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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, 2023

OR

 

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 66,524,866 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)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenues

 

$

470,821

 

 

$

532,814

 

 

$

1,523,350

 

 

$

1,697,881

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales, excluding depreciation and amortization

 

 

403,267

 

 

 

367,710

 

 

 

1,430,805

 

 

 

1,187,476

 

Cost of sales depreciation and amortization

 

 

40,884

 

 

 

32,122

 

 

 

128,485

 

 

 

95,223

 

Selling, general and administrative expenses

 

 

30,096

 

 

 

24,259

 

 

 

96,439

 

 

 

70,077

 

Operating income (loss)

 

 

(3,426

)

 

 

108,723

 

 

 

(132,379

)

 

 

345,105

 

Other income (expenses)

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(21,863

)

 

 

(17,935

)

 

 

(61,001

)

 

 

(52,731

)

Other income

 

 

3,317

 

 

 

7,252

 

 

 

9,689

 

 

 

24,297

 

Total other expenses, net

 

 

(18,546

)

 

 

(10,683

)

 

 

(51,312

)

 

 

(28,434

)

Income (loss) before income taxes

 

 

(21,972

)

 

 

98,040

 

 

 

(183,691

)

 

 

316,671

 

Income tax recovery (provision)

 

 

(3,984

)

 

 

(31,294

)

 

 

28,851

 

 

 

(89,656

)

Net income (loss)

 

$

(25,956

)

 

$

66,746

 

 

$

(154,840

)

 

$

227,015

 

Net income (loss) per common share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.39

)

 

$

1.01

 

 

$

(2.33

)

 

$

3.43

 

Diluted

 

$

(0.39

)

 

$

1.00

 

 

$

(2.33

)

 

$

3.41

 

Dividends declared per common share

 

$

0.075

 

 

$

0.075

 

 

$

0.225

 

 

$

0.225

 

 

 

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands of U.S. dollars)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income (loss)

 

$

(25,956

)

 

$

66,746

 

 

$

(154,840

)

 

$

227,015

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) related to defined benefit pension plans

 

 

81

 

 

 

11

 

 

 

122

 

 

 

(224

)

Income tax recovery

 

 

 

 

 

 

 

 

 

 

 

62

 

Gain (loss) related to defined benefit pension plans, net of tax

 

 

81

 

 

 

11

 

 

 

122

 

 

 

(162

)

Foreign currency translation adjustments

 

 

(38,439

)

 

 

(94,781

)

 

 

(7,553

)

 

 

(189,323

)

Other comprehensive loss, net of taxes

 

 

(38,358

)

 

 

(94,770

)

 

 

(7,431

)

 

 

(189,485

)

Total comprehensive income (loss)

 

$

(64,314

)

 

$

(28,024

)

 

$

(162,271

)

 

$

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)

 

 

 

September 30,
2023

 

 

December 31,
2022

 

ASSETS

 

 

 

 

 

 

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

)

 

 

(