Mercer International Inc. Reports Third Quarter and Nine Months Ended September 30, 2019 Results and Announces Quarterly Cash Dividend of $0.1375
Selected Highlights
- Third quarter net income of $1.2 million ($0.02 per share) and Operating EBITDA* of $50.8 million
- Nine months ended September 30, 2019 net income of $63.1 million ($0.96 per share) and Operating EBITDA of $244.6 million
NEW YORK, Oct. 31, 2019 (GLOBE NEWSWIRE) — Mercer International Inc. (Nasdaq: MERC) today reported third quarter 2019 Operating EBITDA decreased to $50.8 million from $86.7 million in the third quarter of 2018 and from $70.0 million in the second quarter of 2019. In the third quarter of 2019, net income was $1.2 million, or $0.02 per share, compared to $41.2 million, or $0.63 per share, in the third quarter of 2018 and $10.3 million, or $0.16 per share in the second quarter of 2019.
In the first nine months of 2019, Operating EBITDA modestly declined to $244.6 million from $246.5 million in the same period of 2018. In the first nine months of 2019, net income was $63.1 million compared to $83.6 million in the same period of 2018.
Mr. David M. Gandossi, the Chief Executive Officer, stated: “Our third quarter results reflect continuing weakness in the pulp markets. High producer inventories, particularly of hardwood pulp, resulted in pricing pressure through most of the third quarter. However, late in the quarter we saw softwood producer inventories begin to fall and demand began to increase in China. We have announced an NBSK price increase of $10 per tonne for October in China.
Our mills ran well this quarter as we head into a heavy maintenance quarter in the fourth quarter, where three of our pulp mills will have annual maintenance shutdowns.”
____________________
*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: Impacted by lower product sales realizations
| Q3 | Q2 | Q3 | YTD | YTD | ||||||||||||||||
| 2019 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||||||
| Revenues | $ | 383,536 | $ | 425,753 | $ | 331,058 | $ | 1,293,239 | $ | 1,045,493 | ||||||||||
| Operating income | $ | 18,747 | $ | 37,810 | $ | 63,346 | $ | 150,109 | $ | 176,870 | ||||||||||
| Operating EBITDA | $ | 50,799 | $ | 69,958 | $ | 86,656 | $ | 244,556 | $ | 246,513 | ||||||||||
| Loss on settlement of debt | $ | — | $ | — | $ | — | $ | — | $ | (21,515 | ) | (1) | ||||||||
| Legal cost award | $ | — | $ | — | $ | — | $ | — | $ | (6,951 | ) | |||||||||
| Net income | $ | 1,207 | $ | 10,259 | $ | 41,176 | $ | 63,082 | $ | 83,580 | ||||||||||
| Net income per common share | ||||||||||||||||||||
| Basic | $ | 0.02 | $ | 0.16 | $ | 0.63 | $ | 0.96 | $ | 1.28 | ||||||||||
| Diluted | $ | 0.02 | $ | 0.16 | $ | 0.63 | $ | 0.96 | $ | 1.27 | ||||||||||
______________
(1) Redemption of 7.75% senior notes due 2022.
In the third quarter of 2019 our operating EBITDA decreased to $50.8 million from $70.0 million in the second quarter of 2019, and from $86.7 million in the same quarter of 2018. The decrease in the current quarter compared to the prior quarter is primarily due to lower pulp sales realizations only partially being offset by lower per unit fiber costs and the positive impact of a stronger dollar compared to the euro on the dollar denominated cash and receivables held at the German mills. Compared to the same quarter of 2018 lower pulp and lumber sales realizations were partially offset by lower per unit fiber costs and higher sales volumes.
Segment Results
Pulp: Strong sales volumes and lower fiber costs more than offset by lower sales realizations
| Three Months Ended September 30 | |||||||
| 2019 | 2018 | ||||||
| (in thousands) | |||||||
| Pulp revenues | $ | 322,707 | $ | 274,970 | |||
| Energy and chemical revenues | $ | 22,353 | $ | 17,999 | |||
| Operating income | $ | 21,386 | $ | 68,794 | |||
In the third quarter of 2019 pulp segment operating income decreased to $21.4 million from $68.8 million in the same quarter of 2018. The decrease was primarily due to lower pulp sales realizations partially offset by higher sales volumes and lower per unit fiber costs. In the current quarter of 2019, the NBSK pulp realized sales price decreased by approximately 29% to $609 per ADMT from $852 per ADMT in the same quarter of the prior year due to high producer inventory levels. NBSK sales volumes increased by approximately 41% to 451,171 ADMTs in the current quarter from 319,850 ADMTs in the same quarter of 2018 due to the inclusion of Mercer Peace River Pulp Ltd. (“MPR”) and strong sales volumes to China.
As a result of a decline in pulp sales realizations in the current quarter of 2019, we recorded a write down of our inventory carrying values at our Canadian mills of $6.9 million.
In the current quarter of 2019, we received German regulatory approval to reverse a wastewater fee accrual of $7.2 million as a result of certain capital projects.
Per unit fiber costs decreased in the current quarter by approximately 14% from the same quarter of 2018 due to lower per unit fiber costs for our German mills and the positive impact of a stronger dollar on our euro and Canadian dollar denominated fiber costs. In Germany, fiber costs benefitted from the continuing availability of beetle damaged wood. Fiber costs in Canada remained at high levels due to strong fiber demand in Celgar’s fiber procurement basket.
Wood Products: Lower fiber costs partially offset by lower lumber sales realizations
| Three Months Ended September 30, | |||||||
| 2019 | 2018 | ||||||
| (in thousands) | |||||||
| Lumber revenues | $ | 32,687 | $ | 34,270 | |||
| Energy revenues | $ | 1,621 | $ | 1,978 | |||
| Wood residual revenues | $ | 2,150 | $ | 1,841 | |||
| Operating income (loss) | $ | 544 | $ | (1,770 | ) | ||
In the third quarter of 2019 wood products segment operating income increased to $0.5 million compared to an operating loss of $1.8 million in the same quarter of 2018. The increase was primarily due to lower per unit fiber costs partially offset by lower lumber sales realizations. In the current quarter per unit fiber costs decreased by approximately 34% from the same quarter of 2018 primarily as a result of the availability of beetle damaged wood. Average lumber sales realizations decreased by approximately 18% to $337 per Mfbm in the third quarter of 2019 from approximately $409 per Mfbm in the same quarter of 2018 primarily due to lower pricing in both the U.S. and Europe. U.S lumber pricing declined as a result of high producer inventory levels. European lumber pricing declined due to an increase in the supply of lumber processed from beetle damaged wood which generally obtains lower prices.
Consolidated –Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018
Total revenues for the nine months ended September 30, 2019 increased by approximately 24% to $1,293.2 million from $1,045.5 million in the nine months ended September 30, 2018 primarily due to the inclusion of the results of MPR and higher pulp and energy sales volumes partially offset by lower sales realizations.
Costs and expenses in the nine months ended September 30, 2019 increased by approximately 32% to $1,143.1 million from $868.6 million in the nine months ended September 30, 2018 primarily due to the inclusion of MPR and higher pulp sales volumes partially offset by lower per unit fiber and maintenance costs and the positive impact of a stronger dollar on our euro denominated costs and expenses.
For the nine months ended September 30, 2019, our net income decreased to $63.1 million, or $0.96 per share from $83.6 million, or $1.28 per basic and $1.27 per diluted share in the same period of 2018, after giving effect to costs of $28.5 million, or $0.44 per basic and $0.43 per diluted share, for the redemption of our 2022 senior notes in January, 2019 and a legal cost award.
In the nine months ended September 30, 2019, Operating EBITDA modestly declined to $244.6 million from $246.5 million in the same period of 2018 primarily due to lower pulp and lumber sales realizations partially offset by higher pulp and energy sales volumes, lower per unit fiber and maintenance costs, the inclusion of MPR and the positive impact of a stronger dollar on our euro denominated costs and expenses.
Outlook
We currently expect NBSK pulp markets to stabilize in the later part of the year due to lower producer inventories as a result of producer downtime along with steady demand. We currently expect lumber pricing to also stabilize in the later part of the year due to sawmill curtailments in Canada and steady U.S. and European demand.
In the fourth quarter of 2019, we have three of our pulp mills down for scheduled maintenance downtime totaling 53 days or approximately 83,000 ADMTs.
Quarterly Dividend
A quarterly dividend of $0.1375 per share will be paid on December 19, 2019 to all shareholders of record on December 12, 2019. 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 November 1, 2019 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/k576r6r3 or through a link on the company’s home page at https://www.mercerint.com. Please allow 15 minutes prior to the call to visit the site and download and install any necessary audio software.
Mercer International Inc. is a global forest products company with operations in Germany and Canada with consolidated annual production capacity of 2.2 million tonnes of pulp and 550 million board feet of lumber. To obtain further information on the company, please visit its web site at https://www.mercerint.com.
The preceding includes forward looking statements which involve known and unknown risks and uncertainties which may cause our actual results in future periods to differ materially from forecasted results. Words such as “expects”, “anticipates”, “projects”, “intends”, “designed”, “will”, “believes”, “estimates”, “may”, “could” and variations of such words and similar expressions are intended to identify such forward-looking statements. Among those factors which could cause actual results to differ materially are the following: the highly cyclical nature of our business, raw material costs, our level of indebtedness, competition, foreign exchange and interest rate fluctuations, our use of derivatives, expenditures for capital projects, environmental regulation and compliance, disruptions to our production, market conditions and other risk factors listed from time to time in our SEC reports.
APPROVED BY:
Jimmy S.H. Lee
Executive Chairman
(604) 684-1099
David M. Gandossi
Chief Executive Officer
(604) 684-1099
-FINANCIAL TABLES FOLLOW-
Summary Financial Highlights
| Q3 | Q2 | Q3 | YTD | YTD | ||||||||||||||||
| 2019 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||||||
| Pulp segment revenues | $ | 345,060 | $ | 384,799 | $ | 292,969 | $ | 1,166,333 | $ | 898,836 | ||||||||||
| Wood products segment revenues | 36,458 | 39,452 | 38,089 | 120,349 | 146,657 | |||||||||||||||
| Corporate and other revenues | 2,018 | 1,502 | — | 6,557 | — | |||||||||||||||
| Total revenues | $ | 383,536 | $ | 425,753 | $ | 331,058 | $ | 1,293,239 | $ | 1,045,493 | ||||||||||
| Pulp segment operating income | $ | 21,386 | $ | 42,251 | $ | 68,794 | $ | 157,157 | $ | 179,824 | ||||||||||
| Wood products segment operating income (loss) | 544 | (89 | ) | (1,770 | ) | 2,075 | 5,534 | |||||||||||||
| Corporate and other operating loss | (3,183 | ) | (4,352 | ) | (3,678 | ) | (9,123 | ) | (8,488 | ) | ||||||||||
| Total operating income | $ | 18,747 | $ | 37,810 | $ | 63,346 | $ | 150,109 | $ | 176,870 | ||||||||||
| Pulp segment depreciation and amortization | $ | 29,744 | $ | 29,849 | $ | 20,802 | $ | 87,616 | $ | 63,452 | ||||||||||
| Wood products segment depreciation and amortization | 2,016 | 2,010 | 2,395 | 5,937 | 5,860 | |||||||||||||||
| Corporate and other depreciation and amortization | 292 | 289 | 113 | 894 | 331 | |||||||||||||||
| Total depreciation and amortization | $ | 32,052 | $ | 32,148 | $ | 23,310 | $ | 94,447 | $ | 69,643 | ||||||||||
| Operating EBITDA | $ | 50,799 | $ | 69,958 | $ | 86,656 | $ | 244,556 | $ | 246,513 | ||||||||||
| Loss on settlement of debt | $ | — | $ | — | $ | — | $ | — | $ | (21,515 | ) | (1) | ||||||||
| Legal cost award | $ | — | $ | — | $ | — | $ | — | $ | (6,951 | ) | |||||||||
| Provision for income taxes | $ | (244 | ) | $ | (10,433 | ) | $ | (10,182 | ) | $ | (35,101 | ) | $ | (28,224 | ) | |||||
| Net income | $ | 1,207 | $ | 10,259 | $ | 41,176 | $ | 63,082 | $ | 83,580 | ||||||||||
| Net income per common share | ||||||||||||||||||||
| Basic | $ | 0.02 | $ | 0.16 | $ | 0.63 | $ | 0.96 | $ | 1.28 | ||||||||||
| Diluted | $ | 0.02 | $ | 0.16 | $ | 0.63 | $ | 0.96 | $ | 1.27 | ||||||||||
| Common shares outstanding at period end | 65,629 | 65,629 | 65,202 | 65,629 | 65,202 | |||||||||||||||
______________
(1) Redemption of 7.75% senior notes due 2022.
Summary Operating Highlights
| Q3 | Q2 | Q3 | YTD | YTD | ||||||||||||||||
| 2019 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||
| Pulp Segment | ||||||||||||||||||||
| Pulp production (‘000 ADMTs) | ||||||||||||||||||||
| NBSK | 441.7 | 452.8 | 363.5 | 1,355.1 | 1,037.7 | |||||||||||||||
| NBHK | 75.3 | 89.4 | 243.3 | |||||||||||||||||
| Annual maintenance downtime (‘000 ADMTs) | 14.1 | 7.5 | 14.4 | 21.6 | 69.9 | |||||||||||||||
| Annual maintenance downtime (days) | 13 | 15 | 14 | 28 | 51 | |||||||||||||||
| Pulp sales (‘000 ADMTs) | ||||||||||||||||||||
| NBSK | 451.2 | 438.5 | 319.9 | 1,356.6 | 1,025.2 | |||||||||||||||
| NBHK | 91.0 | 81.5 | 260.4 | |||||||||||||||||
| Average NBSK pulp list prices ($/ADMT)(1) | ||||||||||||||||||||
| Europe | 860 | 997 | 1,230 | 987 | 1,176 | |||||||||||||||
| China | 585 | 653 | 887 | 649 | 902 | |||||||||||||||
| North America | 1,170 | 1,292 | 1,377 | 1,281 | 1,307 | |||||||||||||||
| Average NBHK pulp list prices ($/ADMT)(1) | ||||||||||||||||||||
| China | 507 | 635 | 800 | 609 | 799 | |||||||||||||||
| North America | 970 | 1,100 | 1,192 | 1,083 | 1,131 | |||||||||||||||
| Average pulp sales realizations ($/ADMT)(2) | ||||||||||||||||||||
| NBSK | 609 | 699 | 852 | 689 | 817 | |||||||||||||||
| NBHK | 499 | 618 | 589 | |||||||||||||||||
| Energy production (‘000 MWh) | 572.5 | (3) | 575.4 | (3) | 388.0 | 1,708.3 | (3) | 1,120.7 | ||||||||||||
| Energy sales (‘000 MWh) | 224.7 | (3) | 231.9 | (3) | 141.0 | 668.4 | (3) | 401.3 | ||||||||||||
| Average energy sales realizations ($/MWh) | 89 | 93 | 105 | 92 | 105 | |||||||||||||||
| Wood Products Segment | ||||||||||||||||||||
| Lumber production (MMfbm) | 96.6 | 100.8 | 79.5 | 308.0 | 294.1 | |||||||||||||||
| Lumber sales (MMfbm) | 97.0 | 101.5 | 83.8 | 307.7 | 312.0 | |||||||||||||||
| Average lumber sales realizations ($/Mfbm) | 337 | 348 | 409 | 348 | 421 | |||||||||||||||
| Energy production and sales (‘000 MWh) | 13.9 | 24.1 | 16.4 | 60.4 | 62.5 | |||||||||||||||
| Average energy sales realizations ($/MWh) | 116 | 116 | 121 | 117 | 128 | |||||||||||||||
| Average Spot Currency Exchange Rates | ||||||||||||||||||||
| $ / €(4) | 1.1120 | 1.1237 | 1.1629 | 1.1234 | 1.1945 | |||||||||||||||
| $ / C$(4) | 0.7573 | 0.7475 | 0.7651 | 0.7523 | 0.7767 | |||||||||||||||
______________
(1) Source: RISI pricing report.
(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) Excludes energy production and sales relating to our 50% joint venture interest in the Cariboo mill which is accounted for as an equity investment.
(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 September 30 |
Nine Months Ended September 30 |
|||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Revenues | $ | 383,536 | $ | 331,058 | $ | 1,293,239 | $ | 1,045,493 | ||||||||
| Costs and expenses | ||||||||||||||||
| Cost of sales, excluding depreciation and amortization | 314,894 | 230,009 | 994,360 | 755,428 | ||||||||||||
| Cost of sales depreciation and amortization | 31,934 | 23,197 | 94,108 | 69,312 | ||||||||||||
| Selling, general and administrative expenses | 17,961 | 14,506 | 54,662 | 43,883 | ||||||||||||
| Operating income | 18,747 | 63,346 | 150,109 | 176,870 | ||||||||||||
| Other income (expenses) | ||||||||||||||||
| Interest expense | (18,183 | ) | (11,729 | ) | (55,103 | ) | (35,972 | ) | ||||||||
| Loss on settlement of debt | — | — | — | (21,515 | ) | |||||||||||
| Legal cost award | — | — | — | (6,951 | ) | |||||||||||
| Other income (expenses) | 887 | (259 | ) | 3,177 | (628 | ) | ||||||||||
| Total other expenses, net | (17,296 | ) | (11,988 | ) | (51,926 | ) | (65,066 | ) | ||||||||
| Income before provision for income taxes | 1,451 | 51,358 | 98,183 | 111,804 | ||||||||||||
| Provision for income taxes | (244 | ) | (10,182 | ) | (35,101 | ) | (28,224 | ) | ||||||||
| Net income | $ | 1,207 | $ | 41,176 | $ | 63,082 | $ | 83,580 | ||||||||
| Net income per common share | ||||||||||||||||
| Basic | $ | 0.02 | $ | 0.63 | $ | 0.96 | $ | 1.28 | ||||||||
| Diluted | $ | 0.02 | $ | 0.63 | $ | 0.96 | $ | 1.27 | ||||||||
| Dividends declared per common share | $ | 0.1375 | $ | 0.1250 | $ | 0.4000 | $ | 0.3750 | ||||||||
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)
| September 30, | December 31, | |||||||
| 2019 | 2018 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 264,899 | $ | 240,491 | ||||
| Accounts receivable | 228,154 | 252,692 | ||||||
| Inventories | 269,443 | 303,813 | ||||||
| Prepaid expenses and other | 20,512 | 13,703 | ||||||
| Total current assets | 783,008 | 810,699 | ||||||
| Property, plant and equipment, net | 1,009,639 | 1,029,257 | ||||||
| Investment in joint ventures | 55,382 | 62,574 | ||||||
| Intangible assets, net | 53,442 | 53,927 | ||||||
| Operating lease right-of-use assets | 13,054 | — | ||||||
| Other long-term assets | 32,220 | 17,904 | ||||||
| Deferred income tax | 2,908 | 1,374 | ||||||
| Total assets | $ | 1,949,653 | $ | 1,975,735 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and other | $ | 203,279 | $ | 194,484 | ||||
| Pension and other post-retirement benefit obligations | 778 | 904 | ||||||
| Total current liabilities | 204,057 | 195,388 | ||||||
| Debt | 984,087 | 1,041,389 | ||||||
| Pension and other post-retirement benefit obligations | 26,534 | 25,829 | ||||||
| Finance lease liabilities | 21,677 | 24,669 | ||||||
| Operating lease liabilities | 10,631 | — | ||||||
| Other long-term liabilities | 13,423 | 13,924 | ||||||
| Deferred income tax | 97,857 | 93,107 | ||||||
| Total liabilities | 1,358,266 | 1,394,306 | ||||||
| Shareholders’ equity | ||||||||
| Common shares $1 par value; 200,000,000 authorized; 65,629,000 issued and outstanding (2018 – 65,202,000) | 65,598 | 65,171 | ||||||
| Additional paid-in capital | 343,994 | 342,438 | ||||||
| Retained earnings | 338,116 | 301,990 | ||||||
| Accumulated other comprehensive loss | (156,321 | ) | (128,170 | ) | ||||
| Total shareholders’ equity | 591,387 | 581,429 | ||||||
| Total liabilities and shareholders’ equity | $ | 1,949,653 | $ | 1,975,735 | ||||
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| Three Months Ended September 30 |
Nine Months Ended September 30 |
|||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| Cash flows from (used in) operating activities | ||||||||||||||||
| Net income | $ | 1,207 | $ | 41,176 | $ | 63,082 | $ | 83,580 | ||||||||
| Adjustments to reconcile net income to cash flows from operating activities | ||||||||||||||||
| Depreciation and amortization | 32,052 | 23,310 | 94,447 | 69,643 | ||||||||||||
| Deferred income tax provision (benefit) | (1,706 | ) | 1,314 | 2,359 | 7,330 | |||||||||||
| Loss on settlement of debt | — | — | — | 21,515 | ||||||||||||
| Defined benefit pension plans and other post-retirement benefit plan expense | 866 | 423 | 2,582 | 1,294 | ||||||||||||
| Stock compensation expense | 1,179 | 970 | 2,036 | 2,922 | ||||||||||||
| Foreign exchange transaction losses (gains) | (8,873 | ) | 40 | 369 | 564 | |||||||||||
| Other | 2,887 | 844 | 11,231 | 2,451 | ||||||||||||
| Defined benefit pension plans and other post-retirement benefit plan contributions | (1,200 | ) | (19 | ) | (2,628 | ) | (124 | ) | ||||||||
| Changes in working capital | ||||||||||||||||
| Accounts receivable | 41,381 | (150 | ) | 17,232 | 8,193 | |||||||||||
| Inventories | 9,242 | (41,084 | ) | 22,614 | (60,127 | ) | ||||||||||
| Accounts payable and accrued expenses | (16,691 | ) | (10,803 | ) | (12,667 | ) | 44,130 | |||||||||
| Other | (3,483 | ) | (5,252 | ) | (12,889 | ) | (8,480 | ) | ||||||||
| Net cash from (used in) operating activities | 56,861 | 10,769 | 187,768 | 172,891 | ||||||||||||
| Cash flows from (used in) investing activities | ||||||||||||||||
| Purchase of property, plant and equipment | (37,049 | ) | (26,744 | ) | (81,417 | ) | (71,583 | ) | ||||||||
| Purchase of intangible assets | (215 | ) | (163 | ) | (710 | ) | (483 | ) | ||||||||
| Other | 162 | 211 | (181 | ) | 278 | |||||||||||
| Net cash from (used in) investing activities | (37,102 | ) | (26,696 | ) | (82,308 | ) | (71,788 | ) | ||||||||
| Cash flows from (used in) financing activities | ||||||||||||||||
| Redemption of senior notes | — | — | — | (317,439 | ) | |||||||||||
| Proceeds from (repayment of) revolving credit facilities, net | — | (3,443 | ) | (58,404 | ) | 34,293 | ||||||||||
| Dividend payments | (9,025 | ) | (8,150 | ) | (17,231 | ) | (24,424 | ) | ||||||||
| Repurchase of common shares | — | — | (754 | ) | — | |||||||||||
| Payment of debt issuance costs | (369 | ) | — | (1,126 | ) | (1,390 | ) | |||||||||
| Proceeds from government grants | 147 | — | 6,467 | — | ||||||||||||
| Other | (1,735 | ) | (944 | ) | (8,664 | ) | (2,563 | ) | ||||||||
| Net cash from (used in) financing activities | (10,982 | ) | (12,537 | ) | (79,712 | ) | (311,523 | ) | ||||||||
| Effect of exchange rate changes on cash and cash equivalents | (1,200 | ) | 1,167 | (1,340 | ) | (8,133 | ) | |||||||||
| Net increase (decrease) in cash and cash equivalents | 7,577 | (27,297 | ) | 24,408 | (218,553 | ) | ||||||||||
| Cash and cash equivalents, beginning of period | 257,322 | 269,482 | 240,491 | 460,738 | ||||||||||||
| Cash and cash equivalents, end of period | $ | 264,899 | $ | 242,185 | $ | 264,899 | $ | 242,185 | ||||||||
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 income from operations as a measure of performance, nor as an alternative to net cash from operating activities as a measure of liquidity. The following tables set forth the net income to Operating EBITDA:
| Q3 | Q2 | Q3 | YTD | YTD | |||||||||||||||
| 2019 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||
| Net income | $ | 1,207 | $ | 10,259 | $ | 41,176 | $ | 63,082 | $ | 83,580 | |||||||||
| Provision for income taxes | 244 | 10,433 | 10,182 | 35,101 | 28,224 | ||||||||||||||
| Interest expense | 18,183 | 18,369 | 11,729 | 55,103 | 35,972 | ||||||||||||||
| Loss on settlement of debt | — | — | — | — | 21,515 | ||||||||||||||
| Legal cost award | — | — | — | — | 6,951 | ||||||||||||||
| Other (income) expenses | (887 | ) | (1,251 | ) | 259 | (3,177 | ) | 628 | |||||||||||
| Operating income | 18,747 | 37,810 | 63,346 | 150,109 | 176,870 | ||||||||||||||
| Add: Depreciation and amortization | 32,052 | 32,148 | 23,310 | 94,447 | 69,643 | ||||||||||||||
| Operating EBITDA | $ | 50,799 | $ | 69,958 | $ | 86,656 | $ | 244,556 | $ | 246,513 | |||||||||
