Mercer Earnings 2019-09-30

MERC 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

Comparables ($MM TTM)
Ticker	M Cap	Assets	Liab	Rev	G Profit	Net Inc	EBITDA	EV	G Margin	EV/EBITDA	ROA
NP	1,095	858	451	990	170	50	108	1,310	17%	12.1	6%
MERC	996	2,030	1,383	1,241	0	148	392	1,739	0%	4.4	7%
SWM	978	1,489	917	1,037	276	86	202	1,511	27%	7.5	6%
GLT	728	1,296	753	904	134	-165	-83	1,058	15%	-12.7	-13%
VRS	653	1,659	824	2,640	116	96	303	694	4%	2.3	6%
RFP	613	3,752	2,152	3,456	2,365	220	373	895	68%	2.4	6%
ESND	474	1,791	1,358	4,987	647	-58	-11	963	13%	-89.5	-3%
VRTV	294	2,697	2,178	8,323	0	-27	73	1,062	0%	14.5	-1%
CLW	284	1,956	1,521	1,736	183	-150	-34	875	11%	-25.6	-8%
TIS	9	334	230	187	-2	-38	7	197	-1%	26.6	-11%

merc-10q_20190930.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, 2019


☐	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 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. (Check one):

Large Accelerated Filer	☒	Accelerated Filer	☐
Emerging Growth Company	☐	Smaller Reporting Company	☐
Non-Accelerated Filer	☐

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 65,629,582 shares of common stock outstanding as at October 30, 2019.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019

(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
	2019			2018			2019			2018
Revenues	$	383,536		$	331,058		$	1,293,239		$	1,045,493
Costs and expenses
Cost of sales, excluding depreciation and amortization		314,894			230,009			994,360			755,428
Cost of sales depreciation and amortization		31,934			23,197			94,108			69,312
Selling, general and administrative expenses		17,961			14,506			54,662			43,883
Operating income		18,747			63,346			150,109			176,870
Other income (expenses)
Interest expense		(18,183	)		(11,729	)		(55,103	)		(35,972	)
Loss on settlement of debt (Note 5(a))		—			—			—			(21,515	)
Legal cost award		—			—			—			(6,951	)
Other income (expenses)		887			(259	)		3,177			(628	)
Total other expenses, net		(17,296	)		(11,988	)		(51,926	)		(65,066	)
Income before provision for income taxes		1,451			51,358			98,183			111,804
Provision for income taxes		(244	)		(10,182	)		(35,101	)		(28,224	)
Net income	$	1,207		$	41,176		$	63,082		$	83,580
Net income per common share
Basic	$	0.02		$	0.63		$	0.96		$	1.28
Diluted	$	0.02		$	0.63		$	0.96		$	1.27
Dividends declared per common share	$	0.1375		$	0.1250		$	0.4000		$	0.3750

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands of U.S. dollars)

	Three Months Ended September 30						Nine Months Ended September 30
	2019			2018			2019			2018
Net income	$	1,207		$	41,176		$	63,082		$	83,580
Other comprehensive income (loss), net of taxes
Foreign currency translation adjustment		(48,538	)		(1,982	)		(28,285	)		(41,477	)
Change in unrecognized losses and prior service costs related to defined benefit pension plans, net of tax of $7 and $43, respectively (2018 - $nil)		39			(574	)		134			(1,302	)
Other comprehensive loss, net of taxes		(48,499	)		(2,556	)		(28,151	)		(42,779	)
Total comprehensive income (loss)	$	(47,292	)	$	38,620		$	34,931		$	40,801

The accompanying notes are an integral part of these 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,
	2019			2018
ASSETS
Current assets
Cash and cash equivalents	$	264,899		$	240,491
Accounts receivable		228,154			252,692
Inventories		269,443			303,813
Prepaid expenses and other		20,512			13,703
Total current assets		783,008			810,699
Property, plant and equipment, net		1,009,639			1,029,257
Investment in joint ventures		55,382			62,574
Intangible assets, net		53,442			53,927
Operating lease right-of-use assets		13,054			—
Other long-term assets		32,220			17,904
Deferred income tax		2,908			1,374
Total assets	$	1,949,653		$	1,975,735
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable and other	$	203,279		$	194,484
Pension and other post-retirement benefit obligations		778			904
Total current liabilities		204,057			195,388
Debt		984,087			1,041,389
Pension and other post-retirement benefit obligations		26,534			25,829
Finance lease liabilities		21,677			24,669
Operating lease liabilities		10,631			—
Other long-term liabilities		13,423			13,924
Deferred income tax		97,857			93,107
Total liabilities		1,358,266			1,394,306
Shareholders’ equity
Common shares $1 par value; 200,000,000 authorized; 65,629,000 issued and outstanding (2018 – 65,202,000)		65,598			65,171
Additional paid-in capital		343,994			342,438
Retained earnings		338,116			301,990
Accumulated other comprehensive loss		(156,321	)		(128,170	)
Total shareholders’ equity		591,387			581,429
Total liabilities and shareholders’ equity	$	1,949,653		$	1,975,735

Commitments and contingencies (Note 14)
Subsequent events (Note 5(a), 8)

The accompanying notes are an integral part of these 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 Equity
Three Months Ended September 30:
Balance June 30, 2019		65,629	$	65,598	$	342,815	$	345,934		$	(107,822	)	$	646,525
Stock compensation expense		—		—		1,179		—			—			1,179
Net income		—		—		—		1,207			—			1,207
Dividends declared		—		—		—		(9,025	)		—			(9,025	)
Other comprehensive loss		—		—		—		—			(48,499	)		(48,499	)
Balance September 30, 2019		65,629	$	65,598	$	343,994	$	338,116		$	(156,321	)	$	591,387

Balance June 30, 2018		65,202	$	65,171	$	340,450	$	232,105		$	(99,224	)	$	538,502
Stock compensation expense		—		—		970		—			—			970
Net income		—		—		—		41,176			—			41,176
Dividends declared		—		—		—		(8,150	)		—			(8,150	)
Other comprehensive loss		—		—		—		—			(2,556	)		(2,556	)
Balance September 30, 2018		65,202	$	65,171	$	341,420	$	265,131		$	(101,780	)	$	569,942

Nine Months Ended September 30:
Balance December 31, 2018	65,202		$	65,171		$	342,438		$	301,990		$	(128,170	)	$	581,429
Shares issued on grants of restricted shares	31			31			(31	)		—			—			—
Shares issued on grants of performance share units	449			449			(449	)		—			—			—
Stock compensation expense	—			—			2,036			—			—			2,036
Net income	—			—			—			63,082			—			63,082
Dividends declared	—			—			—			(26,255	)		—			(26,255	)
Repurchase of common shares	(53	)		(53	)		—			(701	)		—			(754	)
Other comprehensive loss	—			—			—			—			(28,151	)		(28,151	)
Balance September 30, 2019	65,629		$	65,598		$	343,994		$	338,116

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$0.00	66	$996

10-Q	2019-10-31	Quarter: 2019-09-30
10-Q	2019-08-01	Quarter: 2019-06-30
10-Q	2019-05-02	Quarter: 2019-03-31
10-K	2019-02-14	Annual: 2018-12-31
10-Q	2018-10-25	Quarter: 2018-09-30
10-Q	2018-07-26	Quarter: 2018-06-30
10-Q	2018-05-03	Quarter: 2018-03-31
10-K	2018-02-16	Annual: 2017-12-31
10-Q	2017-10-26	Quarter: 2017-09-30
10-Q	2017-07-27	Quarter: 2017-06-30
10-Q	2017-04-28	Quarter: 2017-03-31
10-K	2017-02-10	Annual: 2016-12-31
10-Q	2016-10-27	Quarter: 2016-09-30
10-Q	2016-07-28	Quarter: 2016-06-30
10-Q	2016-04-28	Quarter: 2016-03-31
10-K	2016-02-12	Annual: 2015-12-31
10-Q	2015-10-29	Quarter: 2015-09-30
10-Q	2015-07-30	Quarter: 2015-06-30
10-Q	2015-04-30	Quarter: 2015-03-31
10-K	2015-02-13	Annual: 2014-12-31
10-Q	2014-10-31	Quarter: 2014-09-30
10-Q	2014-08-01	Quarter: 2014-06-30
10-Q	2014-05-02	Quarter: 2014-03-31
10-K	2014-02-21	Annual: 2013-12-31
10-Q	2013-11-01	Quarter: 2013-09-30
10-Q	2013-08-02	Quarter: 2013-06-30
10-Q	2013-05-03	Quarter: 2013-03-31
10-K	2013-02-15	Annual: 2012-12-31
10-Q	2012-11-02	Quarter: 2012-09-30
10-Q	2012-08-03	Quarter: 2012-06-30
10-Q	2012-05-07	Quarter: 2012-03-31
10-K	2012-02-21	Annual: 2011-12-31
10-Q	2011-11-07	Quarter: 2011-09-30
10-Q	2011-08-04	Quarter: 2011-06-30
10-Q	2011-05-09	Quarter: 2011-03-31
10-K	2011-02-17	Annual: 2010-12-31
10-Q	2010-11-04	Quarter: 2010-09-30
10-Q	2010-08-05	Quarter: 2010-06-30
10-Q	2010-05-04	Quarter: 2010-03-31
10-K	2010-02-26	Annual: 2009-12-31

8-K	2019-10-31	Earnings, Other Events, Exhibits
8-K	2019-10-03	Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K	2019-09-19	Earnings, Regulation FD, Exhibits
8-K	2019-09-19	Other Events, Exhibits
8-K	2019-08-01	Earnings, Other Events, Exhibits
8-K	2019-05-31	Shareholder Vote
8-K	2019-05-02	Earnings, Other Events, Exhibits
8-K	2019-04-16	Amend Bylaw, Exhibits
8-K	2019-02-14	Earnings, Other Events, Exhibits
8-K	2018-12-19	Enter Agreement, Leave Agreement, Off-BS Arrangement, Regulation FD, Exhibits
8-K	2018-12-10	M&A, Regulation FD, Exhibits
8-K	2018-12-07	Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K	2018-11-29	Other Events, Exhibits
8-K	2018-11-28	Regulation FD, Other Events, Exhibits
8-K	2018-10-25	Earnings, Other Events, Exhibits
8-K	2018-10-03	Enter Agreement, Regulation FD, Exhibits
8-K	2018-07-26	Earnings, Other Events, Exhibits
8-K	2018-06-01	Shareholder Vote
8-K	2018-05-25	Other Events
8-K	2018-05-03
8-K	2018-02-15	Earnings, Other Events, Exhibits
8-K	2018-01-01	Officers, Regulation FD, Exhibits

EX-31.1	merc-ex311_9.htm
EX-31.2	merc-ex312_10.htm
EX-32.1	merc-ex321_8.htm
EX-32.2	merc-ex322_7.htm