Mercer Earnings 2019-06-30

MERC 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

merc-10q_20190630.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 June 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 July 31, 2019.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 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 June 30						Six Months Ended June 30
	2019			2018			2019			2018
Revenues	$	425,753		$	346,532		$	909,703		$	714,435
Costs and expenses
Cost of sales, excluding depreciation and amortization		336,433			271,134			679,466			525,419
Cost of sales depreciation and amortization		32,038			22,906			62,174			46,115
Selling, general and administrative expenses		19,472			15,016			36,701			29,377
Operating income		37,810			37,476			131,362			113,524
Other income (expenses)
Interest expense		(18,369	)		(12,128	)		(36,920	)		(24,243	)
Loss on settlement of debt (Note 5(a))		—			—			—			(21,515	)
Legal cost award		—			—			—			(6,951	)
Other income (expenses)		1,251			(132	)		2,290			(369	)
Total other expenses, net		(17,118	)		(12,260	)		(34,630	)		(53,078	)
Income before provision for income taxes		20,692			25,216			96,732			60,446
Provision for income taxes		(10,433	)		(8,461	)		(34,857	)		(18,042	)
Net income	$	10,259		$	16,755		$	61,875		$	42,404
Net income per common share
Basic and diluted	$	0.16		$	0.26		$	0.94		$	0.65
Dividends declared per common share	$	0.1375		$	0.1250		$	0.2625		$	0.2500

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands of U.S. dollars)

	Three Months Ended June 30					Six Months Ended June 30
	2019		2018			2019		2018
Net income	$	10,259	$	16,755		$	61,875	$	42,404
Other comprehensive income (loss), net of taxes
Foreign currency translation adjustment		24,088		(55,807	)		20,237		(39,522	)
Change in unrecognized losses and prior service costs related to defined benefit pension plans, net of tax of $30 and $36, respectively (2018 - $nil)		35		(574	)		95		(728	)
Change in unrealized gains/losses on marketable securities, net of taxes of $nil in all periods.		37		26			16		27
Other comprehensive income (loss), net of taxes		24,160		(56,355	)		20,348		(40,223	)
Total comprehensive income (loss)	$	34,419	$	(39,600	)	$	82,223	$	2,181

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)

	June 30,			December 31,
	2019			2018
ASSETS
Current assets
Cash and cash equivalents	$	257,322		$	240,491
Accounts receivable		273,502			252,692
Inventories		286,839			303,813
Prepaid expenses and other		20,229			13,703
Total current assets		837,892			810,699
Property, plant and equipment, net		1,031,696			1,029,257
Investment in joint ventures		57,659			62,574
Intangible assets, net		55,795			53,927
Operating lease right-of-use assets		14,087			—
Other long-term assets		31,183			17,904
Deferred income tax		1,465			1,374
Total assets	$	2,029,777		$	1,975,735
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable and other	$	222,272		$	194,484
Pension and other post-retirement benefit obligations		831			904
Total current liabilities		223,103			195,388
Debt		983,644			1,041,389
Pension and other post-retirement benefit obligations		26,291			25,829
Finance lease liabilities		23,229			24,669
Operating lease liabilities		11,610			—
Other long-term liabilities		14,394			13,924
Deferred income tax		100,981			93,107
Total liabilities		1,383,252			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		342,815			342,438
Retained earnings		345,934			301,990
Accumulated other comprehensive loss		(107,822	)		(128,170	)
Total shareholders’ equity		646,525			581,429
Total liabilities and shareholders’ equity	$	2,029,777		$	1,975,735

Commitments and contingencies (Note 14)
Subsequent event (Note 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 Income (Loss)			Total Equity
Three Months Ended June 30,
Balance March 31, 2019		65,651		$	65,620		$	341,644		$	345,400		$	(131,982	)	$	620,682
Shares issued on grants of restricted shares		31			31			(31	)		—			—			—
Stock compensation expense		—			—			1,202			—			—			1,202
Net income		—			—			—			10,259			—			10,259
Dividends declared		—			—			—			(9,024	)		—			(9,024	)
Repurchase of common shares		(53	)		(53	)		—			(701	)		—			(754	)
Other comprehensive income		—			—			—			—			24,160			24,160
Balance June 30, 2019		65,629		$	65,598		$	342,815		$	345,934		$	(107,822	)	$	646,525

Balance March 31, 2018		65,171		$	65,128		$	338,734		$	223,501		$	(42,869	)	$	584,494
Shares issued on grants of restricted shares		31			43			(43	)		—			—			—
Stock compensation expense		—			—			1,759			—			—			1,759
Net income		—			—			—			16,755			—			16,755
Dividends declared		—			—			—			(8,151	)		—			(8,151	)
Other comprehensive loss		—			—			—			—			(56,355	)		(56,355	)
Balance June 30, 2018		65,202		$	65,171		$	340,450		$	232,105		$	(99,224	)	$	538,502

Six Months Ended June 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	—			—			857			—			—			857
Net income	—			—			—			61,875			—			61,875
Dividends declared	—			—			—			(17,230	)		—			(17,230	)
Repurchase of common shares	(53	)		(53	)		—			(701	)		—			(754	)
Other comprehensive income	—			—			—			—			20,348			20,348
Balance June 30, 2019	65,629		$	65,598		$	342,815		$	345,934		$	(107,822	)	$	646,525

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$16.97	65	$1,110

10-Q	2019-06-30	Quarter: 2019-06-30
10-Q	2019-03-31	Quarter: 2019-03-31
10-K	2018-12-31	Annual: 2018-12-31
10-Q	2018-09-30	Quarter: 2018-09-30
10-Q	2018-06-30	Quarter: 2018-06-30
10-Q	2018-03-31	Quarter: 2018-03-31
10-K	2017-12-31	Annual: 2017-12-31
10-Q	2017-09-30	Quarter: 2017-09-30
10-Q	2017-06-30	Quarter: 2017-06-30
10-Q	2017-03-31	Quarter: 2017-03-31
10-K	2016-12-31	Annual: 2016-12-31
10-Q	2016-09-30	Quarter: 2016-09-30
10-Q	2016-06-30	Quarter: 2016-06-30
10-Q	2016-03-31	Quarter: 2016-03-31
10-K	2015-12-31	Annual: 2015-12-31
10-Q	2015-09-30	Quarter: 2015-09-30
10-Q	2015-06-30	Quarter: 2015-06-30
10-Q	2015-03-31	Quarter: 2015-03-31
10-K	2014-12-31	Annual: 2014-12-31
10-Q	2014-09-30	Quarter: 2014-09-30
10-Q	2014-06-30	Quarter: 2014-06-30
10-Q	2014-03-31	Quarter: 2014-03-31
10-K	2013-12-31	Annual: 2013-12-31

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	2018-02-15	Earnings, Other Events, Exhibits
8-K	2018-01-01	Officers, Regulation FD, Exhibits

BTI	British American Tobacco	86,910
ASB	Associated BancCorp	3,720
TENB	Tenable Holdings	2,740
GLOP	Gaslog Partners	944
IMXI	International Money Express	431
GCBC	Greene County Bancorp	261
INNT	Innovate Biopharmaceuticals	55
WISA	Summit Wireless Technologies	31
EVOK	Evoke Pharma	16
YUMA	Yuma Energy	6

EX-3.1	merc-ex31_409.htm
EX-31.1	merc-ex311_10.htm
EX-31.2	merc-ex312_11.htm
EX-32.1	merc-ex321_8.htm
EX-32.2	merc-ex322_9.htm