8-K
MERCER INTERNATIONAL INC. (MERC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 31, 2020
MERCER INTERNATIONAL INC.
(Exact name of Registrant as Specified in Its Charter)
| Washington | 000-51826 | 47-0956945 |
|---|---|---|
| (State or Other Jurisdiction<br><br><br>of Incorporation) | (Commission File Number) | (IRS Employer<br><br><br>Identification No.) |
Suite 1120, 700 West Pender Street, Vancouver, British Columbia, Canada, V6C 1G8
(Address of Principal Executive Offices)
Registrant’s Telephone Number, Including Area Code: (604) 684-1099
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br><br><br>Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $1.00 per share | MERC | NASDAQ Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
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. ☐
Item 2.02. Results of Operations and Financial Condition
The information furnished under Item 2.02 of this Current Report shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
On April 30, 2020, Mercer International Inc. (the “Company”) announced by press release the Company’s results for its first quarter ended March 31, 2020. A copy of such press release is furnished as Exhibit 99.1 to this Current Report.
Item 8.01. Other Events
On April 30, 2020, the Company announced by press release that its board of directors had authorized a quarterly cash dividend of $0.065 per share to be paid on July 7, 2020 to all shareholders of record on June 25, 2020. A copy of such press release is furnished as Exhibit 99.1 to this Current Report.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits.
| Exhibit<br><br><br>Number | Description |
|---|---|
| 99.1 | Press Release dated April 30, 2020 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| MERCER INTERNATIONAL INC. | ||
|---|---|---|
| Date: April 30, 2020 | By: | /s/ David K. Ure |
| David K. Ure | ||
| Chief Financial Officer |
2
merc-ex991_6.htm
EXHIBIT 99.1
For Immediate Release
MERCER INTERNATIONAL INC. REPORTS FIRST QUARTER 2020 RESULTS AND ANNOUNCES QUARTERLY CASH DIVIDEND OF $0.065
Selected Highlights
| • | First quarter net loss of $3.4 million |
|---|---|
| • | Quarterly Operating EBITDA* of $57.0 million |
| --- | --- |
| • | Cash on hand and available credit facilities provide liquidity of about $516.5 million at March 31, 2020 |
| --- | --- |
NEW YORK, NY, April 30, 2020 ‑ Mercer International Inc. (Nasdaq: MERC) today reported first quarter 2020 Operating EBITDA decreased to $57.0 million from $123.8 million in the first quarter of 2019 and increased from negative $34.2 million in the fourth quarter of 2019.
In the first quarter of 2020, net loss was $3.4 million (or $0.05 per share) compared to net income of $51.6 million (or $0.79 per basic share and $0.78 per diluted share) in the first quarter of 2019 and a net loss of $72.7 million (or $1.11 per share) in the fourth quarter of 2019.
Mr. David Gandossi, the Chief Executive Officer, stated: “The outbreak of the COVID-19 pandemic in the first quarter has presented a number of challenges and I am proud that our people have risen to meet these head on.
Our pulp products are an important constituent of many pandemic related high demand goods such as tissue and cleaning products and certain personal protective equipment. Accordingly, we have implemented a number of new and important health and safety measures at our operations to protect our employees and to allow our mills to operate responsibly and efficiently. We are constantly monitoring our operations and guidance from governmental and health organizations to ensure we take appropriate and necessary actions to protect our people.
____________________
*Operating EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States ("GAAP") and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. See page 6 of the financial tables included in this press release for a reconciliation of net income (loss) to Operating EBITDA.
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The current working environment and resultant work changes have not been easy and I want to thank all our employees for working cooperatively to implement new procedures to keep safety at the forefront and for looking out for one another. Despite these new procedures, our mills continued to run well in the first quarter of 2020.
Despite weak product pricing, our solid first quarter financial results reflect strong production, effective cost control, steady demand for both pulp and lumber and favorable currency movements. On the pulp side, we experienced modest price increases off trough price levels in the fourth quarter of 2019 as demand was generally steady. Overall, our sales volumes were held back slightly as we worked through pandemic related logistical challenges early in the quarter. On the lumber side, our recent sawmill upgrades allowed us to take advantage of strong demand and upward pricing momentum in the U.S. market to report record quarterly operating income for our wood products segment.
As we manage through the current global business uncertainty, we are working to lower our costs and working capital usage and conservatively managing liquidity. As a result, we have reduced our 2020 planned capital expenditures to about $90 million and reduced our quarterly dividend to $0.065 per share."
Consolidated Financial Results
| Q1 | Q4 | Q1 | ||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2019 | ||||||
| (in thousands, except per share amounts) | ||||||||
| Revenues | $ | 350,599 | $ | 331,172 | $ | 483,950 | ||
| Operating income (loss) | $ | 24,062 | $ | (66,106 | ) | $ | 93,552 | |
| Operating EBITDA | $ | 57,008 | $ | (34,159 | ) | $ | 123,799 | |
| Loss on settlement of debt ^(1)^ | $ | — | $ | (4,750 | ) | $ | — | |
| Net income (loss) | $ | (3,392 | ) | $ | (72,721 | ) | $ | 51,616 |
| Net income (loss) per common share | ||||||||
| Basic | $ | (0.05 | ) | $ | (1.11 | ) | $ | 0.79 |
| Diluted | $ | (0.05 | ) | $ | (1.11 | ) | $ | 0.78 |
______________
| (1) | Redemption of 7.75% senior notes due 2022. |
|---|
Consolidated – Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019
In the first quarter of 2020, our operating EBITDA increased to $57.0 million from negative $34.2 million in the fourth quarter of 2019 and decreased from $123.8 million in the same quarter of 2019. The increase in the current quarter compared to the prior quarter is primarily due to lower maintenance costs, the positive impact of a stronger dollar on our dollar denominated cash and receivables held at our operations and higher sales volumes. The decrease compared to the same quarter of 2019 is primarily due to lower pulp sales realizations partially offset by lower per unit fiber costs and the positive impact of a stronger dollar.
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Segment Results
Pulp: Lower fiber costs more than offset by lower sales realizations
| Three Months Ended March 31, | ||||
|---|---|---|---|---|
| 2020 | 2019 | |||
| (in thousands) | ||||
| Pulp revenues | $ | 278,948 | $ | 413,313 |
| Energy and chemical revenues | $ | 24,657 | $ | 23,161 |
| Operating income | $ | 21,439 | $ | 93,520 |
In the first quarter of 2020, pulp segment operating income decreased to $21.4 million from $93.5 million in the same quarter of 2019. The decrease was primarily due to lower pulp sales realizations partially offset by the positive impact of a stronger dollar and lower per unit fiber costs. In the current quarter of 2020, the NBSK pulp realized sales price decreased by approximately 26% to $561 per ADMT from $757 per ADMT in the same quarter of the prior year due to high producer inventory levels and market uncertainty as COVID-19 spread through China. NBSK sales volumes decreased by approximately 6% to 438,326 ADMTs in the current quarter from 466,893 ADMTs in the same quarter of 2019 due to logistics issues early in the current quarter related to closures, restrictions and other effects related to the COVID-19 pandemic.
Our Canadian pulp mills recorded a non-cash write down of our inventory carrying values of $5.7 million in the current quarter as a result of lower pulp sales realizations and high fiber costs.
Per unit fiber costs decreased in the current quarter by approximately 12% from the same quarter of 2019 primarily due to lower per unit fiber costs for our German mills. In Germany, per unit fiber costs benefitted from the continuing availability of beetle damaged wood. Per unit fiber costs in Canada were flat but remained at historically high levels due to strong fiber demand in the mills' fiber procurement areas.
Wood Products: Record operating income due to record production and lower fiber costs
| Three Months Ended March 31, | ||||
|---|---|---|---|---|
| 2020 | 2019 | |||
| (in thousands) | ||||
| Lumber revenues | $ | 40,986 | $ | 39,163 |
| Energy revenues | $ | 2,631 | $ | 2,666 |
| Wood residual revenues | $ | 2,161 | $ | 2,610 |
| Operating income | $ | 5,555 | $ | 1,620 |
In the first quarter of 2020 the wood products segment operating income increased to a record $5.6 million compared to $1.6 million in the same quarter of 2019. The increase was primarily due to record production and lower per unit fiber costs. Production increased by approximately 5% to 116.4 MMfbm of lumber in the current quarter from 110.7 MMfbm in the same quarter of 2019 primarily due to capital improvements at the mill. In the
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current quarter per unit fiber costs decreased by approximately 25% from the same quarter of 2019 primarily as a result of the continuing availability of beetle damaged wood.
Average lumber sales realizations decreased by approximately 3% to $348 per Mfbm in the first quarter of 2020 from approximately $359 per Mfbm in the same quarter of 2019 primarily due to lower pricing in Europe partially offset by higher pricing in the U.S. market. European lumber pricing declined due to an increase in the supply of lumber processed from beetle damaged wood which generally obtains lower prices. U.S. lumber pricing increased due to strong demand in the current quarter.
Liquidity
The following table is a summary of selected financial information as of the dates indicated:
| March 31, | December 31, | |||
|---|---|---|---|---|
| 2020 | 2019 | |||
| (in thousands) | ||||
| Cash and cash equivalents | $ | 286,526 | $ | 351,085 |
| Working capital | $ | 603,410 | $ | 588,385 |
| Total assets | $ | 1,951,989 | $ | 2,065,720 |
| Long-term liabilities | $ | 1,304,078 | $ | 1,259,005 |
| Total equity | $ | 462,768 | $ | 550,403 |
As of March 31, 2020, we had cash and cash equivalents of approximately $286.5 million, approximately $229.9 million available under our revolving credit facilities, providing aggregate liquidity of about $516.5 million.
Current Market Environment
Although there is a great deal of global business uncertainty resulting from the COVID-19 pandemic and its effect and societal responses are evolving and can change quickly, in the second quarter we are currently expecting to see steady pulp demand from tissue and hygiene producers but a weakening in demand from printing and writing paper producers.
On the pulp supply side, in the upcoming quarter, we are currently expecting certain mills to curtail production as a result of fiber shortages resulting from sawmill downtime. Further, some pulp mills have announced some sporadic curtailments resulting from COVID-19. Additionally, various pulp mills globally have delayed their annual maintenance schedules as a result of the current pandemic. This is expected to curtail production in the later part of the year or early part of next year.
On the lumber side, we are currently expecting weakening lumber markets and lower lumber sales realizations in the second quarter of 2020 due to a drop in housing starts and business slowdowns and disruptions resulting from the pandemic in our major markets.
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Quarterly Dividend
A quarterly dividend of $0.065 per share will be paid on July 7, 2020 to all shareholders of record on June 25, 2020. Future dividends will be subject to Board approval and may be adjusted as business and industry conditions warrant.
Earnings Release Call
In conjunction with this release, Mercer International Inc. will host a conference call, which will be simultaneously broadcast live over the Internet. Management will host the call, which is scheduled for May 1, 2020 at 10:00 AM (Eastern Daylight Time). Listeners can access the conference call live and archived for 30 days over the Internet at https://edge.media-server.com/mmc/p/qrp3w7ec or through a link on the company's home page at https://www.mercerint.com. Please allow 15 minutes prior to the call to visit the site and download and install any necessary audio software.
Mercer International Inc. is a global forest products company with operations in Germany and Canada with consolidated annual production capacity of 2.2 million tonnes of pulp and 550 million board feet of lumber. To obtain further information on the company, please visit its web site at https://www.mercerint.com.
The preceding includes forward looking statements which involve known and unknown risks and uncertainties which may cause our actual results in future periods to differ materially from forecasted results. Words such as "expects", "anticipates", "projects", "intends", "designed", "will", "believes", "estimates", "may", "could" and variations of such words and similar expressions are intended to identify such forward-looking statements. Among those factors which could cause actual results to differ materially are the following: the highly cyclical nature of our business, raw material costs, our level of indebtedness, competition, foreign exchange and interest rate fluctuations, our use of derivatives, expenditures for capital projects, environmental regulation and compliance, disruptions to our production, market conditions and other risk factors listed from time to time in our SEC reports.
APPROVED BY:
Jimmy S.H. Lee
Executive Chairman
(604) 684-1099
David M. Gandossi
Chief Executive Officer
(604) 684-1099
-FINANCIAL TABLES FOLLOW-
Summary Financial Highlights
| Q1 | Q4 | Q1 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2019 | |||||||
| (in thousands, except per share amounts) | |||||||||
| Pulp segment revenues | $ | 303,605 | $ | 290,790 | $ | 436,474 | |||
| Wood products segment revenues | 45,778 | 39,588 | 44,439 | ||||||
| Corporate and other revenues | 1,216 | 794 | 3,037 | ||||||
| Total revenues | $ | 350,599 | $ | 331,172 | $ | 483,950 | |||
| Pulp segment operating income (loss) | $ | 21,439 | $ | (66,574 | ) | $ | 93,520 | ||
| Wood products segment operating income | 5,555 | 5,274 | 1,620 | ||||||
| Corporate and other operating loss | (2,932 | ) | (4,806 | ) | (1,588 | ) | |||
| Total operating income (loss) | $ | 24,062 | $ | (66,106 | ) | $ | 93,552 | ||
| Pulp segment depreciation and amortization | $ | 30,371 | $ | 29,492 | $ | 28,023 | |||
| Wood products segment depreciation and amortization | 2,377 | 2,029 | 1,911 | ||||||
| Corporate and other depreciation and amortization | 198 | 426 | 313 | ||||||
| Total depreciation and amortization | $ | 32,946 | $ | 31,947 | $ | 30,247 | |||
| Operating EBITDA | $ | 57,008 | $ | (34,159 | ) | $ | 123,799 | ||
| Loss on settlement of debt ^(1)^ | $ | — | $ | (4,750 | ) | $ | — | ||
| Benefit (provision) for income taxes | $ | (5,344 | ) | $ | 15,875 | $ | (24,424 | ) | |
| Net income (loss) | $ | (3,392 | ) | $ | (72,721 | ) | $ | 51,616 | |
| Net income (loss) per common share | |||||||||
| Basic | $ | (0.05 | ) | $ | (1.11 | ) | $ | 0.79 | |
| Diluted | $ | (0.05 | ) | $ | (1.11 | ) | $ | 0.78 | |
| Common shares outstanding at period end | 65,800 | 65,629 | 65,651 |
______________
| (1) | Redemption of 7.75% senior notes due 2022. |
|---|
(1)
____________________
*Operating EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States ("GAAP") and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. See page 6 of the financial tables included in this press release for a reconciliation of net income (loss) to Operating EBITDA.
Summary Operating Highlights
| Q4 | Q1 | ||||
|---|---|---|---|---|---|
| 2019 | 2019 | ||||
| Pulp Segment | |||||
| Pulp production ('000 ADMTs) | |||||
| NBSK | 455.2 | 381.3 | 460.6 | ||
| NBHK | 78.9 | 60.9 | 78.6 | ||
| Annual maintenance downtime ('000 ADMTs) | 2.3 | 86.5 | — | ||
| Annual maintenance downtime (days) | 2 | 54 | — | ||
| Pulp sales ('000 ADMTs) | |||||
| NBSK | 438.3 | 416.6 | 466.9 | ||
| NBHK | 66.0 | 65.3 | 87.8 | ||
| Average NBSK pulp prices (/ADMT)(1) | |||||
| Europe | 833 | 822 | 1,105 | ||
| China | 573 | 563 | 700 | ||
| North America | 1,127 | 1,115 | 1,380 | ||
| Average NBHK pulp prices (/ADMT)(1) | |||||
| China | 460 | 455 | 695 | ||
| North America | 890 | 893 | 1,180 | ||
| Average pulp sales realizations (/ADMT)(2) | |||||
| NBSK | 561 | 581 | 757 | ||
| NBHK | 468 | 476 | 656 | ||
| Energy production ('000 MWh)(3) | 578.4 | 432.9 | 560.5 | ||
| Energy sales ('000 MWh)(3) | 231.7 | 154.5 | 211.8 | ||
| Average energy sales realizations (/MWh)(3) | 95 | 88 | 94 | ||
| Wood Products Segment | |||||
| Lumber production (MMfbm) | 116.4 | 106.7 | 110.7 | ||
| Lumber sales (MMfbm) | 117.7 | 101.1 | 109.2 | ||
| Average lumber sales realizations (/Mfbm) | 348 | 347 | 359 | ||
| Energy production and sales ('000 MWh) | 22.8 | 23.1 | 22.4 | ||
| Average energy sales realizations (/MWh) | 116 | 114 | 119 | ||
| Average Spot Currency Exchange Rates | |||||
| / (4) | 1.1022 | 1.1075 | 1.1354 | ||
| / C(4) | 0.7438 | 0.7578 | 0.7521 |
All values are in US Dollars.
______________
| (1) | Source: RISI pricing report. Europe and North America are list prices. China are net prices which include discounts, allowances and rebates. Effective January 2020, the RISI pricing report does not provide list prices for China. |
|---|---|
| (2) | Sales realizations after customer discounts, rebates and other selling concessions. Incorporates the effect of pulp price variations occurring between the order and shipment dates. |
| --- | --- |
| (3) | Does not include our 50% joint venture interest in the Cariboo mill, which is accounted for using the equity method. |
| --- | --- |
| (4) | Average Federal Reserve Bank of New York Noon Buying Rates over the reporting period. |
| --- | --- |
(2)
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
| Three Months Ended March 31, | ||||||
|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||
| Revenues | $ | 350,599 | $ | 483,950 | ||
| Costs and expenses | ||||||
| Cost of sales, excluding depreciation and amortization | 276,056 | 343,033 | ||||
| Cost of sales depreciation and amortization | 32,911 | 30,136 | ||||
| Selling, general and administrative expenses | 17,570 | 17,229 | ||||
| Operating income | 24,062 | 93,552 | ||||
| Other income (expenses) | ||||||
| Interest expense | (20,084 | ) | (18,551 | ) | ||
| Other income (expenses) | (2,026 | ) | 1,039 | |||
| Total other expenses, net | (22,110 | ) | (17,512 | ) | ||
| Income before provision for income taxes | 1,952 | 76,040 | ||||
| Provision for income taxes | (5,344 | ) | (24,424 | ) | ||
| Net income (loss) | $ | (3,392 | ) | $ | 51,616 | |
| Net income (loss) per common share | ||||||
| Basic | $ | (0.05 | ) | $ | 0.79 | |
| Diluted | $ | (0.05 | ) | $ | 0.78 | |
| Dividends declared per common share | $ | 0.1375 | $ | 0.1250 |
(3)
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)
| December 31, | |||||
|---|---|---|---|---|---|
| 2019 | |||||
| ASSETS | |||||
| Current assets | |||||
| Cash and cash equivalents | 286,526 | $ | 351,085 | ||
| Accounts receivable, net | 221,921 | 208,740 | |||
| Inventories | 269,812 | 272,599 | |||
| Prepaid expenses and other | 10,294 | 12,273 | |||
| Total current assets | 788,553 | 844,697 | |||
| Property, plant and equipment, net | 1,020,345 | 1,074,242 | |||
| Investment in joint ventures | 48,188 | 53,122 | |||
| Amortizable intangible assets, net | 48,957 | 53,371 | |||
| Operating lease right-of-use assets | 11,866 | 13,004 | |||
| Other long-term assets | 32,848 | 26,038 | |||
| Deferred income tax | 1,232 | 1,246 | |||
| Total assets | 1,951,989 | $ | 2,065,720 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||
| Current liabilities | |||||
| Accounts payable and other | 184,447 | $ | 255,544 | ||
| Pension and other post-retirement benefit obligations | 696 | 768 | |||
| Total current liabilities | 185,143 | 256,312 | |||
| Debt | 1,136,454 | 1,087,932 | |||
| Pension and other post-retirement benefit obligations | 23,157 | 25,489 | |||
| Finance lease liabilities | 37,537 | 31,103 | |||
| Operating lease liabilities | 9,436 | 10,520 | |||
| Other long-term liabilities | 13,323 | 14,114 | |||
| Deferred income tax | 84,171 | 89,847 | |||
| Total liabilities | 1,489,221 | 1,515,317 | |||
| Shareholders’ equity | |||||
| Common shares 1 par value; 200,000,000 authorized; 65,800,000 issued and outstanding (2019 – 65,629,000) | 65,769 | 65,598 | |||
| Additional paid-in capital | 344,753 | 344,994 | |||
| Retained earnings | 243,794 | 256,371 | |||
| Accumulated other comprehensive loss | (191,548 | ) | (116,560 | ) | |
| Total shareholders’ equity | 462,768 | 550,403 | |||
| Total liabilities and shareholders’ equity | 1,951,989 | $ | 2,065,720 |
All values are in US Dollars.
(4)
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| Three Months Ended March 31, | ||||||
|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||
| Cash flows from (used in) operating activities | ||||||
| Net income (loss) | $ | (3,392 | ) | $ | 51,616 | |
| Adjustments to reconcile net income (loss) to cash flows from operating activities | ||||||
| Depreciation and amortization | 32,946 | 30,247 | ||||
| Deferred income tax provision (benefit) | (1,331 | ) | 3,639 | |||
| Inventory impairment | 5,734 | — | ||||
| Defined benefit pension plans and other post-retirement benefit plan expense | 762 | 856 | ||||
| Stock compensation recovery | (46 | ) | (345 | ) | ||
| Foreign exchange transaction gains | (6,144 | ) | (263 | ) | ||
| Other | (497 | ) | 704 | |||
| Defined benefit pension plans and other post-retirement benefit plan contributions | (915 | ) | (1,158 | ) | ||
| Changes in working capital | ||||||
| Accounts receivable | (20,926 | ) | (56,353 | ) | ||
| Inventories | (18,120 | ) | 21,141 | |||
| Accounts payable and accrued expenses | (57,660 | ) | (173 | ) | ||
| Other | (253 | ) | (7,725 | ) | ||
| Net cash from (used in) operating activities | (69,842 | ) | 42,186 | |||
| Cash flows from (used in) investing activities | ||||||
| Purchase of property, plant and equipment | (23,018 | ) | (19,389 | ) | ||
| Purchase of amortizable intangible assets | (438 | ) | (316 | ) | ||
| Other | 51 | (261 | ) | |||
| Net cash from (used in) investing activities | (23,405 | ) | (19,966 | ) | ||
| Cash flows from (used in) financing activities | ||||||
| Proceeds from (repayment of) revolving credit facilities, net | 51,260 | (33,672 | ) | |||
| Dividend payments | (9,047 | ) | — | |||
| Repurchase of common shares | (162 | ) | — | |||
| Payment of debt issuance costs | — | (509 | ) | |||
| Proceeds from government grants | — | 6,320 | ||||
| Other | (9,801 | ) | (862 | ) | ||
| Net cash from (used in) financing activities | 32,250 | (28,723 | ) | |||
| Effect of exchange rate changes on cash and cash equivalents | (3,562 | ) | (754 | ) | ||
| Net decrease in cash and cash equivalents | (64,559 | ) | (7,257 | ) | ||
| Cash and cash equivalents, beginning of period | 351,085 | 240,491 | ||||
| Cash and cash equivalents, end of period | $ | 286,526 | $ | 233,234 |
(5)
MERCER INTERNATIONAL INC.
COMPUTATION OF OPERATING EBITDA
(Unaudited)
(In thousands)
Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and non-recurring capital asset impairment charges. Management uses Operating EBITDA as a benchmark measurement of its own operating results, and as a benchmark relative to its competitors. Management considers it to be a meaningful supplement to operating income (loss) as a performance measure primarily because depreciation expense and non-recurring capital asset impairment charges are not an actual cash cost, and depreciation expense varies widely from company to company in a manner that management considers largely independent of the underlying cost efficiency of our operating facilities. In addition, we believe Operating EBITDA is commonly used by securities analysts, investors and other interested parties to evaluate our financial performance.
Operating EBITDA does not reflect the impact of a number of items that affect our net income (loss), including financing costs and the effect of derivative instruments. Operating EBITDA is not a measure of financial performance under GAAP, and should not be considered as an alternative to net income (loss) or income (loss) from operations as a measure of performance, nor as an alternative to net cash from operating activities as a measure of liquidity. The following tables set forth the net income (loss) to Operating EBITDA:
| Q1 | Q4 | Q1 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2019 | |||||||
| Net income (loss) | $ | (3,392 | ) | $ | (72,721 | ) | $ | 51,616 | |
| Provision (benefit) for income taxes | 5,344 | (15,875 | ) | 24,424 | |||||
| Interest expense | 20,084 | 20,647 | 18,551 | ||||||
| Loss on settlement of debt | — | 4,750 | — | ||||||
| Other (income) expenses | 2,026 | (2,907 | ) | (1,039 | ) | ||||
| Operating income (loss) | 24,062 | (66,106 | ) | 93,552 | |||||
| Add: Depreciation and amortization | 32,946 | 31,947 | 30,247 | ||||||
| Operating EBITDA | $ | 57,008 | $ | (34,159 | ) | $ | 123,799 |
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