MERCER INTERNATIONAL INC. [MERC] Filings

10-Q 1 merc-10q_20220930.htm 10-Q merc-10q_20220930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File No.: 000-51826

MERCER INTERNATIONAL INC.

(Exact name of Registrant as specified in its charter)

Washington		47-0956945
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)		Identification No.)

Suite 1120, 700 West Pender Street, Vancouver, British Columbia, Canada, V6C 1G8

(Address of office)

(604) 684-1099

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, par value $1.00 per share

MERC

NASDAQ Global Select Market

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ NO ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ NO ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of "large accelerated filer", "accelerated filer", "non-accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

The Registrant had 66,167,191 shares of common stock outstanding as of October 26, 2022.

PART I. FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022

(Unaudited)

FORM 10-Q

QUARTERLY REPORT - PAGE 2

MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands of U.S. dollars, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Revenues	$	532,814		$	469,746		$	1,697,881		$	1,284,298
Costs and expenses
Cost of sales, excluding depreciation and amortization		367,710			302,221			1,187,476			910,244
Cost of sales depreciation and amortization		32,122			34,294			95,223			97,175
Selling, general and administrative expenses		24,259			19,476			70,077			60,259
Operating income		108,723			113,755			345,105			216,620
Other income (expenses)
Interest expense		(17,935	)		(16,882	)		(52,731	)		(53,031	)
Loss on early extinguishment of debt		—			—			—			(30,368	)
Other income		7,252			4,735			24,297			9,118
Total other expenses, net		(10,683	)		(12,147	)		(28,434	)		(74,281	)
Income before income taxes		98,040			101,608			316,671			142,339
Income tax provision		(31,294	)		(32,490	)		(89,656	)		(45,873	)
Net income	$	66,746		$	69,118		$	227,015		$	96,466
Net income per common share
Basic	$	1.01		$	1.05		$	3.43		$	1.46
Diluted	$	1.00		$	1.04		$	3.41		$	1.46
Dividends declared per common share	$	0.075		$	0.065		$	0.225		$	0.195

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands of U.S. dollars)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net income	$	66,746		$	69,118		$	227,015		$	96,466
Other comprehensive income (loss)
Gain (loss) related to defined benefit pension plans		11			(19	)		(224	)		984
Income tax recovery (provision)		—			—			62			(681	)
Gain (loss) related to defined benefit pension plans, net of tax		11			(19	)		(162	)		303
Foreign currency translation adjustment		(94,781	)		(42,110	)		(189,323	)		(59,676	)
Other comprehensive loss, net of taxes		(94,770	)		(42,129	)		(189,485	)		(59,373	)
Total comprehensive income (loss)	$	(28,024	)	$	26,989		$	37,530		$	37,093

See accompanying Notes to the Interim Consolidated Financial Statements.

FORM 10-Q

QUARTERLY REPORT - PAGE 3

MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands of U.S. dollars, except share and per share data)

	September 30,			December 31,
	2022			2021
ASSETS
Current assets
Cash and cash equivalents	$	287,254		$	345,610
Term deposit		75,000			—
Accounts receivable, net		324,343			345,345
Inventories		385,961			356,731
Prepaid expenses and other		24,130			16,619
Total current assets		1,096,688			1,064,305
Property, plant and equipment, net		1,249,056			1,135,631
Investment in joint ventures		45,262			49,651
Amortizable intangible assets, net		57,406			47,902
Goodwill		33,037			—
Operating lease right-of-use assets		12,620			9,712
Pension asset		3,543			4,136
Other long-term assets		46,371			38,718
Deferred income tax		—			1,177
Total assets	$	2,543,983		$	2,351,232
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable and other	$	322,368		$	282,307
Pension and other post-retirement benefit obligations		725			817
Total current liabilities		323,093			283,124
Long-term debt		1,339,086			1,237,545
Pension and other post-retirement benefit obligations		18,126			21,252
Operating lease liabilities		8,306			6,574
Other long-term liabilities		12,163			13,590
Deferred income tax		122,860			95,123
Total liabilities		1,823,634			1,657,208
Shareholders’ equity
Common shares $1 par value; 200,000,000 authorized; 66,167,000 issued and outstanding (2021 – 66,037,000)		66,132			65,988
Additional paid-in capital		351,438			347,902
Retained earnings		583,057			370,927
Accumulated other comprehensive loss		(280,278	)		(90,793	)
Total shareholders’ equity		720,349			694,024
Total liabilities and shareholders’ equity	$	2,543,983		$	2,351,232

Commitments and contingencies (Note 16)
Subsequent event (Note 10)

See accompanying Notes to the Interim Consolidated Financial Statements.

FORM 10-Q

QUARTERLY REPORT - PAGE 4

MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited)

(In thousands of U.S. dollars)

	Common shares
	Number (thousands of shares)		Amount, at Par Value		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Shareholders' Equity
Three Months Ended September 30:
Balance as of June 30, 2022		66,167	$	66,132	$	350,224		$	521,274		$	(185,508	)	$	752,122
Stock compensation expense		—		—		1,214			—			—			1,214
Net income		—		—		—			66,746			—			66,746
Dividends declared		—		—		—			(4,963	)		—			(4,963	)
Other comprehensive loss		—		—		—			—			(94,770	)		(94,770	)
Balance as of September 30, 2022		66,167	$	66,132	$	351,438		$	583,057		$	(280,278	)	$	720,349

Balance as of June 30, 2021		66,037	$	65,988	$	347,093		$	235,872		$	(44,819	)	$	604,134
Stock compensation expense		—		—		1,005			—			—			1,005
Net income		—		—		—			69,118			—			69,118
Dividends declared		—		—		—			(4,292	)		—			(4,292	)
Other comprehensive loss		—		—		—			—			(42,129	)		(42,129	)
Balance as of September 30, 2021		66,037	$	65,988	$	348,098		$	300,698		$	(86,948	)	$	627,836

Nine Months Ended September 30:
Balance as of December 31, 2021		66,037	$	65,988	$	347,902		$	370,927		$	(90,793	)	$	694,024
Shares issued on grants of restricted shares		35		49		(49	)		—			—			—
Shares issued on grants of performance share units		95		95		(95	)		—			—			—
Stock compensation expense		—		—		3,680			—			—			3,680
Net income		—		—		—			227,015			—			227,015
Dividends declared		—		—		—			(14,885	)		—			(14,885	)
Other comprehensive loss		—		—		—			—			(189,485	)		(189,485	)
Balance as of September 30, 2022		66,167	$	66,132	$	351,438		$	583,057		$	(280,278	)	$	720,349

Balance as of December 31, 2020		65,868	$	65,800	$	345,696		$	217,106		$	(27,575	)	$	601,027
Shares issued on grants of restricted shares		49		68		(68	)		—			—			—
Shares issued on grants of performance share units		120		120		(120	)		—			—			—
Stock compensation expense		—		—		2,590			—			—			2,590
Net income		—		—		—			96,466			—			96,466
Dividends declared		—		—		—

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10-Q	[2021-07-29]
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10-K	[2021-02-16]
10-Q	[2020-10-29]
10-Q	[2020-07-31]
10-Q	[2020-04-30]
10-K	[2020-02-13]
10-Q	[2019-10-31]
10-Q	[2019-08-01]
10-Q	[2019-05-02]
10-K	[2019-02-14]
10-Q	[2018-10-25]
10-Q	[2018-07-26]
10-Q	[2018-05-03]
10-K	[2018-02-16]
10-Q	[2017-10-26]
10-Q	[2017-07-27]
10-Q	[2017-04-28]
10-K	[2017-02-10]
10-Q	[2016-10-27]
10-Q	[2016-07-28]
10-Q	[2016-04-28]
10-K	[2016-02-12]
10-Q	[2015-10-29]
10-Q	[2015-07-30]
10-Q	[2015-04-30]
10-K	[2015-02-13]
10-Q	[2014-10-31]
10-Q	[2014-08-01]
10-Q	[2014-05-02]
10-K	[2014-02-21]
10-Q	[2013-11-01]
10-Q	[2013-08-02]
10-Q	[2013-05-03]
10-K	[2013-02-15]
10-Q	[2012-11-02]
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10-K	[2012-02-21]