NEW YORK, Feb. 13, 2014 (GLOBE NEWSWIRE) -- Mercer International Inc. (Nasdaq:MERC) (TSX:MRI.U) today reported results for the fourth quarter and year ended December 31, 2013. Operating EBITDA* in the fourth quarter of 2013 was $27.2 million after giving effect to $2.6 million in restructuring expenses, compared to $27.7 million in the same quarter of last year and $32.8 million in the third quarter of 2013. For 2013, Operating EBITDA was $110.3 million and included $6.4 million in restructuring expenses, compared to $137.7 million in 2012.
For the fourth quarter of 2013, our net loss was $9.8 million, or $0.18 per share, compared to a net loss of $6.7 million, or $0.12 per share, in the fourth quarter of 2012 and a net loss of $3.0 million, or $0.05 per share, for the third quarter of 2013. For 2013, we reported a net loss of $26.4 million, or $0.47 per share, compared to a net loss of $15.7 million, or $0.28 per share, in 2012.
On October 1, 2013, we changed our reporting currency from the Euro to the U.S. dollar. See page 7 of this press release for further information about this change.
Summary Financial Highlights
Q4 | Q3 | Q4 | Year | Year | ||||||
2013 | 2013 | 2012 | 2013 | 2012 | ||||||
(in millions, except per share amounts) | ||||||||||
Pulp revenues | $ 258.5 | $ 246.7 | $ 222.5 | $ 996.2 | $ 979.8 | |||||
Energy and chemical revenues | 24.1 | 22.6 | 22.3 | 92.2 | 93.0 | |||||
Operating income | 6.9 | 13.3 | 9.5 | 31.7 | 63.0 | |||||
Restructuring expenses | 2.6 | 3.8 | -- | 6.4 | -- | |||||
Operating EBITDA | 27.2 | 32.8 | 27.7 | 110.3 | 137.7 | |||||
Gain on derivative instruments | 3.8 | 2.6 | 3.1 | 19.7 | 4.8 | |||||
Income tax benefit (provision) | (6.0) | (1.2) | (3.1) | (9.2) | (9.4) | |||||
Net income (loss)(1) | (9.8) | (3.0) | (6.7) | (26.4) | (15.7) | |||||
Net income (loss) per share(1)(2) | $ (0.18) | $ (0.05) | $ (0.12) | $ (0.47) | $ (0.28) | |||||
Common shares outstanding at period end | 55.9 | 55.9 | 55.8 | 55.9 | 55.8 | |||||
_________________________ | ||||||||||
(1) Attributable to common shareholders. | ||||||||||
(2) Per basic and diluted share. |
Summary Operating Highlights
Q4 | Q3 | Q4 | Year | Year | ||||||
2013 | 2013 | 2012 | 2013 | 2012 | ||||||
Pulp production ('000 ADMTs) | 364.8 | 369.0 | 349.5 | 1,444.5 | 1,468.3 | |||||
Scheduled production downtime ('000 ADMTs) | 22.4 | 9.4 | 18.1 | 47.8 | 50.9 | |||||
Pulp sales ('000 ADMTs) | 358.6 | 356.6 | 335.2 | 1,440.1 | 1,473.5 | |||||
Average NBSK pulp list price in Europe ($/ADMT)(1) | 902 | 867 | 803 | 864 | 813 | |||||
Average pulp sales realizations ($/ADMT)(2) | 713 | 682 | 655 | 683 | 657 | |||||
_________________________ | ||||||||||
(1) Source: RISI pricing report. | ||||||||||
(2) Sales realizations after discounts. Incorporates the effect of pulp price variations occurring between the order and shipment dates. |
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* 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 10 of the financial tables included in this press release for a reconciliation of net income (loss) attributable to common shareholders to Operating EBITDA.
Q4 | Q3 | Q4 | Year | Year | ||||||
2013 | 2013 | 2012 | 2013 | 2012 | ||||||
Energy production ('000 MWh) | 435.8 | 444.2 | 405.9 | 1,710.2 | 1,704.1 | |||||
Energy sales ('000 MWh) | 172.5 | 185.4 | 163.8 | 699.1 | 710.2 | |||||
Average Spot Currency Exchange Rates: | ||||||||||
$ / €(3) | 1.3619 | 1.3252 | 1.2977 | 1.3281 | 1.2859 | |||||
$ / C$(3) | 0.9530 | 0.9630 | 1.0089 | 0.9712 | 1.0007 | |||||
_________________________ | ||||||||||
(3) Average Federal Reserve Bank of New York noon spot rate over the reporting period. |
President's Comments
Mr. Jimmy S.H. Lee, President and Chairman, stated: "In the fourth quarter of 2013, our Operating EBITDA was in line with the comparative period of 2012 and down about 17% from the third quarter of 2013. In the current quarter, we had $2.6 million in restructuring expenses, primarily related to a management restructuring at our Stendal mill and the workforce reduction at our Celgar mill. For the year 2013, Operating EBITDA declined by approximately 20% from 2012 as higher fiber prices in Germany, the weakness of the U.S. dollar versus the Euro and $6.4 million of restructuring expenses more than offset higher average list prices in 2013. The U.S. dollar was 5% and 3% weaker versus the Euro in the current quarter and 2013, compared to the comparable periods of 2012, respectively."
Mr. Lee continued: "Our Stendal mill completed Project Blue Mill in December 2013, slightly below budget, and the mill is currently producing at planned levels. The project is designed to increase the mill's annual production capacity by approximately 30,000 ADMTs of pulp and 109,000 MWh of surplus renewable energy."
Mr. Lee added: "Our Rosenthal and Stendal mills both achieved new monthly production records in the fourth quarter of 2013. Energy production increased 7% and sales increased by about 5% in the fourth quarter of 2013 compared to the same period of 2012 as a result of the start and ramp up of the additional turbine at our Stendal mill. In the fourth quarter, our Stendal mill had 12 days of scheduled downtime for its annual maintenance."
Mr. Lee continued: "At the end of 2013, list pulp prices in Europe were approximately $905 per ADMT, while list prices in North America and China were approximately $990 and $750 per ADMT, respectively. A $20 per ADMT price increase for North America was implemented in January 2014. In Europe, a $15 per ADMT price increase was implemented in January 2014 with a further $10 per ADMT price increase implemented in February 2014. In China, a $10 per ADMT price increase was implemented in February 2014."
Mr. Lee continued: "At year end, the NBSK pulp market was slightly under-balanced with world producer inventories at about 27 days' supply. In addition, we expect to see continued growth in NBSK demand in emerging markets, particularly in China, driven by increasing strong demand from tissue producers. As a result of the foregoing and the closure of a Norwegian mill, we currently expect that NBSK pulp prices will continue their moderate upward trend over the first half of 2014. During the course of 2014, the global supply of hardwood kraft pulp is projected to increase by approximately 2.1 million ADMTs, primarily from South America. This increase in hardwood production is largely targeted at the growing demand for pulp by tissue makers, particularly in China. If such additional hardwood pulp supply is not absorbed by such demand growth, as a result of generally lower prices for hardwood pulp, this supply increase could put downward pressure on NBSK pulp prices. However, we believe customers' ability to further substitute NBSK pulp for lower priced hardwood pulp is limited by the strength characteristic provided by NBSK pulp that large modern paper machines need to run lower basis weight paper products efficiently."
Mr. Lee continued: "Fiber costs in Germany remained at relatively high levels through the fourth quarter of 2013 as a result of continued strong demand for roundwood from sawmills offsetting slightly lower chip prices. Fiber costs at our Celgar mill slightly decreased as a result of strong sawmill activity in the region. Overall, fiber costs per unit were approximately 11% and 2% higher in the fourth quarter of 2013, compared to the last quarter of 2012 and the third quarter of 2013, respectively. We expect fiber costs in Germany and Canada to remain relatively stable in the first quarter of 2014."
Mr. Lee added: "In 2014, we have no scheduled downtime in the first quarter. For the balance of 2014, we have scheduled maintenance downtime of ten days, or approximately 14,000 ADMTs, for our Celgar mill in the second quarter and 12 days, or approximately 12,000 ADMTs, for our Rosenthal mill in the third quarter. Our Stendal mill is not scheduled to have major maintenance downtime in 2014. Instead, in the second and fourth quarters of 2014, our Stendal mill will have two two-day shutdowns, or approximately 3,600 ADMTs for each shutdown."
Mr. Lee concluded: "Currently all of our mills are performing well. In 2014, our Stendal mill should see the benefits of higher production of pulp and electricity from Project Blue Mill. Further, our Celgar mill should benefit from the recent decline of the Canadian dollar versus the U.S. dollar and realize lower fixed costs as a result of its workforce reduction and other initiatives. In 2014, our Rosenthal mill is completing a capital project so that it can produce and sell tall oil, a chemical by-product. These factors, coupled with currently improving pulp prices, should help position us to build value for our stakeholders in 2014."
Three Months Ended December 31, 2013 Compared to Three Months Ended December 31, 2012
Total revenues for the three months ended December 31, 2013 increased by approximately 15% to $282.7 million from $244.8 million in the same period in 2012, due to higher pulp and energy and chemical revenues. Pulp revenues for the three months ended December 31, 2013 increased to $258.5 million from $222.5 million in the comparative quarter of 2012, primarily due to increased sales volume at our Celgar and Stendal mills and higher average pulp sales realizations.
Energy and chemical revenues increased by approximately 8% to $24.1 million in the fourth quarter of 2013 from $22.3 million in the same quarter last year, primarily as a result of higher sales volumes.
Pulp production increased by approximately 4% to 364,798 ADMTs in the current quarter from 349,517 ADMTs in the same quarter of 2012. We took 12 days (approximately 22,400 ADMTs) of scheduled maintenance downtime at our Stendal mill in the fourth quarter of 2013, compared to ten days (approximately 18,100 ADMTs) of scheduled maintenance downtime at our Stendal mill in the fourth quarter of 2012.
Pulp sales volumes increased by approximately 7% to 358,583 ADMTs in the current quarter from 335,215 ADMTs in the comparative quarter, primarily due to higher sales to China.
Average pulp sales realizations increased by approximately 9% to $713 per ADMT from approximately $655 per ADMT in the same quarter last year, primarily due to higher average NBSK list prices.
Costs and expenses in the fourth quarter of 2013 increased by approximately 17% to $275.8 million from $235.3 million in the comparative period of 2012, primarily due to higher sales volume, higher fiber prices in Germany and the impact of a weaker U.S. dollar relative to the Euro on our German mill expenses. Our costs and expenses in the three months ended December 31, 2013 included $10.4 million for the Stendal maintenance shutdown. Several competing producers and members of the peer group that we benchmark our performance against report their financial results in accordance with International Financial Reporting Standards which permit a significant portion of such maintenance costs to be capitalized instead of expensed.
On average, our overall per unit fiber costs in the current quarter increased by approximately 11% from the same period in 2012 as higher fiber costs in Germany were only partially offset by lower fiber costs in Canada.
Selling, general and administrative expenses were $14.7 million in the fourth quarter of 2013, compared to $12.5 million in the fourth quarter of 2012.
In the fourth quarter of 2013, we had restructuring expenses of $2.6 million, primarily related to a management restructuring at our Stendal mill and the workforce reduction at our Celgar mill.
For the fourth quarter of 2013, our operating income decreased to $6.9 million from $9.5 million in the comparative quarter of 2012, primarily due to higher fiber costs in Germany and the impact of a weaker U.S. dollar relative to the Euro on our German mill expenses, only partially offset by a higher realized sales price and higher sales volumes.
Interest expense in the fourth quarter of 2013 decreased to $17.4 million from $17.8 million in the comparative quarter of 2012.
We recorded a net derivative gain of $3.8 million, which includes an unrealized gain of approximately $4.1 million on the mark to market adjustment of our Stendal mill's interest rate derivative and an approximately $0.4 million realized loss related to fixed price pulp swap contracts entered into in the fourth quarter of 2012, compared to a net derivative gain of $3.1 million in the same quarter of last year.
The noncontrolling shareholder's interest in the Stendal mill's net loss in the fourth quarter of 2013 was $1.8 million, compared to $1.5 million in the same quarter last year.
We recognized a deferred tax expense of $5.6 million in the fourth quarter of 2013, compared to $2.8 million in the same quarter of 2012, primarily due to reducing our net deferred tax assets on the balance sheet. This is a non-cash charge and does not reduce our underlying tax attributes or hinder our ability to use them.
In the fourth quarter of 2013, Operating EBITDA decreased marginally to $27.2 million from $27.7 million in the fourth quarter of 2012. Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and non-recurring capital asset impairment charges. Operating EBITDA has significant limitations as an analytical tool and should not be considered in isolation or as a substitute for our results as reported under GAAP. See page 10 of the financial tables included in the press release for a reconciliation of net income (loss) attributable to common shareholders to Operating EBITDA.
We reported a net loss attributable to common shareholders of $9.8 million, or $0.18 per basic and diluted share, for the fourth quarter of 2013, which included a net gain of $3.8 million on the Stendal interest rate derivative and fixed price pulp swaps and $2.6 million in restructuring expenses. In the fourth quarter of 2012, the net loss attributable to common shareholders was $6.7 million, or $0.12 per basic and diluted share, which included a net gain of $3.1 million on the Stendal interest rate derivative and fixed price pulp swaps.
Year Ended December 31, 2013 Compared to Year Ended December 31, 2012
Total revenues for 2013 increased marginally to $1,088.4 million from $1,072.7 million in the same period in 2012. Pulp revenues for 2013 increased by 2% to $996.2 million from $979.8 million in the comparative period of 2012, primarily due to higher average pulp sales realizations, partially offset by lower sales volumes.
Energy and chemical revenues marginally decreased to $92.2 million in 2013 from $93.0 million in the same period last year, primarily as a result of marginally lower sales volumes.
Pulp production decreased by approximately 2% to 1,444,475 ADMTs in 2013 from 1,468,275 ADMTs in the same period of 2012, primarily due to lower pulp production at our Celgar mill. In the second quarter, the Celgar mill took its annual maintenance shutdown. As a result of weather, equipment and execution issues, the shutdown was four days longer and the startup was slower than budgeted, which resulted in a loss of approximately 30,300 ADMTs of NBSK pulp production.
Pulp sales volumes decreased by approximately 2% to 1,440,147 ADMTs in 2013 from 1,473,519 ADMTs in the comparative period of 2012, primarily due to lower production levels at our Celgar mill.
Costs and expenses in 2013 increased by approximately 5% to $1,056.7 million from $1,009.7 million in the comparative period of 2012, primarily due to higher fiber costs at our German mills, the impact of a weaker U.S. dollar relative to the Euro on our German mill expenses and restructuring costs, partially offset by lower sales volume. Included in our 2013 costs and expenses are $24.7 million for regularly scheduled major maintenance shutdowns.
On average, our per unit fiber costs in 2013 increased by approximately 8% over the comparative period of 2012, as higher fiber costs in Germany were only partially offset by lower fiber costs in Canada.
In 2013, we had restructuring expenses of $6.4 million, primarily related to the workforce reduction at our Celgar mill.
For 2013, operating income decreased to $31.7 million from $63.0 million in the comparative period of 2012, primarily due to higher fiber costs in Germany, the impact of a weaker U.S. dollar relative to the Euro on our German mill expenses and the Celgar mill shutdown, partially offset by a higher realized sales price.
Interest expense in 2013 decreased to $69.2 million from $71.8 million in the comparative period of 2012, primarily due to reduced debt levels associated with our Stendal mill.
We recorded a net derivative gain of $19.7 million, which includes a $22.5 million unrealized gain on the mark to market adjustment of our Stendal mill's interest rate derivative and a $2.8 million realized loss on our fixed pulp price swap contracts, compared to a derivative gain of $4.8 million in the same period of last year.
We recognized a deferred tax expense of $11.5 million in 2013, compared to a recovery of $0.2 million in 2012, primarily due to reducing our net deferred tax assets on the balance sheet. This charge is a non-cash charge and does not reduce our underlying tax attributes or hinder our ability to use them.
In 2013, Operating EBITDA decreased to $110.3 million from $137.7 million in 2012.(1)
We reported a net loss attributable to common shareholders of $26.4 million, or $0.47 per basic and diluted share, for 2013, which included a net gain of $19.7 million on the Stendal interest rate derivative and fixed price pulp swaps, restructuring expenses of $6.4 million and $11.5 million of a deferred tax expense. In 2012, the net loss attributable to common shareholders was $15.7 million, or $0.28 per basic and diluted share, which included a gain of $4.8 million on the fixed price pulp swaps and Stendal interest rate derivative.
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(1) See page 10 of the financial tables included in the press release for limitations on the use of Operating EBITDA as an analytical tool and a reconciliation of net income (loss) to Operating EBITDA.
Liquidity and Capital Resources
The following table is a summary of selected financial information as at the dates indicated:
Year Ended December 31, | ||
2013 | 2012 | |
(in thousands) | ||
Financial Position | ||
Cash and cash equivalents | $ 147,728 | $ 137,439 |
Working capital | 306,274 | 275,004 |
Total assets | 1,548,559 | 1,560,581 |
Long-term liabilities | 1,034,743 | 1,012,943 |
Total equity | 348,317 | 367,762 |
As at December 31, 2013, we had approximately €28.3 million and C$33.3 million available under our Rosenthal and Celgar revolving credit facilities, respectively.
On September 30, 2013, we completed an amendment to the Stendal mill's senior project finance credit facility and its amortizing term facility in respect of Project Blue Mill to provide the mill greater financial flexibility.
Restricted Group
The following table is a summary of selected financial information for the Restricted Group (which, under the indenture for our 2017 9.5% Senior Notes, is comprised of Mercer International Inc., certain holding subsidiaries and our Rosenthal and Celgar mills) as at the dates indicated:
Year Ended December 31, | ||
2013 | 2012 | |
(in thousands) | ||
Financial Position | ||
Cash and cash equivalents | $ 82,910 | $ 48,407 |
Working capital | 211,749 | 174,213 |
Total assets | 858,824 | 849,271 |
Long-term liabilities | 394,821 | 343,056 |
Total equity | 412,033 | 442,161 |
Change in Reporting Currency
Effective October 1, 2013, we changed our reporting currency from the Euro to the U.S. dollar, as management is of the opinion that a U.S. dollar reporting currency enhances communication and understanding with our shareholders, analysts and other stakeholders and improves comparability of our financial information with our competitors and peer group companies. Consolidated financial statements issued prior to October 1, 2013 were prepared using the Euro as the reporting currency; however, subsequent to October 1, 2013, both current and historical financial information have been translated to U.S. dollars to reflect our consolidated financial statements as if they had been historically reported in U.S. dollars.
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 Friday, February 14, 2014 at 10:00 AM (Eastern Standard Time). Listeners can access the conference call live and archived through March 16, 2014, over the Internet at http://www.media-server.com/m/p/pwhbva7n or through a link on the Company's home page at http://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 pulp manufacturing company. To obtain further information on the company, please visit its web site at http://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.
-FINANCIAL TABLES FOLLOW-
MERCER INTERNATIONAL INC. | ||
CONSOLIDATED BALANCE SHEETS | ||
(Unaudited) | ||
(In thousands of U.S. dollars) | ||
December 31, | ||
2013 | 2012 | |
ASSETS | ||
Current assets | ||
Cash and cash equivalents | $ 147,728 | $ 137,439 |
Receivables | 135,893 | 145,150 |
Inventories | 170,908 | 155,979 |
Prepaid expenses and other | 10,918 | 10,425 |
Deferred income tax | 6,326 | 5,887 |
Total current assets | 471,773 | 454,880 |
Long-term assets | ||
Property, plant and equipment | 1,038,631 | 1,066,506 |
Deferred note issuance costs and other | 20,998 | 16,036 |
Deferred income tax | 17,157 | 23,159 |
1,076,786 | 1,105,701 | |
Total assets | $ 1,548,559 | $ 1,560,581 |
LIABILITIES | ||
Current liabilities | ||
Accounts payable and other | $ 103,814 | $ 118,599 |
Pension and other post-retirement benefit obligations | 1,330 | 1,072 |
Debt | 60,355 | 60,205 |
Total current liabilities | 165,499 | 179,876 |
Long-term liabilities | ||
Debt | 919,017 | 877,780 |
Interest rate derivative liability | 46,517 | 66,819 |
Pension and other post-retirement benefit obligations | 35,466 | 42,378 |
Capital leases and other | 19,293 | 18,375 |
Deferred income tax | 14,450 | 7,591 |
1,034,743 | 1,012,943 | |
Total liabilities | 1,200,242 | 1,192,819 |
EQUITY | ||
Shareholders' equity | ||
Share capital | 328,549 | 327,818 |
Paid-in capital | (11,756) | (4,481) |
Retained earnings | 10,815 | 37,190 |
Accumulated other comprehensive income | 31,470 | 28,577 |
Total shareholders' equity | 359,078 | 389,104 |
Noncontrolling interest (deficit) | (10,761) | (21,342) |
Total equity | 348,317 | 367,762 |
Total liabilities and equity | $ 1,548,559 | $ 1,560,581 |
MERCER INTERNATIONAL INC. | ||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
(Unaudited) | ||||
(In thousands of U.S. dollars, except per share data) | ||||
Three Months Ended December 31, |
Twelve Months Ended December 31, |
|||
2013 | 2012 | 2013 | 2012 | |
Revenues | ||||
Pulp | $ 258,546 | $ 222,480 | $ 996,187 | $ 979,770 |
Energy and chemicals | 24,136 | 22,317 | 92,198 | 92,966 |
282,682 | 244,797 | 1,088,385 | 1,072,736 | |
Costs and expenses | ||||
Operating costs | 238,325 | 204,670 | 920,832 | 886,144 |
Operating depreciation and amortization | 20,198 | 18,160 | 78,309 | 74,302 |
24,159 | 21,967 | 89,244 | 112,290 | |
Selling, general and administrative expenses | 14,681 | 12,483 | 51,169 | 49,268 |
Restructuring expenses | 2,560 | -- | 6,415 | -- |
Operating income | 6,918 | 9,484 | 31,660 | 63,022 |
Other income (expense) | ||||
Interest expense | (17,372) | (17,810) | (69,156) | (71,767) |
Gain (loss) on derivative instruments | 3,779 | 3,099 | 19,709 | 4,812 |
Other income (expense) | 1,073 | 156 | 1,215 | (179) |
Total other income (expense) | (12,520) | (14,555) | (48,232) | (67,134) |
Income (loss) before income taxes | (5,602) | (5,071) | (16,572) | (4,112) |
Income tax benefit (provision) | ||||
Current | (378) | (290) | 2,286 | (9,531) |
Deferred | (5,611) | (2,797) | (11,482) | 152 |
Net income (loss) | (11,591) | (8,158) | (25,768) | (13,491) |
Less: net loss (income) attributable to noncontrolling interest | 1,758 | 1,495 | (607) | (2,179) |
Net income (loss) attributable to common shareholders | $ (9,833) | $ (6,663) | $ (26,375) | $ (15,670) |
Net income (loss) per share attributable to common shareholders | ||||
Basic and diluted | $ (0.18) | $ (0.12) | $ (0.47) | $ (0.28) |
MERCER INTERNATIONAL INC. | |||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||
(Unaudited) | |||
(In thousands of U.S. dollars) | |||
For the Year Ended December 31, | |||
2013 | 2012 | 2011 | |
Cash flows from (used in) operating activities | |||
Net income (loss) | $ (25,768) | $ (13,491) | $ 75,170 |
Adjustments to reconcile net income (loss) to cash flows from operating activities | |||
Unrealized loss (gain) on derivative instruments | (21,494) | (3,186) | 1,974 |
Depreciation and amortization | 78,645 | 74,657 | 77,952 |
Deferred income taxes | 11,482 | (152) | (3,309) |
Stock compensation expense | 3,574 | 2,616 | 4,607 |
Pension and other post-retirement expense, net of funding | 648 | 365 | (374) |
Other | 3,169 | 4,991 | 1,116 |
Changes in working capital | |||
Receivables | 13,993 | 10,795 | (2,233) |
Inventories | (14,563) | 1,726 | (24,654) |
Accounts payable and accrued expenses | (11,569) | (17,992) | 19,837 |
Other | (1,792) | (1,214) | 4,490 |
Net cash from (used in) operating activities | 36,325 | 59,115 | 154,576 |
Cash flows from (used in) investing activities | |||
Purchase of property, plant and equipment | (45,707) | (47,203) | (52,626) |
Proceeds on sale of property, plant and equipment | 739 | 840 | 1,132 |
Purchase of marketable securities | -- | -- | (16,343) |
Proceeds on maturity of marketable securities | -- | 15,753 | -- |
Note receivable | -- | -- | 3,988 |
Net cash from (used in) investing activities | (44,968) | (30,610) | (63,849) |
Cash flows from (used in) financing activities | |||
Repayment of debt and purchase of notes | (56,416) | (35,440) | (67,702) |
Proceeds from issuance of notes and borrowings of debt | 74,472 | -- | -- |
Repayment of capital lease obligations | (2,593) | (2,733) | (4,095) |
Proceeds from (repayment of) credit facilities, net | (5,640) | 6,031 | (20,491) |
Payment of note issuance costs | (3,855) | (2,570) | -- |
Proceeds from government grants | 9,265 | 5,045 | 20,049 |
Purchase of treasury shares | -- | -- | (10,623) |
Net cash from (used in) financing activities | 15,233 | (29,667) | (82,862) |
Effect of exchange rate changes on cash and cash equivalents | 3,699 | 2,302 | (4,166) |
Net increase (decrease) in cash and cash equivalents | 10,289 | 1,140 | 3,699 |
Cash and cash equivalents, beginning of year | 137,439 | 136,299 | 132,600 |
Cash and cash equivalents, end of year | $ 147,728 | $ 137,439 | $ 136,299 |
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheets
(Unaudited)
(In thousands of U.S. dollars)
The terms of the indenture governing our 9.5% senior unsecured notes requires that we provide the results of operations and financial condition of Mercer International Inc. and our restricted subsidiaries under the indenture, collectively referred to as the "Restricted Group". As at and during the years ended December 31, 2013 and 2012, the Restricted Group was comprised of Mercer International Inc., certain holding subsidiaries and our Rosenthal and Celgar mills. The Restricted Group excludes the Stendal mill.
December 31, 2013 | ||||
Restricted Group |
Unrestricted Subsidiaries |
Eliminations |
Consolidated Group |
|
ASSETS | ||||
Current assets | ||||
Cash and cash equivalents | $ 82,910 | $ 64,818 | $ -- | $ 147,728 |
Receivables | 75,987 | 59,906 | -- | 135,893 |
Inventories | 93,807 | 77,101 | -- | 170,908 |
Prepaid expenses and other | 7,742 | 3,176 | -- | 10,918 |
Deferred income tax | 3,273 | 3,053 | -- | 6,326 |
Total current assets | 263,719 | 208,054 | -- | 471,773 |
Long-term assets | ||||
Property, plant and equipment | 420,373 | 618,258 | -- | 1,038,631 |
Deferred note issuance costs and other | 10,987 | 10,011 | -- | 20,998 |
Deferred income tax | 9,894 | 7,263 | -- | 17,157 |
Due from unrestricted group | 153,851 | -- | (153,851) | -- |
Total assets | $ 858,824 | $ 843,586 | $ (153,851) | $ 1,548,559 |
LIABILITIES | ||||
Current liabilities | ||||
Accounts payable and other | $ 49,891 | $ 53,923 | $ -- | $ 103,814 |
Pension and other post-retirement benefit obligations | 1,330 | -- | -- | 1,330 |
Debt | 749 | 59,606 | -- | 60,355 |
Total current liabilities | 51,970 | 113,529 | -- | 165,499 |
Long-term liabilities | ||||
Debt | 336,382 | 582,635 | -- | 919,017 |
Due to restricted group | -- | 153,851 | (153,851) | -- |
Interest rate derivative liability | -- | 46,517 | -- | 46,517 |
Pension and other post-retirement benefit obligations | 35,466 | -- | -- | 35,466 |
Capital leases and other | 8,523 | 10,770 | -- | 19,293 |
Deferred income tax | 14,450 | -- | -- | 14,450 |
Total liabilities | 446,791 | 907,302 | (153,851) | 1,200,242 |
EQUITY | ||||
Total shareholders' equity (deficit) | 412,033 | (52,955) | -- | 359,078 |
Noncontrolling interest (deficit) | -- | (10,761) | -- | (10,761) |
Total liabilities and equity | $ 858,824 | $ 843,586 | $ (153,851) | $ 1,548,559 |
MERCER INTERNATIONAL INC. | ||||
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE | ||||
Combined Condensed Balance Sheets | ||||
(Unaudited) | ||||
(In thousands of U.S. dollars) | ||||
December 31, 2012 | ||||
Restricted Group |
Unrestricted Subsidiaries |
Eliminations |
Consolidated Group |
|
ASSETS | ||||
Current assets | ||||
Cash and cash equivalents | $ 48,407 | $ 89,032 | $ -- | $ 137,439 |
Receivables | 80,708 | 64,442 | -- | 145,150 |
Inventories | 98,606 | 57,373 | -- | 155,979 |
Prepaid expenses and other | 7,661 | 2,764 | -- | 10,425 |
Deferred income tax | 2,885 | 3,002 | -- | 5,887 |
Total current assets | 238,267 | 216,613 | -- | 454,880 |
Long-term assets | ||||
Property, plant and equipment | 455,293 | 611,213 | -- | 1,066,506 |
Deferred note issuance costs and other | 8,712 | 7,324 | -- | 16,036 |
Deferred income tax | 12,102 | 11,057 | -- | 23,159 |
Due from unrestricted group | 134,897 | -- | (134,897) | -- |
Total assets | $ 849,271 | $ 846,207 | $ (134,897) | $ 1,560,581 |
LIABILITIES | ||||
Current liabilities | ||||
Accounts payable and other | $ 55,517 | $ 63,082 | $ -- | $ 118,599 |
Pension and other post-retirement benefit obligations | 1,072 | -- | -- | 1,072 |
Debt | 7,465 | 52,740 | -- | 60,205 |
Total current liabilities | 64,054 | 115,822 | -- | 179,876 |
Long-term liabilities | ||||
Debt | 285,079 | 592,701 | -- | 877,780 |
Due to restricted group | -- | 134,897 | (134,897) | -- |
Interest rate derivative liability | -- | 66,819 | -- | 66,819 |
Pension and other post-retirement benefit obligations | 42,378 | -- | -- | 42,378 |
Capital leases and other | 8,008 | 10,367 | -- | 18,375 |
Deferred income tax | 7,591 | -- | -- | 7,591 |
Total liabilities | 407,110 | 920,606 | (134,897) | 1,192,819 |
EQUITY | ||||
Total shareholders' equity (deficit) | 442,161 | (53,057) | -- | 389,104 |
Noncontrolling interest (deficit) | -- | (21,342) | -- | (21,342) |
Total liabilities and equity | $ 849,271 | $ 846,207 | $ (134,897) | $ 1,560,581 |
MERCER INTERNATIONAL INC. | ||||
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE | ||||
Combined Condensed Statements of Operations | ||||
(Unaudited) | ||||
(In thousands of U.S. dollars) | ||||
Three Months Ended December 31, 2013 | ||||
Restricted Group |
Unrestricted Subsidiaries |
Eliminations |
Consolidated Group |
|
Revenues | ||||
Pulp | $ 150,850 | $ 107,696 | $ -- | $ 258,546 |
Energy and chemicals | 8,665 | 15,471 | -- | 24,136 |
159,515 | 123,167 | -- | 282,682 | |
Operating costs | 124,919 | 113,406 | -- | 238,325 |
Operating depreciation and amortization | 11,115 | 9,083 | -- | 20,198 |
Selling, general and administrative expenses | 9,588 | 5,093 | -- | 14,681 |
Restructuring expenses | 1,174 | 1,386 | -- | 2,560 |
146,796 | 128,968 | -- | 275,764 | |
Operating income (loss) | 12,719 | (5,801) | -- | 6,918 |
Other income (expense) | ||||
Interest expense | (8,687) | (10,349) | 1,664 | (17,372) |
Gain (loss) on derivative instruments | (360) | 4,139 | -- | 3,779 |
Other income (expense) | 2,701 | 36 | (1,664) | 1,073 |
Total other income (expense) | (6,346) | (6,174) | -- | (12,520) |
Income (loss) before income taxes | 6,373 | (11,975) | -- | (5,602) |
Income tax benefit (provision) | (5,789) | (200) | -- | (5,989) |
Net income (loss) | 584 | (12,175) | -- | (11,591) |
Less: net loss attributable to noncontrolling interest | -- | 1,758 | -- | 1,758 |
Net income (loss) attributable to common shareholders | $ 584 | $ (10,417) | $ -- | $ (9,833) |
Three Months Ended December 31, 2012 | ||||
Restricted Group |
Unrestricted Subsidiaries |
Eliminations |
Consolidated Group |
|
Revenues | ||||
Pulp | $ 126,666 | $ 95,814 | $ -- | $ 222,480 |
Energy and chemicals | 9,184 | 13,133 | -- | 22,317 |
135,850 | 108,947 | -- | 244,797 | |
Operating costs | 111,815 | 92,855 | -- | 204,670 |
Operating depreciation and amortization | 9,664 | 8,496 | -- | 18,160 |
Selling, general and administrative expenses | 8,199 | 4,284 | -- | 12,483 |
129,678 | 105,635 | -- | 235,313 | |
Operating income (loss) | 6,172 | 3,312 | -- | 9,484 |
Other income (expense) | ||||
Interest expense | (7,360) | (12,455) | 2,005 | (17,810) |
Gain (loss) on derivative instruments | 80 | 3,019 | -- | 3,099 |
Other income (expense) | 2,099 | 62 | (2,005) | 156 |
Total other income (expense) | (5,181) | (9,374) | -- | (14,555) |
Income (loss) before income taxes | 991 | (6,062) | -- | (5,071) |
Income tax benefit (provision) | (2,812) | (275) | -- | (3,087) |
Net income (loss) | (1,821) | (6,337) | -- | (8,158) |
Less: net loss attributable to noncontrolling interest | -- | 1,495 | -- | 1,495 |
Net income (loss) attributable to common shareholders | $ (1,821) | $ (4,842) | $ -- | $ (6,663) |
MERCER INTERNATIONAL INC. | ||||
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE | ||||
Combined Condensed Statements of Operations | ||||
(Unaudited) | ||||
(In thousands of U.S. dollars) | ||||
Year Ended December 31, 2013 | ||||
Restricted Group |
Unrestricted Subsidiaries |
Eliminations |
Consolidated Group |
|
Revenues | ||||
Pulp | $ 561,350 | $ 434,837 | $ -- | $ 996,187 |
Energy and chemicals | 33,783 | 58,415 | -- | 92,198 |
595,133 | 493,252 | -- | 1,088,385 | |
Operating costs | 498,952 | 421,880 | -- | 920,832 |
Operating depreciation and amortization | 43,498 | 34,811 | -- | 78,309 |
Selling, general and administrative expenses | 31,943 | 19,226 | -- | 51,169 |
Restructuring expenses | 5,029 | 1,386 | -- | 6,415 |
579,422 | 477,303 | -- | 1,056,725 | |
Operating income | 15,711 | 15,949 | -- | 31,660 |
Other income (expense) | ||||
Interest expense | (32,321) | (45,011) | 8,176 | (69,156) |
Gain (loss) on derivative instruments | (2,767) | 22,476 | -- | 19,709 |
Other income (expense) | 9,217 | 174 | (8,176) | 1,215 |
Total other income (expense) | (25,871) | (22,361) | -- | (48,232) |
Income (loss) before income taxes | (10,160) | (6,412) | -- | (16,572) |
Income tax benefit (provision) | (9,365) | 169 | -- | (9,196) |
Net income (loss) | (19,525) | (6,243) | -- | (25,768) |
Less: net income attributable to noncontrolling interest | -- | (607) | -- | (607) |
Net loss attributable to common shareholders | $ (19,525) | $ (6,850) | $ -- | $ (26,375) |
Year Ended December 31, 2012 | ||||
Restricted Group |
Unrestricted Subsidiaries |
Eliminations |
Consolidated Group |
|
Revenues | ||||
Pulp | $ 545,205 | $ 434,565 | $ -- | $ 979,770 |
Energy and chemicals | 36,638 | 56,328 | -- | 92,966 |
581,843 | 490,893 | -- | 1,072,736 | |
Operating costs | 500,223 | 385,921 | -- | 886,144 |
Operating depreciation and amortization | 40,118 | 34,184 | -- | 74,302 |
Selling, general and administrative expenses | 31,688 | 17,580 | -- | 49,268 |
572,029 | 437,685 | -- | 1,009,714 | |
Operating income | 9,814 | 53,208 | -- | 63,022 |
Other income (expense) | ||||
Interest expense | (30,125) | (48,934) | 7,292 | (71,767) |
Gain (loss) on derivative instruments | 2,609 | 2,203 | -- | 4,812 |
Other income (expense) | 6,465 | 648 | (7,292) | (179) |
Total other income (expense) | (21,051) | (46,083) | -- | (67,134) |
Income (loss) before income taxes | (11,237) | 7,125 | -- | (4,112) |
Income tax benefit (provision) | (7,050) | (2,329) | -- | (9,379) |
Net income (loss) | (18,287) | 4,796 | -- | (13,491) |
Less: net income attributable to noncontrolling interest | -- | (2,179) | -- | (2,179) |
Net income (loss) attributable to common shareholders | $ (18,287) | $ 2,617 | $ -- | $ (15,670) |
MERCER INTERNATIONAL INC. | |||
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE | |||
Combined Condensed Statements of Cash Flows | |||
(Unaudited) | |||
(In thousands of U.S. dollars) | |||
Year Ended December 31, 2013 | |||
Restricted Group |
Unrestricted Subsidiaries |
Consolidated Group |
|
Cash flows from (used in) operating activities | |||
Net income (loss) | $ (19,525) | $ (6,243) | $ (25,768) |
Adjustments to reconcile net income (loss) to cash flows from operating activities | |||
Unrealized loss (gain) on derivative instruments | 982 | (22,476) | (21,494) |
Depreciation and amortization | 43,833 | 34,812 | 78,645 |
Deferred income taxes | 7,263 | 4,219 | 11,482 |
Stock compensation expense | 3,574 | -- | 3,574 |
Pension and other post-retirement expense, net of funding | 648 | -- | 648 |
Other | (360) | 3,529 | 3,169 |
Changes in working capital | |||
Receivables | 4,780 | 9,213 | 13,993 |
Inventories | 1,965 | (16,528) | (14,563) |
Accounts payable and accrued expenses | (6,026) | (5,543) | (11,569) |
Other(1) | (13,621) | 11,829 | (1,792) |
Net cash from (used in) operating activities | 23,513 | 12,812 | 36,325 |
Cash flows from (used in) investing activities | |||
Purchase of property, plant and equipment | (13,183) | (32,524) | (45,707) |
Acquisition of noncontrolling interest | (20,000) | 20,000 | -- |
Proceeds on sale of property, plant and equipment | 581 | 158 | 739 |
Net cash from (used in) investing activities | (32,602) | (12,366) | (44,968) |
Cash flows from (used in) financing activities | |||
Repayment of debt and purchase of notes | (1,459) | (54,957) | (56,416) |
Proceeds from issuance of notes and borrowings of debt | 52,250 | 22,222 | 74,472 |
Repayment of capital lease obligations | (725) | (1,868) | (2,593) |
Proceeds from (repayment of) credit facilities, net | (5,640) | -- | (5,640) |
Payment of note issuance costs | (1,829) | (2,026) | (3,855) |
Proceeds from government grants | -- | 9,265 | 9,265 |
Net cash from (used in) financing activities | 42,597 | (27,364) | 15,233 |
Effect of exchange rate changes on cash and cash equivalents | 995 | 2,704 | 3,699 |
Net increase (decrease) in cash and cash equivalents | 34,503 | (24,214) | 10,289 |
Cash and cash equivalents, beginning of year | 48,407 | 89,032 | 137,439 |
Cash and cash equivalents, end of year | $ 82,910 | $ 64,818 | $ 147,728 |
___________________________ |
|||
(1) Includes intercompany working capital related transactions. |
MERCER INTERNATIONAL INC. | |||
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE | |||
Combined Condensed Statements of Cash Flows | |||
(Unaudited) | |||
(In thousands of U.S. dollars) | |||
Year Ended December 31, 2012 | |||
Restricted Group |
Unrestricted Subsidiaries |
Consolidated Group |
|
Cash flows from (used in) operating activities | |||
Net income (loss) | $ (18,287) | $ 4,796 | $ (13,491) |
Adjustments to reconcile net income (loss) to cash flows from operating activities | |||
Unrealized loss (gain) on derivative instruments | (983) | (2,203) | (3,186) |
Depreciation and amortization | 40,474 | 34,183 | 74,657 |
Deferred income taxes | 6,660 | (6,812) | (152) |
Stock compensation expense | 2,616 | -- | 2,616 |
Pension and other post-retirement expense, net of funding | 365 | -- | 365 |
Other | 1,574 | 3,417 | 4,991 |
Changes in working capital | |||
Receivables | (755) | 11,550 | 10,795 |
Inventories | (5,132) | 6,858 | 1,726 |
Accounts payable and accrued expenses | (9,576) | (8,416) | (17,992) |
Other(1) | (20,292) | 19,078 | (1,214) |
Net cash from (used in) operating activities | (3,336) | 62,451 | 59,115 |
Cash flows from (used in) investing activities | |||
Purchase of property, plant and equipment | (28,213) | (18,990) | (47,203) |
Proceeds on sale of property, plant and equipment | 470 | 370 | 840 |
Proceeds on maturity of marketable securities | 15,753 | -- | 15,753 |
Net cash from (used in) investing activities | (11,990) | (18,620) | (30,610) |
Cash flows from (used in) financing activities | |||
Repayment of debt and purchase of notes | (3,378) | (32,062) | (35,440) |
Repayment of capital lease obligations | (945) | (1,788) | (2,733) |
Proceeds from (repayment of) credit facilities, net | 6,031 | -- | 6,031 |
Payment of note issuance costs | (409) | (2,161) | (2,570) |
Proceeds from government grants | 4,061 | 984 | 5,045 |
Net cash from (used in) financing activities | 5,360 | (35,027) | (29,667) |
Effect of exchange rate changes on cash and cash equivalents | 221 | 2,081 | 2,302 |
Net increase (decrease) in cash and cash equivalents | (9,745) | 10,885 | 1,140 |
Cash and cash equivalents, beginning of year | 58,152 | 78,147 | 136,299 |
Cash and cash equivalents, end of year | $ 48,407 | $ 89,032 | $ 137,439 |
___________________________ |
|||
(1) Includes intercompany working capital related transactions. |
MERCER INTERNATIONAL INC.
COMPUTATION OF OPERATING EBITDA
(Unaudited)
(In thousands of U.S. dollars)
Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and non-recurring capital asset impairment charges. Management uses Operating EBITDA as a benchmark measurement of its own operating results, and as a benchmark relative to its competitors. Management considers it to be a meaningful supplement to operating income (loss) as a performance measure primarily because depreciation expense and non-recurring capital asset impairment charges are not an actual cash cost, and depreciation expense varies widely from company to company in a manner that management considers largely independent of the underlying cost efficiency of their operating facilities. In addition, we believe Operating EBITDA is commonly used by securities analysts, investors and other interested parties to evaluate our financial performance.
Operating EBITDA does not reflect the impact of a number of items that affect our net income (loss), including financing costs and the effect of derivative instruments. Operating EBITDA is not a measure of financial performance under GAAP, and should not be considered as an alternative to net income (loss) or income (loss) from operations as a measure of performance, nor as an alternative to net cash from operating activities as a measure of liquidity. The following tables set forth the net income (loss) attributable to common shareholders to Operating EBITDA for both the consolidated group and our Restricted Group:
|
Three Months Ended December 31, |
Year Ended December 31, |
||
2013 | 2012 | 2013 | 2012 | |
Net income (loss) attributable to common shareholders | $ (9,833) | $ (6,663) | $ (26,375) | $ (15,670) |
Net income (loss) attributable to noncontrolling interest | (1,758) | (1,495) | 607 | 2,179 |
Income tax (benefit) provision | 5,989 | 3,087 | 9,196 | 9,379 |
Interest expense | 17,372 | 17,810 | 69,156 | 71,767 |
(Gain) loss on derivative instruments | (3,779) | (3,099) | (19,709) | (4,812) |
Other (income) expense | (1,073) | (156) | (1,215) | 179 |
Operating income | 6,918 | 9,484 | 31,660 | 63,022 |
Add: Depreciation and amortization | 20,282 | 18,249 | 78,645 | 74,657 |
Operating EBITDA | $ 27,200 | $ 27,733 | $ 110,305 | $ 137,679 |
|
Three Months Ended December 31, |
Year Ended December 31, |
||||||
2013 | 2012 | 2013 | 2012 | |||||
Restricted Group(1) | ||||||||
Net income (loss) attributable to common shareholders | $ 584 | $ (1,821) | $ (19,525) | $ (18,287) | ||||
Income tax (benefit) provision | 5,789 | 2,812 | 9,365 | 7,050 | ||||
Interest expense | 8,687 | 7,360 | 32,321 | 30,125 | ||||
(Gain) loss on derivative instruments | 360 | (80) | 2,767 | (2,609) | ||||
Other (income) expense | (2,701) | (2,099) | (9,217) | (6,465) | ||||
Operating income | 12,719 | 6,172 | 15,711 | 9,814 | ||||
Add: Depreciation and amortization | 11,198 | 9,754 | 43,833 | 40,474 | ||||
Operating EBITDA | $ 23,917 | $ 15,926 | $ 59,544 | $ 50,288 | ||||
__________________ | ||||||||
(1) For the Restricted Group, net income (loss) attributable to common shareholders and net income (loss) are the same. | ||||||||