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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2023
OR
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☐ |
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)
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Washington |
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47-0956945 |
(State or other jurisdiction |
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(I.R.S. Employer |
of incorporation or organization) |
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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:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
Common Stock, par value $1.00 per share |
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MERC |
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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.
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Large accelerated filer |
☒ |
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Accelerated filer |
☐ |
Non-accelerated filer |
☐ |
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Smaller reporting company |
☐ |
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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 66,524,866 shares of common stock outstanding as of November 1, 2023.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023
(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)
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Three Months Ended
September 30, |
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Nine Months Ended
September 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Revenues |
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$ |
470,821 |
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$ |
532,814 |
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$ |
1,523,350 |
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$ |
1,697,881 |
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Costs and expenses |
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Cost of sales, excluding depreciation and amortization |
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403,267 |
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367,710 |
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1,430,805 |
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1,187,476 |
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Cost of sales depreciation and amortization |
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40,884 |
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32,122 |
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128,485 |
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95,223 |
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Selling, general and administrative expenses |
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30,096 |
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24,259 |
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96,439 |
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70,077 |
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Operating income (loss) |
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(3,426 |
) |
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108,723 |
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(132,379 |
) |
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345,105 |
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Other income (expenses) |
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Interest expense |
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(21,863 |
) |
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(17,935 |
) |
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(61,001 |
) |
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(52,731 |
) |
Other income |
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3,317 |
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7,252 |
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9,689 |
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24,297 |
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Total other expenses, net |
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(18,546 |
) |
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(10,683 |
) |
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(51,312 |
) |
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(28,434 |
) |
Income (loss) before income taxes |
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(21,972 |
) |
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98,040 |
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(183,691 |
) |
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316,671 |
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Income tax recovery (provision) |
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(3,984 |
) |
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(31,294 |
) |
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28,851 |
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(89,656 |
) |
Net income (loss) |
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$ |
(25,956 |
) |
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$ |
66,746 |
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$ |
(154,840 |
) |
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$ |
227,015 |
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Net income (loss) per common share |
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Basic |
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$ |
(0.39 |
) |
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$ |
1.01 |
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$ |
(2.33 |
) |
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$ |
3.43 |
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Diluted |
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$ |
(0.39 |
) |
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$ |
1.00 |
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$ |
(2.33 |
) |
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$ |
3.41 |
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Dividends declared per common share |
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$ |
0.075 |
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$ |
0.075 |
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$ |
0.225 |
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$ |
0.225 |
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INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands of U.S. dollars)
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Three Months Ended
September 30, |
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Nine Months Ended
September 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Net income (loss) |
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$ |
(25,956 |
) |
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$ |
66,746 |
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$ |
(154,840 |
) |
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$ |
227,015 |
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Other comprehensive income (loss) |
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Gain (loss) related to defined benefit pension plans |
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81 |
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11 |
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122 |
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(224 |
) |
Income tax recovery |
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— |
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— |
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— |
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62 |
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Gain (loss) related to defined benefit pension plans, net of tax |
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81 |
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11 |
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122 |
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(162 |
) |
Foreign currency translation adjustments |
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(38,439 |
) |
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(94,781 |
) |
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(7,553 |
) |
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(189,323 |
) |
Other comprehensive loss, net of taxes |
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(38,358 |
) |
|
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(94,770 |
) |
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(7,431 |
) |
|
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(189,485 |
) |
Total comprehensive income (loss) |
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$ |
(64,314 |
) |
|
$ |
(28,024 |
) |
|
$ |
(162,271 |
) |
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$ |
37,530 |
|
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)
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September 30,
2023 |
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December 31,
2022 |
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ASSETS |
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|
|
Current assets |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
343,725 |
|
|
$ |
354,032 |
|
Accounts receivable, net |
|
|
266,927 |
|
|
|
351,993 |
|
Inventories |
|
|
422,151 |
|
|
|
450,470 |
|
Prepaid expenses and other |
|
|
31,697 |
|
|
|
21,680 |
|
Total current assets |
|
|
1,064,500 |
|
|
|
1,178,175 |
|
Property, plant and equipment, net |
|
|
1,396,747 |
|
|
|
1,341,322 |
|
Investment in joint ventures |
|
|
43,933 |
|
|
|
45,635 |
|
Amortizable intangible assets, net |
|
|
50,322 |
|
|
|
61,497 |
|
Goodwill |
|
|
33,921 |
|
|
|
30,937 |
|
Operating lease right-of-use assets |
|
|
17,351 |
|
|
|
15,049 |
|
Pension asset |
|
|
3,514 |
|
|
|
4,397 |
|
Other long-term assets |
|
|
44,713 |
|
|
|
48,025 |
|
Total assets |
|
$ |
2,655,001 |
|
|
$ |
2,725,037 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts payable and other |
|
$ |
267,343 |
|
|
$ |
377,306 |
|
Pension and other post-retirement benefit obligations |
|
|
523 |
|
|
|
755 |
|
Total current liabilities |
|
|
267,866 |
|
|
|
378,061 |
|
Long-term debt |
|
|
1,589,776 |
|
|
|
1,346,508 |
|
Pension and other post-retirement benefit obligations |
|
|
10,768 |
|
|
|
12,178 |
|
Operating lease liabilities |
|
|
11,593 |
|
|
|
9,475 |
|
Other long-term liabilities |
|
|
14,158 |
|
|
|
14,072 |
|
Deferred income tax |
|
|
95,388 |
|
|
|
125,959 |
|
Total liabilities |
|
|
1,989,549 |
|
|
|
1,886,253 |
|
Shareholders’ equity |
|
|
|
|
|
|
Common shares $1 par value; 200,000,000 authorized; 66,525,000 issued and outstanding (2022 – 66,167,000) |
|
|
66,471 |
|
|
|
66,132 |
|
Additional paid-in capital |
|
|
358,055 |
|
|
|
354,495 |
|
Retained earnings |
|
|
428,319 |
|
|
|
598,119 |
|
Accumulated other comprehensive loss |
|
|
(187,393 |
) |
|
|
(179,962 |
) |
Total shareholders’ equity |
|
|
665,452 |
|
|
|
838,784 |
|
Total liabilities and shareholders’ equity |
|
$ |
2,655,001 |
|
|
$ |
2,725,037 |
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 17) |
|
|
|
|
|
|
Subsequent events (Note 8, 11) |
|
|
|
|
|
|
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, 2023 |
|
|
66,525 |
|
|
$ |
66,471 |
|
|
$ |
356,769 |
|
|
$ |
459,264 |
|
|
$ |
(149,035 |
) |
|
$ |
733,469 |
|
Stock compensation expense |
|
|
— |
|
|
|
— |
|
|
|
1,286 |
|
|
|
— |
|
|
|
— |
|
|
|
1,286 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(25,956 |
) |
|
|
— |
|
|
|
(25,956 |
) |
Dividends declared |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4,989 |
) |
|
|
— |
|
|
|
(4,989 |
) |
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(38,358 |
) |
|
|
(38,358 |
) |
Balance as of September 30, 2023 |
|
|
66,525 |
|
|
$ |
66,471 |
|
|
$ |
358,055 |
|
|
$ |
428,319 |
|
|
$ |
(187,393 |
) |
|
$ |
665,452 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2022 |
|
|
66,167 |
|
|
$ |
66,132 |
|
|
$ |
354,495 |
|
|
$ |
598,119 |
|
|
$ |
(179,962 |
) |
|
$ |
838,784 |
|
Shares issued on grants of restricted shares |
|
|
54 |
|
|
|
35 |
|
|
|
(35 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Shares issued on grants of performance share units |
|
|
254 |
|
|
|
254 |
|
|
|
(254 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Shares issued on grants of restricted share units |
|
|
50 |
|
|
|
50 |
|
|
|
(50 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock compensation expense |
|
|
— |
|
|
|
— |
|
|
|
3,899 |
|
|
|
— |
|
|
|
— |
|
|
|
3,899 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(154,840 |
) |
|
|
— |
|
|
|
(154,840 |
) |
Dividends declared |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(14,960 |
) |
|
|
— |
|
|
|
(14,960 |
) |
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7,431 |
) |
|
|
(7,431 |
) |
Balance as of September 30, 2023 |
|
|
66,525 |
|
|
$ |
66,471 |
|
|
$ |
358,055 |
|
|
$ |
428,319 |
|
|
$ |
(187,393 |
) |
|
$ |
665,452 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
See accompanying Notes to the Interim Consolidated Financial Statements.
FORM 10-Q
QUARTERLY REPORT - PAGE 5
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands of U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, |
|
|
Nine Months Ended
September 30, |
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
Cash flows from (used in) operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(25,956 |
) |
|
$ |
66,746 |
|
|
$ |
(154,840 |
) |
|
$ |
227,015 |
|
Adjustments to reconcile net income (loss) to cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
40,953 |
|
|
|
32,144 |
|
|
|
128,696 |
|
|
|
95,288 |
|
Deferred income tax provision (recovery) |
|
|
9,520 |
|
|
|
620 |
|
|
|
(34,529 |
) |
|
|
15,627 |
|
Inventory impairment (recovery) |
|
|
(10,000 |
) |
|
|
— |
|
|
|
56,600 |
|
|
|
— |
|
Defined benefit pension plans and other post-retirement benefit plan expense |
|
|
621 |
|
|
|
424 |
|
|
|
1,518 |
|
|
|
1,301 |
|
Stock compensation expense |
|
|
1,754 |
|
|
|
1,214 |
|
|
|
4,367 |
|
|
|
3,680 |
|
Foreign exchange transaction gains |
|
|
(4,830 |
) |
|
|
( |