Greetings and welcome to Rayonier Advanced Materials Fourth Quarter 2016 Teleconference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Mickey Walsh, Treasurer and Vice President of Investor Relations. Thank you. You may begin.

Thank you, Audry, and welcome to Rayonier Advanced Materials 2016 fourth quarter earnings call and webcast. Joining me on today's call are Paul Boynton, our Chairman, President and Chief Executive Officer; and Frank Ruperto, our Chief Financial Officer. Our earnings release and presentation materials were issued yesterday afternoon and are available on our website at rayonieram.com. I'd like to remind you that in today's presentation, we will include forward-looking statements made pursuant to the Safe Harbor provisions of federal securities laws. Our earnings release, as well as our filings with the SEC, list some of the factors which may cause actual results to differ materially from the forward-looking statements we may make. They are also referenced on Slide 2 of our presentation material. Today's presentation will also reference certain non-GAAP financial measures as noted on Slide 3 of our presentation material. We believe non-GAAP financial measures provide useful information for management and investors, but non-GAAP measures should not be considered an alternative to GAAP measures. A reconciliation of these measures to their most directly comparable GAAP financial measures are included on Pages 14 through 18 of our presentation. At this time, I would like to turn the call over to Paul for his opening remarks.

Hey. Thank you, Mickey, and good morning, everyone. A year ago when we addressed you on our fourth quarter call, we faced a $68 million negative impact to EBITDA from price and volume for 2016. At that time, we challenged the organization to take $40 million of cost out of the business. I am pleased to report that each and every employee responded as we exceeded our own expectation and delivered $50 million against the significant initiative. These cost improvements mitigated the majority of the price and volume impact and allowed us to deliver $226 million of EBITDA well above beginning your guidance of $175 million to $190 million. Additionally, we generated $143 million of adjusted free cash flow exceeding our goal for the year by over $50 million. Again, these financial results are the testament to the hard work and persistence of our employees. In 2016, we also took a significant step in strengthening our balance sheet and improving our financial flexibility by issuing $173 million of equity. The combination of a strong balance sheet and improving cost structure provides a solid foundation to fund future growth initiatives and drive stockholder value. Shortly, I will share additional comments on our strategy and the conditions of the market which we operate. Let me now turn over to Frank to review our 2016 financial results as well as provide guidance for 2017. Frank?

Thank you, Paul. Now let's look at Slide 4 to review our financial highlights for the fourth quarter and full-year. Sales for the quarter totaled $231 million, 5% below fourth quarter 2015. Full-year 2016 sales were $869 million or 8% lower than the prior year. The full-year sales decline was primarily driven by a 7% decline in CS prices and a 2% decline in CS volumes. Net income for the quarter and full-year were $11 million and $73 million respectively. Pro forma net income was $67 million compared to $73 million in 2015. Pro forma results exclude one-time adjustments primarily related to the 2015 Jesup asset write-down and the gain on extinguishment of debt repurchased in 2016. Operating income was $26 million for the fourth quarter of 2016 compared to $29 million for the fourth quarter 2015. Full-year operating income was $138 million in 2016 and $120 million in 2015. In 2015, pro forma operating income was $149 million with a significant portion of the negative impact from CS sale decreases offset by our cost improvement initiative. Pro forma results primarily exclude the asset write-down in 2015. The variance analyses for operating income relative to fourth quarter and full-year 2016 are provided on Slide 5. Quarter and year-to-date variances have similar drivers. CS prices were down 8% and 7% respectively from the prior year three-month and full-year periods. Volume variances and sales mix contributed $4 million to the fourth quarter of 2016, while full-year results were $14 million unfavorable to prior year. As referenced on Slide 6, fourth quarter CS sales volumes of 121,000 tons or 5,000 tons above the prior year period primarily due to the timing of revenue recognition. Full-year 2016 CS volumes of 456,000 tons were down approximately 11,000 tons or 2% from 2015. Commodity volumes for…

Thanks, Frank. Turning to Slide 11, let me comment on the market conditions before turning to our four strategic pillars. In the cellulose specialties business, the acetate inventory issues of the past couple years appear to be settling out. We believe we are entering a period where fundamental acetate tow demand is relatively flat. Additionally, we see signs of more robust demand including capacity expansions in ethers and engine filtration segment and increased demand for tire cord. On the supply side, competitors continue to try to move volume from commodity to specialty grade and those with foreign operations are benefiting from the relative strength of the U.S. dollar. These factors in turn placed pressure on our prices and volumes. As Frank pointed out, cellulose specialty pricing is expected be down 3% to 4% in 2017, which is comprised of acetate prices being down about 2% in line with our prior guidance and the remainder due primarily to a mix shift towards lower priced non-acetate volume. In our commodity business, year-over-year viscose prices are stronger, while absorb material prices are experienced modest pressure. Our operations have the flexibility to produce either commodity viscose or absorbent materials. As such, we’re able to flex our production to take advantage of market conditions and our planning to produce even more viscose in 2017. Despite the challenges we face in our cellulose specialties market, we've laid out specific objectives on Page 12, which will allow us to drive growth and value to our stockholders. First, we must continue to improve our cost and cash flow. Our cost transformation total will remain a critical core component of the overall strategy. We've done a commendable job thus far on this initiative, realizing $85 million of our $140 million objectives in just two years. But we also realize,…

Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of John Babcock with Bank of America Merrill Lynch. Please proceed with your question.

Hey. Good morning, guys. One quick question on the CS side, I mean clearly you guys have been targeting essentially acetate pricing down 2%. I just want to get clarified, is that on the contracted side or is there any sort of pricing pressure on the spot side? And then also if you could remind us how much spot volumes you have in acetate?

So John, we have little, virtually no spot volumes on acetate. So that 2% is on our contracted business. We probably commented in the last call that we still had pricing negotiations ongoing. And so those are all now included, but those are part of contractual business, not necessarily spot business.

Okay. And as far as the newer volumes, I mean clearly we're continuing to see price or see volume pressure rather on the acetate side. Can you give us some sense as far as where acetate volumes are kind of going in the year ahead and then also essentially some of the areas and if you could quantify the volume benefit perhaps on some of the newer tonnage that you guys are picking up to help offset those pressures?

Yes. We haven't quantified the magnitude of our mix shift out there. Obviously, acetate is under pressure a bit and you've heard some of our customers probably already talk about their volume. We see it going down, I'd say slightly in the single digits percent and we're picking up the balance of that in other market segments.

Okay. And as far as CapEx, can also remind us what the maintenance CapEx for Rayonier Advanced at this point, I mean it seems $60 million out leased from the numbers that I'm seeing is the lowest level since 2009. So I want to get a sense for and that includes obviously the LignoTech joint venture. So to provide some kind of clarity on whether there's any growth CapEx in there or anything we should take note of?

There's about $50 million in maintenance CapEx is the way you should think about our business going forward. You saw elevated levels over the last several years. We had the CSC projects, we had Boiler MACT, and this year we've got LignoTech Florida, so it's roughly about $50 million is what I planned this year and kind of going forward. It should move a little bit around that depending on which outages we have going on between the different facilities, but $50 million is a good maintenance CapEx number to use going forward.

Okay. And just last question I had for you before I turn it over. With regards to the increase market in R&D spend, is that something that you see is primarily a 2017 item or is that something that we should also expect to see in 2018 and perhaps even more than – even later than that.

So John, we commented it's one of our key pillars for growth and we continue to invest in that area. Not only in people, but obviously in trials that we're running equipments to run the new products and kind of assortment things. So we would expect that to stay slightly elevated, it's up modestly and we continue to invest in it, but it should be from a part of our path going forward.

Okay, so it sounds like it's only a couple million, maybe not even that?

Yes, I see that’s a fair number.

Okay, thanks.

Thank you. Our next question comes from the line of Roger Spitz with Bank of America Merrill Lynch. Please proceed with your question.

Hi, yes, this is Chris Ryan on for Roger. Thanks for taking my question. First question for, what is your view for Chinese cigarette demand growth sort of decline going forward?

Yes, we've commented many others comment, it’s not a terribly transparent picture out there. They have done a significant amount of destocking over the last couple years and it appears to us that that is largely playing out now and settling out. We believe fundamental demand from our conversations with customers there in terms of acetate tow is going to be slightly flat if not up a little bit in China. Again not a terribly clear picture on that, but that's our expectations based on the conversations we had.

Thank you. And if you can comment, has the Brazilian producer changed his tactics since the go private transactions as far as you can tell?

I'm not too sure those tactics, but we’re certainly aware that they're out there in the marketplace, we compete against them. No I don't know anything other than that. You have to ask them with regard to that. So we've got limited visibility, Chris.

Sure, and then finally, what is your expectation for 2017 cash restructuring costs and to what extent do you think working capital be a source or use of cash?

Yes, so going into 2017, we don't have significant restructuring costs built in. We do have a one-time cost built into that cost piece of the guidance bar that you see one of the projects that you have. So yes, working capital right now, we're referencing as roughly flat. We had a significant pick up last year in working capital. It's something we will continue to focus on and see if we can find more opportunities, but given the significant pick up last year on working capital, we've guided extra flat on that.

Got it, thank you. That's all my questions.

Thanks Chris.

[Operator Instructions] Our next question comes from the line of Steve Chercover with D. A. Davidson. Please proceed with your question.

Good morning, everyone.

Hi.

So the first question is from a modeling perspective. Do you recommend that we use the Q4 average CS price of $1,505 as a starting point and then take 3% to 4% off of that?

Yes, I would look at the average over the year and take 3% to 4% over that from a modeling perspective. That's how we think about it. That's how we tend to guide us and year-over-year full-year basis.

Okay, so that $1,525 because I figure there might be some mix issues within that fourth quarter number so? Okay, thanks for that.

A little, but I think it's – I don't think that's going to change your numbers a whole lot.

Yes, okay. And then in the past, I believe you said that the margins on ethers and other specialty were similar to those in acetate. But obviously the selling places are a bit lower, but our production cost lower as well, so – are those margins similar?

Yes, Steve it’s varied out there and in some cases certainly a lot of our ethers businesses are similar. In some cases it's not and in these other segments depending where we're picking up the business, it maybe somewhat different or very different if you will. So it's all over the map a little bit in terms of the actual margins. So we don’t have any guidance out there. So I can't specifically say where it's going to be exactly depending on the customer, the product that we’re supplying, and so it's a bit varied.

Okay, and then quick question on LignoTech and I guess still a ways away, but obviously you wouldn't even pursue it. You didn't expect to earn-in excess of your cost of capital. Is it going to be a new business segment or are you just going to report it as a line item, what finally comes on stream?

Yes, it's going to come through as a line item. So where we don't consolidate, but we don't plan to consolidate LignoTech as we're not a majority owner. So it will come through as a single line item on our P&L.

Will you give us any I guess visibility in terms of selling prices and what the end markets are like in the margins even if it's not consolidated?

Our partner goes into great detail on their views on the market and the cellular specialty side as they do that. Given we're not selling any lignin yet. We haven't thought through that issue from how much disclosure would be helpful to analysts on this call. But obviously, Beauregard will be giving out significant detail on the lignin markets as they typically do on their calls.

Yes. Well, we don't cover Beauregard, but I guess - for a wish list, it would be nice to know that it's not just a pure black box, so if you can help us [indiscernible] that would be great. Thank you.

You’re, that’s fair Steve, that we just again it's where 18 months out before we sell. We just haven't tackled that question yet, but good point.

Understood. Thanks, Frank.

Thank you. Our next question comes from the line of Paul Quinn with RBC Capital Markets. Please proceed with your question.

Yes. Thanks very much guys. Just following up on Steve's question on LignoTech and disclosure. If we looked at Beauregard’s recent disclosure with regard to how they characterize the lignin market? Is the product that’s going to come out of LignoTech representative of what they're making now or is their mix different?

So, I'd say it's relatively similar to their mix that they have today and large part of that going into the construction markets.

Okay. Thanks for that. And then just on the new products, you’ve referenced $14 million, I guess that's sales in 2017 as part of your plan to grow that to 20%. The LignoTech is going to fit into this new product category as well?

No, we've attempted to put it into that acquisition side of things and driving that, so we haven't included there.

Okay. And the goal of 20%, is that 20% of sales?

Yes, 20% of sales and within 10 years.

Okay. So the 14 at 870 is the small. Okay, so essentially you're going to have to really ramp up this new product development?

Yes. You're absolutely right. And we're doing that now and again, we said this is just a small, but we thought significant step as some of these things are being picked up in the marketplace that we appreciated and they take time and they've been pushing new products out there. So we're pleased with the small progress we've made and again we've got a lot of activity going on, but we hope we’ll bring in and help us meet that goal in the time period.

Okay. And just a quick one maybe to Frank on modeling SG&A 2017 guidance that seems to be all over the map on a quarterly basis in 2016, what are you expecting for the full-year?

Flat full-year this year.

Flat on 2016. Thanks so much guys. Cheers.

Thanks, Paul.

[Operator Instructions] Our next question is a follow-up from John Babcock with Bank of America Merrill Lynch. Please proceed with your question.

Point that I was hoping to get a little bit more color on it was essentially on the acquisition front. I know you guys have talked about essentially going into complimentary areas and all that and essentially trying to capture some growth. And I was just wondering, it looks like I mean clearly with the lower CapEx here, it looks like that pay down kind of slow down a little bit. Are you guys at the point where you're within a relatively reasonable timeframe to be announcing something here or how should we think about that?

So John, we have an active program to evaluate opportunities as they come along. So we are always looking at opportunities as we move forward, and again our focus is in areas that are complementary to our core competencies of manufacturing excellence and processing technologies and cost takeout in the cellulose specialty chemicals, but we don't have anything to announce at this point. So you’ll just have to stay tuned, but obviously it is a key focus and when we find the right opportunity, we will pursue it. But we're also very prudent and don't want to pursue something that we don't think will create value for our shareholders.

Okay. And as far as the debt pay down, is there any reason to think that perhaps the pace might fall a little bit in 2017?

It depends on our use of capital, right now our capital allocation plans, but right now, we have some minimum debt pay downs that we anticipate to do and then depending on whether or not we see opportunities to use the capital otherwise that we think is higher returns will pursue that before we pursue more debt pay down.

Okay. And are you expecting higher interest rate in the next year or so from the increase?

Yes. We do have some floating rate debt, so we will see that portion of our debt, the non-bond debt increase and float with wherever LIBOR rates go.

Okay. And I assume the $37 million guidance for the year does that include any debt pay down?

That includes just minimal debt pay down and it includes on that perspective of slightly higher rates.

Okay. Perfect. All right. Thanks guys. End of Q&A

Ladies and gentlemen, that does conclude our question-and-answer session. At this time, I will turn it back to Mr. Paul Boynton for closing comments.

Well, I like to thank you all for joining us today. In summary, we are pleased with the execution against our objectives in 2016. We feel confident that the strategic steps that we will take in 2017. Best positions Rayonier Advanced Materials to serve our customers with the highest level of quality, service and security of supply, thereby enabling us to drive long-term value for our stockholders. We look forward to updating you on our progress throughout the year. Thank you. Good morning.

This concludes today's teleconference. Thank you for your participation. You may disconnect your lines at this time.