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): September 30, 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 October 29, 2020, Mercer International Inc. (the “Company”) announced by press release the Company’s results for its third quarter ended September 30, 2020. A copy of such press release is furnished as Exhibit 99.1 to this Current Report.
Item 8.01. Other Events
On October 29, 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 December 30, 2020 to all shareholders of record on December 23, 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 October 29, 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: October 29, 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 THIRD QUARTER AND NINE MONTHS 2020 RESULTS AND ANNOUNCES QUARTERLY CASH DIVIDEND OF $0.065
Selected Highlights
| • | Third quarter net income of $7.5 million and Operating EBITDA* of $45.6 million |
|---|---|
| • | Record Wood Segment Results |
| --- | --- |
| • | Cash on hand and available credit facilities provide liquidity of about $600.6 million at September 30, 2020 |
| --- | --- |
NEW YORK, NY, October 29, 2020 ‑ Mercer International Inc. (Nasdaq: MERC) today reported third quarter 2020 Operating EBITDA decreased to $45.6 million from $50.8 million in the third quarter of 2019 and increased from $40.5 million in the second quarter of 2020.
In the third quarter of 2020, net income was $7.5 million (or $0.11 per share) compared to $1.2 million (or $0.02 per share) in the third quarter of 2019 and a net loss of $8.4 million (or $0.13 per share) in the second quarter of 2020.
In the first nine months of 2020, Operating EBITDA decreased by 41% to $143.1 million from $244.6 million in the same period of 2019. In the first nine months of 2020, net loss was $4.3 million compared to net income of $63.1 million in the same period of 2019.
Mr. David Gandossi, the Chief Executive Officer, stated: “As a resurgence or second wave of infections from COVID-19 is being felt in a number of countries, we remain committed to maintaining measures and procedures to operate our business safely and efficiently and protect our people.
All of our mills ran well this quarter and our Friesau sawmill had record operating income of $12.0 million despite ten days of downtime related to capital upgrades. Our pulp production was down in the quarter primarily due to the previously announced planned 30-day curtailment at our Celgar mill.
____________________
*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.
Page 2
Our Q3 results reflect strong cost control and steady production. On average, NBSK pulp pricing was flat compared to Q2. Globally the supply demand fundamentals are slowly improving based on China’s improving economy and expected higher levels of maintenance by pulp producers going into the fourth quarter.
Our wood products segment had a record quarter and benefitted from strong demand and robust pricing in the U.S. market. In the current quarter approximately 59% of lumber revenues and 39% of our lumber sales volumes were to the U.S. which was our single largest market.
In Q4, our pulp mills have 17 days of planned annual maintenance downtime (approximately 19,600 ADMTs). We have no planned downtime at our Friesau sawmill. Going forward we will continue to ensure we control our costs, manage our working capital and conservatively manage our strong liquidity position.”
Consolidated Financial Results
| Q3 | Q2 | Q3 | YTD | YTD | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2020 | 2019 | 2020 | 2019 | ||||||||
| (in thousands, except per share amounts) | ||||||||||||
| Revenues | $ | 333,151 | $ | 341,195 | $ | 383,536 | $ | 1,024,945 | $ | 1,293,239 | ||
| Operating income | $ | 13,736 | $ | 10,315 | $ | 18,747 | $ | 48,113 | $ | 150,109 | ||
| Operating EBITDA | $ | 45,620 | $ | 40,516 | $ | 50,799 | $ | 143,144 | $ | 244,556 | ||
| Net income (loss) | $ | 7,545 | $ | (8,411 | ) | $ | 1,207 | $ | (4,258 | ) | $ | 63,082 |
| Net income (loss) per common share | ||||||||||||
| Basic and diluted | $ | 0.11 | $ | (0.13 | ) | $ | 0.02 | $ | (0.06 | ) | $ | 0.96 |
Consolidated – Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019
Total revenues for the three months ended September 30, 2020 decreased by approximately 13% to $333.2 million from $383.5 million in the same quarter of 2019 primarily due to lower pulp sales volumes and pulp sales realizations partially offset by higher lumber sales realizations and volumes.
Costs and expenses in the current quarter decreased by approximately 12% to $319.4 million from $364.8 million in the third quarter of 2019 primarily due to lower pulp sales volumes, per unit fiber costs and maintenance costs partially offset by the negative impact of a weaker dollar primarily on our euro denominated costs and expenses. In the current quarter of 2020, we received approximately $3.5 million of wage assistance under a Canadian government wage subsidy program.
In the third quarter of 2020, other income increased to $11.9 million from $0.9 million in the same quarter of 2019 primarily as a result of $15.4 million of realized gains on the sale of investments in the current quarter.
Page 3
In the third quarter of 2020, Operating EBITDA decreased by approximately 10% to $45.6 million from $50.8 million in the same quarter of 2019 primarily due to lower pulp sales realizations and the negative impact of a weaker dollar primarily on our euro denominated costs and expenses partially offset by lower per unit fiber costs and higher lumber sales realizations.
Segment Results
Pulp: Lower fiber costs more than offset by lower sales realizations
| Three Months Ended September 30, | ||||
|---|---|---|---|---|
| 2020 | 2019 | |||
| (in thousands) | ||||
| Pulp revenues | $ | 253,056 | $ | 322,707 |
| Energy and chemical revenues | $ | 21,860 | $ | 22,353 |
| Operating income | $ | 3,753 | $ | 21,386 |
In the third quarter of 2020, pulp segment operating income decreased to $3.8 million from $21.4 million in the same quarter of 2019 as lower pulp sales realizations and the negative impact of a weaker dollar were only partially offset by the positive impact of lower per unit fiber costs and lower maintenance costs.
In the current quarter of 2020, NBSK pulp sales realizations decreased by approximately 8% to $562 per ADMT from $609 per ADMT in the same quarter of the prior year. NBSK sales volumes decreased by approximately 18% to 369,913 ADMTs in the current quarter from 451,171 ADMTs in the same quarter of 2019 primarily due to lower production.
In the current quarter our Canadian pulp mills recorded a non-cash write down of our inventory carrying values of $8.0 million as a result of low pulp sales realizations and high per unit fiber costs. In the same quarter of the prior year our Canadian mills recorded a non-cash write down of our inventory carrying values of $6.9 million.
In the current quarter per unit fiber costs decreased by approximately 12% from the same quarter of 2019 due to lower per unit fiber costs for all of our mills. In Germany, per unit fiber costs benefitted from the continuing availability of beetle damaged wood. Per unit fiber costs in Canada declined due to increased sawmill activity but remained at historically high levels due to strong fiber demand in our mills' fiber procurement areas.
Page 4
Wood Products: Record operating income driven by strong demand
| Three Months Ended September 30, | ||||
|---|---|---|---|---|
| 2020 | 2019 | |||
| (in thousands) | ||||
| Lumber revenues | $ | 53,612 | $ | 32,687 |
| Energy revenues | $ | 2,226 | $ | 1,621 |
| Wood residual revenues | $ | 1,215 | $ | 2,150 |
| Operating income | $ | 11,963 | $ | 544 |
In the third quarter of 2020, our wood products segment had record operating income of $12.0 million compared to $0.5 million in the same quarter of 2019 primarily due to a higher lumber realized sales price.
Average lumber sales realizations increased by approximately 34% to $453 per Mfbm in the third quarter of 2020 compared to approximately $337 per Mfbm in the same quarter of 2019 primarily due to higher pricing in the U.S. market. U.S. lumber pricing increased due to strong demand in the current quarter. European lumber pricing modestly decreased due to the supply of lumber processed from beetle damaged wood which generally obtains a lower price.
In the current quarter per unit fiber costs decreased by approximately 6% from the same quarter of 2019 primarily as a result of the continuing availability of beetle damaged wood.
Consolidated – Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019
Total revenues for the nine months ended September 30, 2020 decreased by approximately 21% to $1,024.9 million from $1,293.2 million in the nine months ended September 30, 2019 primarily due to lower pulp sales realizations and pulp sales volumes partially offset by higher lumber sales volumes and realizations.
Costs and expenses in the nine months ended September 30, 2020 decreased by approximately 15% to $976.8 million from $1,143.1 million in the nine months ended September 30, 2019 primarily due to lower pulp sales volumes, per unit fiber costs and maintenance costs.
Other income in the nine months ended September 30, 2020 increased to $12.1 million from $3.2 million in the same period of 2019 primarily due to $15.4 million of realized gains in the sale of investments.
For the nine months ended September 30, 2020, our net loss was $4.3 million, or $0.06 per share compared to net income of $63.1 million, or $0.96 per share, in the same period of 2019.
Page 5
In the nine months ended September 30, 2020, Operating EBITDA decreased by approximately 41% to $143.1 million from $244.6 million in the same period of 2019 primarily due to lower pulp sales realizations and pulp sales volumes partially offset by lower per unit fiber costs, lower maintenance costs and higher lumber sales realizations.
Liquidity
The following table is a summary of selected financial information as of the dates indicated:
| September 30, | December 31, | |||
|---|---|---|---|---|
| 2020 | 2019 | |||
| (in thousands) | ||||
| Cash and cash equivalents | $ | 345,580 | $ | 351,085 |
| Working capital | $ | 633,764 | $ | 588,385 |
| Total assets | $ | 2,044,735 | $ | 2,065,720 |
| Long-term liabilities | $ | 1,293,312 | $ | 1,259,005 |
| Total equity | $ | 550,707 | $ | 550,403 |
As of September 30, 2020, we had cash and cash equivalents of approximately $345.6 million, approximately $255.0 million available under our revolving credit facilities, providing aggregate liquidity of about $600.6 million.
Current Market Environment
In mid-2020, many countries eased restrictions on economic and social activities adopted in response to the COVID-19 pandemic to, among other things, reopen their economies by allowing businesses to restart and encourage economic activity. The results of such economic measures and reopening have varied from country to country.
We are encouraged by improved economic activity globally. However, recently there has been a widespread increase or "second wave" in reported infections from COVID-19 including in Europe and the United States. In response, various countries including in Europe have announced the re-imposition of some restrictions on social, business and other activities. Currently we are unable to predict the impact of the recent resurgence in infections, the extent of measures governments may take in response thereto, including imposing some or all prior or new restrictive measures, including business closures, or the overall impact on global economic activity, including the pace of any economic recovery.
Although there is continued economic uncertainty created by the COVID-19 pandemic, we are currently expecting generally stable pulp demand in the upcoming quarter with some modest price improvements due to improving global economic activity, particularly in China.
On the pulp supply side, to date various pulp mills globally have delayed their annual maintenance schedules as a result of the pandemic. As a result, we currently expect mills to curtail production to implement such delayed maintenance in the later part of this year or the early part of next year.
Page 6
We currently expect strong lumber demand and lumber prices in the U.S. market and steady demand and modestly improving sales realizations in the European lumber market in the upcoming quarter.
Quarterly Dividend
A quarterly dividend of $0.065 per share will be paid on December 30, 2020 to all shareholders of record on December 23, 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 October 30, 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/ermirxzo 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.
Page 7
APPROVED BY:
Jimmy S.H. Lee
Executive Chairman
(604) 684-1099
David M. Gandossi, FCPA, FCA
Chief Executive Officer
(604) 684-1099
-FINANCIAL TABLES FOLLOW-
Summary Financial Highlights
| Q3 | Q2 | Q3 | YTD | YTD | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||
| (in thousands, except per share amounts) | |||||||||||||||
| Pulp segment revenues | $ | 274,916 | $ | 298,046 | $ | 345,060 | $ | 876,567 | $ | 1,166,333 | |||||
| Wood products segment revenues | 57,053 | 41,727 | 36,458 | 144,558 | 120,349 | ||||||||||
| Corporate and other revenues | 1,182 | 1,422 | 2,018 | 3,820 | 6,557 | ||||||||||
| Total revenues | $ | 333,151 | $ | 341,195 | $ | 383,536 | $ | 1,024,945 | $ | 1,293,239 | |||||
| Pulp segment operating income | $ | 3,753 | $ | 8,110 | $ | 21,386 | $ | 33,302 | $ | 157,157 | |||||
| Wood products segment operating income | 11,963 | 4,327 | 544 | 21,845 | 2,075 | ||||||||||
| Corporate and other operating loss | (1,980 | ) | (2,122 | ) | (3,183 | ) | (7,034 | ) | (9,123 | ) | |||||
| Total operating income | $ | 13,736 | $ | 10,315 | $ | 18,747 | $ | 48,113 | $ | 150,109 | |||||
| Pulp segment depreciation and amortization | $ | 28,251 | $ | 27,219 | $ | 29,744 | $ | 85,841 | $ | 87,616 | |||||
| Wood products segment depreciation and amortization | 3,446 | 2,804 | 2,016 | 8,627 | 5,937 | ||||||||||
| Corporate and other depreciation and amortization | 187 | 178 | 292 | 563 | 894 | ||||||||||
| Total depreciation and amortization | $ | 31,884 | $ | 30,201 | $ | 32,052 | $ | 95,031 | $ | 94,447 | |||||
| Operating EBITDA | $ | 45,620 | $ | 40,516 | $ | 50,799 | $ | 143,144 | $ | 244,556 | |||||
| Income tax recovery (provision) | $ | 1,775 | $ | (882 | ) | $ | (244 | ) | $ | (4,451 | ) | $ | (35,101 | ) | |
| Net income (loss) | $ | 7,545 | $ | (8,411 | ) | $ | 1,207 | $ | (4,258 | ) | $ | 63,082 | |||
| Net income (loss) per common share | |||||||||||||||
| Basic and diluted | $ | 0.11 | $ | (0.13 | ) | $ | 0.02 | $ | (0.06 | ) | $ | 0.96 | |||
| Common shares outstanding at period end | 65,868 | 65,868 | 65,629 | 65,868 | 65,629 |
(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
| Q2 | Q3 | YTD | YTD | ||||||
|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | ||||||
| Pulp Segment | |||||||||
| Pulp production ('000 ADMTs) | |||||||||
| NBSK | 400.2 | 423.8 | 441.7 | 1,279.1 | 1,355.1 | ||||
| NBHK | 79.8 | 88.8 | 75.3 | 247.6 | 243.3 | ||||
| Annual maintenance downtime ('000 ADMTs) | 15.0 | 11.3 | 14.1 | 28.6 | 21.6 | ||||
| Annual maintenance downtime (days) | 10 | 15 | 13 | 27 | 28 | ||||
| Pulp sales ('000 ADMTs) | |||||||||
| NBSK | 369.9 | 422.6 | 451.2 | 1,230.8 | 1,356.6 | ||||
| NBHK | 100.1 | 69.3 | 91.0 | 235.4 | 260.4 | ||||
| Average NBSK pulp prices (/ADMT)(1) | |||||||||
| Europe | 840 | 850 | 860 | 841 | 987 | ||||
| China | 572 | 572 | 555 | 572 | 628 | ||||
| North America | 1,133 | 1,158 | 1,170 | 1,139 | 1,281 | ||||
| Average NBHK pulp prices (/ADMT)(1) | |||||||||
| China | 443 | 465 | 477 | 456 | 593 | ||||
| North America | 868 | 897 | 970 | 885 | 1,083 | ||||
| Average pulp sales realizations (/ADMT)(2) | |||||||||
| NBSK | 562 | 573 | 609 | 565 | 689 | ||||
| NBHK | 424 | 475 | 499 | 451 | 589 | ||||
| Energy production ('000 MWh)(3) | 529.2 | 562.9 | 572.5 | 1,670.5 | 1,708.3 | ||||
| Energy sales ('000 MWh)(3) | 215.5 | 222.0 | 224.7 | 669.3 | 668.4 | ||||
| Average energy sales realizations (/MWh)(3) | 96 | 85 | 89 | 92 | 92 | ||||
| Wood Products Segment | |||||||||
| Lumber production (MMfbm) | 96.8 | 113.5 | 96.6 | 326.6 | 308.0 | ||||
| Lumber sales (MMfbm) | 118.5 | 109.0 | 97.0 | 345.2 | 307.7 | ||||
| Average lumber sales realizations (/Mfbm) | 453 | 345 | 337 | 383 | 348 | ||||
| Energy production and sales ('000 MWh) | 17.8 | 22.7 | 13.9 | 63.3 | 60.4 | ||||
| Average energy sales realizations (/MWh) | 125 | 116 | 116 | 118 | 117 | ||||
| Average Spot Currency Exchange Rates | |||||||||
| / (4) | 1.1698 | 1.1016 | 1.1120 | 1.1248 | 1.1234 | ||||
| / C(4) | 0.7508 | 0.7221 | 0.7573 | 0.7388 | 0.7523 |
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<br><br><br>September 30 | Nine Months Ended<br><br><br>September 30 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Revenues | $ | 333,151 | $ | 383,536 | $ | 1,024,945 | $ | 1,293,239 | ||||
| Costs and expenses | ||||||||||||
| Cost of sales, excluding depreciation and amortization | 272,165 | 314,894 | 832,554 | 994,360 | ||||||||
| Cost of sales depreciation and amortization | 31,862 | 31,934 | 94,952 | 94,108 | ||||||||
| Selling, general and administrative expenses | 15,388 | 17,961 | 49,326 | 54,662 | ||||||||
| Operating income | 13,736 | 18,747 | 48,113 | 150,109 | ||||||||
| Other income (expenses) | ||||||||||||
| Interest expense | (19,864 | ) | (18,183 | ) | (60,056 | ) | (55,103 | ) | ||||
| Other income | 11,898 | 887 | 12,136 | 3,177 | ||||||||
| Total other expenses, net | (7,966 | ) | (17,296 | ) | (47,920 | ) | (51,926 | ) | ||||
| Income before income taxes | 5,770 | 1,451 | 193 | 98,183 | ||||||||
| Income tax recovery (provision) | 1,775 | (244 | ) | (4,451 | ) | (35,101 | ) | |||||
| Net income (loss) | $ | 7,545 | $ | 1,207 | $ | (4,258 | ) | $ | 63,082 | |||
| Net income (loss) per common share | ||||||||||||
| Basic and diluted | $ | 0.11 | $ | 0.02 | $ | (0.06 | ) | $ | 0.96 | |||
| Dividends declared per common share | $ | 0.0650 | $ | 0.1375 | $ | 0.2675 | $ | 0.4000 |
(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 | 345,580 | $ | 351,085 | ||
| Accounts receivable, net | 202,619 | 208,740 | |||
| Inventories | 269,864 | 272,599 | |||
| Prepaid expenses and other | 16,417 | 12,273 | |||
| Total current assets | 834,480 | 844,697 | |||
| Property, plant and equipment, net | 1,065,345 | 1,074,242 | |||
| Investment in joint ventures | 47,865 | 53,122 | |||
| Amortizable intangible assets, net | 50,132 | 53,371 | |||
| Operating lease right-of-use assets | 12,932 | 13,004 | |||
| Other long-term assets | 32,744 | 26,038 | |||
| Deferred income tax | 1,237 | 1,246 | |||
| Total assets | 2,044,735 | $ | 2,065,720 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||
| Current liabilities | |||||
| Accounts payable and other | 199,992 | $ | 255,544 | ||
| Pension and other post-retirement benefit obligations | 724 | 768 | |||
| Total current liabilities | 200,716 | 256,312 | |||
| Debt | 1,124,202 | 1,087,932 | |||
| Pension and other post-retirement benefit obligations | 24,613 | 25,489 | |||
| Finance lease liabilities | 39,741 | 31,103 | |||
| Operating lease liabilities | 9,912 | 10,520 | |||
| Other long-term liabilities | 14,213 | 14,114 | |||
| Deferred income tax | 80,631 | 89,847 | |||
| Total liabilities | 1,494,028 | 1,515,317 | |||
| Shareholders’ equity | |||||
| Common shares 1 par value; 200,000,000 authorized; 65,868,000 issued and outstanding (2019 – 65,629,000) | 65,800 | 65,598 | |||
| Additional paid-in capital | 345,583 | 344,994 | |||
| Retained earnings | 234,365 | 256,371 | |||
| Accumulated other comprehensive loss | (95,041 | ) | (116,560 | ) | |
| Total shareholders’ equity | 550,707 | 550,403 | |||
| Total liabilities and shareholders’ equity | 2,044,735 | $ | 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<br><br><br>September 30 | Nine Months Ended<br><br><br>September 30 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||||||
| Cash flows from (used in) operating activities | ||||||||||||
| Net income (loss) | $ | 7,545 | $ | 1,207 | $ | (4,258 | ) | $ | 63,082 | |||
| Adjustments to reconcile net income (loss) to cash flows from operating activities | ||||||||||||
| Depreciation and amortization | 31,884 | 32,052 | 95,031 | 94,447 | ||||||||
| Deferred income tax provision (recovery) | (4,255 | ) | (1,706 | ) | (10,330 | ) | 2,359 | |||||
| Inventory impairment | 8,000 | 6,900 | 25,998 | 13,800 | ||||||||
| Defined benefit pension plans and other post-retirement benefit plan expense | 769 | 866 | 2,270 | 2,582 | ||||||||
| Stock compensation expense | 895 | 1,179 | 815 | 2,036 | ||||||||
| Gain on sale of investments | (15,443 | ) | — | (15,443 | ) | — | ||||||
| Foreign exchange transaction losses (gains) | 3,384 | (8,873 | ) | 4,120 | 369 | |||||||
| Other | (1,801 | ) | 2,887 | (2,993 | ) | 4,331 | ||||||
| Defined benefit pension plans and other post-retirement benefit plan contributions | (783 | ) | (1,200 | ) | (2,495 | ) | (2,628 | ) | ||||
| Changes in working capital | ||||||||||||
| Accounts receivable | 17,226 | 41,381 | 11,238 | 17,232 | ||||||||
| Inventories | (8,031 | ) | 2,342 | (20,443 | ) | 15,714 | ||||||
| Accounts payable and accrued expenses | (4,219 | ) | (16,691 | ) | (54,000 | ) | (12,667 | ) | ||||
| Other | (6,683 | ) | (3,483 | ) | (6,759 | ) | (12,889 | ) | ||||
| Net cash from (used in) operating activities | 28,488 | 56,861 | 22,751 | 187,768 | ||||||||
| Cash flows from (used in) investing activities | ||||||||||||
| Purchase of property, plant and equipment | (14,639 | ) | (37,049 | ) | (59,201 | ) | (81,417 | ) | ||||
| Purchase of amortizable intangible assets | (30 | ) | (215 | ) | (557 | ) | (710 | ) | ||||
| Purchase of investments | — | — | (9,370 | ) | — | |||||||
| Proceeds from sale of investments | 21,540 | — | 21,540 | — | ||||||||
| Other | 396 | 162 | 1,243 | (181 | ) | |||||||
| Net cash from (used in) investing activities | 7,267 | (37,102 | ) | (46,345 | ) | (82,308 | ) | |||||
| Cash flows from (used in) financing activities | ||||||||||||
| Proceeds from (repayment of) revolving credit facilities, net | 8,750 | — | 34,359 | (58,404 | ) | |||||||
| Dividend payments | (4,282 | ) | (9,025 | ) | (13,329 | ) | (17,231 | ) | ||||
| Repurchase of common shares | — | — | (162 | ) | (754 | ) | ||||||
| Payment of debt issuance costs | — | (369 | ) | — | (1,126 | ) | ||||||
| Proceeds from government grants | — | 147 | 299 | 6,467 | ||||||||
| Other | (302 | ) | (1,735 | ) | (2,729 | ) | (8,664 | ) | ||||
| Net cash from (used in) financing activities | 4,166 | (10,982 | ) | 18,438 | (79,712 | ) | ||||||
| Effect of exchange rate changes on cash and cash equivalents | 2,325 | (1,200 | ) | (349 | ) | (1,340 | ) | |||||
| Net increase (decrease) in cash and cash equivalents | 42,246 | 7,577 | (5,505 | ) | 24,408 | |||||||
| Cash and cash equivalents, beginning of period | 303,334 | 257,322 | 351,085 | 240,491 | ||||||||
| Cash and cash equivalents, end of period | $ | 345,580 | $ | 264,899 | $ | 345,580 | $ | 264,899 |
(5)
MERCER INTERNATIONAL INC.
COMPUTATION OF OPERATING EBITDA
(Unaudited)
(In thousands)
Operating EBITDA is defined as operating income 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 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 operating income as a measure of performance, nor as an alternative to net cash from (used in) operating activities as a measure of liquidity. The following tables set forth the net income (loss) to Operating EBITDA:
| Q3 | Q2 | Q3 | YTD | YTD | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2020 | 2019 | 2020 | 2019 | |||||||||||
| Net income (loss) | $ | 7,545 | $ | (8,411 | ) | $ | 1,207 | $ | (4,258 | ) | $ | 63,082 | |||
| Income tax provision (recovery) | (1,775 | ) | 882 | 244 | 4,451 | 35,101 | |||||||||
| Interest expense | 19,864 | 20,108 | 18,183 | 60,056 | 55,103 | ||||||||||
| Other income | (11,898 | ) | (2,264 | ) | (887 | ) | (12,136 | ) | (3,177 | ) | |||||
| Operating income | 13,736 | 10,315 | 18,747 | 48,113 | 150,109 | ||||||||||
| Add: Depreciation and amortization | 31,884 | 30,201 | 32,052 | 95,031 | 94,447 | ||||||||||
| Operating EBITDA | $ | 45,620 | $ | 40,516 | $ | 50,799 | $ | 143,144 | $ | 244,556 |
(6)