Selected Highlights

  • Strong first quarter net income of $51.6 million ($0.78 per diluted share)
  • Record quarterly Operating EBITDA* of $123.8 million

NEW YORK, May 02, 2019 (GLOBE NEWSWIRE) -- Mercer International Inc. (Nasdaq: MERC) today reported first quarter 2019 Operating EBITDA increased to a record $123.8 million from $99.4 million in the first quarter of 2018 and $118.1 million in the fourth quarter of 2018.

For the first quarter of 2019, net income increased to $51.6 million, or $0.79 per basic share and $0.78 per diluted share, from $25.6 million, or $0.39 per share, in the first quarter of 2018 and $45.0 million, or $0.69 per basic share and $0.68 per diluted share, in the fourth quarter of 2018. 

Mr. David M. Gandossi, the Chief Executive Officer, stated: "Our record first quarter results reflect overall strong operating performance and cost discipline at our mills, generally steady demand and the inclusion of a full quarter of results of Mercer Peace River Pulp Ltd. ("MPR") acquired in December 2018.

Pulp pricing was generally softer quarter over quarter, however, there was some modest price improvements late in the current quarter resulting from better paper producer demand.

As I have mentioned previously, the acquisition of MPR has materially increased our production, revenues and scope of operations. Our recent acquisitions highlight the benefits of our value creation strategy of delivering sustainable profitable growth by leveraging our core competencies to complement our world class assets.  Our integration of MPR is proceeding well and according to plan."

____________________

*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 Highlights: Record Operating EBITDA

 Q1 Q4 Q1 
 2019 2018(1) 2018 
       
 (in thousands, except per share amounts) 
Revenues$483,950  $412,225  $367,903  
Operating income$93,552  $90,997  $76,048  
Operating EBITDA$123,799  $118,083  $99,367  
Loss on settlement of debt$  $  $(21,515)(2)
Legal cost award$  $  $(6,951) 
Acquisition commitment fee$  $(5,250) $  
Net income$51,616  $45,009  $25,649  
Net income per common share      
Basic$0.79  $0.69  $0.39  
Diluted$0.78  $0.68  $0.39  

                               

(1) Results of MPR included from the date of acquisition on December 10, 2018.
(2) Redemption of 7.75% senior notes due 2022.

In the first quarter 2019 our operating income increased to $93.6 million, or by approximately 3% from $91.0 million in the fourth quarter of 2018, and approximately 23% from $76.0 million in the same quarter of the prior year. The increase in the current quarter over the prior quarter is primarily due to the inclusion of a full quarter of results of MPR, lower maintenance and per unit fiber costs and higher pulp and lumber sales volumes partially offset by lower pulp sales realizations. The increase in the current quarter over the same quarter of the prior year is primarily due to inclusion of the results of MPR, the net positive impact of a stronger dollar on our euro denominated costs and expenses and higher pulp sales volumes partially offset by lower product sales realizations.

Segment Results

Pulp: Record revenues and positive impact of a stronger dollar

 Three Months Ended March 31,
 2019 2018
    
 (in thousands)
Pulp revenues$413,313  $290,551 
Energy and chemical revenues$23,161  $23,684 
Operating income$93,520  $74,054 

In the first quarter of 2019 pulp segment operating income increased by approximately 26% to $93.5 million from $74.1 million in the same quarter of 2018. The increase was primarily due to the positive impact of a strong dollar relative to the euro on our euro denominated costs and expenses and the inclusion of the results of MPR in the current quarter. NBSK pulp sales volumes increased by approximately 27% to 466,893 ADMTs in the current quarter from 367,074 ADMTs in the same quarter of 2018.

The NBSK pulp realized sales price decreased by approximately 3% to $757 per ADMT in the first quarter of 2019 from $783 per ADMT in the same quarter of the prior year due to lower overall demand in China. In China, demand from tissue producers was steady but there was a decline in demand from paper and packaging producers. Per unit fiber costs were generally flat in the current quarter compared to the same quarter of 2018. In Germany, the fiber market was stable due to the availability of storm and beetle damaged wood and the market in Celgar's fiber procurement basket remained tight due to strong demand. MPR's fiber costs were largely in line with prior quarter costs.

Wood Products: Strong production offset by lower realized prices 

 Three Months Ended March 31,
 2019 2018
    
 (in thousands)
Lumber revenues$39,163  $48,168 
Energy revenues$2,666  $2,781 
Wood residual revenues$2,610  $2,719 
Operating income$1,620  $2,982 

In the first quarter of 2019 our wood products segment had operating income of $1.6 million compared to $3.0 million in the same quarter of 2018. Average lumber sales realizations decreased by approximately 14% to $359 per Mfbm in the first quarter of 2019 from approximately $418 per Mfbm in the same quarter of 2018 primarily due to weakening in the U.S. lumber markets which started in the second half of 2018 as a result of high customer inventory levels. European lumber pricing also declined due to an increase in beetle and storm damaged wood entering the market which generally obtains lower prices. In the current quarter we also had modestly lower sales volumes due to the timing of shipments. Production increased approximately 8% to 110.7 MMfbm of lumber in the current quarter from 102.7 MMfbm in the same quarter of 2018. In the current quarter, per unit fiber costs decreased by approximately 21% from the same quarter of 2018 primarily as a result of the availability of storm and beetle damaged wood in the market and the positive impact of a stronger dollar on our euro denominated fiber costs.

Outlook
We currently expect pulp markets to modestly strengthen with prices improving in the second half of the year. We believe that, in the second quarter of 2019, pulp producer inventories will decline due to continued steady demand in Europe and North America, modestly higher demand from paper producers in China and scheduled producer downtime. At the end of March 2019, world NBSK producer inventories were about 37 days' supply.

In Germany, we expect fiber costs for our pulp mills to decline in the second quarter as a result of the availability of storm damaged and beetle infested wood which is suitable for pulp production. In the second quarter, our 50% joint venture Cariboo mill has 12 days of scheduled maintenance downtime (which will reduce our production by approximately 5,800 ADMTs). In the second quarter we will also continue to be focused on executing against the identified synergies at MPR.

We currently expect lumber pricing in the second quarter to modestly increase due to seasonal increased demand from the U.S. lumber market.

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 May 3, 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/m6/p/3wco46ru 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

 Q1 Q4 Q1 
 2019 2018(1) 2018 
       
 (in thousands, except per share amounts) 
Pulp segment revenues$436,474  $369,368  $314,235  
Wood products segment revenues44,439  42,379  53,668  
Corporate and other revenues3,037  478    
Total revenues$483,950  $412,225  $367,903  
       
Pulp segment operating income$93,520  $94,532  $74,054  
Wood products segment operating income1,620  669  2,982  
Corporate and other operating loss(1,588) (4,204) (988) 
Total operating income$93,552  $90,997  $76,048  
       
Pulp segment depreciation and amortization$28,023  $24,176  $21,523  
Wood products segment depreciation and amortization1,911  2,625  1,686  
Corporate and other depreciation and amortization313  285  110  
Total depreciation and amortization$30,247  $27,086  $23,319  
       
Operating EBITDA$123,799  $118,083  $99,367  
Loss on settlement of debt$  $  $(21,515)(2)
Legal cost award$  $  $(6,951) 
Acquisition commitment fee$  $(5,250) $  
Provision for income taxes$(24,424) $(20,457) $(9,581) 
Net income$51,616  $45,009  $25,649  
Net income per common share      
Basic$0.79  $0.69  $0.39  
Diluted$0.78  $0.68  $0.39  
Common shares outstanding at period end65,651  65,202  65,171  

________________

(1) Results of MPR included from the date of acquisition on December 10, 2018.
(2) Redemption of 7.75% senior notes due 2022.


Summary Operating Highlights

 Q1 Q4 Q1 
 2019 2018(1) 2018 
Pulp Segment      
Pulp production ('000 ADMTs)      
NBSK460.6  413.6  364.5  
NBHK78.6  21.3    
Annual maintenance downtime ('000 ADMTs)  5.7    
Annual maintenance downtime (days)  3    
Pulp sales ('000 ADMTs)      
NBSK466.9  392.7  367.1  
NBHK87.8  22.9    
Average NBSK pulp list prices ($/ADMT)(2)      
   Europe1,105
  1,205
  1,097  
   China710  805  910  
 North America1,380  1,428  1,233  
Average NBHK pulp list prices ($/ADMT)(2)      
China687  763  798  
North America1,180  1,213  1,077  
Average pulp sales realizations ($/ADMT)(3)      
NBSK757  830  783  
NBHK656  707    
Energy production ('000 MWh)560.5 (4)504.6 (4)438.0  
Energy sales ('000 MWh)211.8 (4)213.9 (4)175.7  
Average energy sales realizations ($/MWh)94  99  107  
       
Wood Products Segment      
Lumber production (MMfbm)110.7  104.7  102.7  
Lumber sales (MMfbm)109.2  100.9  115.1  
Average lumber sales realizations ($/Mfbm)359  369  418  
Energy production and sales ('000 MWh)22.4  23.8  20.6  
Average energy sales realizations ($/MWh)119  118  135  
       
Average Spot Currency Exchange Rates      
$ / €(5)1.1354  1.1414  1.2289  
$ / C$(5)0.7521  0.7577  0.7904  

_____________

(1) Results of MPR included from the date of acquisition on December 10, 2018.
(2) Source: RISI pricing report.
(3) Sales realizations after customer discounts, rebates and other selling concessions. Incorporates the effect of pulp price variations occurring between the order and shipment dates.
(4) Excludes energy production and sales relating to our 50% joint venture interest in the Cariboo Pulp and Paper mill which is accounted for as an equity investment.
(5) 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 March 31,
 2019 2018
    
Revenues$483,950  $367,903 
Costs and expenses   
Cost of sales, excluding depreciation and amortization343,033  254,285 
Cost of sales depreciation and amortization30,136  23,209 
Selling, general and administrative expenses17,229  14,361 
Operating income93,552  76,048 
    
Other income (expenses)   
Interest expense(18,551) (12,115)
Loss on settlement of debt  (21,515)
Legal cost award  (6,951)
Other income (expenses)1,039  (237)
Total other expenses, net(17,512) (40,818)
Income before provision for income taxes76,040  35,230 
Provision for income taxes(24,424) (9,581)
Net income$51,616  $25,649 
    
Net income per common share
Basic$0.79  $0.39 
Diluted$0.78  $0.39 
    
Dividends declared per common share$0.125  $0.125 


MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)

 March 31, December 31,
 2019 2018
ASSETS   
Current assets   
  Cash and cash equivalents$233,234  $240,491 
  Accounts receivable308,573  252,692 
  Inventories282,308  303,813 
  Prepaid expenses and other19,636  13,703 
Total current assets843,751  810,699 
    
  Property, plant and equipment, net1,021,957  1,029,257 
Investment in joint ventures56,049  62,574 
Intangible assets, net55,721  53,927 
Operating lease right-of-use assets14,581   
Other long-term assets19,985  17,904 
  Deferred income tax1,351  1,374 
Total assets$2,013,395  $1,975,735 
    
LIABILITIES AND SHAREHOLDERS' EQUITY   
Current liabilities   
  Accounts payable and other$211,377  $194,484 
  Pension and other post-retirement benefit obligations879  904 
Total current liabilities212,256  195,388 
    
  Debt1,007,774  1,041,389 
  Pension and other post-retirement benefit obligations26,052  25,829 
Finance lease liabilities23,604  24,669 
Operating lease liabilities12,145   
Other long-term liabilities14,118  13,924 
  Deferred income tax96,764  93,107 
Total liabilities1,392,713  1,394,306 
    
Shareholders' equity   
  Common shares $1 par value; 200,000,000 authorized;
  65,651,000 issued and outstanding (2018 – 65,202,000)
65,620  65,171 
  Additional paid-in capital341,644  342,438 
  Retained earnings345,400  301,990 
  Accumulated other comprehensive loss(131,982) (128,170)
Total shareholders' equity620,682  581,429 
Total liabilities and shareholders' equity$2,013,395  $1,975,735 


MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

 Three Months Ended March 31,
 2019 2018
Cash flows from (used in) operating activities   
Net income$51,616  $25,649 
Adjustments to reconcile net income to cash flows from operating activities
Depreciation and amortization30,247  23,319 
Deferred income tax provision3,639  4,812 
Loss on settlement of debt  21,515 
Defined benefit pension plans and other post-retirement benefit plan expense856  439 
Stock compensation expense (recovery)(345) 193 
Other441  820 
Defined benefit pension plans and other post-retirement benefit plan contributions(1,158) (45)
Changes in working capital   
Accounts receivable(56,353) (5,132)
Inventories21,141  (6,822)
Accounts payable and accrued expenses(173) 18,027 
Other(7,725) (6,398)
Net cash from (used in) operating activities42,186  76,377 
Cash flows from (used in) investing activities   
Purchase of property, plant and equipment(19,389) (16,184)
Purchase of intangible assets(316) (167)
Other(261)  
Net cash from (used in) investing activities(19,966) (16,351)
Cash flows from (used in) financing activities   
Redemption of senior notes  (317,439)
Proceeds from (repayment of) revolving credit facilities, net(33,672) 20,071 
Dividend payments  (8,127)
Payment of debt issuance costs(509) (1,390)
Proceeds from government grants6,320   
Other(862) (848)
Net cash from (used in) financing activities(28,723) (307,733)
Effect of exchange rate changes on cash and cash equivalents(754) 535 
Net decrease in cash and cash equivalents(7,257) (247,172)
Cash and cash equivalents, beginning of period240,491  460,738 
Cash and cash equivalents, end of period$233,234  $213,566 


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:

 Q1 Q4 Q1 
 2019 2018(1) 2018 
Net income$51,616  $45,009  $25,649  
Provision for income taxes24,424  20,457  9,581  
Interest expense18,551  15,492  12,115  
Loss on settlement of debt    21,515  
Legal cost award    6,951  
Acquisition commitment fee  5,250    
Other (income) expenses(1,039) 4,789  237  
Operating income93,552  90,997  76,048  
Add: Depreciation and amortization30,247  27,086  23,319  
Operating EBITDA$123,799  $118,083  $99,367  

_____________

(1) Results of MPR included from the date of acquisition on December 10, 2018.