 

$

135

 

 

$

382

 

 

$

263

 

Latin America

 

270

 

 

 

200

 

 

 

249

 

 

 

734

 

 

 

557

 

North America

 

589

 

 

 

447

 

 

 

549

 

 

 

1,646

 

 

 

1,255

 

Total Business Segment Net Sales

$

989

 

 

$

732

 

 

$

933

 

 

$

2,762

 

 

$

2,075

 

Adjusted EBITDA Margin

 

 

 

 

 

 

 

 

 

Europe

 

18

%

 

 

5

%

 

 

16

%

 

 

14

%

 

 

3

%

Latin America

 

27

%

 

 

30

%

 

 

32

%

 

 

28

%

 

 

31

%

North America

 

20

%

 

 

15

%

 

 

16

%

 

 

17

%

 

 

11

%

SYLVAMO CORPORATION

Sales and Earnings by Business Segment

Preliminary and Unaudited

(In millions)

Net Sales by Business Segment

 

 

Three Months Ended

September 30,

 

Three Months

Ended

June 30,

2022

 

Nine Months Ended

September 30,

 

 

2022

 

2021

 

 

2022

 

2021

 

Europe

$

130

 

 

$

85

 

 

$

135

 

 

$

382

 

 

$

263

 

 

Latin America

 

270

 

 

 

200

 

 

 

249

 

 

 

734

 

 

 

557

 

 

North America

 

589

 

 

 

447

 

 

 

549

 

 

 

1,646

 

 

 

1,255

 

 

Inter-segment Sales

 

(21

)

 

 

(1

)

 

 

(21

)

 

 

(61

)

 

 

(25

)

 

Net Sales

$

968

 

 

$

731

 

 

$

912

 

 

$

2,701

 

 

$

2,050

 

 

Operating Profit by Business Segment

 

 

Three Months Ended

September 30,

 

Three Months

Ended

June 30,

2022

 

Nine Months Ended

September 30,

 

 

2022

 

2021

 

 

2022

 

2021

 

Europe

$

19

 

$

(1

)

 

$

17

 

$

38

 

$

(5

)

 

Latin America

 

58

 

 

44

 

 

 

59

 

 

156

 

 

131

 

 

North America

 

98

 

 

52

 

 

 

66

 

 

226

 

 

91

 

 

Business Segment Operating Profit

$

175

 

$

95

 

 

$

142

 

$

420

 

$

217

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations Before Income Taxes

$

147

 

$

78

 

 

$

117

 

$

345

 

$

271

 

 

Interest (income) expense, net

 

18

 

 

10

 

(c)

 

17

 

 

52

 

 

(19

)

(c)

Net special items expense (income)

 

10

(a)

 

7

 

(d)

 

8

(b)

 

23

(a)

 

(35

)

(d)

Business Segment Operating Profit (e)

$

175

 

$

95

 

 

$

142

 

$

420

 

$

217

 

 

 

 

Three Months and Nine Months Ended September 30, 2022

 

 

(a)

Includes pre-tax loss of $10 million ($7 million after taxes) for the three months ended September 30, 2022, and a pre-tax loss of $23 million ($17 million after taxes) for the nine months ended September 30, 2022, for one-time costs associated with the spin-off.

 

 

Three Months Ended June 30, 2022

 

 

(b)

Includes pre-tax loss of $8 million ($6 million after taxes) for the three months ended June 30, 2022, for one-time costs associated with the spin-off.

 

 

Three Months and Nine Months Ended September 30, 2021

 

 

(c)

Includes pre-tax loss of $8 million ($5 million after taxes) for the three months ended September 30, 2021, and net pre-tax income of $20 million ($14 million after taxes) for the nine months ended September 30, 2021, for interest income associated with the accrual of a foreign value-added tax refund in Brazil.

 

 

(d)

Includes pre-tax loss of $7 million ($5 million after taxes) for the three months ended September 30, 2021, and net pre-tax income of $35 million ($23 million after taxes) for the nine months ended September 30, 2021, for the accrual of a foreign value-added tax refund in Brazil.

 

 

(e)

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 (income) expense 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.

SYLVAMO CORPORATION

Condensed Consolidated Balance Sheet

(In millions)

 

 

September 30,

2022

 

December 31,

2021

 

(Preliminary

and

Unaudited)

 

 

Assets

 

 

 

Current Assets

 

 

 

Cash and temporary investments

$

163

 

 

$

159

 

Accounts and notes receivable, net

 

482

 

 

 

402

 

Contract assets

 

28

 

 

 

26

 

Inventories

 

338

 

 

 

279

 

Assets held for sale

 

377

 

 

 

179

 

Other current assets

 

21

 

 

 

63

 

Total Current Assets

 

1,409

 

 

 

1,108

 

Plants, Properties and Equipment, Net

 

753

 

 

 

764

 

Forestlands

 

303

 

 

 

278

 

Goodwill

 

124

 

 

 

122

 

Right of Use Assets

 

39

 

 

 

40

 

Long-Term Assets Held for Sale

 

 

 

 

141

 

Deferred Charges and Other Assets

 

169

 

 

 

144

 

Total Assets

$

2,797

 

 

$

2,597

 

Liabilities and Equity

 

 

 

Current Liabilities

 

 

 

Accounts payable

$

396

 

 

$

387

 

Notes payable and current maturities of long-term debt

 

29

 

 

 

41

 

Accrued payroll and benefits

 

56

 

 

 

48

 

Liabilities held for sale

 

365

 

 

 

91

 

Other current liabilities

 

183

 

 

 

191

 

Total Current Liabilities

 

1,029

 

 

 

758

 

Long-Term Debt

 

1,200

 

 

 

1,357

 

Deferred Income Taxes

 

181

 

 

 

169

 

Long-Term Liabilities Held for Sale

 

 

 

 

13

 

Other Liabilities

 

129

 

 

 

118

 

Equity

 

 

 

Common stock, $1 par value, 200.0 shares authorized, 44.1 shares and 43.9 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

 

44

 

 

 

44

 

Paid-In Capital

 

20

 

 

 

4

 

Retained Earnings

 

1,949

 

 

 

1,935

 

Accumulated Other Comprehensive Loss

 

(1,753

)

 

 

(1,801

)

 

 

260

 

 

 

182

 

Less: Common stock held in treasury, at cost, 0.1 shares and 0.0 shares at September 30, 2022 and December 31, 2021, respectively

 

(2

)

 

 

 

Total Equity

 

258

 

 

 

182

 

Total Liabilities and Equity

$

2,797

 

 

$

2,597

 

SYLVAMO CORPORATION

Condensed Consolidated and Combined Statement of Cash Flows

Preliminary and Unaudited

(In millions)

 

 

Nine Months Ended September 30,

 

2022

 

2021

Operating Activities

 

 

 

Net income from continuing operations

$

248

 

 

$

198

 

Depreciation, amortization, and cost of timber harvested

 

94

 

 

 

95

 

Deferred income tax provision (benefit), net

 

4

 

 

 

(8

)

Stock-based compensation

 

16

 

 

 

10

 

Changes in operating assets and liabilities and other

 

 

 

Accounts and notes receivable

 

(81

)

 

 

(37

)

Inventories

 

(76

)

 

 

(9

)

Accounts payable and accrued liabilities

 

18

 

 

 

97

 

Other

 

53

 

 

 

(54

)

Cash Provided By Operating Activities from Continuing Operations

 

276

 

 

 

292

 

Cash Provided By Operating Activities from Discontinued Operations, net

 

20

 

 

 

87

 

Cash Provided By Operating Activities

 

296

 

 

 

379

 

Investment Activities

 

 

 

Invested in capital projects

 

(91

)

 

 

(47

)

Cash pool arrangements with Parent

 

 

 

 

181

 

Other

 

 

 

 

(8

)

Cash Provided By (Used for) Investment Activities from Continuing Operations

 

(91

)

 

 

126

 

Cash Provided By (Used for) Investment Activities from Discontinued Operations, net

 

(5

)

 

 

14

 

Cash Provided By (Used for) Investment Activities

 

(96

)

 

 

140

 

Financing Activities

 

 

 

Net transfers from Parent

 

 

 

 

(359

)

Special payment to Parent

 

 

 

 

(1,520

)

Dividends paid

 

(5

)

 

 

 

Issuance of debt

 

 

 

 

1,499

 

Reduction of debt

 

(174

)

 

 

(5

)

Other

 

(2

)

 

 

 

Cash Provided By (Used for) Financing Activities from Continuing Operations

 

(181

)

 

 

(385

)

Cash Provided By (Used for) Financing Activities from Discontinued Operations, net

 

(1

)

 

 

(1

)

Cash Provided By (Used for) Financing Activities

 

(182

)

 

 

(386

)

Effect of Exchange Rate Changes on Cash

 

27

 

 

 

(96

)

Change in Cash Included in Assets Held for Sale

 

41

 

 

 

(17

)

Change in Cash and Temporary Investments

 

4

 

 

 

54

 

Cash and Temporary Investments

 

 

 

Beginning of the period

 

159

 

 

 

70

 

End of the period

$

163

 

 

$

124

 

SYLVAMO CORPORATION

Reconciliation of Cash Provided by Operations to Free Cash Flow

Preliminary and Unaudited

(In millions)

 

 

Three Months Ended

September 30,

 

Three Months

Ended

June 30,

2022

 

Nine Months Ended

September 30,

 

2022

 

2021

 

 

2022

 

2021

Cash Provided By Operating Activities From Continuing Operations

$

146

 

 

$

137

 

 

$

76

 

 

$

276

 

 

$

292

 

Adjustments:

 

 

 

 

 

 

 

 

 

Cash invested in capital projects

 

(32

)

 

 

(20

)

 

 

(37

)

 

 

(91

)

 

 

(47

)

Free Cash Flow

$

114

 

 

$

117

 

 

$

39

 

 

$

185

 

 

$

245

 

Reconciliation of Net Income From Continuing Operations to Adjusted EBITDA - 2022 Outlook

Estimates

(In millions)

 

 

Three Months Ended

December 31,

2022

 

Net Income From Continuing Operations

$87 - $94

Adjustments:

 

Income tax provision

36 - 39

Interest (income) expense, net

13

Depreciation, amortization and cost of timber harvested

32

Stock-based compensation

4

Transition service agreement expense

1

Net Special items expense (income)

7

Adjusted EBITDA

$180 - $190

This reconciliation excludes the outlook for our Russian operations which are included within Discontinued operations, net of tax.

 

 

 

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.

 

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