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Mercer International Inc. Reports Second Quarter and First Half 2022 Results and Announces Quarterly Cash Dividend of $0.075

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Mercer International Inc.
Mercer International Inc.

Selected Highlights

  • Second quarter net income of $71.4 million and Operating EBITDA* of $145.1 million

  • Record quarterly wood products operating income and energy revenues

NEW YORK, July 28, 2022 (GLOBE NEWSWIRE) -- Mercer International Inc. (Nasdaq: MERC) today reported second quarter 2022 Operating EBITDA increased to a $145.1 million from $83.8 million in the second quarter of 2021 and decreased from $154.5 million in the first quarter of 2022.

In the second quarter of 2022, net income was $71.4 million (or $1.08 per basic share and $1.07 per diluted share) compared to $21.4 million (or $0.32 per share) in the second quarter of 2021 and net income of $88.9 million (or $1.35 per basic share and $1.34 per diluted share) in the first quarter of 2022.

In the first half of 2022, Operating EBITDA increased by 81% to $299.5 million from $165.8 million in the same period of 2021. In the first half of 2022, net income was $160.3 million (or $2.43 per basic share and $2.41 per diluted share) compared to $27.3 million (or $0.41 per share) in the same period of 2021.

Mr. Juan Carlos Bueno, the Chief Executive Officer, stated: “Our strong second quarter operating results were driven by increased pulp and lumber pricing, continued strong energy pricing and our Stendal mill’s reversal of it’s wastewater fee accrual. These positive effects were offset by higher planned maintenance costs, higher costs for key inputs including fiber, energy and chemicals, and lower pulp sales volumes. We continue to see cost inflation for certain inputs, including energy costs. However, we see our surplus energy sales as a strong hedge against higher energy prices and we are focused on developing strategies to manage the cost of our key inputs.

When comparing our second quarter pulp results to the first quarter, our second quarter was negatively impacted by higher planned maintenance costs, lower pulp sales volumes and higher per unit fiber costs. During the quarter our mills were down for planned maintenance a total of 43 days compared to none in the first quarter and our Celgar mill was down an additional six days due to a slower than plan startup. As expected, our fiber costs were up quarter over quarter, but we are currently expecting that these costs will be flat in the third quarter with a modest increase in Germany and a modest decrease in Canada.

In July 2022 our Stendal mill had a fire in its woodyard which did not damage the mill's operations. We have now restarted the mill and are ramping up its production. We have implemented a work around chip in-feed process which is designed to let the mill operate at about 80% of capacity. We expect the planning and installation of replacement equipment will take several months.

Our Friesau sawmill continued its strong performance in the second quarter achieving record operating income. The mill’s improvement relative to first quarter was primarily due to improved lumber pricing in Europe and strong pricing in the U.S., which were partially offset by higher fiber prices. In the second quarter of 2022, our solid wood segment generated operating income of $45.9 million.

Pulp supply demand fundamentals remained strong throughout the second quarter and resulted in price improvements in all of our markets. Low customer inventory levels and limited pulp supply were the main drivers in market tightness. As of June 30, 2022, third party industry quoted NBSK list prices were approximately $1,485 per ADMT in Europe and net prices were approximately $1,008 per ADMT in China.

Global logistics challenges are slowly easing but continue to impact our business primarily in the form of irregular North American rail traffic, which forces us to use additional higher cost trucking. We are seeing the railways making slow progress in unwinding their system backlogs and expect that these logistics issues will continue to improve going forward.

As we move into the third quarter, we expect stable pulp prices as a result of low customer inventory levels and supply constraints. We expect lumber prices in the United States to be generally stable and prices in Europe to decline from the second quarter but remain at historically attractive levels in both markets. Further, we expect continued strong energy demand and prices in Germany in the third quarter of 2022.

Currently our 2022 capital expenditures are on track to total approximately $175 million to $200 million. The majority of these investments are designed to deliver high returns, help us achieve our ESG objectives and enhance shareholder value. I am also pleased to announce that our Board has approved an incremental $27 million investment at our Spokane mass timber facility. This investment will allow this state-of-the-art facility to fully utilize a more varied raw material mix and increase finger joint lumber production. We expect this investment will become a stepping stone to additional modest investments to increase cross-laminated timber ("CLT") and glue laminated beam capacity as our order book grows. We are excited about the potential of this business given CLT’s lower carbon footprint and faster construction characteristics compared to traditional construction materials like concrete and steel. Over time, as we continue to ramp up this business, I believe our CLT business will become a key component in our solid wood business.”

____________________

*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 to Operating EBITDA.

Consolidated Financial Results

 

Q2

 

 

Q1

 

 

Q2

 

 

YTD

 

 

YTD

 

 

 

2022

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(in thousands, except per share amounts)

 

 

Revenues

$

572,326

 

 

$

592,741

 

 

$

401,832

 

 

$

1,165,067

 

 

$

814,552

 

 

Operating income

$

114,031

 

 

$

122,351

 

 

$

51,836

 

 

$

236,382

 

 

$

102,865

 

 

Operating EBITDA

$

145,059

 

 

$

154,467

 

 

$

83,791

 

 

$

299,526

 

 

$

165,787

 

 

Loss on early extinguishment of debt

$

 

 

$

 

 

$

 

 

$

 

 

$

(30,368

)

(1)

Net income

$

71,372

 

 

$

88,897

 

 

$

21,415

 

 

$

160,269

 

 

$

27,348

 

 

Net income per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

1.08

 

 

$

1.35

 

 

$

0.32

 

 

$

2.43

 

 

$

0.41

 

 

Diluted

$

1.07

 

 

$

1.34

 

 

$

0.32

 

 

$

2.41

 

 

$

0.41

 

 

______________

(1)   Redemption of 6.50% senior notes due 2024 and 7.375% senior notes due 2025.


Consolidated – Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

Total revenues in the second quarter of 2022 increased by approximately 42% to $572.3 million from $401.8 million in the same quarter of 2021 primarily due to higher pulp sales volumes and higher pulp, energy and lumber sales realizations.

In the second quarter of 2022, our energy and chemical revenues increased to $47.8 million from $16.9 million in the same quarter of 2021 primarily as a result of higher energy prices in Germany, which were double those in the same quarter of 2021.

Costs and expenses in the second quarter of 2022 increased by approximately 31% to $458.3 million from $350.0 million in the second quarter of 2021 primarily due to higher pulp sales volumes and driven by inflationary pressure on our key production costs such as fiber, energy and chemicals and also freight costs. Such cost increases were partially offset by the positive impact of a stronger dollar on our euro and Canadian dollar denominated costs and expenses.

In the second quarter of 2022, Operating EBITDA increased by approximately 73% to $145.1 million from $83.8 million in the same quarter of 2021 primarily due to higher sales realizations and pulp sales volumes and the positive impact of a stronger dollar partially offset by higher per unit fiber and other production costs.

Segment Results
Pulp

 

Three Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

 

(in thousands)

 

 

Pulp revenues

$

418,579

 

 

$

297,191

 

 

Energy and chemical revenues

$

41,725

 

 

$

13,058

 

 

Operating income

$

75,471

 

 

$

13,338

 

 

In the second quarter of 2022, pulp segment operating income increased to $75.5 million from $13.3 million in the same quarter of 2021 primarily due to higher sales realizations and sales volumes and the positive impact of a stronger dollar, partially offset by higher per unit fiber costs and other production costs.

Pulp revenues in the second quarter of 2022 increased by approximately 41% to $418.6 million from $297.2 million in the same quarter of 2021 due to both higher sales volumes and sales realizations.

Energy and chemical revenues increased to a record $41.7 million in the second quarter of 2022 from $13.1 million in the same quarter of 2021 primarily due to higher sales realizations. During the second quarter of 2022, we benefitted from strong energy demand and higher energy prices in Germany.

In the second quarter of 2022, third party industry quoted average list prices for NBSK pulp increased from the same quarter of 2021 primarily as a result of low customer inventory levels. Our average NBSK pulp sales realizations increased by approximately 7% to $890 per ADMT in the second quarter of 2022 from approximately $830 per ADMT in the same quarter of 2021.

Costs and expenses in the second quarter of 2022 increased by approximately 30% to $384.8 million from $297.0 million in the second quarter of 2021 primarily due to higher pulp sales volumes, per unit fiber costs and energy, chemical and freight costs. The higher costs were partially offset by the positive impact of a stronger dollar and in the second quarter of 2022, we received German regulatory approval to reverse a wastewater fee accrual of $13.3 million as a result of completing certain capital projects.

In the second quarter of 2022 per unit fiber costs increased by approximately 32% from the same quarter of 2021 primarily due to higher per unit fiber costs for our German mills as a result of higher demand from other wood consumers such as heating pellet manufacturers. For our Canadian mills, per unit fiber costs were flat as demand remained strong in the mills' fiber baskets. We currently expect per unit fiber costs to be flat in the third quarter of 2022 with a modest increase in Germany and a modest decrease in Canada.

Wood Products

 

Three Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

 

(in thousands)

 

 

Lumber revenues

$

96,268

 

 

$

86,285

 

 

Energy revenues

$

5,055

 

 

$

2,692

 

 

Wood residual revenues

$

3,367

 

 

$

1,462

 

 

Operating income

$

45,853

 

 

$

42,314

 

 


In the second quarter of 2022, our wood products segment operating income increased approximately 9% to a record $45.9 million from $42.3 million in the same quarter of 2021 primarily due to higher sales realizations partially offset by higher per unit fiber costs.

Average lumber sales realizations increased by approximately 10% to $867 per Mfbm in the second quarter of 2022 from approximately $789 per Mfbm in the same quarter of 2021 as we benefitted from strong sales to the U.S. market and its high prices in the first part of the quarter. Although U.S. lumber pricing decreased in the later part of the current quarter due to concerns of rising interest rates and inflationary pressures, prices were still at historically attractive levels. European lumber pricing increased due to steady demand with limited supply.

In the second quarter of 2022 per unit fiber costs increased by approximately 37% from the same quarter of 2021 as a result of both strong demand for sawlogs and the use of more green logs as producers have largely worked through the availability of lower cost beetle damaged timber. We currently expect per unit fiber costs to increase in the third quarter of 2022.

Consolidated – Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021
Total revenues for the first half of 2022 increased by approximately 43% to $1,165.1 million from $814.6 million in the first half of 2021 primarily due to higher sales realizations and higher pulp sales volumes.

Costs and expenses in the first half of 2022 increased by approximately 30% to $928.7 million from $711.7 million in the first half of 2021 primarily due to higher pulp sales volumes, per unit fiber costs and energy, freight and chemical costs partially offset by the positive impact of a stronger dollar on our euro and Canadian dollar denominated costs and expenses.

In the first half of 2022, Operating EBITDA increased by approximately 81% to $299.5 million from $165.8 million in the same period of 2021 primarily due to higher sales realizations and pulp sales volumes and the positive impact of a stronger dollar partially offset by higher per unit fiber costs and other production costs.

Liquidity
As of June 30, 2022, we had cash, cash equivalents and a term deposit aggregating $494.9 million and approximately $276.2 million available under our revolving credit facilities providing us with aggregate liquidity of about $771.1 million.

Quarterly Dividend
A quarterly dividend of $0.075 per share will be paid on October 5, 2022 to all shareholders of record on September 28, 2022. 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 July 29, 2022 at 11:00 AM ET. Listeners can access the conference call live and archived for 30 days over the Internet at https://edge.media-server.com/mmc/p/ka7jrybt 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, USA and Canada with consolidated annual production capacity of 2.3 million tonnes of pulp, 550 million board feet of lumber and 140 thousand cubic meters of CLT. 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", "are optimistic that", "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

Juan Carlos Bueno
Chief Executive Officer
(604) 684-1099


-FINANCIAL TABLES FOLLOW-


Summary Financial Highlights

 

Q2

 

 

Q1

 

 

Q2

 

 

YTD

 

 

YTD

 

 

 

2022

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(in thousands, except per share amounts)

 

 

Pulp segment revenues

$

460,304

 

 

$

485,931

 

 

$

310,249

 

 

$

946,235

 

 

$

650,005

 

 

Wood products segment revenues

 

104,690

 

 

 

101,033

 

 

 

90,439

 

 

 

205,723

 

 

 

161,426

 

 

Corporate and other revenues

 

7,332

 

 

 

5,777

 

 

 

1,144

 

 

 

13,109

 

 

 

3,121

 

 

Total revenues

$

572,326

 

 

$

592,741

 

 

$

401,832

 

 

$

1,165,067

 

 

$

814,552

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pulp segment operating income

$

75,471

 

 

$

86,236

 

 

$

13,338

 

 

$

161,707

 

 

$

38,634

 

 

Wood products segment operating income

 

45,853

 

 

 

40,479

 

 

 

42,314

 

 

 

86,332

 

 

 

70,291

 

 

Corporate and other operating loss

 

(7,293

)

 

 

(4,364

)

 

 

(3,816

)

 

 

(11,657

)

 

 

(6,060

)

 

Total operating income

$

114,031

 

 

$

122,351

 

 

$

51,836

 

 

$

236,382

 

 

$

102,865

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pulp segment depreciation and amortization

$

27,001

 

 

$

27,684

 

 

$

27,967

 

 

$

54,685

 

 

$

55,013

 

 

Wood products segment depreciation and amortization

 

3,234

 

 

 

3,637

 

 

 

3,748

 

 

 

6,871

 

 

 

7,471

 

 

Corporate and other depreciation and amortization

 

793

 

 

 

795

 

 

 

240

 

 

 

1,588

 

 

 

438

 

 

Total depreciation and amortization

$

31,028

 

 

$

32,116

 

 

$

31,955

 

 

$

63,144

 

 

$

62,922

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating EBITDA

$

145,059

 

 

$

154,467

 

 

$

83,791

 

 

$

299,526

 

 

$

165,787

 

 

Loss on early extinguishment of debt

$

 

 

$

 

 

$

 

 

$

 

 

$

(30,368

)

(1)

Income tax provision

$

(34,126

)

 

$

(24,236

)

 

$

(10,685

)

 

$

(58,362

)

 

$

(13,383

)

 

Net income

$

71,372

 

 

$

88,897

 

 

$

21,415

 

 

$

160,269

 

 

$

27,348

 

 

Net income per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

1.08

 

 

$

1.35

 

 

$

0.32

 

 

$

2.43

 

 

$

0.41

 

 

Diluted

$

1.07

 

 

$

1.34

 

 

$

0.32

 

 

$

2.41

 

 

$

0.41

 

 

Common shares outstanding at period end

 

66,167

 

 

 

66,132

 

 

 

66,037

 

 

 

66,167

 

 

 

66,037

 

 

______________

(1)   Redemption of 6.50% senior notes due 2024 and 7.375% senior notes due 2025.


Summary Operating Highlights

 

Q2

 

 

Q1

 

 

Q2

 

 

YTD

 

 

YTD

 

 

 

2022

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

Pulp Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pulp production ('000 ADMTs)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NBSK

 

418.3

 

 

 

435.5

 

 

 

355.1

 

 

 

853.8

 

 

 

752.0

 

 

NBHK

 

51.6

 

 

 

56.8

 

 

 

4.5

 

 

 

108.4

 

 

 

86.1

 

 

Annual maintenance downtime ('000 ADMTs)

 

54.2

 

 

 

 

 

 

173.1

 

 

 

54.2

 

 

 

210.9

 

 

Annual maintenance downtime (days)

 

43

 

 

 

 

 

 

117

 

 

 

43

 

 

 

144

 

 

Pulp sales ('000 ADMTs)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NBSK

 

405.7

 

 

 

505.1

 

 

 

330.4

 

 

 

910.8

 

 

 

749.1

 

 

NBHK

 

65.8

 

 

 

49.9

 

 

 

30.3

 

 

 

115.8

 

 

 

99.4

 

 

Average NBSK pulp prices ($/ADMT)(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Europe

 

1,437

 

 

 

1,330

 

 

 

1,288

 

 

 

1,383

 

 

 

1,163

 

 

China

 

1,008

 

 

 

899

 

 

 

962

 

 

 

954

 

 

 

922

 

 

North America

 

1,743

 

 

 

1,527

 

 

 

1,598

 

 

 

1,635

 

 

 

1,450

 

 

Average NBHK pulp prices ($/ADMT)(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

China

 

815

 

 

 

668

 

 

 

767

 

 

 

742

 

 

 

729

 

 

North America

 

1,517

 

 

 

1,312

 

 

 

1,297

 

 

 

1,414

 

 

 

1,158

 

 

Average pulp sales realizations ($/ADMT)(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NBSK

 

890

 

 

 

812

 

 

 

830

 

 

 

847

 

 

 

739

 

 

NBHK

 

843

 

 

 

695

 

 

 

672

 

 

 

780

 

 

 

566

 

 

Energy production ('000 MWh)(3)

 

496.6

 

 

 

531.5

 

 

 

362.0

 

 

 

1,028.1

 

 

 

881.1

 

 

Energy sales ('000 MWh)(3)

 

199.3

 

 

 

194.7

 

 

 

130.9

 

 

 

394.0

 

 

 

332.0

 

 

Average energy sales realizations ($/MWh)(3)

 

186

 

 

 

186

 

 

 

90

 

 

 

186

 

 

 

94

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wood Products Segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lumber production (MMfbm)

 

112.2

 

 

 

115.6

 

 

 

116.7

 

 

 

227.8

 

 

 

234.5

 

 

Lumber sales (MMfbm)

 

111.0

 

 

 

109.9

 

 

 

109.3

 

 

 

220.9

 

 

 

217.5

 

 

Average lumber sales realizations ($/Mfbm)

 

867

 

 

840

 

 

789

 

 

 

854

 

 

706

 

 

Energy production and sales ('000 MWh)

 

25.5

 

 

 

24.5

 

 

 

21.0

 

 

 

50.0

 

 

 

37.3

 

 

Average energy sales realizations ($/MWh)

 

198

 

 

211

 

 

128

 

 

205

 

 

129

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average Spot Currency Exchange Rates

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$ / €(4)

 

1.0646

 

 

 

1.1216

 

 

 

1.2050

 

 

 

1.0929

 

 

 

1.2048

 

 

$ / C$(4)

 

0.7836

 

 

0.7897

 

 

0.8142

 

 

0.7866

 

 

0.8026

 

 

______________

(1)    Source: RISI pricing report. Europe and North America are list prices. China are net prices which include discounts, allowances and rebates.    
        (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.


MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

Revenues

 

$

572,326

 

 

$

401,832

 

 

$

1,165,067

 

 

$

814,552

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales, excluding depreciation and amortization

 

 

403,671

 

 

 

297,826

 

 

 

819,766

 

 

 

608,023

 

 

Cost of sales depreciation and amortization

 

 

31,004

 

 

 

31,935

 

 

 

63,101

 

 

 

62,881

 

 

Selling, general and administrative expenses

 

 

23,620

 

 

 

20,235

 

 

 

45,818

 

 

 

40,783

 

 

Operating income

 

 

114,031

 

 

 

51,836

 

 

 

236,382

 

 

 

102,865

 

 

Other income (expenses)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(17,332

)

 

 

(17,130

)

 

 

(34,796

)

 

 

(36,149

)

 

Loss on early extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

(30,368

)

 

Other income (expenses)

 

 

8,799

 

 

 

(2,606

)

 

 

17,045

 

 

 

4,383

 

 

Total other expenses, net

 

 

(8,533

)

 

 

(19,736

)

 

 

(17,751

)

 

 

(62,134

)

 

Income before income taxes

 

 

105,498

 

 

 

32,100

 

 

 

218,631

 

 

 

40,731

 

 

Income tax provision

 

 

(34,126

)

 

 

(10,685

)

 

 

(58,362

)

 

 

(13,383

)

 

Net income

 

$

71,372

 

 

$

21,415

 

 

$

160,269

 

 

$

27,348

 

 

Net income per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.08

 

 

$

0.32

 

 

$

2.43

 

 

$

0.41

 

 

Diluted

 

$

1.07

 

 

$

0.32

 

 

$

2.41

 

 

$

0.41

 

 

Dividends declared per common share

 

$

0.0750

 

 

$

0.0650

 

 

$

0.1500

 

 

$

0.1300

 

 



MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)

 

 

June 30,

 

 

December 31,

 

 

 

 

2022

 

 

2021

 

 

ASSETS

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

419,861

 

 

$

345,610

 

 

Term deposit

 

 

75,000

 

 

 

 

 

Accounts receivable, net

 

 

308,067

 

 

 

345,345

 

 

Inventories

 

 

348,837

 

 

 

356,731

 

 

Prepaid expenses and other

 

 

17,349

 

 

 

16,619

 

 

Total current assets

 

 

1,169,114

 

 

 

1,064,305

 

 

Property, plant and equipment, net

 

 

1,095,340

 

 

 

1,135,631

 

 

Investment in joint ventures

 

 

46,584

 

 

 

49,651

 

 

Amortizable intangible assets, net

 

 

44,901

 

 

 

47,902

 

 

Operating lease right-of-use assets

 

 

9,958

 

 

 

9,712

 

 

Pension asset

 

 

3,888

 

 

 

4,136

 

 

Other long-term assets

 

 

44,672

 

 

 

38,718

 

 

Deferred income tax

 

 

1,259

 

 

 

1,177

 

 

Total assets

 

$

2,415,716

 

 

$

2,351,232

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

Accounts payable and other

 

$

273,122

 

 

$

282,307

 

 

Pension and other post-retirement benefit obligations

 

 

782

 

 

 

817

 

 

Total current liabilities

 

 

273,904

 

 

 

283,124

 

 

Long-term debt

 

 

1,245,906

 

 

 

1,237,545

 

 

Pension and other post-retirement benefit obligations

 

 

19,498

 

 

 

21,252

 

 

Operating lease liabilities

 

 

7,161

 

 

 

6,574

 

 

Other long-term liabilities

 

 

13,227

 

 

 

13,590

 

 

Deferred income tax

 

 

103,898

 

 

 

95,123

 

 

Total liabilities

 

 

1,663,594

 

 

 

1,657,208

 

 

Shareholders’ equity

 

 

 

 

 

 

 

 

 

Common shares $1 par value; 200,000,000 authorized; 66,167,000 issued and outstanding (2021 – 66,037,000)

 

 

66,132

 

 

 

65,988

 

 

Additional paid-in capital

 

 

350,224

 

 

 

347,902

 

 

Retained earnings

 

 

521,274

 

 

 

370,927

 

 

Accumulated other comprehensive loss

 

 

(185,508

)

 

 

(90,793

)

 

Total shareholders’ equity

 

 

752,122

 

 

 

694,024

 

 

Total liabilities and shareholders’ equity

 

$

2,415,716

 

 

$

2,351,232

 

 



MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

Cash flows from (used in) operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

71,372

 

 

$

21,415

 

 

$

160,269

 

 

$

27,348

 

 

Adjustments to reconcile net income to cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

31,028

 

 

 

31,955

 

 

 

63,144

 

 

 

62,922

 

 

Deferred income tax provision

 

 

6,624

 

 

 

1,276

 

 

 

15,007

 

 

 

2,480

 

 

Loss on early extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

30,368

 

 

Defined benefit pension plans and other post-retirement benefit plan expense

 

 

439

 

 

 

856

 

 

 

877

 

 

 

1,775

 

 

Stock compensation expense

 

 

1,517

 

 

 

975

 

 

 

2,466

 

 

 

1,585

 

 

Foreign exchange transaction losses (gains)

 

 

(9,591

)

 

 

1,966

 

 

 

(13,419

)

 

 

(6,640

)

 

Other

 

 

30

 

 

 

356

 

 

 

(771

)

 

 

(260

)

 

Defined benefit pension plans and other post-retirement benefit plan contributions

 

 

(1,200

)

 

 

(1,202

)

 

 

(2,394

)

 

 

(2,125

)

 

Changes in working capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

65,509

 

 

 

16,364

 

 

 

13,382

 

 

 

3,941

 

 

Inventories

 

 

(13,342

)

 

 

(21,964

)

 

 

(15,067

)

 

 

(42,763

)

 

Accounts payable and accrued expenses

 

 

3,813

 

 

 

30,167

 

 

 

3,246

 

 

 

34,603

 

 

Other

 

 

(1,658

)

 

 

(1,012

)

 

 

(3,389

)

 

 

(1,794

)

 

Net cash from (used in) operating activities

 

 

154,541

 

 

 

81,152

 

 

 

223,351

 

 

 

111,440

 

 

Cash flows from (used in) investing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(47,028

)

 

 

(62,124

)

 

 

(80,321

)

 

 

(87,386

)

 

Insurance proceeds

 

 

 

 

 

20,048

 

 

 

6,410

 

 

 

20,048

 

 

Purchase of term deposit

 

 

(75,000

)

 

 

 

 

 

(75,000

)

 

 

 

 

Purchase of amortizable intangible assets

 

 

(25

)

 

 

(568

)

 

 

(85

)

 

 

(1,209

)

 

Other

 

 

499

 

 

 

285

 

 

 

652

 

 

 

(109

)

 

Net cash from (used in) investing activities

 

 

(121,554

)

 

 

(42,359

)

 

 

(148,344

)

 

 

(68,656

)

 

Cash flows from (used in) financing activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redemption of senior notes

 

 

 

 

 

 

 

 

 

 

 

(824,557

)

 

Proceeds from issuance of senior notes

 

 

 

 

 

 

 

 

 

 

 

875,000

 

 

Proceeds from (repayment of) revolving credit facilities, net

 

 

(13,066

)

 

 

(42,042

)

 

 

17,438

 

 

 

(57,112

)

 

Dividend payments

 

 

(4,960

)

 

 

(4,289

)

 

 

(4,960

)

 

 

(4,289

)

 

Payment of debt issuance costs

 

 

 

 

 

 

 

 

(1,184

)

 

 

(14,414

)

 

Proceeds from government grants

 

 

 

 

 

 

 

 

1,067

 

 

 

8,532

 

 

Payment of finance lease obligations

 

 

(1,671

)

 

 

(1,833

)

 

 

(6,606

)

 

 

(3,536

)

 

Other

 

 

277

 

 

 

1

 

 

 

(566

)

 

 

3,625

 

 

Net cash from (used in) financing activities

 

 

(19,420

)

 

 

(48,163

)

 

 

5,189

 

 

 

(16,751

)

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(4,411

)

 

 

(1,179

)

 

 

(5,945

)

 

 

(2,597

)

 

Net increase (decrease) in cash and cash equivalents

 

 

9,156

 

 

 

(10,549

)

 

 

74,251

 

 

 

23,436

 

 

Cash and cash equivalents, beginning of period

 

 

410,705

 

 

 

395,083

 

 

 

345,610

 

 

 

361,098

 

 

Cash and cash equivalents, end of period

 

$

419,861

 

 

$

384,534

 

 

$

419,861

 

 

$

384,534

 

 


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, 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 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 to Operating EBITDA:

 

Q2

 

 

Q1

 

 

Q2

 

 

YTD

 

 

YTD

 

 

 

2022

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

Net income

$

71,372

 

 

$

88,897

 

 

$

21,415

 

 

$

160,269

 

 

$

27,348

 

 

Income tax provision

 

34,126

 

 

 

24,236

 

 

 

10,685

 

 

 

58,362

 

 

 

13,383

 

 

Interest expense

 

17,332

 

 

 

17,464

 

 

 

17,130

 

 

 

34,796

 

 

 

36,149

 

 

Loss on early extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

 

 

30,368

 

 

Other expense (income)

 

(8,799

)

 

 

(8,246

)

 

 

2,606

 

 

 

(17,045

)

 

 

(4,383

)

 

Operating income

 

114,031

 

 

 

122,351

 

 

 

51,836

 

 

 

236,382

 

 

 

102,865

 

 

Add: Depreciation and amortization

 

31,028

 

 

 

32,116

 

 

 

31,955

 

 

 

63,144

 

 

 

62,922

 

 

Operating EBITDA

$

145,059

 

 

$

154,467

 

 

$

83,791

 

 

$

299,526

 

 

$

165,787