Selected Highlights
- Fourth quarter net income of $20.0 million and Operating EBITDA* of $96.1 million
- Full year 2022 record net income of $247.0 million and record Operating EBITDA* of $536.5 million
- Quarterly cash dividend of $0.075 per share
NEW YORK, Feb. 16, 2023 (GLOBE NEWSWIRE) -- Mercer International Inc. (Nasdaq: MERC) today reported fourth quarter 2022 Operating EBITDA of $96.1 million a decrease from $164.9 million in the fourth quarter of 2021 and $140.9 million in the third quarter of 2022.
In the fourth quarter of 2022, net income was $20.0 million (or $0.30 per share) compared to $74.5 million (or $1.13 per basic share and $1.12 per diluted share) in the fourth quarter of 2021 and net income of $66.7 million (or $1.01 per basic share and $1.00 per diluted share) in the third quarter of 2022.
In 2022, Operating EBITDA increased by 12% to a record $536.5 million from $478.8 million in 2021. In 2022, net income was a record $247.0 million (or $3.74 per basic share and $3.71 per diluted share) from $171.0 million (or $2.59 per basic share and $2.58 per diluted share) in 2021.
Mr. Juan Carlos Bueno, the Chief Executive Officer, stated: “Our solid fourth quarter operating results reflect strong pulp sales, which were however more than offset by lower sales prices, higher planned maintenance and fiber costs and the negative impact of the weaker US dollar compared to our third quarter operating results.
Total pulp production increased approximately 6% compared to the third quarter primarily due to improved production at our Stendal mill as they ramped up production following the third quarter shut down caused by a fire in its wood yard. The Stendal mill is currently running at or about capacity and the repairs related to the fire are expected to be completed in the second quarter. Pulp sales volumes also increased relative to the third quarter in proportion to the pulp production increase.
Our solid wood segment’s fourth quarter operating results include the results of our recently acquired Torgau mill. Overall, this segment’s operating results were negatively impacted by lower sales prices, which were partially offset by improved lumber and energy sales volumes. During the quarter we achieved approximately $6 million of synergies on an annualized basis from our Torgau operations. These primarily came in the form of optimizing fiber utilizations among our mills. Our integration efforts are ongoing as we work to capture all available synergies.
Lower energy prices and the impact of the German energy windfall tax negatively affected our fourth quarter results by approximately $49 million compared to the prior quarter. The decline is the result of lower energy prices in Germany in the fourth quarter as warm weather and strong natural gas storage levels took significant pressure off the market electricity price. Effective December 1, 2022, Germany implemented a windfall tax which taxes revenues at 90% above a “base threshold”. Energy prices in Germany ended the year at about such base threshold level.
In the fourth quarter we also experienced significant fiber cost increases as demand for low quality pulp wood in Germany was being driven by the energy sector and in Western Canada there was lower fiber availability due to sawmill curtailments. In the fourth quarter our fiber costs increased roughly $21 million compared to the prior quarter. Planned major maintenance negatively impacted EBITDA by almost $20 million in the current quarter compared to the third quarter.
In China we currently expect modestly higher NBSK pulp prices in the first part of 2023 due to China's reopening after lifting of COVID-19 restrictions and the seasonal demand increase after the lunar new year. We currently expect modestly declining NBSK pulp prices in Europe and North America in the first half of 2023 as a result of lower demand due to inflationary pressures negatively impacting paper demand. For NBHK pulp we currently expect prices to decrease in the first half of 2023 due to additional supply coming online.
In our solid wood segment, we currently expect lumber prices to modestly increase in the first half of 2023 due to producer curtailments, low customer inventory levels and the start of the construction season. These positive impacts will be partially offset by lower demand caused by continued economic uncertainty due to inflation and higher interest rates. ”
Mr. Bueno concluded: “As I look to 2023, I am excited about Mercer’s strong operational foundation and the many options it gives us as we look to continue to grow and diversify our solid wood and bio-products revenues. Last year Mercer Mass Timber built up the engineering and design team and enhanced the operations to position it to bid on major construction projects and fill out its order book. We will continue to run the Company based on continuous improvement to enhance efficiency, lower costs and manage our liquidity prudently to enhance value.”
____________________
*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
| Q4 | Q3 | Q4 | YTD | YTD | ||||||||||||||||
| 2022 | 2022 | 2021 | 2022 | (1) | 2021 | |||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||||||
| Revenues | $ | 583,056 | $ | 532,814 | $ | 518,957 | $ | 2,280,937 | $ | 1,803,255 | ||||||||||
| Operating income | $ | 47,263 | $ | 108,723 | $ | 129,963 | $ | 392,368 | $ | 346,583 | ||||||||||
| Operating EBITDA | $ | 96,128 | $ | 140,867 | $ | 164,925 | $ | 536,521 | $ | 478,782 | ||||||||||
| Loss on early extinguishment of debt | $ | — | $ | — | $ | — | $ | — | $ | (30,368 | ) | (2) | ||||||||
| Net income | $ | 20,024 | $ | 66,746 | $ | 74,522 | $ | 247,039 | $ | 170,988 | ||||||||||
| Net income per common share | ||||||||||||||||||||
| Basic | $ | 0.30 | $ | 1.01 | $ | 1.13 | $ | 3.74 | $ | 2.59 | ||||||||||
| Diluted | $ | 0.30 | $ | 1.00 | $ | 1.12 | $ | 3.71 | $ | 2.58 | ||||||||||
______________
(1) Results of Torgau included from the date of acquisition on September 30, 2022.
(2) Redemption of 6.50% senior notes due 2024 and 7.375% senior notes due 2025.
Consolidated – Three Months Ended December 31, 2022 Compared to Three Months Ended December 31, 2021
Total revenues in the fourth quarter of 2022 increased by approximately 12% to $583.1 million from $519.0 million in the same quarter of 2021 primarily due to higher pulp sales realizations and the inclusion of the Torgau facility from September 30, 2022 partially offset by lower sales volumes and lumber sales realizations.
Costs and expenses in the fourth quarter of 2022 increased by approximately 38% to $535.8 million from $389.0 million in the fourth quarter of 2021 due to the inclusion of Torgau, higher per unit fiber and chemical costs and maintenance costs partially offset by the positive impact of a stronger dollar on our euro and Canadian dollar denominated costs and expenses and a lower pulp sales volume.
In the fourth quarter of 2022, Operating EBITDA decreased by approximately 42% to $96.1 million from $164.9 million in the same quarter of 2021 primarily due to higher per unit fiber and chemical costs and higher maintenance costs partially offset by higher pulp sales realizations and the positive impact of a stronger dollar.
Segment Results
Pulp
| Three Months Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| (in thousands) | ||||||||
| Pulp revenues | $ | 425,421 | $ | 400,379 | ||||
| Energy and chemical revenues | $ | 37,804 | $ | 35,966 | ||||
| Operating income | $ | 68,972 | $ | 113,172 | ||||
In the fourth quarter of 2022, pulp segment operating income decreased by approximately 39% to $69.0 million from $113.2 million in the same quarter of 2021 primarily due to higher per unit fiber and chemical costs and higher maintenance costs partially offset by higher realized prices and the positive impact of a stronger dollar.
Pulp revenues in the fourth quarter of 2022 increased by approximately 6% to $425.4 million from $400.4 million in the same quarter of 2021 due to higher sales realizations partially offset by lower sales volumes. In the fourth 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 16% to $913 per ADMT in the fourth quarter of 2022 from approximately $784 per ADMT in the same quarter of 2021.
In the fourth quarter of 2022 compared to the same quarter of 2021, we had a positive impact of approximately $27.4 million in operating income due to foreign exchange, primarily as a result of the effect of the stronger dollar on our euro and Canadian dollar denominated costs and expenses.
Costs and expenses in the fourth quarter of 2022 increased by approximately 22% to $394.3 million from $323.3 million in the fourth quarter of 2021 primarily due to higher per unit fiber and chemical costs and higher maintenance costs partially offset by the positive impact of a stronger dollar and lower pulp sales volumes. In the fourth quarter of 2022, our pulp mills had 21 days of annual maintenance downtime compared to no annual maintenance downtime in the fourth quarter of 2021.
In the fourth quarter of 2022 per unit fiber costs increased by approximately 43% from the same quarter of 2021 due to higher per unit fiber costs for all of our mills. Our German mills had higher per unit fiber costs as a result of strong demand from other wood consumers such as heating pellet manufacturers. For our Canadian mills, per unit fiber costs increased due to strong demand in the mills' fiber baskets and for our Celgar mill a decrease in the availability of wood chips due to regional sawmill curtailments. In the first quarter of 2023, we currently expect modestly lower per unit fiber costs in Germany due to lower demand for wood for energy purposes and generally flat per unit fiber costs in Canada.
Solid Wood
| Three Months Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| (in thousands) | ||||||||
| Lumber revenues | $ | 45,041 | $ | 71,965 | ||||
| Energy revenues | $ | 7,310 | $ | 4,940 | ||||
| Manufactured products revenues | $ | 5,583 | $ | 2,391 | ||||
| Pallet revenues | $ | 36,063 | $ | — | ||||
| Biofuel revenues | $ | 17,691 | $ | — | ||||
| Wood residual revenues | $ | 6,722 | $ | 2,027 | ||||
| Operating income (loss) | $ | (14,281 | ) | $ | 17,852 | |||
In the fourth quarter of 2022, the solid wood segment had an operating loss of $14.3 million compared to operating income of $17.9 million in the same quarter of 2021 primarily due to lower sales realizations.
Average lumber sales realizations decreased by approximately 34% to $454 per Mfbm in the fourth quarter of 2022 from approximately $689 per Mfbm in the same quarter of 2021 due to lower demand in both the European and U.S. markets. Demand in both the European and U.S. markets was negatively impacted by rising interest rates, inflationary pressures and an uncertain economic outlook.
Fiber costs were approximately 75% of our lumber cash production costs in the fourth quarter of 2022. In the fourth quarter of 2022, per unit fiber costs for our Friesau sawmill were flat when compared to the same quarter of 2021. We currently expect per unit fiber costs to modestly decrease in the first quarter of 2023.
Consolidated – Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
Total revenues in 2022 increased by approximately 26% to a record $2,280.9 million from $1,803.3 million in 2021 primarily due to higher sales realizations, higher pulp sales volumes and the inclusion of revenues from our Torgau facility since September 30, 2022. These increases were partially offset by the negative impact of a stronger dollar on our euro denominated energy and European lumber revenues.
Costs and expenses in 2022 increased by approximately 30% to $1,888.6 million from $1,456.7 million in 2021 primarily due to higher per unit fiber, freight, chemical and energy costs, the inclusion of Torgau's results and a higher pulp sales volume partially offset by the positive impact of a stronger dollar on our euro and Canadian dollar denominated costs and expenses.
In 2022, Operating EBITDA increased by approximately 12% to a record $536.5 million from $478.8 million in 2021 as higher sales realizations, the positive impact of a stronger dollar and higher pulp sales volumes were only partially offset by higher per unit fiber and other production and freight costs.
Liquidity
As of December 31, 2022, we had cash and cash equivalents of $354.0 million and approximately $281.6 million available under our revolving credit facilities providing us with aggregate liquidity of about $635.6 million.
Quarterly Dividend
A quarterly dividend of $0.075 per share will be paid on April 5, 2023 to all shareholders of record on March 29, 2023. Future dividends are 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 February 17, 2023 at 10:00 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/9vbapy7e 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, 960 million board feet of lumber, 140 thousand cubic meters of CLT, 17 million pallets and 230,000 metric tonnes of biofuels. 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
| Q4 | Q3 | Q4 | YTD | YTD | ||||||||||||||||
| 2022 | 2022 | 2021 | 2022 | (1) | 2021 | |||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||||||
| Pulp segment revenues | $ | 463,225 | $ | 456,657 | $ | 436,345 | $ | 1,866,117 | $ | 1,483,093 | ||||||||||
| Solid wood segment revenues | 118,410 | 74,266 | 81,323 | 408,458 | 313,472 | |||||||||||||||
| Corporate and other revenues | 1,421 | 1,891 | 1,289 | 6,362 | 6,690 | |||||||||||||||
| Total revenues | $ | 583,056 | $ | 532,814 | $ | 518,957 | $ | 2,280,937 | $ | 1,803,255 | ||||||||||
| Pulp segment operating income | $ | 68,972 | $ | 109,985 | $ | 113,172 | $ | 340,664 | $ | 251,724 | ||||||||||
| Solid wood segment operating income (loss) | (14,281 | ) | 2,896 | 17,852 | 70,642 | 106,092 | ||||||||||||||
| Corporate and other operating loss | (7,428 | ) | (4,158 | ) | (1,061 | ) | (18,938 | ) | (11,233 | ) | ||||||||||
| Total operating income | $ | 47,263 | $ | 108,723 | $ | 129,963 | $ | 392,368 | $ | 346,583 | ||||||||||
| Pulp segment depreciation and amortization | $ | 29,199 | $ | 28,174 | $ | 30,298 | $ | 112,058 | $ | 115,293 | ||||||||||
| Solid wood segment depreciation and amortization | 19,451 | 3,733 | 4,288 | 31,170 | 15,784 | |||||||||||||||
| Corporate and other depreciation and amortization | 215 | 237 | 376 | 925 | 1,122 | |||||||||||||||
| Total depreciation and amortization | $ | 48,865 | $ | 32,144 | $ | 34,962 | $ | 144,153 | $ | 132,199 | ||||||||||
| Operating EBITDA | $ | 96,128 | $ | 140,867 | $ | 164,925 | $ | 536,521 | $ | 478,782 | ||||||||||
| Loss on early extinguishment of debt | $ | — | $ | — | $ | — | $ | — | $ | (30,368 | ) | (2) | ||||||||
| Income tax provision | $ | (8,608 | ) | $ | (31,294 | ) | $ | (43,706 | ) | $ | (98,264 | ) | $ | (89,579 | ) | |||||
| Net income | $ | 20,024 | $ | 66,746 | $ | 74,522 | $ | 247,039 | $ | 170,988 | ||||||||||
| Net income per common share | ||||||||||||||||||||
| Basic | $ | 0.30 | $ | 1.01 | $ | 1.13 | $ | 3.74 | $ | 2.59 | ||||||||||
| Diluted | $ | 0.30 | $ | 1.00 | $ | 1.12 | $ | 3.71 | $ | 2.58 | ||||||||||
| Common shares outstanding at period end | 66,167 | 66,167 | 66,037 | 66,167 | 66,037 | |||||||||||||||
______________
(1) Results of Torgau included from the date of acquisition on September 30, 2022.
(2) Redemption of 6.50% senior notes due 2024 and 7.375% senior notes due 2025.
Summary Operating Highlights
| Q4 | Q3 | Q4 | YTD | YTD | ||||||||||||||||
| 2022 | 2022 | 2021 | 2022 | (1) | 2021 | |||||||||||||||
| Pulp Segment | ||||||||||||||||||||
| Pulp production ('000 ADMTs) | ||||||||||||||||||||
| NBSK | 390.9 | 362.9 | 476.2 | 1,607.6 | 1,671.2 | |||||||||||||||
| NBHK | 80.6 | 82.1 | 48.8 | 271.0 | 192.7 | |||||||||||||||
| Annual maintenance downtime ('000 ADMTs) | 39.5 | 17.3 | - | 111.0 | 253.7 | |||||||||||||||
| Annual maintenance downtime (days) | 21 | 17 | - | 80 | 188 | |||||||||||||||
| Pulp sales ('000 ADMTs) | ||||||||||||||||||||
| NBSK | 393.4 | 356.6 | 465.6 | 1,660.8 | 1,616.9 | |||||||||||||||
| NBHK | 72.0 | 69.3 | 50.7 | 257.0 | 195.8 | |||||||||||||||
| Average NBSK pulp prices ($/ADMT)(2) | ||||||||||||||||||||
| Europe | 1,442 | 1,500 | 1,302 | 1,427 | 1,243 | |||||||||||||||
| China | 920 | 969 | 723 | 949 | 850 | |||||||||||||||
| North America | 1,745 | 1,800 | 1,472 | 1,704 | 1,478 | |||||||||||||||
| Average NBHK pulp prices ($/ADMT)(2) | ||||||||||||||||||||
| China | 837 | 855 | 562 | 794 | 661 | |||||||||||||||
| North America | 1,608 | 1,620 | 1,262 | 1,514 | 1,225 | |||||||||||||||
| Average pulp sales realizations ($/ADMT)(3) | ||||||||||||||||||||
| NBSK | 913 | 911 | 784 | 876 | 779 | |||||||||||||||
| NBHK | 896 | 990 | 649 | 869 | 615 | |||||||||||||||
| Energy production ('000 MWh)(4) | 515.8 | 484.2 | 480.9 | 2,028.1 | 1,826.5 | |||||||||||||||
| Energy sales ('000 MWh)(4) | 183.4 | 174.3 | 184.2 | 751.7 | 702.0 | |||||||||||||||
| Average energy sales realizations ($/MWh)(4) | 156 | (5) | 339 | 184 | 214 | (5) | 123 | |||||||||||||
| Solid Wood Segment | ||||||||||||||||||||
| Lumber | ||||||||||||||||||||
| Production (MMfbm) | 117.3 | 97.1 | 111.3 | 442.2 | 447.9 | |||||||||||||||
| Sales (MMfbm) | 99.2 | 89.8 | 104.4 | 409.9 | 419.7 | |||||||||||||||
| Average sales realizations ($/Mfbm) | 454 | 605 | 689 | 703 | 699 | |||||||||||||||
| Energy | ||||||||||||||||||||
| Production and sales ('000 MWh) | 39.0 | 20.6 | 23.2 | 109.6 | 74.6 | |||||||||||||||
| Average sales realizations ($/MWh) | 159 | (5) | 394 | 213 | 224 | (5) | 155 | |||||||||||||
| Manufactured products(6) | ||||||||||||||||||||
| Production ('000 cubic meters) | 8.3 | 15.0 | 6.1 | 36.3 | 6.1 | |||||||||||||||
| Sales ('000 cubic meters) | 6.1 | 10.5 | 4.1 | 28.8 | 4.1 | |||||||||||||||
| Average sales realizations ($/cubic meters) | 561 | 677 | 580 | 715 | 580 | |||||||||||||||
| Pallets | ||||||||||||||||||||
| Production ('000 units) | 2,568.4 | - | - | 2,568.4 | - | |||||||||||||||
| Sales ('000 units) | 2,646.3 | - | - | 2,646.3 | - | |||||||||||||||
| Average sales realizations ($/unit) | 14 | - | - | 14 | - | |||||||||||||||
| Biofuels(7) | ||||||||||||||||||||
| Production ('000 tonnes) | 45.7 | - | - | 45.7 | - | |||||||||||||||
| Sales ('000 tonnes) | 49.8 | - | - | 49.8 | - | |||||||||||||||
| Average realizations ($/tonne) | 355 | - | - | 355 | - | |||||||||||||||
| Average Spot Currency Exchange Rates | ||||||||||||||||||||
| $ / €(8) | 1.0218 | 1.0066 | 1.1437 | 1.0534 | 1.1830 | |||||||||||||||
| $ / C$(8) | 0.7366 | 0.7659 | 0.7936 | 0.7691 | 0.7981 | |||||||||||||||
______________
(1) Results of Torgau included from the date of acquisition on September 30, 2022.
(2) Source: RISI pricing report. Europe and North America are list prices. China are net prices which include discounts, allowances and rebates.
(3) Sales realizations after customer discounts, rebates and other selling concessions. Incorporates the effect of pulp price variations occurring between the order and shipment dates.
(4) Does not include our 50% joint venture interest in the Cariboo mill, which is accounted for using the equity method.
(5) Energy sales realizations for Q4 2022 and YTD 2022 are net of the German energy windfall tax of $6.7 million for the pulp segment and $1.1 million for the solid wood segment.
(6) Manufactured products includes finger joint lumber and cross-laminated timber.
(7) Biofuels includes briquettes and pellets.
(8) Average Federal Reserve Bank of New York Noon Buying Rates over the reporting period.
MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
| Three Months Ended December 31, | For the Year Ended December 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenues | $ | 583,056 | $ | 518,957 | $ | 2,280,937 | $ | 1,803,255 | ||||||||
| Costs and expenses | ||||||||||||||||
| Cost of sales, excluding depreciation and amortization | 451,196 | 335,378 | 1,638,672 | 1,245,622 | ||||||||||||
| Cost of sales depreciation and amortization | 48,841 | 34,942 | 144,064 | 132,117 | ||||||||||||
| Selling, general and administrative expenses | 35,756 | 18,674 | 105,833 | 78,933 | ||||||||||||
| Operating income | 47,263 | 129,963 | 392,368 | 346,583 | ||||||||||||
| Other income (expenses) | ||||||||||||||||
| Interest expense | (18,768 | ) | (17,016 | ) | (71,499 | ) | (70,047 | ) | ||||||||
| Loss on early extinguishment of debt | — | — | — | (30,368 | ) | |||||||||||
| Other income | 137 | 5,281 | 24,434 | 14,399 | ||||||||||||
| Total other expenses, net | (18,631 | ) | (11,735 | ) | (47,065 | ) | (86,016 | ) | ||||||||
| Income before income taxes | 28,632 | 118,228 | 345,303 | 260,567 | ||||||||||||
| Income tax provision | (8,608 | ) | (43,706 | ) | (98,264 | ) | (89,579 | ) | ||||||||
| Net income | $ | 20,024 | $ | 74,522 | $ | 247,039 | $ | 170,988 | ||||||||
| Net income per common share | ||||||||||||||||
| Basic | $ | 0.30 | $ | 1.13 | $ | 3.74 | $ | 2.59 | ||||||||
| Diluted | $ | 0.30 | $ | 1.12 | $ | 3.71 | $ | 2.58 | ||||||||
| Dividends declared per common share | $ | 0.075 | $ | 0.065 | $ | 0.300 | $ | 0.260 | ||||||||
MERCER INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)
| December 31, | |||||||||
| 2022 | 2021 | ||||||||
| ASSETS | |||||||||
| Current assets | |||||||||
| Cash and cash equivalents | $ | 354,032 | $ | 345,610 | |||||
| Accounts receivable, net | 351,993 | 345,345 | |||||||
| Inventories | 450,470 | 356,731 | |||||||
| Prepaid expenses and other | 21,680 | 16,619 | |||||||
| Total current assets | 1,178,175 | 1,064,305 | |||||||
| Property, plant and equipment, net | 1,341,322 | 1,135,631 | |||||||
| Investment in joint ventures | 45,635 | 49,651 | |||||||
| Amortizable intangible assets, net | 61,497 | 47,902 | |||||||
| Goodwill | 30,937 | — | |||||||
| Operating lease right-of-use assets | 15,049 | 9,712 | |||||||
| Pension asset | 4,397 | 4,136 | |||||||
| Other long-term assets | 48,025 | 38,718 | |||||||
| Deferred income tax | — | 1,177 | |||||||
| Total assets | $ | 2,725,037 | $ | 2,351,232 | |||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||
| Current liabilities | |||||||||
| Accounts payable and other | $ | 377,306 | $ | 282,307 | |||||
| Pension and other post-retirement benefit obligations | 755 | 817 | |||||||
| Total current liabilities | 378,061 | 283,124 | |||||||
| Long-term debt | 1,346,508 | 1,237,545 | |||||||
| Pension and other post-retirement benefit obligations | 12,178 | 21,252 | |||||||
| Operating lease liabilities | 9,475 | 6,574 | |||||||
| Other long-term liabilities | 14,072 | 13,590 | |||||||
| Deferred income tax | 125,959 | 95,123 | |||||||
| Total liabilities | 1,886,253 | 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 | 354,495 | 347,902 | |||||||
| Retained earnings | 598,119 | 370,927 | |||||||
| Accumulated other comprehensive loss | (179,962 | ) | (90,793 | ) | |||||
| Total shareholders’ equity | 838,784 | 694,024 | |||||||
| Total liabilities and shareholders’ equity | $ | 2,725,037 | $ | 2,351,232 | |||||
MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| For the Year Ended December 31, | |||||||||||||
| 2022 | 2021 | 2020 | |||||||||||
| Cash flows from (used in) operating activities | |||||||||||||
| Net income (loss) | $ | 247,039 | $ | 170,988 | $ | (17,235 | ) | ||||||
| Adjustments to reconcile net income (loss) to cash flows from operating activities | |||||||||||||
| Depreciation and amortization | 144,153 | 132,199 | 128,921 | ||||||||||
| Deferred income tax provision (recovery) | 7,003 | 18,791 | (15,249 | ) | |||||||||
| Inventory impairment | — | — | 25,998 | ||||||||||
| Loss on early extinguishment of debt | — | 30,368 | — | ||||||||||
| Defined benefit pension plans and other post-retirement benefit plan expense | 1,708 | 2,831 | 3,053 | ||||||||||
| Stock compensation expense | 6,737 | 2,394 | 928 | ||||||||||
| Gain on sale of investments | (519 | ) | — | (17,540 | ) | ||||||||
| Foreign exchange transaction losses (gains) | (16,802 | ) | (16,597 | ) | 13,272 | ||||||||
| Other | (722 | ) | 384 | 543 | |||||||||
| Defined benefit pension plans and other post-retirement benefit plan contributions | (2,942 | ) | (4,258 | ) | (4,164 | ) | |||||||
| Changes in working capital | |||||||||||||
| Accounts receivable | (20,476 | ) | (121,579 | ) | (6,269 | ) | |||||||
| Inventories | (63,184 | ) | (96,442 | ) | (11,430 | ) | |||||||
| Accounts payable and accrued expenses | 66,796 | 75,589 | (53,744 | ) | |||||||||
| Other | (8,131 | ) | (12,454 | ) | (5,519 | ) | |||||||
| Net cash from (used in) operating activities | 360,660 | 182,214 | 41,565 | ||||||||||
| Cash flows from (used in) investing activities | |||||||||||||
| Purchase of property, plant and equipment | (178,742 | ) | (159,440 | ) | (78,518 | ) | |||||||
| Acquisitions, net of cash acquired | (256,604 | ) | (51,258 | ) | — | ||||||||
| Property insurance proceeds | 8,616 | 21,540 | — | ||||||||||
| Purchase of amortizable intangible assets | (495 | ) | (1,385 | ) | (647 | ) | |||||||
| Purchase of investments | (75,000 | ) | — | (9,370 | ) | ||||||||
| Proceeds from sale of investments | 75,519 | — | 26,910 | ||||||||||
| Other | 1,029 | 3,416 | 1,798 | ||||||||||
| Net cash from (used in) investing activities | (425,677 | ) | (187,127 | ) | (59,827 | ) | |||||||
| 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 | 115,330 | (33,396 | ) | 52,651 | |||||||||
| Dividend payments | (19,847 | ) | (17,167 | ) | (21,892 | ) | |||||||
| Payment of debt issuance costs | (3,871 | ) | (14,483 | ) | — | ||||||||
| Proceeds from government grants | 1,067 | 9,333 | 362 | ||||||||||
| Payment of finance lease obligations | (10,003 | ) | (7,850 | ) | (4,636 | ) | |||||||
| Other | (711 | ) | 3,616 | (168 | ) | ||||||||
| Net cash from (used in) financing activities | 81,965 | (9,504 | ) | 26,317 | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | (8,526 | ) | (1,071 | ) | 1,958 | ||||||||
| Net increase (decrease) in cash and cash equivalents | 8,422 | (15,488 | ) | 10,013 | |||||||||
| Cash and cash equivalents, beginning of year | 345,610 | 361,098 | 351,085 | ||||||||||
| Cash and cash equivalents, end of year | $ | 354,032 | $ | 345,610 | $ | 361,098 | |||||||
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:
| Q4 | Q3 | Q4 | YTD | YTD | ||||||||||||||||
| 2022 | 2022 | 2021 | 2022 | (1) | 2021 | |||||||||||||||
| Net income | $ | 20,024 | $ | 66,746 | $ | 74,522 | $ | 247,039 | $ | 170,988 | ||||||||||
| Income tax provision | 8,608 | 31,294 | 43,706 | 98,264 | 89,579 | |||||||||||||||
| Interest expense | 18,768 | 17,935 | 17,016 | 71,499 | 70,047 | |||||||||||||||
| Loss on early extinguishment of debt | — | — | — | — | 30,368 | |||||||||||||||
| Other income | (137 | ) | (7,252 | ) | (5,281 | ) | (24,434 | ) | (14,399 | ) | ||||||||||
| Operating income | 47,263 | 108,723 | 129,963 | 392,368 | 346,583 | |||||||||||||||
| Add: Depreciation and amortization | 48,865 | 32,144 | 34,962 | 144,153 | 132,199 | |||||||||||||||
| Operating EBITDA | $ | 96,128 | $ | 140,867 | $ | 164,925 | $ | 536,521 | $ | 478,782 | ||||||||||
______________
(1) Results of Torgau included from the date of acquisition on September 30, 2022.
