syl-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-Q

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☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From to

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Commission File Number 001-40718

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SYLVAMO CORPORATION

(Exact Name of Registrant as Specified in its Charter)

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Delaware			86-2596371
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)


6077 Primacy Parkway Memphis, Tennessee			38119
(Address of Principal Executive Offices)			(Zip Code)

901-519-8000

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former name, former address and and former fiscal year if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.00 per share	SLVM	New York Stock Exchange

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (paragraph 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange

Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock, par value $1.00 per share, as of November 3, 2023 was 41,553,680.

INDEX


		PAGE NO.
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Statements of Operations - Three Months and Nine Months Ended September 30, 2023 and 2022	1
	Condensed Consolidated Statements of Comprehensive Income (Loss) - Three Months and Nine Months Ended September 30, 2023 and 2022	2
	Condensed Consolidated Balance Sheets - September 30, 2023 and December 31, 2022	3
	Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2023 and 2022	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	30
Item 6.	Exhibits	31
Signatures		32

ITEM 1. FINANCIAL STATEMENTS

SYLVAMO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In millions, except per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
NET SALES	$	897	$	968	$	2,757	$	2,701
COSTS AND EXPENSES
Cost of products sold (exclusive of depreciation, amortization and cost of timber harvested shown separately below)	665		687		2,055		1,965
Selling and administrative expenses	89		80		248		227
Depreciation, amortization and cost of timber harvested	36		30		105		94
Taxes other than payroll and income taxes	7		6		19		18
Interest (income) expense, net	9		18		28		52
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	91		147		302		345
Income tax provision	33		38		98		97
NET INCOME FROM CONTINUING OPERATIONS	58		109		204		248
Discontinued operations, net of taxes	—		(52)		—		(224)
NET INCOME (LOSS)	$	58	$	57	$	204	$	24
BASIC EARNINGS (LOSS) PER SHARE
Earnings from continuing operations	$	1.39	$	2.47	$	4.83	$	5.62
Discontinued operations, net of taxes	—		(1.18)		—		(5.08)
Net earnings (loss)	$	1.39	$	1.29	$	4.83	$	0.54
DILUTED EARNINGS (LOSS) PER SHARE
Earnings from continuing operations	$	1.37	$	2.44	$	4.77	$	5.58
Discontinued operations, net of taxes	—		(1.16)		—		(5.04)
Net earnings (loss)	$	1.37	$	1.28	$	4.77	$	0.54

The accompanying notes are an integral part of these condensed consolidated financial statements.

SYLVAMO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In millions)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
NET INCOME (LOSS)	$	58	$	57	$	204	$	24
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES
Defined Benefit Pension and Postretirement Adjustments:
Amortization of pension and postretirement loss (less taxes of $0, $0, $0 and $0)	—		—		—		(1)
Change in cumulative foreign currency translation adjustment	(46)		(57)		40		21
Net gains/losses on cash flow hedging derivatives:
Net gains (losses) arising during the period (less taxes of $0, $2, $9 and $15)	3		7		21		40
Reclassification adjustment for (gains) losses included in net earnings (less taxes of $3, $1, $9 and $6)	(7)		(2)		(21)		(12)
TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES	(50)		(52)		40		48
COMPREHENSIVE INCOME (LOSS)	$	8	$	5	$	244	$	72

The accompanying notes are an integral part of these condensed consolidated financial statements.

SYLVAMO CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)


	September 30, 2023		December 31, 2022
	(unaudited)
ASSETS
Current Assets
Cash and temporary investments	$	194	$	360
Restricted cash	60		—
Accounts and notes receivable, net	423		450
Contract assets	25		30
Inventories	456		364
Other current assets	28		39
Total Current Assets	1,186		1,243
Plants, Properties and Equipment, net	949		817
Forestlands	346		322
Goodwill	134		128
Right of Use Assets	39		35
Deferred Charges and Other Assets	131		165
TOTAL ASSETS	$	2,785	$	2,710
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	382	$	453
Notes payable and current maturities of long-term debt	53		29
Accrued payroll and benefits	66		81
Other current liabilities	173		165
Total Current Liabilities	674		728
Long-Term Debt	946		1,003
Deferred Income Taxes	202		183
Other Liabilities	127		118
Commitments and Contingent Liabilities (Note 13)
Equity
Common stock $1 par value, 200.0 shares authorized, 44.5 shares and 44.2 shares issued and 41.5 shares and 42.6 shares outstanding at September 30, 2023 and December 31, 2022, respectively	45		44
Paid-in capital	45		25
Retained earnings	2,185		2,029
Accumulated other comprehensive loss	(1,298)		(1,338)
	977		760
Less: Common stock held in treasury, at cost, 2.9 shares and 1.6 shares at September 30, 2023 and December 31, 2022, respectively	(141)		(82)
Total Equity	836		678
TOTAL LIABILITIES AND EQUITY	$	2,785	$	2,710

The accompanying notes are an integral part of these condensed consolidated financial statements.

SYLVAMO CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)


	Nine Months Ended September 30,
	2023		2022
OPERATING ACTIVITIES
Net income from continuing operations	$	204	$	248
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and cost of timber harvested	105		94
Deferred income tax provision (benefit), net	4		4
Stock-based compensation	21		16
Changes in operating assets and liabilities and other
Accounts and notes receivable	99		(81)
Inventories	(46)		(76)
Accounts payable and accrued liabilities	(122)		18
Other	72		53
CASH PROVIDED BY OPERATING ACTIVITIES FROM CONTINUING OPERATIONS	337		276
CASH PROVIDED BY OPERATING ACTIVITIES FROM DISCONTINUED OPERATIONS, NET	—		20
CASH PROVIDED BY OPERATING ACTIVITIES	337		296
INVESTMENT ACTIVITIES
Invested in capital projects	(147)		(91)

Acquisition of business	(167)		—
CASH PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES FROM CONTINUING OPERATIONS	(314)		(91)
CASH PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES FROM DISCONTINUED OPERATIONS, NET	—		(5)
CASH PROVIDED BY (USED FOR) INVESTMENT ACTIVITIES	(314)		(96)
FINANCING ACTIVITIES

Dividends paid	(32)		(5)
Issuance of debt	443		—
Reduction of debt	(482)		(174)
Repurchases of common stock	(53)		—
Other	(7)		(2)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES FROM CONTINUING OPERATIONS	(131)		(181)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES FROM DISCONTINUED OPERATIONS, NET	—		(1)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	(131)		(182)
Effect of Exchange Rate Changes on Cash	2		27
Change in Cash Included in Assets Held for Sale	—		41
Change in Cash, Temporary Investments and Restricted Cash	(106)		4
Cash, Temporary Investments and Restricted Cash
Beginning of the period	360		159
End of the period	$	254	$	163

The accompanying notes are an integral part of these condensed consolidated financial statements.

SYLVAMO CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States and in accordance with the instructions to Form 10-Q and, in the opinion of management, include all adjustments that are necessary for the fair presentation of Sylvamo Corporation’s ("Sylvamo's", "the Company’s" or "our") financial position, results of operations, and cash flows for the interim periods presented. Except as disclosed herein, such adjustments are of a normal, recurring nature. Results for the first nine months of the year may not necessarily be indicative of full year results due to factors such as the Company’s planned maintenance outage schedule at its mills. All intercompany transactions have been eliminated. You should read these condensed consolidated financial statements in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the "Annual Report"), which have previously been filed with the Securities and Exchange Commission. These consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States that require the use of management’s estimates. Actual results could differ from management’s estimates.

Acquisition of Nymölla

On January 2, 2023, the Company completed the previously announced acquisition of Stora Enso’s uncoated freesheet paper mill in Nymölla, Sweden. Sylvamo accounted for the acquisition under ASC 805, “Business Combinations” and the Nymölla mill’s results of operations are included in Sylvamo’s condensed consolidated financial statements from the date of acquisition. See Note 7 Acquisitions for further details.

Divestiture of Russian Operations

During the second quarter of 2022, management committed to a plan to sell the Company’s Russian operations, which were previously part of the Europe business segment. As a result, all historical operating results of the Russian operations are presented as “Discontinued operations, net of taxes” in the condensed consolidated statement of operations and the notes to the condensed consolidated financial statements. In October 2022, the Company completed the sale of its Russian operations to Pulp Invest Limited Liability Company, a company incorporated in the Russian Federation. See Note 8 Divestiture and Impairment of Business for further details.

NOTE 2 SIGNIFICANT ACCOUNTING POLICIES

Our significant accounting policies are described in Note 2 Significant Accounting Policies to the audited consolidated and combined financial statements included in our 2022 Form 10-K. There have been no material changes to the significant accounting policies for the nine months ended September 30, 2023.

Recently Issued Accounting Pronouncements

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” which was subsequently amended by ASU 2022-06, “Reference Rate Reform (Topic 848): Deferral of Sunset Date of Topic 848,“ issued in December 2022. Together this guidance provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. This guidance is effective upon issuance and generally can be applied through December 31, 2024.

During the three months ended June 30, 2023, the Company transitioned its LIBOR-based debt arrangements and the related interest rate swaps from a reference rate of LIBOR to SOFR (“Standard Overnight Financing Rate”). See Note 14 Long-Term Debt for further details. The impact of the reference rate transition to the debt arrangements and the related interest rate swaps, along with the adoption of the provisions from this standard, did not have a material impact on our condensed consolidated financial statements. At this time, the Company does not plan to enter into additional contracts using LIBOR as a reference rate.

NOTE 3 REVENUE RECOGNITION

External Net Sales by Product

External net sales by major products were as follows by business segment:


	Three Months Ended September 30,		Nine Months Ended September 30,
In millions	2023	2022	2023	2022
Europe
Uncoated Papers	$

SEC Form 10-Q filed by Sylvamo Corporation