NEW YORK, Oct. 31, 2013 (GLOBE NEWSWIRE) -- Mercer International Inc. MERC MRI today reported results for the third quarter ended September 30, 2013. Operating EBITDA* increased in the third quarter of 2013 to €24.8 million ($32.9 million) from €22.3 million ($27.9 million) in the third quarter of 2012 and €14.0 million ($18.3 million) in the second quarter of 2013. Current quarter Operating EBITDA includes €2.9 million of severance and personnel costs associated with our Celgar mill workforce reduction.
For the third quarter of 2013, our net loss declined to €2.2 million ($2.9 million), or €0.04 ($0.05) per share, from a net loss of €9.7 million ($12.1 million), or €0.17 ($0.21) per share, in the third quarter of 2012 and a net loss of €9.9 million ($12.9 million), or €0.18 ($0.24) per share, for the second quarter of 2013.
Summary Financial Highlights | |||||
Q3 | Q2 | Q3 | YTD | YTD | |
2013 | 2013 | 2012 | 2013 | 2012 | |
(in millions, except per share amounts) | |||||
Pulp revenues | € 186.1 | € 193.7 | € 205.1 | € 559.9 | € 590.6 |
Energy and chemical revenues | 17.0 | 16.5 | 18.2 | 51.7 | 55.1 |
Operating income (loss) | 10.1 | (0.8) | 7.2 | 18.8 | 41.8 |
Operating EBITDA | 24.8 | 14.0 | 22.3 | 63.1 | 85.7 |
Gain (loss) on derivative instruments | 2.0 | 5.3 | (0.9) | 12.1 | 1.3 |
Income tax provision | (0.9) | (0.6) | (1.9) | (2.4) | (4.9) |
Net loss (1) | (2.2) | (9.9) | (9.7) | (12.6) | (7.0) |
Net loss per share(1)(2) | € (0.04) | € (0.18) | € (0.17) | € (0.23) | € (0.13) |
Common shares outstanding at period end | 55.9 | 55.9 | 55.8 | 55.9 | 55.8 |
____________________ | |||||
(1) Attributable to common shareholders. | |||||
(2) Per basic and diluted share. |
Summary Operating Highlights | |||||
Q3 | Q2 | Q3 | YTD | YTD | |
2013 | 2013 | 2012 | 2013 | 2012 | |
Pulp production ('000 ADMTs) | 369.0 | 349.5 | 373.4 | 1,079.7 | 1,118.8 |
Scheduled production downtime ('000 ADMTs) | 9.4 | 16.0 | 10.2 | 25.4 | 32.8 |
Pulp sales ('000 ADMTs) | 356.6 | 368.3 | 404.3 | 1,081.6 | 1,138.3 |
Average NBSK pulp list price in Europe ($/ADMT)(1) | 867 | 857 | 777 | 852 | 817 |
Average NBSK pulp list price in Europe (€/ADMT) | 654 | 656 | 620 | 646 | 637 |
Average pulp sales realizations (€/ADMT)(2) | 515 | 520 | 501 | 511 | 512 |
___________________ | |||||
(1) Source: RISI pricing report. | |||||
(2) Sales realizations after discounts. Incorporates the effect of pulp price variations occurring between the order and shipment dates. | |||||
___________________ | |||||
* Operating EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States ("GAAP") and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. See page 12 of the financial tables included in this press release for a reconciliation of net income (loss) attributable to common shareholders to Operating EBITDA. |
Q3 | Q2 | Q3 | YTD | YTD | |
2013 | 2013 | 2012 | 2013 | 2012 | |
Energy production ('000 MWh) | 444.2 | 405.8 | 436.5 | 1,274.4 | 1,298.2 |
Energy sales ('000 MWh) | 185.4 | 167.5 | 181.3 | 526.6 | 546.4 |
Average Spot Currency Exchange Rates: | |||||
€ / $(3) | 0.7547 | 0.7655 | 0.7999 | 0.7594 | 0.7807 |
C$ / $(3) | 1.0385 | 1.0230 | 0.9954 | 1.0236 | 1.0022 |
C$ / €(4) | 1.3762 | 1.3374 | 1.2452 | 1.3485 | 1.2847 |
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(3) Average Federal Reserve Bank of New York noon spot rate over the reporting period. | |||||
(4) Average Bank of Canada noon spot rate over the reporting period. |
President's Comments
Mr. Jimmy S.H. Lee, President and Chairman, stated: "In the current quarter, Operating EBITDA improved to €24.8 million from €14.0 million in the prior quarter which included costs and production losses associated with our Celgar mill's shutdown. Our results in the current quarter reflect generally stable pulp prices, severance and personnel costs associated with the Celgar workforce reduction, a strong Euro versus the U.S. dollar and continued high fiber costs in Germany."
Mr. Lee added: "At the end of the third quarter of 2013, list prices in Europe were approximately $880 per ADMT and in North America and China were approximately $945 and $695 per ADMT, respectively. A $20 per ADMT price increase in all markets was announced in late September and a further $20 per ADMT price increase has been announced in October 2013. We expect demand and pricing to have an upward trend in the fourth quarter of 2013 due to rising Asian demand, the closure of the Tofte mill in Norway and current NBSK inventory levels being slightly under-balanced at 27 days."
Mr. Lee continued: "In the current quarter, pulp production was approximately 19,500 ADMTs higher and energy production and sales were also approximately 38,400 MWh and 17,900 MWh higher, respectively, than the second quarter. Our Rosenthal mill completed its annual maintenance shutdown essentially on time and budget and our Stendal mill is scheduled to shut down for its annual maintenance in the fourth quarter."
Mr. Lee continued: "Fiber costs at our German mills remained at high levels during the third quarter of 2013 due to continuing strong demand from European pellet and board producers. High fiber costs in Germany were partially offset by continuing price decreases in Canada due to strong sawmill activity. Going forward this year, we currently expect fiber costs in Germany to increase slightly and to remain largely unchanged in Canada."
Mr. Lee added: "In the current quarter, we incurred pre-tax charges of approximately €2.9 million for severance and other personnel related expenses in connection with the Celgar mill workforce reduction. We currently estimate incurring additional pre-tax severance and personnel charges of approximately €1.5 million to €3.0 million in connection therewith in the fourth quarter of 2013 as additional personnel leave the workforce. We expect that our Celgar mill will realize approximately €6.0 million to €7.5 million in annual pre-tax cost savings once the workforce restructuring has been fully implemented, with approximately 80% of such annual cost savings being realized in 2014."
Mr. Lee continued: "Project Blue Mill at our Stendal mill, designed to increase its annual energy production by 109,000 MWh and annual pulp production by 30,000 ADMTs, is expected to be finalized in mid-November 2013. In the meantime, we are pleased to report that the project's new turbine is ramping up energy production and that electricity is currently being sold."
Mr. Lee added: "Our Stendal mill successfully amended its senior project finance credit facility and its amortizing term facility in respect of Project Blue Mill to provide it with greater flexibility going forward. In connection therewith, we contributed $20.0 million to the capital of Stendal and increased our equity ownership in Stendal to 83.0% from 74.9%."
Mr. Lee concluded: "We intend to change our reporting currency from Euros to the U.S. dollar for our public reporting commencing with the fourth quarter this year. We believe the use of U.S. dollar reporting will enhance communication and understanding with shareholders, analysts and other stakeholders and improve comparability of our financial information with other competitors and peer group companies."
Three Months Ended September 30, 2013 Compared to Three Months Ended September 30, 2012
Total revenues for the three months ended September 30, 2013 decreased by approximately 9% to €203.1 million from €223.3 million in the same period in 2012, due to lower pulp revenues and marginally lower energy and chemical revenues. Pulp revenues for the three months ended September 30, 2013 decreased to €186.1 million from €205.1 million in the comparative quarter of 2012, primarily due to lower sales volumes and the impact of a weaker U.S. dollar relative to the Euro, partially offset by a higher realized price.
Energy and chemical revenues decreased by approximately 7% to €17.0 million in the third quarter of 2013 from €18.2 million in the same quarter last year, primarily as a result of lower prices.
Pulp production decreased by approximately 1% to 369,011 ADMTs in the current quarter from 373,369 ADMTs in the same quarter of 2012. We took 10 days (approximately 9,400 ADMTs) of scheduled maintenance downtime at our Rosenthal mill in the third quarter of 2013, compared to seven days (approximately 10,200 ADMTs) of scheduled maintenance downtime at our Celgar mill in the third quarter of 2012.
Pulp sales volumes decreased by approximately 12% to 356,619 ADMTs in the current quarter from 404,301 ADMTs in the comparative quarter, primarily due to lower sales to China, compared to exceedingly high sales to China in the comparative quarter of 2012.
Average pulp sales realizations marginally increased by approximately 3% to €515 per ADMT from approximately €501 per ADMT in the same quarter last year, primarily due to higher average NBSK list prices, partially offset by a weaker U.S. dollar relative to the Euro.
Costs and expenses in the third quarter of 2013 decreased by approximately 11% to €193.0 million from €216.1 million in the comparative period of 2012, primarily due to lower sales volumes and the reversal of certain wastewater fee accruals at our Rosenthal mill.
On average, our overall per unit fiber costs in the current quarter increased by approximately 7% from the same period in 2012 as higher fiber costs in Germany were only partially offset by lower fiber costs in Canada.
Selling, general and administrative expenses were €9.4 million in the third quarter of 2013, compared to €10.0 million in the third quarter of 2012.
For the third quarter of 2013, our operating income increased to €10.1 million from €7.2 million in the comparative quarter of 2012, primarily due to higher pulp sales realizations.
Interest expense in the third quarter of 2013 decreased to €13.0 million from €14.1 million in the comparative quarter of 2012, primarily due to lower debt levels associated with the Stendal mill in the third quarter of 2013.
We recorded a net derivative gain of €2.0 million, which includes an approximately €1.0 million loss related to fixed price pulp swap contracts entered into in the fourth quarter of 2012 and an unrealized gain of approximately €3.0 million on the mark to market adjustment of our Stendal mill's interest rate derivative, compared to a net derivative loss of €0.9 million in the same quarter of last year.
The noncontrolling shareholder's interest in the Stendal mill's net income in the third quarter of 2013 was €0.5 million, compared to €0.6 million in the same quarter last year.
In the third quarter of 2013, Operating EBITDA increased to €24.8 million from €22.3 million in the third quarter of 2012. Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and non-recurring capital asset impairment charges. Operating EBITDA has significant limitations as an analytical tool and should not be considered in isolation or as a substitute for our results as reported under GAAP. See page 12 of the financial tables included in the press release for a reconciliation of net loss attributable to common shareholders to Operating EBITDA.
We reported a net loss attributable to common shareholders of €2.2 million, or €0.04 per basic and diluted share, for the third quarter of 2013, which included a net non-cash unrealized gain of €2.4 million on the fixed price pulp swaps and Stendal interest rate derivative. In the third quarter of 2012, the net loss attributable to common shareholders was €9.7 million, or €0.17 per basic and diluted share, which included a total non-cash unrealized loss of €1.3 million on the Stendal interest rate derivative and fixed price pulp swaps.
Nine Months Ended September 30, 2013 Compared to Nine Months Ended September 30, 2012
Total revenues for the nine months ended September 30, 2013 decreased by approximately 5% to €611.5 million from €645.7 million in the same period in 2012, due to both lower pulp and energy and chemical revenues. Pulp revenues for the nine months ended September 30, 2013 decreased to €559.9 million from €590.6 million in the comparative period of 2012, primarily due to lower pulp sales volumes and a weaker U.S. dollar relative to the Euro.
Energy and chemical revenues decreased by approximately 6% to €51.7 million in the nine months ended September 30, 2013 from €55.1 million in the same period last year, primarily as a result of lower pulp production and lower prices.
Pulp production decreased by approximately 3% to 1,079,677 ADMTs in the nine months ended September 30, 2013 from 1,118,758 ADMTs in the same period of 2012, primarily due to lower pulp production at our Celgar mill. In the prior quarter, the Celgar mill took its annual maintenance shutdown. As a result of weather, equipment and execution issues, the shutdown was four days longer and the startup was slower than budgeted, which resulted in a loss of approximately 30,300 ADMTs of NBSK pulp production.
Pulp sales volumes decreased by approximately 5% to 1,081,564 ADMTs in the nine months ended September 30, 2013 from 1,138,304 ADMTs in the comparative period of 2012, primarily due to lower sales to China and the United States.
Costs and expenses in the nine months ended September 30, 2013 decreased by approximately 2% to €592.8 million from €603.9 million in the comparative period of 2012, primarily due to lower sales volumes and the reversal of certain wastewater fee accruals at our Rosenthal mill.
On average, our per unit fiber costs in the nine months ended September 30, 2013 increased by approximately 4% over the comparative period of 2012, as higher fiber costs in Germany were only partially offset by lower fiber costs in Canada.
For the nine months ended September 30, 2013, operating income decreased to €18.8 million from €41.8 million in the comparative period of 2012, primarily due to the combined effect of higher fiber costs, the impact of a weaker U.S. dollar relative to the Euro and the Celgar mill's maintenance shutdown.
Interest expense in the nine months ended September 30, 2013 decreased to €39.3 million from €42.1 million in the comparative period of 2012, primarily due to lower debt levels associated with the Stendal mill.
We recorded a net derivative gain of €12.1 million, which includes a €1.8 million loss related to fixed price pulp swap contracts entered into in the fourth quarter of 2012 and an unrealized gain of approximately €13.9 million on the mark to market adjustment of our Stendal mill's interest rate derivative, compared to a net derivative gain of €1.3 million in the same period of last year.
In the nine months ended September 30, 2013, Operating EBITDA decreased to €63.1 million from €85.7 million in the nine months ended September 30, 2012.(1)
We reported a net loss attributable to common shareholders of €12.6 million, or €0.23 per basic and diluted share, for the nine months ended September 30, 2013, which included a net non-cash unrealized gain of €12.8 million on the fixed price pulp swaps and Stendal interest rate derivative, partially offset by a negative impact of approximately €11.0 million related to the Celgar maintenance shutdown. In the nine months ended September 30, 2012, the net loss attributable to common shareholders was €7.0 million, or €0.13 per basic and diluted share, which included a net non-cash unrealized gain of €0.8 million on the fixed price pulp swaps and Stendal interest rate derivative.
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(1) See page 12 of the financial tables included in the press release for limitations on the use of Operating EBITDA as an analytical tool and a reconciliation of net income (loss) to Operating EBITDA.
Liquidity and Capital Resources
The following table is a summary of selected financial information as at the dates indicated:
As at September 30, | As at December 31, | |
2013 | 2012 | |
(in thousands) | ||
Financial Position | ||
Cash and cash equivalents | € 134,168 | € 104,239 |
Working capital | 222,981 | 208,573 |
Total assets | 1,176,484 | 1,183,603 |
Long-term liabilities | 766,087 | 768,253 |
Total equity | 262,673 | 278,925 |
As at September 30, 2013, we had approximately €28.3 million and C$21.4 million available under our Rosenthal and Celgar revolving credit facilities, respectively.
In July 2013, we issued an additional $50.0 million of 2017 9.5% Senior Notes at a price of 104.5%.
On September 30, 2013, we completed an amendment to the Stendal mill's senior project finance credit facility and its amortizing term facility in respect of Project Blue Mill to provide the mill greater financial flexibility.
Restricted Group
The following table is a summary of selected financial information for the Restricted Group (which, under the indenture for our 2017 9.5% Senior Notes, is comprised of Mercer International Inc., certain holding subsidiaries and our Rosenthal and Celgar mills) as at the dates indicated:
As at September 30, | As at December 31, | |
2013 | 2012 | |
(in thousands) | ||
Financial Position | ||
Cash and cash equivalents | € 75,075 | € 36,714 |
Working capital | 153,421 | 132,130 |
Total assets | 651,112 | 644,119 |
Long-term liabilities | 298,214 | 260,185 |
Total equity | 299,722 | 335,353 |
Earnings Release Call
In conjunction with this release, Mercer International Inc. will host a conference call, which will be simultaneously broadcast live over the Internet. Management will host the call, which is scheduled for Friday, November 1, 2013 at 10:00 AM (Eastern Daylight Time). Listeners can access the conference call live over the Internet at http://www.media-server.com/m/p/zwwb4a3z. A recording of the completed conference call can be accessed through December 1, 2013 through a link on the Company's home page at http://www.mercerint.com, or by dialing (855) 859-2056 and entering Conference ID 79074350. Please allow 15 minutes prior to the call to visit the site and download and install any necessary audio software.
Mercer International Inc. is a global pulp manufacturing company. To obtain further information on the company, please visit its web site at http://www.mercerint.com.
The preceding includes forward looking statements which involve known and unknown risks and uncertainties which may cause our actual results in future periods to differ materially from forecasted results. Words such as "expects", "anticipates", "projects", "intends", "designed", "will", "believes", "estimates", "may", "could" and variations of such words and similar expressions are intended to identify such forward-looking statements. Among those factors which could cause actual results to differ materially are the following: the highly cyclical nature of our business, raw material costs, our level of indebtedness, competition, foreign exchange and interest rate fluctuations, our use of derivatives, expenditures for capital projects, environmental regulation and compliance, disruptions to our production, market conditions and other risk factors listed from time to time in our SEC reports.
MERCER INTERNATIONAL INC. | ||
INTERIM CONSOLIDATED BALANCE SHEETS | ||
(Unaudited) | ||
(In thousands of Euros) | ||
ASSETS | September 30, | December 31, |
Current assets | 2013 | 2012 |
Cash and cash equivalents | € 134,168 | € 104,239 |
Receivables | 97,303 | 110,087 |
Inventories | 122,604 | 118,300 |
Prepaid expenses and other | 12,395 | 7,907 |
Deferred income tax | 4,235 | 4,465 |
Total current assets | 370,705 | 344,998 |
Long-term assets | ||
Property, plant and equipment | 777,415 | 808,878 |
Deferred note issuance and other | 14,138 | 12,162 |
Deferred income tax | 14,226 | 17,565 |
805,779 | 838,605 | |
Total assets | € 1,176,484 | € 1,183,603 |
LIABILITIES | ||
Current liabilities | ||
Accounts payable and other | € 103,155 | € 89,950 |
Pension and other post-retirement benefit obligations | 767 | 813 |
Debt | 43,802 | 45,662 |
Total current liabilities | 147,724 | 136,425 |
Long-term liabilities | ||
Debt | 676,447 | 665,741 |
Unrealized interest rate derivative losses | 36,759 | 50,678 |
Pension and other post-retirement benefit obligations | 30,737 | 32,141 |
Capital leases and other | 14,505 | 13,936 |
Deferred income tax | 7,639 | 5,757 |
766,087 | 768,253 | |
Total liabilities | 913,811 | 904,678 |
EQUITY | ||
Shareholders' equity | ||
Share capital | 248,923 | 248,371 |
Paid-in capital | (10,425) | (3,547) |
Retained earnings | 13,244 | 25,800 |
Accumulated other comprehensive income | 18,630 | 25,181 |
Total shareholders' equity | 270,372 | 295,805 |
Noncontrolling interest (deficit) | (7,699) | (16,880) |
Total equity | 262,673 | 278,925 |
Total liabilities and equity | € 1,176,484 | € 1,183,603 |
MERCER INTERNATIONAL INC. | ||||
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
(Unaudited) | ||||
(In thousands of Euros, except per share data) |
||||
Three Months Ended | Nine Months Ended | |||
September 30, | September 30, | |||
Revenues | 2013 | 2012 | 2013 | 2012 |
Pulp | € 186,100 | € 205,122 | € 559,879 | € 590,597 |
Energy and chemicals | 17,021 | 18,153 | 51,660 | 55,098 |
203,121 | 223,275 | 611,539 | 645,695 | |
Costs and expenses | ||||
Operating costs | 166,054 | 191,083 | 518,032 | 531,470 |
Operating depreciation and amortization | 14,632 | 14,972 | 44,107 | 43,784 |
22,435 | 17,220 | 49,400 | 70,441 | |
Selling, general and administrative expenses | 9,437 | 10,006 | 27,695 | 28,688 |
Restructuring expenses | 2,926 | -- | 2,926 | -- |
Operating income (loss) | 10,072 | 7,214 | 18,779 | 41,753 |
Other income (expense) | ||||
Interest expense | (13,018) | (14,084) | (39,305) | (42,080) |
Gain (loss) on derivative instruments | 1,978 | (883) | 12,091 | 1,336 |
Other income (expense) | 172 | 517 | 108 | (261) |
Total other income (expense) | (10,868) | (14,450) | (27,106) | (41,005) |
Income (loss) before income taxes | (796) | (7,236) | (8,327) | 748 |
Income tax benefit (provision) | ||||
Current | (1,057) | (870) | 2,022 | (7,207) |
Deferred | 115 | (1,040) | (4,456) | 2,300 |
Net income (loss) | (1,738) | (9,146) | (10,761) | (4,159) |
Less: net income attributable to noncontrolling interest | (482) | (566) | (1,795) | (2,865) |
Net income (loss) attributable to common shareholders | € (2,220) | € (9,712) | € (12,556) | € (7,024) |
Net income (loss) per share attributable to common shareholders | ||||
Basic and diluted | € (0.04) | € (0.17) | € (0.23) | € (0.13) |
MERCER INTERNATIONAL INC. | ||||
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
(Unaudited) | ||||
(In thousands of Euros) | ||||
Three Months Ended | Nine Months Ended | |||
September 30, | September 30, | |||
Cash flows from (used in) operating activities | 2013 | 2012 | 2013 | 2012 |
Net income (loss) | € (1,738) | € (9,146) | € (10,761) | € (4,159) |
Adjustments to reconcile net income (loss) to cash flows from operating activities | ||||
Unrealized loss (gain) on derivative instruments | (2,398) | 883 | (12,774) | (1,336) |
Depreciation and amortization | 14,694 | 15,054 | 44,298 | 43,992 |
Deferred income taxes | (115) | 1,040 | 4,456 | (2,300) |
Stock compensation expense | 621 | 891 | 1,194 | 1,753 |
Pension and other post-retirement expense, net of funding | 124 | (73) | 457 | (128) |
Other | 461 | 1,412 | 2,614 | 2,278 |
Changes in working capital | ||||
Receivables | (696) | (14,122) | 11,349 | 901 |
Inventories | (15,248) | 5,834 | (7,355) | 9,276 |
Accounts payable and accrued expenses | 9,061 | 9,692 | 18,088 | 13,146 |
Other | 77 | (2,239) | (6,413) | (901) |
Net cash from (used in) operating activities | 4,843 | 9,226 | 45,153 | 62,522 |
Cash flows from (used in) investing activities | ||||
Purchase of property, plant and equipment | (6,991) | (9,152) | (29,368) | (27,455) |
Proceeds on sale of property, plant and equipment | 233 | 48 | 248 | 387 |
Proceeds on maturity of marketable securities | -- | 10,213 | -- | 12,221 |
Net cash from (used in) investing activities | (6,758) | 1,109 | (29,120) | (14,847) |
Cash flows from (used in) financing activities | ||||
Repayment of debt and purchase of notes | (22,174) | (15,544) | (42,719) | (27,254) |
Proceeds from issuance of notes and borrowings of debt | 39,607 | -- | 56,607 | -- |
Repayment of capital lease obligations | (396) | (508) | (1,497) | (1,567) |
Proceeds from (repayment of) credit facilities, net | (12,226) | -- | 728 | -- |
Payment of note issuance costs | (1,794) | -- | (1,794) | (1,621) |
Proceeds from government grants | -- | 778 | 4,147 | 3,100 |
Net cash from (used in) financing activities | 3,017 | (15,274) | 15,472 | (27,342) |
Effect of exchange rate changes on cash and cash equivalents | (1,367) | 221 | (1,576) | 764 |
Net increase (decrease) in cash and cash equivalents | (265) | (4,718) | 29,929 | 21,097 |
Cash and cash equivalents, beginning of period | 134,433 | 130,887 | 104,239 | 105,072 |
Cash and cash equivalents, end of period | € 134,168 | € 126,169 | € 134,168 | € 126,169 |
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheets
(Unaudited)
(In thousands of Euros)
The terms of the indenture governing our 9.5% senior unsecured notes require that we provide the results of operations and financial condition of Mercer International Inc. and our restricted subsidiaries under the indenture, collectively referred to as the "Restricted Group". As at and during the three and nine months ended September 30, 2013 and 2012, the Restricted Group was comprised of Mercer International Inc., certain holding subsidiaries and our Rosenthal and Celgar mills. The Restricted Group excludes the Stendal mill.
September 30, 2013 | ||||
Restricted | Unrestricted | Consolidated | ||
Group | Subsidiaries | Eliminations | Group | |
ASSETS | ||||
Current assets | ||||
Cash and cash equivalents | € 75,075 | € 59,093 | € -- | € 134,168 |
Receivables | 52,595 | 44,708 | -- | 97,303 |
Inventories | 68,731 | 53,873 | -- | 122,604 |
Prepaid expenses and other | 7,977 | 4,418 | -- | 12,395 |
Deferred income tax | 2,219 | 2,016 | -- | 4,235 |
Total current assets | 206,597 | 164,108 | -- | 370,705 |
Long-term assets | ||||
Property, plant and equipment | 318,865 | 458,550 | -- | 777,415 |
Deferred note issuance and other | 7,525 | 6,613 | -- | 14,138 |
Deferred income tax | 8,726 | 5,500 | -- | 14,226 |
Due from unrestricted group | 109,399 | -- | (109,399) | -- |
Total assets | € 651,112 | € 634,771 | € (109,399) | € 1,176,484 |
LIABILITIES | ||||
Current liabilities | ||||
Accounts payable and other | € 51,865 | € 51,290 | € -- | € 103,155 |
Pension and other post-retirement benefit obligations | 767 | -- | -- | 767 |
Debt | 544 | 43,258 | -- | 43,802 |
Total current liabilities | 53,176 | 94,548 | -- | 147,724 |
Long-term liabilities | ||||
Debt | 253,671 | 422,776 | -- | 676,447 |
Due to restricted group | -- | 109,399 | (109,399) | -- |
Unrealized interest rate derivative losses | -- | 36,759 | -- | 36,759 |
Pension and other post-retirement benefit obligations | 30,737 | -- | -- | 30,737 |
Capital leases and other | 6,167 | 8,338 | -- | 14,505 |
Deferred income tax | 7,639 | -- | -- | 7,639 |
Total liabilities | 351,390 | 671,820 | (109,399) | 913,811 |
EQUITY | ||||
Total shareholders' equity (deficit) | 299,722 | (29,350) | -- | 270,372 |
Noncontrolling interest (deficit) | -- | (7,699) | -- | (7,699) |
Total liabilities and equity | € 651,112 | € 634,771 | € (109,399) | € 1,176,484 |
MERCER INTERNATIONAL INC. | ||||
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE | ||||
Combined Condensed Balance Sheets | ||||
(Unaudited) | ||||
(In thousands of Euros) | ||||
December 31, 2012 | ||||
Restricted | Unrestricted | Consolidated | ||
Group | Subsidiaries | Eliminations | Group | |
ASSETS | ||||
Current assets | ||||
Cash and cash equivalents | € 36,714 | € 67,525 | € -- | € 104,239 |
Receivables | 61,212 | 48,875 | -- | 110,087 |
Inventories | 74,786 | 43,514 | -- | 118,300 |
Prepaid expenses and other | 5,811 | 2,096 | -- | 7,907 |
Deferred income tax | 2,188 | 2,277 | -- | 4,465 |
Total current assets | 180,711 | 164,287 | -- | 344,998 |
Long-term assets | ||||
Property, plant and equipment | 345,311 | 463,567 | -- | 808,878 |
Deferred note issuance and other | 6,607 | 5,555 | -- | 12,162 |
Deferred income tax | 9,179 | 8,386 | -- | 17,565 |
Due from unrestricted group | 102,311 | -- | (102,311) | -- |
Total assets | € 644,119 | € 641,795 | € (102,311) | € 1,183,603 |
LIABILITIES | ||||
Current liabilities | ||||
Accounts payable and other | € 42,106 | € 47,844 | € -- | € 89,950 |
Pension and other post-retirement benefit obligations | 813 | -- | -- | 813 |
Debt | 5,662 | 40,000 | -- | 45,662 |
Total current liabilities | 48,581 | 87,844 | -- | 136,425 |
Long-term liabilities | ||||
Debt | 216,214 | 449,527 | -- | 665,741 |
Due to restricted group | -- | 102,311 | (102,311) | -- |
Unrealized interest rate derivative losses | -- | 50,678 | -- | 50,678 |
Pension and other post-retirement benefit obligations | 32,141 | -- | -- | 32,141 |
Capital leases and other | 6,073 | 7,863 | -- | 13,936 |
Deferred income tax | 5,757 | -- | -- | 5,757 |
Total liabilities | 308,766 | 698,223 | (102,311) | 904,678 |
EQUITY | ||||
Total shareholders' equity (deficit) | 335,353 | (39,548) | -- | 295,805 |
Noncontrolling interest (deficit) | -- | (16,880) | -- | (16,880) |
Total liabilities and equity | € 644,119 | € 641,795 | € (102,311) | € 1,183,603 |
MERCER INTERNATIONAL INC. | ||||
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE | ||||
Combined Condensed Statements of Operations | ||||
(Unaudited) | ||||
(In thousands of Euros) | ||||
Three Months Ended September 30, 2013 | ||||
Restricted | Unrestricted | Consolidated | ||
Group | Subsidiaries | Eliminations | Group | |
Revenues | ||||
Pulp | € 105,794 | € 80,306 | € -- | € 186,100 |
Energy and chemicals | 5,935 | 11,086 | -- | 17,021 |
111,729 | 91,392 | -- | 203,121 | |
Operating costs | 90,815 | 75,239 | -- | 166,054 |
Operating depreciation and amortization | 8,130 | 6,502 | -- | 14,632 |
Selling, general and administrative expenses | 5,608 | 3,829 | -- | 9,437 |
Restructuring expenses | 2,926 | -- | -- | 2,926 |
107,479 | 85,570 | -- | 193,049 | |
Operating income (loss) | 4,250 | 5,822 | -- | 10,072 |
Other income (expense) | ||||
Interest expense | (6,193) | (8,472) | 1,647 | (13,018) |
Gain (loss) on derivative instruments | (1,060) | 3,038 | -- | 1,978 |
Other income (expense) | 1,791 | 28 | (1,647) | 172 |
Total other income (expense) | (5,462) | (5,406) | -- | (10,868) |
Income (loss) before income taxes | (1,212) | 416 | -- | (796) |
Income tax benefit (provision) | (1,087) | 145 | -- | (942) |
Net income (loss) | (2,299) | 561 | -- | (1,738) |
Less: net income attributable to noncontrolling interest | -- | (482) | -- | (482) |
Net income (loss) attributable to common shareholders | € (2,299) | € 79 | € -- | € (2,220) |
Three Months Ended September 30, 2012 | ||||
Restricted | Unrestricted | Consolidated | ||
Group | Subsidiaries | Eliminations | Group | |
Revenues | ||||
Pulp | € 112,777 | € 92,345 | € -- | € 205,122 |
Energy and chemicals | 6,960 | 11,193 | -- | 18,153 |
119,737 | 103,538 | -- | 223,275 | |
Operating costs | 109,815 | 81,268 | -- | 191,083 |
Operating depreciation and amortization | 8,303 | 6,669 | -- | 14,972 |
Selling, general and administrative expenses | 6,392 | 3,614 | -- | 10,006 |
124,510 | 91,551 | -- | 216,061 | |
Operating income (loss) | (4,773) | 11,987 | -- | 7,214 |
Other income (expense) | ||||
Interest expense | (6,010) | (9,473) | 1,399 | (14,084) |
Gain (loss) on derivative instruments | 353 | (1,236) | -- | (883) |
Other income (expense) | 1,665 | 251 | (1,399) | 517 |
Total other income (expense) | (3,992) | (10,458) | -- | (14,450) |
Income (loss) before income taxes | (8,765) | 1,529 | -- | (7,236) |
Income tax benefit (provision) | (1,192) | (718) | -- | (1,910) |
Net income (loss) | (9,957) | 811 | -- | (9,146) |
Less: net income attributable to noncontrolling interest | -- | (566) | -- | (566) |
Net income (loss) attributable to common shareholders | € (9,957) | € 245 | € -- | € (9,712) |
MERCER INTERNATIONAL INC. | ||||
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE | ||||
Combined Condensed Statements of Operations | ||||
(Unaudited) | ||||
(In thousands of Euros) | ||||
Nine Months Ended September 30, 2013 | ||||
Restricted Group |
Unrestricted Subsidiaries |
Eliminations |
Consolidated Group | |
Revenues | ||||
Pulp | € 311,575 | € 248,304 | € -- | € 559,879 |
Energy and chemicals | 19,065 | 32,595 | -- | 51,660 |
330,640 | 280,899 | -- | 611,539 | |
Operating costs | 283,896 | 234,136 | -- | 518,032 |
Operating depreciation and amortization | 24,579 | 19,528 | -- | 44,107 |
Selling, general and administrative expenses | 16,968 | 10,727 | -- | 27,695 |
Restructuring expenses | 2,926 | -- | -- | 2,926 |
328,369 | 264,391 | -- | 592,760 | |
Operating income (loss) | 2,271 | 16,508 | -- | 18,779 |
Other income (expense) | ||||
Interest expense | (17,939) | (26,309) | 4,943 | (39,305) |
Gain (loss) on derivative instruments | (1,827) | 13,918 | -- | 12,091 |
Other income (expense) | 4,946 | 105 | (4,943) | 108 |
Total other income (expense) | (14,820) | (12,286) | -- | (27,106) |
Income (loss) before income taxes | (12,549) | 4,222 | -- | (8,327) |
Income tax benefit (provision) | (2,714) | 280 | -- | (2,434) |
Net income (loss) | (15,263) | 4,502 | -- | (10,761) |
Less: net income attributable to noncontrolling interest | -- | (1,795) | -- | (1,795) |
Net income (loss) attributable to common shareholders | € (15,263) | € 2,707 | € -- | € (12,556) |
Nine Months Ended September 30, 2012 | ||||
Restricted Group | Unrestricted Subsidiaries |
Eliminations |
Consolidated Group | |
Revenues | ||||
Pulp | € 326,411 | € 264,186 | € -- | € 590,597 |
Energy and chemicals | 21,411 | 33,687 | -- | 55,098 |
347,822 | 297,873 | -- | 645,695 | |
Operating costs | 302,913 | 228,557 | -- | 531,470 |
Operating depreciation and amortization | 23,750 | 20,034 | -- | 43,784 |
Selling, general and administrative expenses | 18,319 | 10,369 | -- | 28,688 |
344,982 | 258,960 | -- | 603,942 | |
Operating income (loss) | 2,840 | 38,913 | -- | 41,753 |
Other income (expense) | ||||
Interest expense | (17,754) | (28,449) | 4,123 | (42,080) |
Gain (loss) on derivative instruments | 1,972 | (636) | -- | 1,336 |
Other income (expense) | 3,405 | 457 | (4,123) | (261) |
Total other income (expense) | (12,377) | (28,628) | -- | (41,005) |
Income (loss) before income taxes | (9,537) | 10,285 | -- | 748 |
Income tax benefit (provision) | (3,305) | (1,602) | -- | (4,907) |
Net income (loss) | (12,842) | 8,683 | -- | (4,159) |
Less: net income attributable to noncontrolling interest | -- | (2,865) | -- | (2,865) |
Net income (loss) attributable to common shareholders | € (12,842) | € 5,818 | € -- | € (7,024) |
MERCER INTERNATIONAL INC. | |||
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE | |||
Combined Condensed Statements of Cash Flows | |||
(Unaudited) | |||
(In thousands of Euros) | |||
Three Months Ended September 30, 2013 | |||
Restricted | Unrestricted | Consolidated | |
Group | Subsidiaries | Group | |
Cash flows from (used in) operating activities | |||
Net income (loss) | € (2,299) | € 561 | € (1,738) |
Adjustments to reconcile net income (loss) to cash flows from operating activities | |||
Unrealized loss (gain) on derivative instruments | 640 | (3,038) | (2,398) |
Depreciation and amortization | 8,192 | 6,502 | 14,694 |
Deferred income taxes | (115) | -- | (115) |
Stock compensation expense | 621 | -- | 621 |
Pension and other post-retirement expense, net of funding | 124 | -- | 124 |
Other | 75 | 386 | 461 |
Changes in working capital | |||
Receivables | (3,350) | 2,654 | (696) |
Inventories | (5,366) | (9,882) | (15,248) |
Accounts payable and accrued expenses | 2,517 | 6,544 | 9,061 |
Other(1) | (2,659) | 2,736 | 77 |
Net cash from (used in) operating activities | (1,620) | 6,463 | 4,843 |
Cash flows from (used in) investing activities | |||
Purchase of property, plant and equipment | (2,199) | (4,792) | (6,991) |
Acquisition of noncontrolling interest | (14,809) | 14,809 | -- |
Proceeds on sale of property, plant and equipment | 194 | 39 | 233 |
Net cash from (used in) investing activities | (16,814) | 10,056 | (6,758) |
Cash flows from (used in) financing activities | |||
Repayment of debt | (544) | (21,630) | (22,174) |
Proceeds from issuance of notes and borrowings of debt | 39,607 | -- | 39,607 |
Repayment of capital lease obligations | (122) | (274) | (396) |
Proceeds from (repayment of) credit facilities, net | (12,226) | -- | (12,226) |
Payment of note issuance costs | (1,306) | (488) | (1,794) |
Proceeds from government grants | -- | -- | -- |
Net cash from (used in) financing activities | 25,409 | (22,392) | 3,017 |
Effect of exchange rate changes on cash and cash equivalents | (1,367) | -- | (1,367) |
Net increase (decrease) in cash and cash equivalents | 5,608 | (5,873) | (265) |
Cash and cash equivalents, beginning of period | 69,467 | 64,966 | 134,433 |
Cash and cash equivalents, end of period | € 75,075 | € 59,093 | € 134,168 |
____________________ | |||
(1) Includes intercompany related transactions. |
MERCER INTERNATIONAL INC. | |||
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE | |||
Combined Condensed Statements of Cash Flows | |||
(Unaudited) | |||
(In thousands of Euros) | |||
Three Months Ended September 30, 2012 | |||
Restricted | Unrestricted | Consolidated | |
Group | Subsidiaries | Group | |
Cash flows from (used in) operating activities | |||
Net income (loss) | € (9,957) | € 811 | € (9,146) |
Adjustments to reconcile net income (loss) to cash flows from operating activities | |||
Unrealized loss (gain) on derivative instruments | (353) | 1,236 | 883 |
Depreciation and amortization | 8,385 | 6,669 | 15,054 |
Deferred income taxes | 1,040 | -- | 1,040 |
Stock compensation expense | 891 | -- | 891 |
Pension and other post-retirement expense, net of funding | (73) | -- | (73) |
Other | 543 | 869 | 1,412 |
Changes in working capital | |||
Receivables | (6,130) | (7,992) | (14,122) |
Inventories | 1,693 | 4,141 | 5,834 |
Accounts payable and accrued expenses | 9,800 | (108) | 9,692 |
Other(1) | (4,225) | 1,986 | (2,239) |
Net cash from (used in) operating activities | 1,614 | 7,612 | 9,226 |
Cash flows from (used in) investing activities | |||
Purchase of property, plant and equipment | (6,380) | (2,772) | (9,152) |
Proceeds on sale of property, plant and equipment | 37 | 11 | 48 |
Proceeds on maturity of marketable securities | 10,213 | -- | 10,213 |
Net cash from (used in) investing activities | 3,870 | (2,761) | 1,109 |
Cash flows from (used in) financing activities | |||
Repayment of debt | (544) | (15,000) | (15,544) |
Repayment of capital lease obligations | (234) | (274) | (508) |
Proceeds from government grants | -- | 778 | 778 |
Net cash from (used in) financing activities | (778) | (14,496) | (15,274) |
Effect of exchange rate changes on cash and cash equivalents | 221 | -- | 221 |
Net increase (decrease) in cash and cash equivalents | 4,927 | (9,645) | (4,718) |
Cash and cash equivalents, beginning of period | 50,096 | 80,791 | 130,887 |
Cash and cash equivalents, end of period | € 55,023 | € 71,146 | € 126,169 |
___________________ | |||
(1) Includes intercompany related transactions. |
MERCER INTERNATIONAL INC. | |||
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE | |||
Combined Condensed Statements of Cash Flows | |||
(Unaudited) | |||
(In thousands of Euros) | |||
Nine Months Ended September 30, 2013 | |||
Restricted Group |
Unrestricted Subsidiaries |
Consolidated Group |
|
Cash flows from (used in) operating activities | |||
Net income (loss) | € (15,263) | € 4,502 | € (10,761) |
Adjustments to reconcile net income (loss) to cash flows from operating activities | |||
Unrealized loss (gain) on derivative instruments | 1,144 | (13,918) | (12,774) |
Depreciation and amortization | 24,770 | 19,528 | 44,298 |
Deferred income taxes | 1,309 | 3,147 | 4,456 |
Stock compensation expense | 1,194 | -- | 1,194 |
Pension and other post-retirement expense, net of funding | 457 | -- | 457 |
Other | 778 | 1,836 | 2,614 |
Changes in working capital | |||
Receivables | 7,174 | 4,175 | 11,349 |
Inventories | 3,004 | (10,359) | (7,355) |
Accounts payable and accrued expenses | 11,143 | 6,945 | 18,088 |
Other(1) | (11,299) | 4,886 | (6,413) |
Net cash from (used in) operating activities | 24,411 | 20,742 | 45,153 |
Cash flows from (used in) investing activities | |||
Purchase of property, plant and equipment | (7,446) | (21,922) | (29,368) |
Acquisition of noncontrolling interest | (14,809) | 14,809 | -- |
Proceeds on sale of property, plant and equipment | 207 | 41 | 248 |
Net cash from (used in) investing activities | (22,048) | (7,072) | (29,120) |
Cash flows from (used in) financing activities | |||
Repayment of debt | (1,089) | (41,630) | (42,719) |
Proceeds from issuance of notes and borrowings of debt | 39,607 | 17,000 | 56,607 |
Repayment of capital lease obligations | (366) | (1,131) | (1,497) |
Proceeds from (repayment of) credit facilities, net | 728 | -- | 728 |
Payment of note issuance costs | (1,306) | (488) | (1,794) |
Proceeds from government grants | -- | 4,147 | 4,147 |
Net cash from (used in) financing activities | 37,574 | (22,102) | 15,472 |
Effect of exchange rate changes on cash and cash equivalents | (1,576) | -- | (1,576) |
Net increase (decrease) in cash and cash equivalents | 38,361 | (8,432) | 29,929 |
Cash and cash equivalents, beginning of period | 36,714 | 67,525 | 104,239 |
Cash and cash equivalents, end of period | € 75,075 | € 59,093 | € 134,168 |
___________________ | |||
(1) Includes intercompany related transactions. |
MERCER INTERNATIONAL INC. | |||
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE | |||
Combined Condensed Statements of Cash Flows | |||
(Unaudited) | |||
(In thousands of Euros) | |||
Nine Months Ended September 30, 2012 | |||
Restricted Group |
Unrestricted Subsidiaries |
Consolidated Group |
|
Cash flows from (used in) operating activities | |||
Net income (loss) | € (12,842) | € 8,683 | € (4,159) |
Adjustments to reconcile net income (loss) to cash flows from operating activities | |||
Unrealized loss (gain) on derivative instruments | (1,972) | 636 | (1,336) |
Depreciation and amortization | 23,958 | 20,034 | 43,992 |
Deferred income taxes | 2,956 | (5,256) | (2,300) |
Stock compensation expense | 1,753 | -- | 1,753 |
Pension and other post-retirement expense, net of funding | (128) | -- | (128) |
Other | 66 | 2,212 | 2,278 |
Changes in working capital | |||
Receivables | (407) | 1,308 | 901 |
Inventories | 3,946 | 5,330 | 9,276 |
Accounts payable and accrued expenses | 12,180 | 966 | 13,146 |
Other(1) | (12,213) | 11,312 | (901) |
Net cash from (used in) operating activities | 17,297 | 45,225 | 62,522 |
Cash flows from (used in) investing activities | |||
Purchase of property, plant and equipment | (19,413) | (8,042) | (27,455) |
Proceeds on sale of property, plant and equipment | 274 | 113 | 387 |
Proceeds on maturity of marketable securities | 12,221 | -- | 12,221 |
Net cash from (used in) investing activities | (6,918) | (7,929) | (14,847) |
Cash flows from (used in) financing activities | |||
Repayment of debt and purchase of notes | (2,671) | (24,583) | (27,254) |
Repayment of capital lease obligations | (600) | (967) | (1,567) |
Payment of note issuance costs | -- | (1,621) | (1,621) |
Proceeds from government grants | 2,322 | 778 | 3,100 |
Net cash from (used in) financing activities | (949) | (26,393) | (27,342) |
Effect of exchange rate changes on cash and cash equivalents | 764 | -- | 764 |
Net increase (decrease) in cash and cash equivalents | 10,194 | 10,903 | 21,097 |
Cash and cash equivalents, beginning of period | 44,829 | 60,243 | 105,072 |
Cash and cash equivalents, end of period | € 55,023 | € 71,146 | € 126,169 |
__________________ | |||
(1) Includes intercompany related transactions. |
MERCER INTERNATIONAL INC.
COMPUTATION OF OPERATING EBITDA
(Unaudited)
Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and non-recurring capital asset impairment charges. Management uses Operating EBITDA as a benchmark measurement of its own operating results, and as a benchmark relative to its competitors. Management considers it to be a meaningful supplement to operating income (loss) as a performance measure primarily because depreciation expense and non-recurring capital asset impairment charges are not an actual cash cost, and depreciation expense varies widely from company to company in a manner that management considers largely independent of the underlying cost efficiency of their operating facilities. In addition, we believe Operating EBITDA is commonly used by securities analysts, investors and other interested parties to evaluate our financial performance.
Operating EBITDA does not reflect the impact of a number of items that affect our net income (loss), including financing costs and the effect of derivative instruments. Operating EBITDA is not a measure of financial performance under GAAP, and should not be considered as an alternative to net income (loss) or income (loss) from operations as a measure of performance, nor as an alternative to net cash from operating activities as a measure of liquidity. The following tables set forth the net income (loss) attributable to common shareholders to Operating EBITDA for both the consolidated group and our Restricted Group:
Three Months Ended | Nine Months Ended | |||
September 30, | September 30, | |||
2013 | 2012 | 2013 | 2012 | |
(in thousands) | (in thousands) | |||
Net loss attributable to common shareholders | € (2,220) | € (9,712) | € (12,556) | € (7,024) |
Net income attributable to noncontrolling interest | 482 | 566 | 1,795 | 2,865 |
Income tax provision | 942 | 1,910 | 2,434 | 4,907 |
Interest expense | 13,018 | 14,084 | 39,305 | 42,080 |
(Gain) loss on derivative instruments | (1,978) | 883 | (12,091) | (1,336) |
Other (income) expense | (172) | (517) | (108) | 261 |
Operating income | 10,072 | 7,214 | 18,779 | 41,753 |
Add: Depreciation and amortization | 14,694 | 15,054 | 44,298 | 43,992 |
Operating EBITDA | € 24,766 | € 22,268 | € 63,077 | € 85,745 |
Three Months Ended | Nine Months Ended | |||
September 30, | September 30, | |||
2013 | 2012 | 2013 | 2012 | |
(in thousands) | (in thousands) | |||
Restricted Group(1) | ||||
Net loss | € (2,299) | € (9,957) | € (15,263) | € (12,842) |
Income tax provision | 1,087 | 1,192 | 2,714 | 3,305 |
Interest expense | 6,193 | 6,010 | 17,939 | 17,754 |
(Gain) loss on derivative instruments | 1,060 | (353) | 1,827 | (1,972) |
Other (income) expense | (1,791) | (1,665) | (4,946) | (3,405) |
Operating income (loss) | 4,250 | (4,773) | 2,271 | 2,840 |
Add: Depreciation and amortization | 8,192 | 8,385 | 24,770 | 23,958 |
Operating EBITDA | € 12,442 | € 3,612 | € 27,041 | € 26,798 |
_________________ | ||||
(1) For the Restricted Group, net income (loss) attributable to common shareholders and net income (loss) are the same. | ||||
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