NEW YORK, May 1, 2014 (GLOBE NEWSWIRE) -- Mercer International Inc. (Nasdaq:MERC) (TSX:MRI.U) today reported strong results for the first quarter ended March 31, 2014. Operating EBITDA* in the first quarter of 2014 increased markedly to $59.0 million from $32.1 million in the first quarter of 2013 and $27.2 million in the fourth quarter of 2013.
For the first quarter of 2014, our net income increased materially to $21.0 million, or $0.38 per basic and $0.37 per diluted share, from a net loss of $0.6 million, or $0.01 per basic and diluted share, in the first quarter of 2013.
On October 1, 2013, we changed our reporting currency from the Euro to the U.S. dollar.
| Summary Financial Highlights | |||
| Q1 | Q4 | Q1 | |
| 2014 | 2013 | 2013 | |
| (in millions, except per share amounts) | |||
| Pulp revenues | $ 278.5 | $ 258.5 | $ 237.8 |
| Energy and chemical revenues | 27.2 | 24.1 | 24.0 |
| Operating income | 39.2 | 6.9 | 12.6 |
| Operating EBITDA | 59.0 | 27.2 | 32.1 |
| Gain on derivative instruments | 3.2 | 3.8 | 6.4 |
| Income tax provision | 1.9 | 6.0 | 1.1 |
| Net income (loss)(1) | 21.0 | (9.8) | (0.6) |
| Net income (loss) per share(1) | |||
| Basic | 0.38 | (0.18) | (0.01) |
| Diluted | 0.37 | (0.18) | (0.01) |
| Common shares outstanding at period end | 55.9 | 55.9 | 55.8 |
| (1) Attributable to common shareholders. | |||
| Summary Operating Highlights | |||
| Q1 | Q4 | Q1 | |
| 2014 | 2013 | 2013 | |
| Pulp production ('000 ADMTs) | 381.8 | 364.8 | 361.2 |
| Scheduled production downtime ('000 ADMTs) | – | 22.4 | – |
| Pulp sales ('000 ADMTs) | 381.4 | 358.6 | 356.7 |
| Average NBSK pulp list price in Europe ($/ADMT)(1) | 920 | 902 | 832 |
| Average pulp sales realizations ($/ADMT)(2) | 723 | 713 | 659 |
| Energy production ('000 MWh) | 466.3 | 435.8 | 424.4 |
| Energy sales ('000 MWh) | 201.5 | 172.5 | 173.6 |
| Average Spot Currency Exchange Rates: | |||
| $ / €(3) | 1.3705 | 1.3619 | 1.3196 |
| $ / C$(3) | 0.9065 | 0.9530 | 0.9916 |
| (1) Source: RISI pricing report. | |||
| (2) Sales realizations after discounts. Incorporates the effect of pulp price variations occurring between the order and shipment dates. | |||
| (3) Average Federal Reserve Bank of New York noon spot rate over the reporting period. |
_________________________
* 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 9 of the financial tables included in this press release for a reconciliation of net income (loss) attributable to common shareholders to Operating EBITDA.
President's Comments
Mr. Jimmy S.H. Lee, President and Chairman, stated: "For the first quarter of 2014, our Operating EBITDA increased by approximately 84% and 117% from the comparative and fourth quarters of 2013, respectively. In the current quarter, our mills performed very well and sales volumes increased due to generally strong demand, despite lower than budgeted sales from our Celgar mill in March, primarily due to the work stoppage at Port Metro Vancouver."
Mr. Lee continued: "Our Stendal mill completed Project Blue Mill in the last quarter of 2013 and is now realizing its benefits in terms of both increased pulp and energy production. In the first quarter of 2014, we had record quarterly production with the Stendal mill having its second best production quarter, while our Rosenthal and Celgar mills also had strong production quarters. Overall, energy production at our mills increased by approximately 10% compared to the same period in 2013 and we had record energy sales volumes. Energy and chemical revenues increased by approximately 13% in the first quarter of 2014 compared to the same period of 2013. We had no scheduled maintenance downtime at any of our mills in the first quarter of 2014."
Mr. Lee added: "In March 2014, the since settled work stoppage at Port Metro Vancouver, combined with railcar limitations, caused approximately 21,000 ADMTs of NBSK pulp that we had planned to ship in March 2014 to be delayed into the second quarter of 2014."
Mr. Lee continued: "NBSK list prices continued to increase slowly through the first quarter of 2014 due to steady demand. At the end of the current quarter, list pulp prices in Europe were approximately $925 per ADMT, while list prices in North America and China had marginally increased to $1,030 and $760 per ADMT, respectively. We currently expect some very modest downward price pressure in China in the next quarter but currently expect prices to further improve over the balance of the year."
Mr. Lee continued: "The NBSK pulp market remained generally balanced at approximately 28 days' supply at the end of the current quarter. During March, world producer inventories declined by one day, despite shipping delays from Western Canada. We currently expect producer spring maintenance and other mill downtime to keep the NBSK pulp market generally steady in the near term."
Mr. Lee continued: "On average, our overall per unit fiber costs in the current quarter increased by approximately 4% from the same period in 2013 as higher fiber costs in Germany were only partially offset by lower fiber costs in Canada. Due to a warm winter in Germany, timber harvesting increased and demand from pellet producers decreased, leading to an increase in the supply of wood chips and a better supply of logs. As a result, fiber prices in Germany are currently trending moderately downward. Fiber costs at our Celgar mill decreased compared to the same quarter in the prior year as a result of strong sawmill activity in the region. For the next quarter of 2014, we currently expect fiber costs in Germany to decrease moderately and to remain largely unchanged in Canada."
Mr. Lee added: "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 maintenance shutdowns, or approximately 3,600 ADMTs for each shutdown."
Mr. Lee concluded: "We are pleased with our mills' operating performance in the current quarter. This, along with generally favorable markets and prices, let us generate strong results, despite the continuing weakness of the U.S. dollar to the Euro and the delay in shipments resulting primarily from the Port Metro Vancouver work stoppage. Going forward, our Celgar mill should continue to benefit from the 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 addition, in 2014, our Rosenthal mill expects to complete a capital project to enable it to produce and sell tall oil, a chemical by-product. Our recently completed equity issue will provide us with greater operational and financial flexibility. We believe these factors should help position us to further build value for our stakeholders in fiscal 2014."
Three Months Ended March 31, 2014 Compared to Three Months Ended March 31, 2013
Total revenues for the three months ended March 31, 2014 increased by approximately 17% to $305.7 million from $261.8 million in the same period in 2013, due to higher pulp and energy sales volumes and higher pulp prices. Pulp revenues for the current quarter increased by approximately 17% to $278.5 million from $237.8 million in the comparative quarter of 2013, primarily due to higher sales volumes and price realizations.
Energy and chemical revenues increased by approximately 13% to $27.2 million in the first quarter of 2014 from $24.0 million in the same quarter last year, primarily because of higher production and sales resulting from Project Blue Mill coming online at our Stendal mill at the end of 2013.
Average list prices for NBSK pulp in Europe were approximately $920 per ADMT in the current quarter, compared to approximately $832 per ADMT in the same quarter last year. In the first quarter of 2014, average pulp sales realizations increased by approximately 10% to $723 per ADMT from approximately $659 per ADMT in the same quarter last year, primarily due to higher pulp prices.
Pulp production increased by approximately 6% to 381,785 ADMTs in the current quarter from 361,164 ADMTs in the same quarter of 2013. We have ten days (approximately 14,000 ADMTs) of maintenance downtime scheduled for our Celgar mill in the second quarter of 2014 in order to perform annual maintenance. Our Stendal mill will have a scheduled two-day maintenance shutdown (approximately 3,600 ADMTs) in the second quarter of 2014.
Pulp sales volumes increased by approximately 7% to 381,355 ADMTs in the current quarter from 356,660 ADMTs in the comparative quarter, primarily due to generally strong demand in all our markets.
In the first quarter of 2014, a strike by truckers at Port Metro Vancouver, as well as railcar limitations, caused a delay in shipping of approximately 21,000 ADMTs of pulp from the current quarter to the second quarter of 2014.
Costs and expenses in the first quarter of 2014 increased by approximately 7% to $266.4 million from $249.2 million in the comparative period of 2013, primarily due to higher sales volumes.
On average, our overall per unit fiber costs in the current quarter increased by approximately 4% from the same period in 2013 as higher fiber costs in Germany were only partially offset by lower fiber costs in Canada.
For the first quarter of 2014, our operating income increased over three-fold to $39.2 million from $12.6 million in the comparative quarter of 2013, primarily due to higher pulp sales realizations.
Interest expense in the first quarter of 2014 marginally increased to $17.5 million from $17.4 million in the comparative quarter of 2013.
We recorded a derivative gain of $3.2 million on the mark to market adjustment of our Stendal mill's interest rate derivative in the current quarter, compared to a net derivative gain of $6.4 million in the same quarter of last year.
During the current quarter, we recorded an income tax expense of $1.9 million, compared to a net income tax expense of $1.1 million in the same quarter of 2013.
The noncontrolling shareholder's interest in the Stendal mill's net income in the first quarter of 2014 was $2.1 million, compared to $0.9 million in the same quarter last year.
We reported net income attributable to common shareholders of $21.0 million, or $0.38 per basic and $0.37 per diluted share, for the first quarter of 2014, which included a non-cash unrealized gain of $3.2 million on the Stendal interest rate derivative. In the first quarter of 2013, the net loss attributable to common shareholders was $0.6 million, or $0.01 per basic and diluted share, which included a total non-cash net unrealized gain of $6.2 million on the Stendal interest rate derivative and fixed price pulp swaps.
Liquidity and Capital Resources
The following table is a summary of selected financial information as at the dates indicated:
| As at March 31, | As at December 31, | |||
| 2014 | 2013 | |||
| (in thousands) | ||||
| Financial Position | ||||
| Cash and cash equivalents | $ 172,109 | (1) | $ 147,728 | |
| Working capital | 310,294 | (1) | 306,274 | |
| Total assets | 1,546,673 | (1) | 1,548,559 | |
| Long-term liabilities | 999,707 | 1,034,743 | ||
| Total equity | 362,140 | (1) | 348,317 | |
| (1) Does not include net proceeds of approximately $53.6 million from our equity issue in April, 2014. |
As at March 31, 2014, we had approximately €28.4 million and C$38.3 million available under our Rosenthal and Celgar revolving credit facilities, respectively.
In March 2014, our Stendal mill received a waiver under its two term credit facilities to: postpone the testing date of its Senior Debt/EBITDA cover ratio to September 30, 2014 from June 30, 2014 and report thereon by November 15, 2014; extend the date by which a portion of the net proceeds of our recent equity offering must be contributed to Stendal to November 17, 2014; and confirm that any such contributed capital shall qualify as an "equity cure" in the event that the Stendal mill is not in compliance with prescribed financial ratio covenants.
On April 2, 2014, we completed our registered public offering of 8,050,000 shares of our common stock at $7.15 per share and realized net proceeds of approximately $53.6 million therefrom.
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:
| As at March 31, | As at December 31, | |||
| 2014 | 2013 | |||
| (in thousands) | ||||
| Financial Position | ||||
| Cash and cash equivalents | $ 108,046 | (1) | $ 82,910 | |
| Working capital | 229,271 | (1) | 211,749 | |
| Total assets | 873,581 | (1) | 858,824 | |
| Long-term liabilities | 395,777 | 394,821 | ||
| Total equity | 413,725 | (1) | 412,033 | |
| (1) Does not include net proceeds of approximately $53.6 million from our equity issue in April, 2014. |
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, May 2, 2014 at 10:00 AM (Eastern Daylight Time). Listeners can access the conference call live and archived through June 2, 2014, over the Internet at http://www.media-server.com/m/p/oj7szvju 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. | ||
| INTERIM CONSOLIDATED BALANCE SHEETS | ||
| (Unaudited) | ||
| (In thousands of U.S. dollars) | ||
| March 31, | December 31, | |
| 2014 | 2013 | |
| ASSETS | ||
| Current assets | ||
| Cash and cash equivalents | $ 172,109 | $ 147,728 |
| Receivables | 149,062 | 135,893 |
| Inventories | 149,889 | 170,908 |
| Prepaid expenses and other | 17,513 | 10,918 |
| Deferred income tax | 6,547 | 6,326 |
| Total current assets | 495,120 | 471,773 |
| Long-term assets | ||
| Property, plant and equipment | 1,014,511 | 1,038,631 |
| Deferred note issuance costs and other | 20,112 | 20,998 |
| Deferred income tax | 16,930 | 17,157 |
| 1,051,553 | 1,076,786 | |
| Total assets | $ 1,546,673 | $ 1,548,559 |
| LIABILITIES | ||
| Current liabilities | ||
| Accounts payable and other | $ 120,973 | $ 103,814 |
| Pension and other post-retirement benefit obligations | 1,280 | 1,330 |
| Debt | 62,573 | 60,355 |
| Total current liabilities | 184,826 | 165,499 |
| Long-term liabilities | ||
| Debt | 885,994 | 919,017 |
| Interest rate derivative liability | 43,262 | 46,517 |
| Pension and other post-retirement benefit obligations | 34,344 | 35,466 |
| Capital leases and other | 19,926 | 19,293 |
| Deferred income tax | 16,181 | 14,450 |
| 999,707 | 1,034,743 | |
| Total liabilities | 1,184,533 | 1,200,242 |
| EQUITY | ||
| Shareholders' equity | ||
| Share capital | 329,063 | 328,549 |
| Paid-in capital | (12,539) | (11,756) |
| Retained earnings | 31,856 | 10,815 |
| Accumulated other comprehensive income | 22,385 | 31,470 |
| Total shareholders' equity | 370,765 | 359,078 |
| Noncontrolling interest (deficit) | (8,625) | (10,761) |
| Total equity | 362,140 | 348,317 |
| Total liabilities and equity | $ 1,546,673 | $ 1,548,559 |
| MERCER INTERNATIONAL INC. | ||
| INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS | ||
| (Unaudited) | ||
| (In thousands of U.S. dollars, except per share data) | ||
| Three Months Ended | ||
| March 31, | ||
| 2014 | 2013 | |
| Revenues | ||
| Pulp | $ 278,506 | $ 237,818 |
| Energy and chemicals | 27,179 | 23,967 |
| 305,685 | 261,785 | |
| Costs and expenses | ||
| Operating costs | 236,304 | 217,984 |
| Operating depreciation and amortization | 19,702 | 19,450 |
| 49,679 | 24,351 | |
| Selling, general and administrative expenses | 10,436 | 11,744 |
| Operating income | 39,243 | 12,607 |
| Other income (expense) | ||
| Interest expense | (17,450) | (17,360) |
| Gain (loss) on derivative instruments | 3,228 | 6,364 |
| Other income (expense) | 6 | (92) |
| Total other income (expense) | (14,216) | (11,088) |
| Income (loss) before income taxes | 25,027 | 1,519 |
| Income tax benefit (provision) | ||
| Current | (122) | 4,319 |
| Deferred | (1,728) | (5,464) |
| Net income (loss) | 23,177 | 374 |
| Less: net income attributable to noncontrolling interest | (2,136) | (935) |
| Net income (loss) attributable to common shareholders | $ 21,041 | $ (561) |
| Net income (loss) per share attributable to common shareholders | ||
| Basic | $ 0.38 | $ (0.01) |
| Diluted | $ 0.37 | $ (0.01) |
| MERCER INTERNATIONAL INC. | ||
| INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (Unaudited) | ||
| (In thousands of U.S. dollars) | ||
| Three Months Ended | ||
| March 31, | ||
| 2014 | 2013 | |
| Cash flows from (used in) operating activities | ||
| Net income (loss) | $ 23,177 | $ 374 |
| Adjustments to reconcile net income (loss) to cash flows from operating activities | ||
| Unrealized loss (gain) on derivative instruments | (3,228) | (6,199) |
| Depreciation and amortization | 19,787 | 19,533 |
| Deferred income taxes | 1,728 | 5,464 |
| Stock compensation expense | (269) | 356 |
| Pension and other post-retirement expense, net of funding | 211 | 160 |
| Other | 652 | 1,562 |
| Changes in working capital | ||
| Receivables | (17,332) | (12,813) |
| Inventories | 18,723 | 7,587 |
| Accounts payable and accrued expenses | 22,242 | 13,992 |
| Other | (6,012) | (1,033) |
| Net cash from (used in) operating activities | 59,679 | 28,983 |
| Cash flows from (used in) investing activities | ||
| Purchase of property, plant and equipment | (6,566) | (15,045) |
| Purchase of intangible assets | (1,740) | -- |
| Proceeds on sale of property, plant and equipment | 179 | 17 |
| Net cash from (used in) investing activities | (8,127) | (15,028) |
| Cash flows from (used in) financing activities | ||
| Repayment of debt | (30,541) | (26,420) |
| Proceeds from borrowings of debt | -- | 13,133 |
| Repayment of capital lease obligations | (660) | (924) |
| Proceeds from sale and lease-back transactions | 1,047 | -- |
| Proceeds from (repayment of) credit facilities, net | -- | 7,948 |
| Proceeds from government grants | 3,297 | 972 |
| Net cash from (used in) financing activities | (26,857) | (5,291) |
| Effect of exchange rate changes on cash and cash equivalents | (314) | (3,988) |
| Net increase (decrease) in cash and cash equivalents | 24,381 | 4,676 |
| Cash and cash equivalents, beginning of period | 147,728 | 137,439 |
| Cash and cash equivalents, end of period | $ 172,109 | $ 142,115 |
| 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 three months ended March 31, 2014 and 2013, 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.
| March 31, 2014 | ||||
| Restricted | Unrestricted | Consolidated | ||
| Group | Subsidiaries | Eliminations | Group | |
| ASSETS | ||||
| Current assets | ||||
| Cash and cash equivalents | $ 108,046 | $ 64,063 | $ -- | $ 172,109 |
| Receivables | 73,801 | 75,261 | -- | 149,062 |
| Inventories | 93,226 | 56,663 | -- | 149,889 |
| Prepaid expenses and other | 15,005 | 2,508 | -- | 17,513 |
| Deferred income tax | 3,272 | 3,275 | -- | 6,547 |
| Total current assets | 293,350 | 201,770 | -- | 495,120 |
| Long-term assets | ||||
| Property, plant and equipment | 404,647 | 609,864 | -- | 1,014,511 |
| Deferred note issuance costs and other | 10,702 | 9,410 | -- | 20,112 |
| Deferred income tax | 9,890 | 7,040 | -- | 16,930 |
| Due from unrestricted group | 154,992 | -- | (154,992) | -- |
| Total assets | $ 873,581 | $ 828,084 | $ (154,992) | $ 1,546,673 |
| LIABILITIES | ||||
| Current liabilities | ||||
| Accounts payable and other | $ 62,799 | $ 58,174 | $ -- | $ 120,973 |
| Pension and other post-retirement benefit obligations | 1,280 | -- | -- | 1,280 |
| Debt | -- | 62,573 | -- | 62,573 |
| Total current liabilities | 64,079 | 120,747 | -- | 184,826 |
| Long-term liabilities | ||||
| Debt | 336,253 | 549,741 | -- | 885,994 |
| Due to restricted group | -- | 154,992 | (154,992) | -- |
| Interest rate derivative liability | -- | 43,262 | -- | 43,262 |
| Pension and other post-retirement benefit obligations | 34,344 | -- | -- | 34,344 |
| Capital leases and other | 8,999 | 10,927 | -- | 19,926 |
| Deferred income tax | 16,181 | -- | -- | 16,181 |
| Total liabilities | 459,856 | 879,669 | (154,992) | 1,184,533 |
| EQUITY | ||||
| Total shareholders' equity (deficit) | 413,725 | (42,960) | -- | 370,765 |
| Noncontrolling interest (deficit) | -- | (8,625) | -- | (8,625) |
| Total liabilities and equity | $ 873,581 | $ 828,084 | $ (154,992) | $ 1,546,673 |
| MERCER INTERNATIONAL INC. | ||||
| RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE | ||||
| Combined Condensed Balance Sheets | ||||
| (Unaudited) | ||||
| (In thousands of U.S. dollars) | ||||
| December 31, 2013 | ||||
| Restricted | Unrestricted | Consolidated | ||
| Group | Subsidiaries | Eliminations | 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 Statements of Operations | ||||
| (Unaudited) | ||||
| (In thousands of U.S. dollars) | ||||
| Three Months Ended March 31, 2014 | ||||
| Restricted | Unrestricted | Consolidated | ||
| Group | Subsidiaries | Eliminations | Group | |
| Revenues | ||||
| Pulp | $ 140,797 | $ 137,709 | $ -- | $ 278,506 |
| Energy and chemicals | 8,881 | 18,298 | -- | 27,179 |
| 149,678 | 156,007 | -- | 305,685 | |
| Operating costs | 111,368 | 124,936 | -- | 236,304 |
| Operating depreciation and amortization | 10,574 | 9,128 | -- | 19,702 |
| Selling, general and administrative expenses | 6,451 | 3,985 | -- | 10,436 |
| 128,393 | 138,049 | -- | 266,442 | |
| Operating income | 21,285 | 17,958 | -- | 39,243 |
| Other income (expense) | ||||
| Interest expense | (8,518) | (9,072) | 140 | (17,450) |
| Gain (loss) on derivative instruments | -- | 3,228 | -- | 3,228 |
| Other income (expense) | 112 | 34 | (140) | 6 |
| Total other income (expense) | (8,406) | (5,810) | -- | (14,216) |
| Income (loss) before income taxes | 12,879 | 12,148 | -- | 25,027 |
| Income tax benefit (provision) | (1,752) | (98) | -- | (1,850) |
| Net income (loss) | 11,127 | 12,050 | -- | 23,177 |
| Less: net income attributable to noncontrolling interest | -- | (2,136) | -- | (2,136) |
| Net income (loss) attributable to common shareholders | $ 11,127 | $ 9,914 | $ -- | $ 21,041 |
| Three Months Ended March 31, 2013 | ||||
| Restricted | Unrestricted | Consolidated | ||
| Group | Subsidiaries | Eliminations | Group | |
| Revenues | ||||
| Pulp | $ 132,350 | $ 105,468 | $ -- | $ 237,818 |
| Energy and chemicals | 9,361 | 14,606 | -- | 23,967 |
| 141,711 | 120,074 | -- | 261,785 | |
| Operating costs | 118,200 | 99,784 | -- | 217,984 |
| Operating depreciation and amortization | 10,815 | 8,635 | -- | 19,450 |
| Selling, general and administrative expenses | 7,547 | 4,197 | -- | 11,744 |
| 136,562 | 112,616 | -- | 249,178 | |
| Operating income | 5,149 | 7,458 | -- | 12,607 |
| Other income (expense) | ||||
| Interest expense | (7,745) | (11,791) | 2,176 | (17,360) |
| Gain (loss) on derivative instruments | (456) | 6,820 | -- | 6,364 |
| Other income (expense) | 2,027 | 57 | (2,176) | (92) |
| Total other income (expense) | (6,174) | (4,914) | -- | (11,088) |
| Income (loss) before income taxes | (1,025) | 2,544 | -- | 1,519 |
| Income tax benefit (provision) | (1,342) | 197 | -- | (1,145) |
| Net income (loss) | (2,367) | 2,741 | -- | 374 |
| Less: net income attributable to noncontrolling interest | -- | (935) | -- | (935) |
| Net income (loss) attributable to common shareholders | $ (2,367) | $ 1,806 | $ -- | $ (561) |
| MERCER INTERNATIONAL INC. | |||
| RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE | |||
| Combined Condensed Statements of Cash Flows | |||
| (Unaudited) | |||
| (In thousands of U.S. dollars) | |||
| Three Months Ended March 31, 2014 | |||
| Restricted | Unrestricted | Consolidated | |
| Group | Subsidiaries | Group | |
| Cash flows from (used in) operating activities | |||
| Net income (loss) | $ 11,127 | $ 12,050 | $ 23,177 |
| Adjustments to reconcile net income (loss) to cash flows from operating activities | |||
| Unrealized loss (gain) on derivative instruments | -- | (3,228) | (3,228) |
| Depreciation and amortization | 10,659 | 9,128 | 19,787 |
| Deferred income taxes | 1,728 | -- | 1,728 |
| Stock compensation expense | (269) | -- | (269) |
| Pension and other post-retirement expense, net of funding | 211 | -- | 211 |
| Other | 171 | 481 | 652 |
| Changes in working capital | |||
| Receivables | (96) | (17,236) | (17,332) |
| Inventories | (1,589) | 20,312 | 18,723 |
| Accounts payable and accrued expenses | 14,683 | 7,559 | 22,242 |
| Other(1) | (8,092) | 2,080 | (6,012) |
| Net cash from (used in) operating activities | 28,533 | 31,146 | 59,679 |
| Cash flows from (used in) investing activities | |||
| Purchase of property, plant and equipment | (2,960) | (3,606) | (6,566) |
| Purchase of intangible assets | (974) | (766) | (1,740) |
| Proceeds on sale of property, plant and equipment | 134 | 45 | 179 |
| Net cash from (used in) investing activities | (3,800) | (4,327) | (8,127) |
| Cash flows from (used in) financing activities | |||
| Repayment of debt | (744) | (29,797) | (30,541) |
| Repayment of capital lease obligations | (272) | (388) | (660) |
| Proceeds from sale and lease-back transactions | 1,047 | -- | 1,047 |
| Proceeds from government grants | 832 | 2,465 | 3,297 |
| Net cash from (used in) financing activities | 863 | (27,720) | (26,857) |
| Effect of exchange rate changes on cash and cash equivalents | (460) | 146 | (314) |
| Net increase (decrease) in cash and cash equivalents | 25,136 | (755) | 24,381 |
| Cash and cash equivalents, beginning of period | 82,910 | 64,818 | 147,728 |
| Cash and cash equivalents, end of period | $ 108,046 | $ 64,063 | $ 172,109 |
| (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) | |||
| Three Months Ended March 31, 2013 | |||
| Restricted | Unrestricted | Consolidated | |
| Group | Subsidiaries | Group | |
| Cash flows from (used in) operating activities | |||
| Net income (loss) | $ (2,367) | $ 2,741 | $ 374 |
| Adjustments to reconcile net income (loss) to cash flows from operating activities | |||
| Unrealized loss (gain) on derivative instruments | 621 | (6,820) | (6,199) |
| Depreciation and amortization | 10,898 | 8,635 | 19,533 |
| Deferred income taxes | 1,309 | 4,155 | 5,464 |
| Stock compensation expense | 356 | -- | 356 |
| Pension and other post-retirement expense, net of funding | 160 | -- | 160 |
| Other | 545 | 1,017 | 1,562 |
| Changes in working capital | |||
| Receivables | (11,011) | (1,802) | (12,813) |
| Inventories | 4,050 | 3,537 | 7,587 |
| Accounts payable and accrued expenses | 13,871 | 121 | 13,992 |
| Other(1) | (2,264) | 1,231 | (1,033) |
| Net cash from (used in) operating activities | 16,168 | 12,815 | 28,983 |
| Cash flows from (used in) investing activities | |||
| Purchase of property, plant and equipment | (3,492) | (11,553) | (15,045) |
| Proceeds on sale of property, plant and equipment | 17 | -- | 17 |
| Net cash from (used in) investing activities | (3,475) | (11,553) | (15,028) |
| Cash flows from (used in) financing activities | |||
| Repayment of debt | (736) | (25,684) | (26,420) |
| Proceeds from borrowings of debt | -- | 13,133 | 13,133 |
| Repayment of capital lease obligations | (161) | (763) | (924) |
| Proceeds from (repayment of) credit facilities, net | 7,948 | -- | 7,948 |
| Proceeds from government grants | -- | 972 | 972 |
| Net cash from (used in) financing activities | 7,051 | (12,342) | (5,291) |
| Effect of exchange rate changes on cash and cash equivalents | (1,331) | (2,657) | (3,988) |
| Net increase (decrease) in cash and cash equivalents | 18,413 | (13,737) | 4,676 |
| Cash and cash equivalents, beginning of period | 48,407 | 89,032 | 137,439 |
| Cash and cash equivalents, end of period | $ 66,820 | $ 75,295 | $ 142,115 |
| (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 | ||
| March 31, | ||
| 2014 | 2013 | |
| Net income (loss) attributable to common shareholders | $ 21,041 | $ (561) |
| Net income attributable to noncontrolling interest | 2,136 | 935 |
| Income tax provision | 1,850 | 1,145 |
| Interest expense | 17,450 | 17,360 |
| (Gain) loss on derivative instruments | (3,228) | (6,364) |
| Other (income) expense | (6) | 92 |
| Operating income | 39,243 | 12,607 |
| Add: Depreciation and amortization | 19,787 | 19,533 |
| Operating EBITDA | $ 59,030 | $ 32,140 |
| Three Months Ended | ||
| March 31, | ||
| 2014 | 2013 | |
| Restricted Group(1) | ||
| Net income (loss) attributable to common shareholders | $ 11,127 | $ (2,367) |
| Income tax provision | 1,752 | 1,342 |
| Interest expense | 8,518 | 7,745 |
| (Gain) loss on derivative instruments | – | 456 |
| Other (income) expense | (112) | (2,027) |
| Operating income | 21,285 | 5,149 |
| Add: Depreciation and amortization | 10,659 | 10,898 |
| Operating EBITDA | $ 31,944 | $ 16,047 |
| (1) For the Restricted Group, net income (loss) attributable to common shareholders and net income (loss) are the same. |