# RAYONIER ADVANCED MATERIALS INC. (RYAM) FY 2024 MD&A Verbatim Item 7 Management's Discussion and Analysis from RAYONIER ADVANCED MATERIALS INC.'s 10-K for fiscal year 2024. SEC filing source: https://www.sec.gov/Archives/edgar/data/1597672/000159767225000008/ryam-20241231.htm Accession: 0001597672-25-000008 Filing date: 2025-03-06 Report date: 2024-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture. Confidence: high Company profile: /company/RYAM/ All MD&A years: /company/RYAM/mda/ Previous year: /company/RYAM/mda/fy2023/ (FY 2023) Next year: /company/RYAM/mda/fy2025/ (FY 2025) Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with our Financial Statements, the notes thereto, and the financial information appearing elsewhere in this 2024 Form 10-K. The following discussion includes forward-looking statements that involve certain risks and uncertainties. See Forward-Looking Statements and Item 1A—Risk Factors in this 2024 Form 10-K. This section primarily discusses 2024 and 2023 items and comparisons between these years. For a discussion of year-over-year comparisons between 2023 and 2022 and other financial information related to 2022 that is not included in this 2024 Form 10-K, refer to Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 29, 2024. Overview of Operations We are a diversified global leader of cellulose-based technologies that operated in the following operating segments during the years presented in this 2024 Form 10-K: •High Purity Cellulose •Paperboard •High-Yield Pulp All segment information disclosed in this 2024 Form 10-K is according to the above operating segment structure. High Purity Cellulose We manufacture and market high purity cellulose, sold as cellulose specialties or commodity products. We are the leading global producer of cellulose specialties, which are primarily used in dissolving chemical applications that require a highly purified form of cellulose. Pricing for our cellulose specialties products is typically set by contract for at least one year, based on negotiations with customers. Our commodity products primarily consist of commodity viscose and fluff. Commodity viscose is a raw material required for the manufacture of viscose staple fibers, which are used in woven and non-woven applications. Commodity fluff is used as an absorbent medium in consumer products. Pricing for commodity products is typically referenced to published indices or based on publicly available spot market prices. Our specialized assets also produce bioelectricity and biomaterials, including biofuels, lignin and tall oil soap. Sales of chemicals and energy, by-products of our manufacturing process, are also included in the High Purity Cellulose operating segment. Our three operating production facilities, located in the U.S., Canada and France, have a combined annual production capacity of 895,000 MTs of cellulose specialties and commodity products, excluding the 150,000 MTs capacity of the Temiscaming plant whose operations were indefinitely suspended in July 2024. Of our total annual capacity, we dedicate 270,000 MTs of annual production to commodity products, primarily fluff. Key input costs — wood, chemicals and energy — represent approximately 50 percent of our per MT cost of sales. Transportation, depreciation, labor, maintenance and other manufacturing fixed costs represent our remaining cost of sales. Paperboard We manufacture paperboard that is used for packaging, printing documents, brochures, promotional materials, paperback book and catalog covers, file folders, tags and lottery tickets. Pricing for paperboard is typically referenced to published indices and marketed through our internal sales team. Our production facility, located in Canada, has an annual production capacity of 180,000 MTs of paperboard. Key input costs — wood, chemicals and energy — represent approximately 75 percent of our per MT cost of sales. Transportation, depreciation, labor, maintenance and other manufacturing fixed costs represent our remaining cost of sales. High-Yield Pulp We manufacture and market high-yield pulp, which paper manufacturers use to produce paperboard, packaging, printing and writing papers and a variety of other paper products. Pricing for high-yield pulp is typically referenced to published indices marketed through our internal sales team. Our production facility in Canada has an annual production capacity of 290,000 MTs of high-yield pulp. Key input costs — wood, chemicals and energy — represent approximately 40 percent of our per MT cost of sales. Transportation, depreciation, labor, maintenance and other manufacturing fixed costs represent our remaining cost of sales. 26 Table of Contents Recent Business Developments •In November 2024, we secured green capital of €67 million, including €37 million in secured term loans and €30 million in preferred equity. We expect the proceeds from this capital raise to be used by our newly-formed subsidiary, BioNova, to invest in qualifying biomaterials projects. See Note 2—Significant Accounting Policies and Recent Accounting Developments—Redeemable Noncontrolling Interest and Note 10—Debt and Finance Leases to our Financial Statements. •In October 2024, we secured term loan financing of $700 million in aggregate principal amount, which was used, together with cash on hand, to redeem the outstanding principal balances of the 2026 Notes and the 2027 Term Loan and pay fees and expenses related to the refinancing. In conjunction with this refinancing, we secured commitments for a five-year $175 million ABL credit facility. See Note 10—Debt and Finance Leases to our Financial Statements. •In October 2024, an isolated fire occurred at our Jesup plant during planned maintenance activity. See Note 21—Segment and Geographical Information to our Financial Statements. •In September 2024, we announced price increases for our cellulose specialties products of up to 10 percent, depending on product grade, as contracts allow. This increase was driven by market dynamics, cost inflation and other economic drivers. •In September 2024, we repurchased $12 million principal of our 2026 Notes through open-market transactions. See Note 10—Debt and Finance Leases to our Financial Statements. •In July 2024, we indefinitely suspended operations at our Temiscaming High Purity Cellulose plant and in September 2024, we recorded a $25 million non-cash asset impairment, among other charges, related to the indefinite suspension. See Note 3—Indefinite Suspension of Operations to our Financial Statements. •In June 2024, we recognized $15 million in pre-tax income related to CEWS benefit claims deferred since 2021. See Note 4—Discontinued Operations and Note 9—Accrued and Other Current Liabilities to our Financial Statements. •In June 2024, we sold our refund rights, including interest, related to softwood lumber duties paid from 2017 through 2021 for $39 million. See Note 4—Discontinued Operations to our Financial Statements. Business Outlook See Performance and Liquidity Indicators below for discussion of non-GAAP measures. In October 2023, we announced that we were exploring the potential sale of our Paperboard and High-Yield Pulp assets at our Temiscaming site. We remain committed to pursuing a sale of these assets at a fair price. In July 2024, we indefinitely suspended operations at our Temiscaming High Purity Cellulose plant. The indefinite suspension of the Temiscaming High Purity Cellulose plant was $17 million positive to Adjusted EBITDA for 2024 and increased free cash flow by $40 million, as lower capital expenditures and benefits from the monetization of working capital more than offset the one-time and other cash costs associated with the indefinite suspension of operations. Following the indefinite suspension of Temiscaming High Purity Cellulose operations, the Temiscaming site continues to incur custodial site costs in support of the ongoing energy needs of the Paperboard and High-Yield Pulp operations. These costs are mitigated by any sales of electricity generated during the process. We expect to incur net custodial site costs totaling $20 million to $22 million in 2025. In October 2024, an isolated fire occurred at our Jesup plant during planned maintenance activity. There were no injuries to employees or contractors and no risk to the surrounding community. The plant’s operations fully resumed within two weeks, incurring $3 million of emergency maintenance capital expenditures and a total estimated unfavorable impact to 2024 EBITDA of $9 million, including $2 million in immediate repair costs. Our preliminary estimates indicate that additional capital expenditures of approximately $15 million will be required over the next two years. We carry property and business interruption loss insurance with a $15 million combined deductible. We have notified our insurance underwriters and are in the process of evaluating and documenting the damage caused by the fire. The amount expected to be recovered from property and business interruption loss insurance is not currently estimable. 27 Table of Contents Beginning in January 2025, we reorganized our High Purity Cellulose operating segment as a result of changes in our internal operating model, significant developments in our Biomaterials strategy (see Note 2—Significant Accounting Policies and Recent Accounting Developments—Redeemable Noncontrolling Interest and Note 10—Debt and Finance Leases to our Financial Statements for information regarding our newly-formed subsidiary, BioNova, and important financing milestones reached) and a successful enterprise reporting system launch that significantly enhances our financial reporting capabilities. Specifically, we determined, in light of these new developments and capabilities, that the performance and outlook of the High Purity Cellulose business will be better managed as three separate businesses: Cellulose Specialties, Cellulose Commodities and a new Biomaterials business. No changes were made to the composition of the Paperboard and High-Yield Pulp operating segments. In February and March 2025, the U.S. government imposed new tariffs on products imported from China, Canada and Mexico, including a 25 percent tariff on U.S. sales of paperboard, effective March 4, 2025. These tariffs may result in retaliatory tariffs and other trade actions from these nations, as has already occurred with a 25 percent retaliatory tariff on U.S.-sourced paperboard and substitute products, effective March 25, 2025. Given the evolving nature of trade policies and the potential for further modifications, reductions or expansions of these tariffs, it remains uncertain how these actions will ultimately impact the Company. The following market assessment represents our current outlook for our operating segments’ future performance. Cellulose Specialties Average sales prices for cellulose specialties in 2025 are expected to increase a mid single-digit percentage as compared to 2024. Sales volumes for cellulose specialties are expected to decline a low single-digit percentage compared to 2024 as certain sales volumes accelerated in 2024 due to the indefinite suspension of operations in Temiscaming will not repeat in 2025. Demand for RYAM cellulose specialties is expected to be mixed. Acetate is expected to experience moderate destocking, specifically in China, while ethers volumes are anticipated to improve. Other cellulose specialties volumes are also expected to remain robust. Raw material input and logistics costs are expected to be moderately higher in 2025. We will take planned maintenance outages at all three of our High Purity Cellulose facilities in the first half of 2025, compared to only one outage, at our Jesup facility, in 2024. Cellulose Commodities Average sales prices for cellulose commodities in 2025 are expected to increase by a mid single-digit percentage as compared to 2024. Demand for RYAM fluff remains resilient. Other cellulose commodities sales volumes are expected to decline in 2025, as we mitigated our exposure to the commodity viscose markets with the indefinite suspension of operations at Temiscaming in 2024. Raw material input and logistics costs are expected to be moderately higher in 2025. Biomaterials We are investing in new green energy and renewable products to provide both increased end-market diversity and incremental profitability. We intend to proceed only with those projects that are expected to meet our investment hurdles: a minimum 30 percent return on equity and less than a two-year payback period for RYAM equity. In the fourth quarter, we secured green capital of €67 million, which allows us to advance the biomaterials strategy and further progress towards our future goal of generating over $70 million from RYAM’s Biomaterials business, inclusive of the projects below: •Our bioethanol facility in France is currently operational. We expect to generate $6 million of EBITDA in 2025 from this plant. •We re-started our lignosulfonate powder plant in France, which is expected to generate $4 million of EBITDA in 2025. •We continue to pursue an investment in a bioethanol facility in Fernandina Beach, Florida, similar to our bioethanol facility in France. While the City of Fernandina Beach recently denied the site plan application for this project, we believe the City erred in making its determination and intend to pursue all available legal and administrative remedies. In expectation of a favorable outcome, we continue to advance engineering plans and explore potential commercial agreements, with a final investment decision still expected in 2025. •We are evaluating investments in crude tall oil facilities in Jesup, Georgia and Tartas and a prebiotics facility at our Jesup plant, and are currently working on permitting, engineering and commercial agreements on these new facilities ahead of making final investment decisions later this year. 28 Table of Contents •We are actively involved in AGE, a start-up entity that aims to utilize renewable forestry waste and other biomass generally discarded as waste to generate green electricity for the state of Georgia from a new facility to be constructed adjacent to our Jesup plant. Although the project remains in the development phase, AGE is actively evaluating the construction and financing requirements for the new facility, with a final investment decision expected in the third quarter of 2025. Paperboard Paperboard prices in 2025 are expected to decline as compared to the fourth quarter of 2024, while sales volumes are expected to improve as production is ramped up after taking scheduled maintenance downtime in the fourth quarter. Raw material prices are expected to rise as purchased pulp prices are forecast to increase from fourth quarter 2024 levels. Operating costs are expected to increase as net custodial site costs are incurred to support ongoing operations at the Temiscaming site. High-Yield Pulp High-Yield Pulp prices are expected to decrease slightly in the first quarter of 2025 while sales volumes are expected to increase as production improves after taking downtime in the fourth quarter of 2024. Operating costs are expected to increase as net custodial site costs are incurred to support ongoing operations at the Temiscaming site. Corporate Corporate costs are expected to decrease slightly in 2025 due to the completion of our ERP implementation, though currency fluctuations could offset any potential savings. Results of Operations: Year Ended December 31, 2024 versus December 31, 2023 [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["(in millions, except percentages)","2024","","2023"],["Net sales","$","1,630","","","$","1,643"],["Cost of sales","(1,464)","","","(1,555)"],["Gross margin","166","","","88"],["Selling, general and administrative expenses","(92)","","","(76)"],["Foreign exchange gain (loss)","7","","","(3)"],["Asset impairment","(25)","","","(62)"],["Indefinite suspension charges","(17)","","","\u2014"],["Other operating income (expense), net","\u2014","","","(12)"],["Operating income (loss)","39","","","(65)"],["Interest expense","(86)","","","(74)"],["Components of pension and OPEB, excluding service costs","3","","","\u2014"],["Debt refinancing charges","(10)","","","\u2014"],["Other income, net","5","","","7"],["Loss from continuing operations before income tax","(49)","","","(132)"],["Income tax benefit","9","","","32"],["Equity in loss of equity method investment","(2)","","","(2)"],["Loss from continuing operations","(42)","","","(102)"],["Income from discontinued operations, net of tax","3","","","\u2014"],["Net loss","(39)","","","(102)"],["Net income attributable to redeemable noncontrolling interest","\u2014","","","\u2014"],["Net loss attributable to RYAM","$","(39)","","","$","(102)"],["Gross margin %","10.2","%","","5.4","%"],["Operating margin %","2.4","%","","(4.0)","%"],["Effective tax rate","18.1","%","","24.4","%"]] [[/GREPCENT_TABLE]] 29 Table of Contents Net Sales [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["(in millions)","2024","","2023"],["High Purity Cellulose","$","1,302","","","$","1,313"],["Paperboard","228","","","219"],["High-Yield Pulp","127","","","136"],["Eliminations","(27)","","","(25)"],["Net sales","$","1,630","","","$","1,643"]] [[/GREPCENT_TABLE]] Net sales decreased $13 million in 2024 compared to 2023 driven by lower sales prices in High Purity Cellulose commodity products and our Paperboard and High-Yield Pulp operating segments and lower sales volumes in High Purity Cellulose commodity products, partially offset by higher sales prices and volumes in cellulose specialties and higher sales volumes in our Paperboard operating segment. See Operating Results by Segment below for further discussion. Operating Income (Loss) [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["(in millions)","","2024","","2023"],["High Purity Cellulose","","$","76","","","$","(42)"],["Paperboard","","31","","","37"],["High-Yield Pulp","","(8)","","","(3)"],["Corporate","","(60)","","","(57)"],["Operating income (loss)","","$","39","","","$","(65)"]] [[/GREPCENT_TABLE]] Operating results improved $104 million in 2024 compared to 2023 driven in part by the prior year fourth quarter $62 million non-cash impairment recorded because of the optimization and realignment of our High Purity Cellulose assets. Partially offsetting the impact of the 2023 impairment in the current year were one-time charges of $17 million and a non-cash impairment of $25 million related to the indefinite suspension of Temiscaming High Purity Cellulose operations and $2 million in immediate repair costs related to the fire at our Jesup plant. The improvement in operating results was further driven by lower costs due to the indefinite suspension of High Purity Cellulose operations at Temiscaming, cost benefit from strategic capital investment, the impact of favorable foreign exchange rates in the current year compared to unfavorable rates in the prior year and the recognition of $10 million in CEWS benefit claims deferred since 2021. Partially offsetting these improvements were the decrease in net sales discussed above, higher Corporate variable and other compensation expense and the prior year recognition of a $3 million benefit from payroll tax credit carryforwards. See Operating Results by Segment below for further discussion. Non-Operating Income & Expense Interest expense increased $12 million in 2024 compared to 2023 driven by an increase in the average effective interest rate on debt, partially offset by a decrease in the average outstanding debt principal balance. Total debt decreased $47 million from December 31, 2023 to December 31, 2024. During 2024, we recorded charges of $10 million related to the refinancing of our 2026 Notes and 2027 Term Loan. Interest income decreased $3 million in 2024 compared to 2023 driven by the prior year timing of the receipt of the 2027 Term Loan proceeds and their subsequent use in the repayment of the 2024 Notes. See Note 10—Debt and Finance Leases to our Financial Statements for further information on these debt items. Favorable foreign exchange rates during 2024 compared to unfavorable rates in 2023 resulted in a net favorable impact of $3 million. Included in “other income, net” in 2023 were a $2 million gain on a passive land sale and a $2 million pension settlement loss. 30 Table of Contents Income Taxes The effective tax rate on the loss from continuing operations for 2024 was a benefit of 18 percent. The 2024 effective tax rate differed from the federal statutory rate of 21 percent primarily due to changes in the valuation allowance on disallowed interest deductions, the release of certain tax reserves, different statutory tax rates in foreign jurisdictions, U.S. tax credits, excess deficit on vested stock compensation and nondeductible executive compensation. The effective tax rate on the loss from continuing operations for 2023 was a benefit of 24 percent. The 2023 effective tax rate differed from the federal statutory rate of 21 percent primarily due to different statutory tax rates in foreign jurisdictions, U.S. tax credits, return-to-accrual adjustments related to previously filed tax returns and changes in the valuation allowance on disallowed interest deductions. See Note 20—Income Taxes to our Financial Statements for further information. Discontinued Operations In 2024, we recorded pre-tax income from discontinued operations of $5 million related to CEWS benefit claims deferred since 2021 and a pre-tax loss of $1 million on the sale of our softwood lumber duty refund rights. In 2023, we recorded a pre-tax gain of $2 million related to a reduction in the rates applied to Canadian softwood lumber exports to the U.S during 2021. Offsetting this gain was a $2 million pre-tax loss related to the settlement of a claim pursuant to the representations and warranties in the asset purchase agreement. See Note 4—Discontinued Operations to our Financial Statements for further information. Operating Results by Segment Following the indefinite suspension of Temiscaming High Purity Cellulose operations in the third quarter of 2024, the Temiscaming site continues to incur custodial site costs in support of the ongoing energy needs of the Paperboard and High-Yield Pulp operations. Further, the electricity generated from the Temiscaming High Purity Cellulose plant assets is no longer deemed a by-product of the High Purity Cellulose manufacturing process. Due to these assets now running solely to support Paperboard and High-Yield Pulp, beginning in the fourth quarter, the net impact of these electricity sales and the custodial site costs being incurred in support of these operations is reflected within the operating results of the Paperboard and High-Yield Pulp businesses. High Purity Cellulose [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["(in millions, unless otherwise stated)","","2024","","2023"],["Net sales","","$","1,302","","","$","1,313"],["Operating income (loss)","","$","76","","","$","(42)"],["Average sales prices ($ per MT)","","$","1,335","","","$","1,273"],["Sales volumes (thousands of MTs)","","909","","955"]] [[/GREPCENT_TABLE]] Net Sales [[GREPCENT_TABLE]] [["","Year Ended December 31, 2023","","Changes Attributable to:","","Year Ended December 31, 2024"],["(in millions)","Price","","Volume/Mix/Other"],["Cellulose specialties","$","783","","","$","8","","","$","81","","","$","872"],["Commodity products","432","","","(22)","","","(69)","","","341"],["Other sales (a)","98","","","\u2014","","","(9)","","","89"],["Net sales","$","1,313","","","$","(14)","","","$","3","","","$","1,302"]] [[/GREPCENT_TABLE]] (a)Includes sales of bioelectricity, lignosulfonates and other by-products to third parties. 31 Table of Contents Net sales of our High Purity Cellulose operating segment for 2024 decreased $11 million compared to 2023. Included within net sales for 2024 and 2023 were $89 million and $98 million, respectively, in other sales primarily from bio-based energy and lignosulfonates, which decreased due to the indefinite suspension of Temiscaming High Purity Cellulose operations. Total sales prices increased 5 percent primarily driven by a higher mix of cellulose specialties and a 1 percent increase in cellulose specialties prices, partially offset by a 3 percent decrease in commodity prices. Despite a cellulose specialties sales volumes increase of 10 percent, total sales volumes decreased 5 percent due to a 19 percent decrease in commodity volumes. The increase in cellulose specialties sales volumes was driven by the closure of a competitor’s plant in late 2023, accelerated volumes due to the indefinite suspension of Temiscaming High Purity Cellulose operations and an uptick in ethers sales volumes, partially offset by the one-time favorable impact in the prior year from a change in customer contract terms. The decrease in commodity sales volumes was primarily driven by the higher mix of cellulose specialties production and the indefinite suspension of Temiscaming High Purity Cellulose operations. Sales volumes were also negatively impacted by the fire at the Jesup plant that impacted operations on two of the plant’s three lines for a two-week period in October 2024. Operating Income (Loss) [[GREPCENT_TABLE]] [["","Year Ended December 31, 2023","","Gross Margin Changes Attributable to:","","","","Year Ended December 31, 2024"],["(in millions, except percentages)","Sales Price","","Sales Volume/Mix/Other(a)","","Cost","","SG&A and other"],["Operating income (loss)","$","(42)","","","$","(14)","","","$","(22)","","","$","128","","","$","26","","","$","76"],["Operating margin %","(3.2)","%","","(1.1)","%","","(1.7)","%","","9.8","%","","2.0","%","","5.8","%"]] [[/GREPCENT_TABLE]] (a)Computed based on contribution margin. Operating income (loss) of our High Purity Cellulose operating segment improved $118 million in 2024 compared to 2023 driven by the prior year fourth quarter $62 million non-cash impairment recorded as a result of the optimization and realignment of our High Purity Cellulose assets. Partially offsetting the impact of the 2023 impairment in the current year were one-time charges of $17 million and a $25 million non-cash asset impairment related to the indefinite suspension of Temiscaming High Purity Cellulose operations. The improvement in operating results was further driven by the higher cellulose specialties sales prices and volumes, lower costs due to the indefinite suspension of High Purity Cellulose operations at Temiscaming, cost benefit from strategic capital investment and the recognition of $5 million in CEWS benefit claims deferred since 2021. Partially offsetting these improvements were the lower commodity sales prices and volumes, $2 million in immediate repair costs related to the fire at our Jesup plant and the prior year recognition of a one-time $3 million benefit from payroll tax credit carryforwards. Paperboard [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["(in millions, unless otherwise stated)","","2024","","2023"],["Net sales","","$","228","","","$","219"],["Operating income","","$","31","","","$","37"],["Average sales prices ($ per MT)","","$","1,390","","","$","1,491"],["Sales volumes (thousands of MTs)","","164","","","147"]] [[/GREPCENT_TABLE]] Net Sales [[GREPCENT_TABLE]] [["","Year Ended December 31, 2023","","Changes Attributable to:","","Year Ended December 31, 2024"],["(in millions)","Price","","Volume/Mix"],["Net sales","$","219","","","$","(16)","","","$","25","","","$","228"]] [[/GREPCENT_TABLE]] Net sales of our Paperboard operating segment increased $9 million in 2024 compared to 2023. Sales volumes increased 12 percent driven by the easing of prior year customer destocking in the current year, partially offset by a 7 percent decrease in sales prices driven by mix and increased competitive activity from European imports. 32 Table of Contents Operating Income [[GREPCENT_TABLE]] [["","Year Ended December 31, 2023","","Gross Margin Changes Attributable to:","","","","Year Ended December 31, 2024"],["(in millions, except percentages)","Sales Price","","Sales Volume/ Mix(a)","","Cost","","SG&A and other"],["Operating income","$","37","","","$","(16)","","","$","11","","","$","(1)","","","$","\u2014","","","$","31"],["Operating margin %","16.9","%","","(6.6)","%","","3.7","%","","(0.4)","%","","\u2014","%","","13.6","%"]] [[/GREPCENT_TABLE]] (a)Computed based on contribution margin. Operating income of our Paperboard operating segment decreased $6 million in 2024 compared to 2023 driven by the lower sales prices, higher labor costs and $3 million of net custodial site costs for Temiscaming site operations, partially offset by the higher sales volumes, higher productivity and the recognition of $2 million in CEWS benefit claims deferred since 2021. High-Yield Pulp [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["(in millions, unless otherwise stated)","","2024","","2023"],["Net sales","","$","127","","","$","136"],["Operating loss","","$","(8)","","","$","(3)"],["Average sales prices ($ per MT)(a)","","$","553","","","$","606"],["Sales volumes (thousands of MTs)(a)","","182","","","182"]] [[/GREPCENT_TABLE]] (a)Average sales prices and sales volumes for external sales only. During the years ended December 31, 2024 and 2023, the High-Yield Pulp operating segment sold 61,000 MTs and 60,000 MTs of high-yield pulp for $27 million and $25 million, respectively, to the Paperboard operating segment. Net Sales [[GREPCENT_TABLE]] [["","Year Ended December 31, 2023","","Changes Attributable to:","","Year Ended December 31, 2024"],["(in millions)","Price","","Volume/Mix"],["Net sales","$","136","","","$","(9)","","","$","\u2014","","","$","127"]] [[/GREPCENT_TABLE]] Net sales of our High-Yield Pulp operating segment decreased $9 million in 2024 compared to 2023 driven by a 9 percent decrease in sales prices and flat sales volumes driven by over-supply in China, lower demand and timing of shipments. Operating Loss [[GREPCENT_TABLE]] [["","Year Ended December 31, 2023","","Gross Margin Changes Attributable to:","","","","Year Ended December 31, 2024"],["(in millions, except percentages)","Sales Price","","Sales Volume/Mix(a)","","Cost","","SG&A and other"],["Operating loss","$","(3)","","","$","(9)","","","$","\u2014","","","$","3","","","$","1","","","$","(8)"],["Operating margin %","(2.2)","%","","(7.2)","%","","\u2014","%","","2.4","%","","0.7","%","","(6.3)","%"]] [[/GREPCENT_TABLE]] (a)Computed based on contribution margin. Operating loss of our High-Yield Pulp operating segment increased $5 million in 2024 compared to 2023 driven by the lower sales prices, flat sales volumes, higher labor costs and $4 million of net custodial site costs for Temiscaming site operations, partially offset by lower logistics and key input costs, higher productivity and the recognition of $2 million in CEWS benefit claims deferred since 2021. Corporate [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["(in millions)","","2024","","2023"],["Operating loss","","$","(60)","","","$","(57)"]] [[/GREPCENT_TABLE]] 33 Table of Contents Our Corporate operating loss increased $3 million in 2024 compared to 2023 driven by higher variable and other compensation expense, higher discounting and financing fees and higher costs related to our ERP transformation project, partially offset by favorable foreign exchange rates in 2024 compared to unfavorable rates in 2023. Liquidity and Capital Resources Overview Cash flows from operations, primarily driven by operating results, have historically been our primary source of liquidity and capital resources. As operating cash flows can be negatively impacted by fluctuations in market prices for our commodity products and changes in demand for our products, we maintain a key focus on cash, managing working capital closely and optimizing the timing and level of our capital expenditures. We believe our future cash flows from operations, availability under our ABL Credit Facility and our ability to access the capital markets, if necessary or desirable, will be adequate to fund our operations and anticipated long-term funding requirements, including capital expenditures, defined benefit plan contributions and repayment of debt maturities. Our Board of Directors suspended our quarterly common stock dividend in September 2019. No dividends have been declared since. The declaration and payment of future common stock dividends, if any, will be at the discretion of our Board of Directors and dependent upon our financial condition, results of operations, capital requirements and other factors that the Board of Directors deems relevant. In addition, our debt facilities place limitations on the declaration and payment of future dividends. In January 2018, our Board of Directors authorized a $100 million common stock share buyback program. We did not repurchase any shares under this program during the years ended December 31, 2024, 2023 and 2022, and do not expect to utilize any of the remaining $60 million in unused authorization in the future. Our liquidity and capital resources are summarized below: [[GREPCENT_TABLE]] [["","December 31,"],["(in millions, except ratios)","2024","","2023"],["Cash and cash equivalents","$","125","","","$","76"],["Availability under the ABL Credit Facility(a)(b)","141","","","118"],["Total debt(b)","730","","","777"],["Stockholders\u2019 equity","714","","","747"],["Total capitalization (total debt plus stockholders\u2019 equity)","1,444","","","1,524"],["Debt to capital ratio","51","%","","51","%"]] [[/GREPCENT_TABLE]] (a)Amounts available under the ABL Credit Facility fluctuate based on eligible accounts receivable and inventory levels. At December 31, 2024, we had $168 million of gross availability and net available borrowings of $141 million after taking into account outstanding letters of credit of $27 million. In addition to the availability under the ABL Credit Facility, we have $10 million available under our accounts receivable factoring line of credit in France. (b)See Note 10—Debt and Finance Leases to our Financial Statements for further information. In conjunction with the 2029 Term Loan refinancing discussed below, we amended our ABL Credit Facility in November 2024, reducing aggregate commitments from $200 million to $175 million and extending its maturity to November 2029. Borrowings under the amended facility are initially priced at Term SOFR plus a margin of 2 percent. Other Sources of Cash SWEN Investment In November 2024, we secured €30 million to be provided by SWEN in return for a 20 percent preferred equity interest in BioNova. As of December 31, 2024, we received €15 million from SWEN and we expect to receive the additional €15 million in late 2025. See Note 2—Significant Accounting Policies and Recent Accounting Developments—Redeemable Noncontrolling Interest to our Financial Statements for further information. BioNova Term Loan In November 2024, we entered into a credit agreement that authorizes up to €37 million in seven- and eight-year secured term loan tranches at an initial floating rate of approximately 5 percent. As of December 31, 2024, we had not yet drawn on these loans. See Note 10—Debt and Finance Leases to our Financial Statements for further information. 34 Table of Contents Cash Requirements Contractual Commitments Our principal contractual commitments include standby letters of credit, surety bonds, guarantees, purchase obligations and leases. We utilize arrangements such as standby letters of credit and surety bonds to provide credit support for certain suppliers and vendors in case of their default on critical obligations, collateral for certain of our self-insurance programs and guarantees for the completion of our remediation of environmental liabilities. As part of our ongoing operations, we also periodically issue guarantees to third parties. Our primary purchase obligation payments relate to natural gas, steam energy and wood chips purchase contracts. As of December 31, 2024, our noncancellable unconditional purchase obligations totaled $542 million. We remain subject to purchase obligations under the 20-year wood chip and residual fiber supply agreement with GreenFirst, under which total required purchase volumes of wood chips and residual fiber are dependent on sawmill production. In connection with the indefinite suspension of operations at the Temiscaming High Purity Cellulose plant, we have agreed with GreenFirst that we will purchase the required volumes at market value and sell them to third parties at the same amount for an expected neutral impact. See Note 22—Commitments and Contingencies to our Financial Statements for further information. Redeemable Noncontrolling Interest As mentioned in Other Sources of Cash above, the SWEN investment is a redeemable noncontrolling interest, which may require the use of cash to pay dividends and/or in the event SWEN exercises its put option. The timing and amount of dividend payments or a put payment is dependent on certain terms and conditions and would not occur prior to 2027. See Note 2—Significant Accounting Policies and Recent Accounting Developments—Redeemable Noncontrolling Interest to our Financial Statements for further information on the circumstances under which the put may be exercised. Debt As of December 31, 2024, we were in compliance with all financial and other covenants under our debt agreements. 2029 Term Loan. In October 2024, we issued $700 million in aggregate principal amount of secured term loan financing, which was used in the fourth quarter, together with cash on hand, to redeem the respective $453 million and $245 million outstanding principal balances of the 2026 Notes and 2027 Term Loan and pay fees and expenses related to the refinancing. The 2029 Term Loan matures in October 2029, bears interest at an annual rate equal to three-month Term SOFR plus an initial spread of 7 percent and requires quarterly principal payments of $1.75 million. The initial spread may fluctuate by 0.5 percent based on our net secured leverage ratio. We may voluntarily make prepayments at any time, subject to customary breakage costs and, if within the first three anniversaries of closing, an additional premium. The agreement governing the 2029 Term Loan contains various customary covenants, including the requirement to maintain a specified consolidated net secured leverage ratio, based on covenant EBITDA. See Note 10—Debt and Finance Leases to our Financial Statements for further information of the following transactions. Cash Flows [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["(in millions)","2024","","2023"],["Cash flows provided by (used in):"],["Operating activities","$","203","","","$","136"],["Investing activities-continuing operations","(108)","","","(128)"],["Investing activities-discontinued operations","\u2014","","","1"],["Financing activities","(42)","","","(87)"]] [[/GREPCENT_TABLE]] Cash provided by operating activities increased $67 million primarily due to stronger operating results, proceeds of $39 million for the sale of our softwood lumber duty refund rights, net tax refunds of $19 million in the current year compared to net tax payments in the prior year and higher payments in the prior year on deferred energy liabilities associated with our Tartas facility operations. These cash inflows were partially offset by decreased cash inflows from working capital and higher payments of interest on long-term debt. 35 Table of Contents Cash used in investing activities of continuing operations decreased $20 million primarily due to the timing of payments of capital expenditures, lower strategic capital spend and lower custodial capital spend due to the indefinite suspension of Temiscaming High Purity Cellulose operations. Cash used in financing activities decreased $45 million primarily due to lower net repayment of long-term debt, SWEN’s €15 million investment in BioNova and a decrease in repurchases of common stock to satisfy tax withholding requirements related to the issuance of stock under our incentive stock plans. The decrease in cash used was partially offset by an increase in debt issuance costs and net repayment of short-term financing. Performance and Liquidity Indicators The discussion below is presented to enhance the reader’s understanding of our operating performance, liquidity and ability to generate cash and satisfy rating agency and creditor requirements. This information includes the non-GAAP financial measures of EBITDA, adjusted EBITDA and adjusted free cash flow. These measures are not defined by GAAP and our discussion of them is not intended to conflict with or change any of our GAAP disclosures provided in this Annual Report on Form 10-K. We believe these non-GAAP financial measures provide useful information to our Board of Directors, management and investors regarding our financial condition and results of operations. Our management uses these non-GAAP financial measures to compare our performance to that of prior periods for trend analyses, to determine management incentive compensation and for budgeting, forecasting and planning purposes. Our management considers these non-GAAP financial measures, in addition to operating income, to be important in estimating our enterprise and stockholder values and for making strategic and operating decisions. In addition, analysts, investors and creditors use these non-GAAP financial measures when analyzing our operating performance, financial condition and cash-generating ability. We use EBITDA and adjusted EBITDA as performance measures and adjusted free cash flow as a liquidity measure. We do not consider non-GAAP financial measures an alternative to financial measures determined in accordance with GAAP. The principal limitation of these non-GAAP financial measures is that they may exclude significant expense and income items that are required by GAAP to be recognized in our Financial Statements. In addition, they reflect the exercise of management’s judgment about which expense and income items are excluded or included in determining these non-GAAP financial measures. To compensate for these limitations, reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measures are provided below. Non-GAAP financial measures are not necessarily indicative of results that may be generated in future periods and should not be relied upon, in whole or part, in evaluating our financial condition, results of operations or future prospects. EBITDA and Adjusted EBITDA EBITDA is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA adjusted for items that management believes are not representative of our core operations. Loss from continuing operations is reconciled to EBITDA and adjusted EBITDA as follows: [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["(in millions)","2024","","2023"],["Loss from continuing operations","$","(42)","","","$","(102)"],["Loss from continuing operations attributable to redeemable noncontrolling interest","\u2014","","","\u2014"],["Loss from continuing operations attributable to RYAM","(42)","","","(102)"],["Depreciation and amortization","137","","","140"],["Interest expense, net","84","","","69"],["Income tax benefit","(9)","","","(32)"],["EBITDA-continuing operations attributable to RYAM","170","","","75"],["Asset impairment","25","","","62"],["Indefinite suspension charges","17","","","\u2014"],["Debt refinancing charges","10","","","\u2014"],["Pension settlement loss","\u2014","","","2"],["Adjusted EBITDA-continuing operations attributable to RYAM","$","222","","","$","139"]] [[/GREPCENT_TABLE]] 36 Table of Contents EBITDA from continuing operations increased $95 million in 2024 compared to 2023 primarily driven by the prior year fourth quarter $62 million non-cash impairment recorded as a result of the optimization and realignment of our High Purity Cellulose assets, lower costs due to the indefinite suspension of High Purity Cellulose operations at Temiscaming, cost benefit from strategic capital investment, the impact of favorable foreign exchange rates in the current year compared to unfavorable rates in the prior year and the recognition of $10 million in CEWS benefit claims deferred since 2021. Partially offsetting these improvements were the decrease in net sales, one-time charges of $17 million and a $25 million non-cash asset impairment related to the indefinite suspension of Temiscaming High Purity Cellulose operations, higher Corporate variable and other compensation expense, $2 million in immediate repair costs related to the fire at our Jesup plant and the prior year recognition of a $3 million benefit from payroll tax credit carryforwards. See Results of Operations above for additional discussion of the changes in our operating results. Our non-guarantor subsidiaries had assets of $451 million, liabilities of $171 million, year-to-date revenue of $227 million and a trailing twelve-month ABL Credit Facility and 2029 Term Loan covenant EBITDA for continuing operations of $25 million as of December 31, 2024. Adjusted Free Cash Flow Adjusted free cash flow is defined as cash provided by operating activities adjusted for capital expenditures, net of proceeds from the sale of assets and excluding strategic capital expenditures deemed discretionary by management. Adjusted free cash flow is a non-GAAP financial measure of cash generated during a period that is available for debt reduction, strategic capital expenditures, acquisitions and repurchases of our common stock. Adjusted free cash flow is not necessarily indicative of the adjusted free cash flow that may be generated in future periods. Cash provided by operating activities is reconciled to adjusted free cash flow as follows: [[GREPCENT_TABLE]] [["","Year Ended December 31,"],["(in millions)","2024","","2023"],["Cash provided by operating activities","$","203","","","$","136"],["Capital expenditures, net(a)","(75)","","","(83)"],["Adjusted free cash flow-continuing operations","$","128","","","$","53"]] [[/GREPCENT_TABLE]] (a)Net of proceeds from the sale of assets and excluding strategic capital expenditures. Strategic capital expenditures were $33 million and $45 million for the years ended December 31, 2024 and 2023, respectively. Adjusted free cash flow of continuing operations increased primarily due to stronger operating results, proceeds from the sale of our softwood lumber duty refund rights, net tax refunds and lower capital expenditures, partially offset by changes in working capital and higher interest payments. See section Liquidity and Capital Resources—Cash Flows for additional discussion of our operating cash flows and capital expenditures. Critical Accounting Estimates The preparation of financial statements requires us to make estimates, assumptions and judgments that affect our assets, liabilities, revenues and expenses, and to disclose contingent assets and liabilities in our Financial Statements. We base these estimates and assumptions on historical data and trends, current fact patterns, expectations and other sources of information we believe are reasonable. Actual results may differ from these estimates. Revenue Recognition and Measurement Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied. The majority of our contracts have a single performance obligation to transfer products. Accordingly, we recognize revenue when control has been transferred to the customer. Generally, control transfers upon delivery to a location in accordance with the terms and conditions of the sale. Changes in customer contract terms and conditions, as well as the timing of orders and shipments, may impact the timing of revenue recognition. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring our products and is generally based upon contractual arrangements with customers or published indices. We sell our products both directly to customers and through distributors and agents typically under agreements with payment terms less than 90 days. 37 Table of Contents The nature of our contracts may give rise to variable consideration, which may be constrained, including sales volume-based rebates to customers. We estimate the level of volumes based on anticipated purchases at the beginning of the period and record a rebate accrual for each purchase toward the requisite rebate volume. These estimated rebates are included in the transaction price as a reduction to net sales. Property, Plant & Equipment Depreciation Depreciation expense is computed using the units-of-production method for our high purity cellulose, paperboard and high-yield pulp plant and equipment and the straight-line method for all other property, plant and equipment over the useful economic lives of the assets involved. The total units of production used to calculate depreciation expense is determined by factoring annual production days, based on normal production conditions, by the economic useful life of the asset involved. Our estimate of useful lives and salvage values are based on assumptions and judgments that reflect both historical experience and expectations regarding the future use of our assets, including wear and tear, obsolescence, technical standards, market demand and geographic location. The use of different assumptions and judgments in the calculation of depreciation, especially those involving useful lives, would likely result in significantly different net book values and results of operations. Asset Impairment Long-lived assets are reviewed annually for impairment or when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets that are held and used is measured by net undiscounted cash flows expected to be generated by the asset. An impairment loss may exist when the estimated recovery value is less than the carrying amount. Should a review for impairment be required, determining whether the carrying amount of an asset is recoverable requires judgments regarding long-term forecasts of future revenue and costs related to the asset subject to review. These forecasts are uncertain, as they require significant assumptions about future market conditions. Significant and unanticipated changes to these assumptions could require a provision for impairment in a future period. Property, plant and equipment are primarily grouped for purposes of evaluating recoverability at the combined plant level, the lowest level for which independent cash flows are identifiable. In 2024, we indefinitely suspended operations at our Temiscaming High Purity Cellulose plant. The indefinite suspension does not affect the Temiscaming paperboard and high-yield pulp plants that support our High-Yield Pulp and Paperboard operating segments, which will continue to operate at full capacity while remaining part of an ongoing sales process. The High Purity Cellulose plant was idled in a safe and environmentally sound manner. We will assess on at least an annual basis the possibility of restarting the Temiscaming High Purity Cellulose plant. In the third quarter of 2024, in conjunction with the indefinite suspension of operations, we recognized a non-cash asset impairment of $25 million, as it was determined that the Temiscaming High Purity Cellulose plant’s net carrying value exceeded its estimated fair value. In the fourth quarter of 2023, we began efforts towards the optimization and realignment of our High Purity Cellulose assets that included the consolidation of commodity viscose production into our Temiscaming plant and fluff production into our Jesup plant’s C Line. This realignment materially impacts the way we have managed and will manage the underlying assets and ultimately led to the recognition of a $62 million impairment. Our impairment analyses involved various assumptions and estimates in the determination of fair value, the most significant being our estimates of future cash flows, including key assumptions regarding production levels, price levels, profit margins, capital expenditures and discount rate. While the results of the impairment analyses are highly sensitive to these assumptions, we believe the assumptions are reasonable and appropriately supported; however, our operating results could be adversely affected if actual results are not consistent with our estimates and assumptions. See Note 3—Indefinite Suspension of Operations and Note 8—Property, Plant and Equipment, Net to our Financial Statements for further information regarding these impairments. 38 Table of Contents Environmental Liabilities At December 31, 2024, we had $170 million of accrued liabilities for environmental costs relating to disposed operations. Numerous price, quantity, cost and probability assumptions are used in estimating these obligations. Factors affecting these estimates include changes in the nature or extent of contamination, changes in the content or volume of the material discharged or treated in connection with one or more impacted sites, requirements to perform additional or different assessment or remediation, changes in technology that may lead to additional or different environmental remediation strategies, approaches and workplans, discovery of additional or unanticipated contaminated soil, groundwater or sediment on or off-site, changes in remedy selection, changes in law or interpretation of existing law and the outcome of negotiations with governmental agencies or non-governmental parties. We periodically review our environmental liabilities and also engage third-party consultants to assess our ongoing remediation of contaminated sites. We review our environmental liabilities related to assessment activities and remediation costs quarterly and adjust them as necessary. Liabilities for financial assurance, monitoring and maintenance activities and other activities are assessed annually. A significant change in any of these estimates could have a material effect on our results of operations and financial condition. See Note 11—Environmental Liabilities to our Financial Statements for further information. Pension and Other Postretirement Benefit Assets and Liabilities Our defined benefit pension and postretirement plans for employees in the U.S. and Canada require numerous estimates and assumptions to determine the proper amount of pension and postretirement liabilities and annual expense to record in our Financial Statements. The key assumptions include discount rate, return on assets, salary increases, health care cost trends, mortality rates, longevity and service lives of employees. Although authoritative guidance on how to select most of these assumptions exists, we exercise judgment when selecting these assumptions based on input from our actuary and other advisors. Different assumptions, as well as actual versus expected results, would change the periodic benefit cost and funded status of the benefit plans recognized in the financial statements. Our assumed long-term return on plan assets was established based on historical long-term rates of return on broad equity and bond indices, discussions with our actuary and investment advisors and consideration of the actual historical annualized rate of returns. In determining future pension obligations, we select a discount rate based on information supplied by our actuary. The actuarial rates are developed by models which incorporate high-quality (AA rated), long-term corporate bond rates into their calculations. The weighted average discount rate increased from 4.71 percent at December 31, 2023 to 5.16 percent at December 31, 2024. Our defined pension plans were underfunded by $61 million at December 31, 2024. The underfunded status decreased by $22 million in 2024, primarily due to actuarial gains because of increased discount rates, partially offset by decreased returns on plan assets. In 2025, pension expense is expected to increase slightly compared to 2024. Many factors will impact future pension expense, including actual investment performance, changes in discount rates, timing of contributions and other employee related matters. See Note 18—Employee Benefit Plans to our Financial Statements for further information. In 2024, we made mandatory contributions and benefit payments to plan participants of $9 million. During 2025, we expect to make mandatory contributions and benefit payments to plan participants of $8 million. Future mandatory contribution requirements will vary depending on actual investment performance, changes in valuation assumptions, interest rates and legal requirements to maintain a certain funding status. The sensitivity of pension expense and projected benefit obligation related to our pension plans to changes in economic assumptions is presented below: [[GREPCENT_TABLE]] [["(in millions)","Increase (Decrease)in 2025 Pension Expense","","Increase (Decrease)in December 31, 2024Projected Benefit Obligation"],["Change in Assumption"],["50 bp decrease in discount rate","$(1)","","$28"],["50 bp increase in discount rate","$\u2014","","$(25)"],["50 bp decrease in long-term return on assets","$3","","n/a"],["50 bp increase in long-term return on assets","$(3)","","n/a"]] [[/GREPCENT_TABLE]] 39 Table of Contents Realizability of Recorded and Unrecorded Tax Assets and Liabilities Our income tax expense, deferred tax assets and liabilities and reserves for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid. Significant judgments and estimates are required to determine consolidated income tax expense. Realizability of Deferred Tax Assets We have recorded certain DTAs that we believe will be realized in future periods. The recognition of these DTAs is based on our analysis of both positive and negative evidence regarding the future realization of the tax benefit of each existing deductible temporary difference or carryforward. Future realization is based on the existence of sufficient taxable income, of the appropriate character, within the appropriate taxing jurisdiction (for example country, state or province) and within the carryback and carryforward periods available under applicable tax laws. In projecting future taxable income, we evaluate historical earnings (adjusted for certain items, including the results from discontinued operations), along with future earnings forecasts, the reversal of temporary differences, and the implementation of feasible and prudent tax-planning strategies. The vast majority of our DTAs are in Canada, including $627 million of NOLs subject to expiration after 20 years and other DTAs that can be carried forward indefinitely. We have $334 million of net DTAs in Canada recognized on the consolidated balance sheet as of December 31, 2024. We evaluate the realizability of these Canadian DTAs in two steps. The first step evaluates future projected Canadian earnings from continuing operations to confirm the Canadian operations are more-likely-than-not to be profitable in future years. If future years are not expected to be profitable, the Company would only be able to recognize DTAs to the extent there are other sources of taxable income, such as reversals of deductible timing differences. Although this step does not require earnings be realized before any set time period, the Canadian operations would eventually need cumulative profits (excluding permanent tax adjustments) sufficient to utilize its net DTAs. Heavy consideration in this analysis is given to Canadian operating results, adjusted for permanent tax adjustments and other non-recurring items, over the most recent three-year period. The second step is to determine the realizability of the Canadian NOLs prior to expiration. This is done by forecasting Canadian taxable income in each year to confirm that each NOL pool is more-likely-than-not to be realized before its respective expiration, which ranges from 2027 to 2043. The forecasted taxable income excludes depreciation, which can be deferred indefinitely under Canadian tax law. Evaluation of all available evidence supports the realizability of most recorded DTAs. If the review of evidence indicates the realizability may be less than likely, then a valuation allowance is recorded, except for recorded DTAs for suspended U.S. interest deductions, which do not have a full valuation allowance in accordance with specific AICPA guidance. See Note 20—Income Taxes to our Financial Statements for further information on this item. Unrecognized Tax Benefits Our income tax returns are subject to examination by U.S. federal and state taxing authorities as well as foreign jurisdictions, including Canada and France. In evaluating the tax benefits associated with various tax filing positions, we record a tax benefit for an uncertain tax position if it is more-likely-than-not to be realized upon ultimate settlement of the issue. We record a liability or an offset to the corresponding DTAs for any uncertain tax position that does not meet this criterion. The liabilities for unrecognized tax benefits are adjusted in the period in which it is determined the issue is settled with the taxing authorities, the statute of limitations expires for the relevant taxing authority to examine the tax position or when new facts or information become available. See Note 20—Income Taxes to our Financial Statements for further information.