Mercer International Inc. Reports Strong 2014 Third Quarter Results
NEW YORK, Oct. 30, 2014 (GLOBE NEWSWIRE) -- Mercer International Inc. (Nasdaq: MERC) (TSX:MRI.U) today reported results for the third quarter ended September 30, 2014. Operating EBITDA* in the third quarter of 2014 increased to $67.6 million from $32.8 million in the third quarter of 2013 and $41.9 million in the prior quarter of 2014. For the third quarter of 2014, we had record net income of $88.3 million, or $1.38 per basic and $1.37 per diluted share, compared to net loss of $3.0 million, or $0.05 per basic and diluted share, in the third quarter of 2013.
On October 1, 2013, we changed our reporting currency from the Euro to the U.S. dollar.
Summary Financial Highlights
| Q3 | Q2 | Q3 | YTD | YTD | |
| 2014 | 2014 | 2013 | 2014 | 2013 | |
| (in millions, except per share amounts) | |||||
| Pulp revenues | $ 277.0 | $ 259.5 | $ 246.7 | $ 814.9 | $ 737.6 |
| Energy and chemical revenues | $ 24.7 | $ 25.7 | $ 22.6 | $ 77.5 | $ 68.1 |
| Operating income | $ 48.2 | $ 22.0 | $ 13.3 | $ 109.5 | $ 24.7 |
| Operating EBITDA* | $ 67.6 | $ 41.9 | $ 32.8 | $ 168.5 | $ 83.1 |
| Gain on settlement of debt | $ 31.9 | $ ‑ | $ ‑ | $ 31.9 | $ ‑ |
| Gain on derivative instruments | $ 3.4 | $ 2.5 | $ 2.6 | $ 9.2 | $ 15.9 |
| Income tax benefit (provision) | $ 29.2 | $ (4.6) | $ (1.2) | $ 22.8 | $ (3.2) |
| Net income (loss)(1) | $ 88.3 | $ 0.6 | $ (3.0) | $ 109.9 | $ (16.5) |
| Net income (loss) per share(1) | |||||
| Basic | $ 1.38 | $ 0.01 | $ (0.05) | $ 1.79 | $ (0.30) |
| Diluted | $ 1.37 | $ 0.01 | $ (0.05) | $ 1.78 | $ (0.30) |
| Common shares outstanding at period end | 64.3 | 64.3 | 55.9 | 64.3 | 55.9 |
| (1) Attributable to common shareholders. | |||||
Summary Operating Highlights
| Q3 | Q2 | Q3 | YTD | YTD | |
| 2014 | 2014 | 2013 | 2014 | 2013 | |
| Pulp production ('000 ADMTs) | 375.7 | 353.8 | 369.0 | 1,111.3 | 1,079.7 |
| Scheduled production downtime ('000 ADMTs) | 10.1 | 17.7 | 9.4 | 27.8 | 25.4 |
| Scheduled production downtime (days) | 10 | 12 | 10 | 22 | 21 |
| Pulp sales ('000 ADMTs) | 386.9 | 356.8 | 356.6 | 1,125.1 | 1,081.6 |
| Average NBSK pulp list price in Europe ($/ADMT)(1) | 932 | 925 | 867 | 926 | 852 |
| Average pulp sales realizations ($/ADMT)(2) | 709 | 720 | 682 | 717 | 673 |
| Energy production ('000 MWh) | 472.0 | 446.2 | 444.2 | 1,384.5 | 1,274.4 |
| Energy sales ('000 MWh) | 207.4 | 197.1 | 185.4 | 606.0 | 526.6 |
| Average Spot Currency Exchange Rates: | |||||
| $ / €(3) | 1.3250 | 1.3716 | 1.3252 | 1.3555 | 1.3171 |
| $ / C$(3) | 0.9184 | 0.9169 | 0.9630 | 0.9141 | 0.9772 |
| (1) Source: RISI pricing report. |
| (2) Sales realizations after discounts. Incorporates the effect of pulp price variations occurring between the order and shipment dates. |
| (3) Average Federal Reserve Bank of New York noon spot rate over the reporting period. |
* 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.
President's Comments
Mr. Jimmy S.H. Lee, President and Chairman, stated: "For the third quarter of 2014, our Operating EBITDA increased by approximately 106% to $67.6 million from $32.8 million in the comparative quarter of 2013, primarily as a result of lower per unit fiber costs, higher pulp pricing and the strengthening of the U.S. dollar relative to the Canadian dollar and the Euro. Compared to the prior quarter of 2014, our Operating EBITDA increased by approximately 61% from $41.9 million, primarily as a result of less lost production from scheduled maintenance downtime at our mills and the overall strengthening of the U.S. dollar relative to the Euro and the Canadian dollar."
Mr. Lee continued: "We had ten days of scheduled maintenance downtime at our Rosenthal mill, or approximately 10,100 ADMTs, in the current quarter which adversely impacted Operating EBITDA by approximately $5.6 million, comprised of approximately $4.4 million in direct out-of-pocket expenses and the balance for reduced production. Many of our competitors that report their financial results using "IFRS" capitalize their direct costs of maintenance shutdowns. Going forward, our Stendal mill has a two-day scheduled maintenance shutdown in the fourth quarter."
Mr. Lee continued: "In the current quarter, our mills performed very well, achieving near record pulp sales due to strong demand in Europe and China and record energy sales volumes. Energy production at our mills increased by approximately 6% compared to the same period in 2013. Energy and chemical revenues increased by approximately 9% in the current quarter from the same period of 2013. We currently expect energy and chemical production and revenues to remain generally consistent in the fourth quarter of 2014 due to fewer scheduled maintenance shutdown days, partially offset by some planned work at the Celgar mill related to its lime kiln."
Mr. Lee continued: "NBSK list prices were essentially flat during the third quarter of 2014 compared to the prior quarter due to steady demand, with a modest increase in Europe. At the end of the current quarter, the NBSK list price in North America and China was approximately $1,030 and $730 per ADMT, respectively, while the list price in Europe increased to $935 per ADMT. We currently expect list prices to remain flat during the fourth quarter although some analysts continue to predict that the new South American hardwood capacity will negatively affect NBSK demand and pricing."
Mr. Lee continued: "The NBSK pulp market remained generally under-balanced at approximately 27 days' supply at the end of the current quarter. We believe the NBSK pulp market is generally balanced when supply is at approximately 30 days. During the quarter, world producer inventories increased by two days from the end of the second quarter of 2014. We currently expect demand to be steady through the fourth quarter of 2014 and going into 2015 as new tissue machines are expected to come online in China."
Mr. Lee continued: "On average, our per unit fiber costs for our German mills in the current quarter decreased by approximately 5% from the prior quarter of 2014 due to lower chip prices resulting from sawmills running at higher rates, a strong supply of logs and lower demand from pellet producers and board manufacturers. Our per unit fiber cost for our Celgar mill remained generally flat during the third quarter of 2014, compared to the prior quarter. For the next quarter of 2014, we currently expect our overall per unit fiber costs to increase marginally."
Mr. Lee continued: "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. We also acquired all of the shareholder loans and substantially all of the shares of the minority shareholder in our Stendal mill and other rights. As a result of these transactions, we now consolidate all of the economic interest in Stendal."
Mr. Lee concluded: "In connection with our acquisition of all of the shareholder loans of the minority shareholder in our Stendal mill, during the current quarter, we recorded a non-cash gain of $31.9 million on the settlement of such debt. During the current quarter, we also recorded a non-cash gain of $31.3 million as an income tax benefit on the deferred tax assets associated with our Stendal mill."
Three Months Ended September 30, 2014 Compared to Three Months Ended September 30, 2013
Total revenues for the three months ended September 30, 2014 increased by approximately 12% to $301.6 million from $269.2 million in the same period in 2013, due to higher pulp revenues and higher energy and chemical revenues.
Pulp revenues for the three months ended September 30, 2014 increased by approximately 12% to $277.0 million from $246.7 million in the comparative quarter of 2013, due to higher sales volumes and higher pulp price realizations.
Energy and chemical revenues increased by approximately 9% to $24.7 million in the third quarter of 2014 from $22.6 million in the same quarter last year, primarily because of record energy sales volumes resulting from Project Blue Mill coming online at our Stendal mill at the end of 2013.
Pulp production increased by approximately 2% to 375,742 ADMTs in the current quarter from 369,011 ADMTs in the same quarter of 2013. We had an aggregate of ten days (approximately 10,100 ADMTs) of scheduled maintenance downtime at our Rosenthal mill in the third quarter of 2014. In the fourth quarter of 2014, our Stendal mill is scheduled to have a second two-day maintenance shutdown and our Celgar mill has some planned work related to its lime kiln which may cause it to run at a lower capacity for a short period and lower planned production by approximately 4,500 ADMTs.
Pulp sales volumes increased by approximately 9% to 386,944 ADMTs in the current quarter from 356,619 ADMTs in the comparative quarter, primarily due to strong demand in Europe.
Average pulp sales realizations increased by approximately 4% to $709 per ADMT from approximately $682 per ADMT in the same quarter last year primarily due to higher pulp prices.
Costs and expenses in the third quarter of 2014 decreased by approximately 1% to $253.4 million from $255.9 million in the comparative period of 2013, primarily due to lower per unit fiber costs and the impact of a stronger U.S. dollar on our Canadian dollar and Euro denominated expenses, partially offset by the impact of higher sales volumes.
Transportation costs increased marginally to $24.3 million in the current quarter of 2014 from $22.6 million in the comparative quarter of 2013 primarily due to higher sales volumes and marginally higher freight costs at our Celgar mill resulting from limitations on rail car availability.
On average, our overall per unit fiber costs in the current quarter decreased by approximately 12% from the same period in 2013, primarily as a result of a decrease in per unit fiber costs for our German mills due to lower chip prices resulting from sawmills running at higher rates, a strong supply of logs and lower demand from pellet producers and board manufacturers. Our per unit fiber costs for our Celgar mill decreased during the third quarter of 2014 compared to the same quarter last year due to the strong supply of pulpwood and residual chips, despite increased demand for fiber from coastal mills, and the impact of a stronger U.S. dollar on our Canadian dollar denominated expenses. For the next quarter of 2014, we currently expect our overall per unit fiber costs to increase marginally due to an expected slight reduction in German chip supply and increased demand for chips from British Columbia's coastal mills.
For the third quarter of 2014, our operating income increased by approximately 262% to $48.2 million from $13.3 million in the comparative quarter of 2013, primarily due to lower per unit fiber costs, higher pulp prices and the impact of a stronger U.S. dollar on our Canadian dollar and Euro denominated expenses.
Interest expense was $17.5 million in the third quarter of 2014, compared to $17.3 million in the comparative quarter of 2013.
The noncontrolling shareholder's interest in the Stendal mill's net income in the third quarter of 2014 was $3.5 million, compared to $0.6 million in the same quarter last year.
In the third quarter of 2014, Operating EBITDA increased to $67.6 million from $32.8 million in the third quarter of 2013. 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 income (loss) attributable to common shareholders to Operating EBITDA.
We recorded a non-cash derivative gain of $3.4 million on the mark to market adjustment of our Stendal mill's interest rate derivative in the third quarter of 2014, compared to a net derivative gain of $2.6 million in the same quarter of last year.
During the current quarter, we recorded a non-cash gain of $31.9 million on the settlement of debt as a result of our acquisition of all of the shareholder loans of the former noncontrolling shareholder in Stendal which had a net book value of $47.7 million for purchase consideration of $15.8 million.
During the current quarter, we recorded a net income tax benefit of $29.2 million, compared to a net income tax expense of $1.2 million in the same quarter of 2013, primarily due to the recognition of income tax loss carry-forwards associated with our Stendal mill.
We reported record net income attributable to common shareholders of $88.3 million, or $1.38 per basic and $1.37 per diluted share, for the third quarter of 2014. In the third quarter of 2013, the net loss attributable to common shareholders was $3.0 million, or $0.05 per basic and diluted share.
Nine Months Ended September 30, 2014 Compared to Nine Months Ended September 30, 2013
Total revenues for the nine months ended September 30, 2014 increased by approximately 11% to $892.5 million from $805.7 million in the same period in 2013, due to higher pulp revenues and higher energy and chemical revenues.
Pulp revenues for the nine months ended September 30, 2014 increased by approximately 10% to $814.9 million from $737.6 million in the comparative period of 2013, due to higher pulp price realizations and higher sales volumes.
Energy and chemical revenues increased by approximately 14% to $77.5 million for the nine months ended September 30, 2014 from $68.1 million in the same period last year, primarily because of record energy sales volumes resulting from Project Blue Mill coming online at our Stendal mill at the end of 2013.
Pulp production increased by approximately 3% to 1,111,330 ADMTs in the nine months ended September 30, 2014 from 1,079,677 ADMTs in the same period of 2013. We had an aggregate of 22 days (approximately 27,800 ADMTs) of scheduled maintenance downtime at our mills in the nine months ended September 30, 2014.
Pulp sales volumes increased by approximately 4% to 1,125,054 ADMTs in the nine months ended September 30, 2014 from 1,081,564 ADMTs in the comparative period of 2013, primarily due to strong demand in Europe.
Average pulp sales realizations increased by approximately 7% to $717 per ADMT from approximately $673 per ADMT in the same period last year, primarily due to higher pulp prices.
Costs and expenses in the nine months ended September 30, 2014 increased marginally to $783.0 million from $781.0 million in the comparative period of 2013, primarily due to higher sales volumes and the impact of a weaker U.S. dollar on our Euro denominated expenses, mostly offset by lower per unit fiber costs and the impact of a stronger U.S. dollar on our Canadian dollar denominated expenses.
Transportation costs marginally increased to $68.6 million in the nine months ended September 30, 2014 from $67.8 million in the comparative period of 2013.
On average, our overall per unit fiber costs in the nine months ended September 30, 2014 decreased by approximately 4% from the same period in 2013, primarily as a result of a decrease in per unit fiber costs for our German mills due to lower chip prices resulting from sawmills running at high rates, a stronger supply of logs and lower demand from pellet producers and board manufacturers. Our per unit fiber costs for our Celgar mill decreased during the nine months ended September 30, 2014 compared to the same period last year due to strong sawmill activity in the region and the impact of a stronger U.S. dollar on our Canadian dollar denominated expenses.
In the nine months ended September 30, 2014, our operating income increased to $109.5 million from $24.7 million in the comparative period of 2013, primarily due to higher pulp price realizations, lower per unit fiber costs and higher pulp and record energy sales volumes.
Interest expense in the nine months ended September 30, 2014 marginally increased to $52.1 million from $51.8 million in the comparative period of 2013.
In the nine months ended September 30, 2014, Operating EBITDA increased to $168.5 million from $83.1 million in the same period of 2013. See page 12 of the financial tables included in the press release for a reconciliation of net income (loss) attributable to common shareholders to Operating EBITDA.
We recorded a non-cash derivative gain of $9.2 million on the mark to market adjustment of our Stendal mill's interest rate derivative, compared to a net derivative gain of $15.9 million in the same period of last year.
During the nine months ended September 30, 2014, we recorded a non-cash gain on the settlement of debt of $31.9 million as a result of our acquisition of all of the shareholder loans of the former noncontrolling shareholder in Stendal.
During the nine months ended September 30, 2014, we recorded a net income tax benefit of $22.8 million, compared to a net income tax expense of $3.2 million in the same period of 2013, primarily due to the recognition of income tax loss carry-forwards associated with our Stendal mill.
We reported net income attributable to common shareholders of $109.9 million, or $1.79 per basic and $1.78 per diluted share, for the nine months ended September 30, 2014. In the nine months ended September 30, 2013, the net loss attributable to common shareholders was $16.5 million, or $0.30 per basic and diluted share.
Liquidity and Capital Resources
The following table is a summary of selected financial information as at the dates indicated:
| As at September 30, 2014 | As at December 31, 2013 | |
| (in thousands) | ||
| Financial Position | ||
| Cash and cash equivalents | $ 239,923 | $ 147,728 |
| Working capital | $ 409,409 | $ 306,274 |
| Total assets | $ 1,547,916 | $ 1,548,559 |
| Long-term liabilities | $ 928,079 | $ 1,034,743 |
| Total equity | $ 475,116 | $ 348,317 |
As at September 30, 2014, we had approximately €28.4 million and C$38.3 million available under our Rosenthal and Celgar revolving credit facilities, respectively.
On September 25, 2014, we amended and restated our Stendal credit facilities to provide the mill with greater financial flexibility. As part of the amendments and restatements, we made a capital investment of $20.0 million in Stendal on such date. In October 2014, we amended the revolving credit facility for our Celgar mill to extend its maturity date to May 2019 and reduce the applicable margin on interest rates for Canadian and U.S. dollar denominated balances by 0.25%.
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, 2014 | As at December 31, 2013 | |
| (in thousands) | ||
| Financial Position | ||
| Cash and cash equivalents | $ 137,218 | $ 82,910 |
| Working capital | $ 256,906 | $ 211,749 |
| Total assets | $ 872,428 | $ 858,824 |
| Long-term liabilities | $ 401,945 | $ 394,821 |
| Total equity | $ 410,007 | $ 412,033 |
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, October 31, 2014 at 10:00 AM (Eastern Daylight Time). Listeners can access the conference call live and archived through November 30, 2014, over the Internet at http://www.media-server.com/m/p/zarv37tk or through a link on the Company's home page at http://www.mercerint.com. 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.
-FINANCIAL TABLES FOLLOW-
| MERCER INTERNATIONAL INC. | ||
| INTERIM CONSOLIDATED BALANCE SHEETS | ||
| (Unaudited) | ||
| (In thousands) | ||
| September 30, | December 31, | |
| 2014 | 2013 | |
| ASSETS | ||
| Current assets | ||
| Cash and cash equivalents | $ 239,923 | $ 147,728 |
| Receivables | 139,326 | 135,893 |
| Inventories | 154,204 | 170,908 |
| Prepaid expenses and other | 10,052 | 10,918 |
| Deferred income tax | 10,625 | 6,326 |
| Total current assets | 554,130 | 471,773 |
| Long-term assets | ||
| Property, plant and equipment | 923,993 | 1,038,631 |
| Deferred note issuance costs and other | 20,402 | 20,998 |
| Deferred income tax | 49,391 | 17,157 |
| 993,786 | 1,076,786 | |
| Total assets | $ 1,547,916 | $ 1,548,559 |
| LIABILITIES | ||
| Current liabilities | ||
| Accounts payable and other | $ 111,151 | $ 103,814 |
| Pension and other post-retirement benefit obligations | 1,262 | 1,330 |
| Debt | 32,308 | 60,355 |
| Total current liabilities | 144,721 | 165,499 |
| Long-term liabilities | ||
| Debt | 815,145 | 919,017 |
| Interest rate derivative liability | 34,036 | 46,517 |
| Pension and other post-retirement benefit obligations | 32,999 | 35,466 |
| Capital leases and other | 21,170 | 19,293 |
| Deferred income tax | 24,729 | 14,450 |
| 928,079 | 1,034,743 | |
| Total liabilities | 1,072,800 | 1,200,242 |
| EQUITY | ||
| Shareholders' equity | ||
| Share capital | 386,338 | 328,549 |
| Paid-in capital | 4,221 | (11,756) |
| Retained earnings | 97,009 | 10,815 |
| Accumulated other comprehensive income (loss) | (12,452) | 31,470 |
| Total shareholders' equity | 475,116 | 359,078 |
| Noncontrolling interest (deficit) | -- | (10,761) |
| Total equity | 475,116 | 348,317 |
| Total liabilities and equity | $ 1,547,916 | $ 1,548,559 |
| MERCER INTERNATIONAL INC. | ||||
| INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| (Unaudited) | ||||
| (In thousands, except per share data) | ||||
| Three Months Ended | Nine Months Ended | |||
| September 30, | September 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| Revenues | ||||
| Pulp | $ 276,959 | $ 246,657 | $ 814,947 | $ 737,641 |
| Energy and chemicals | 24,651 | 22,561 | 77,540 | 68,062 |
| 301,610 | 269,218 | 892,487 | 805,703 | |
| Costs and expenses | ||||
| Operating costs | 222,831 | 220,160 | 689,600 | 682,507 |
| Operating depreciation and amortization | 19,314 | 19,394 | 58,784 | 58,111 |
| 59,465 | 29,664 | 144,103 | 65,085 | |
| Selling, general and administrative expenses | 11,279 | 12,505 | 34,653 | 36,488 |
| Restructuring expenses | -- | 3,855 | -- | 3,855 |
| Operating income | 48,186 | 13,304 | 109,450 | 24,742 |
| Other income (expense) | ||||
| Interest expense | (17,456) | (17,254) | (52,071) | (51,784) |
| Gain on settlement of debt | 31,851 | -- | 31,851 | -- |
| Gain (loss) on derivative instruments | 3,447 | 2,645 | 9,224 | 15,930 |
| Other income (expense) | (3,408) | 226 | (3,484) | 142 |
| Total other income (expense) | 14,434 | (14,383) | (14,480) | (35,712) |
| Income (loss) before income taxes | 62,620 | (1,079) | 94,970 | (10,970) |
| Income tax benefit (provision) | ||||
| Current | (1,106) | (1,380) | (2,633) | 2,664 |
| Deferred | 30,305 | 133 | 25,424 | (5,871) |
| Net income (loss) | 91,819 | (2,326) | 117,761 | (14,177) |
| Less: net income attributable to noncontrolling interest | (3,482) | (640) | (7,812) | (2,365) |
| Net income (loss) attributable to common shareholders | $ 88,337 | $ (2,966) | $ 109,949 | $ (16,542) |
| Net income (loss) per share attributable to common shareholders | ||||
| Basic | $ 1.38 | $ (0.05) | $ 1.79 | $ (0.30) |
| Diluted | $ 1.37 | $ (0.05) | $ 1.78 | $ (0.30) |
| MERCER INTERNATIONAL INC. | ||||
| INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
| (Unaudited) | ||||
| (In thousands) | ||||
| Three Months Ended | Nine Months Ended | |||
| September 30, | September 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| Cash flows from (used in) operating activities | ||||
| Net income (loss) | $ 91,819 | $ (2,326) | $ 117,761 | $ (14,177) |
| Adjustments to reconcile net income (loss) to cash flows from operating activities | ||||
| Gain on settlement of debt | (31,851) | -- | (31,851) | -- |
| Unrealized loss (gain) on derivative instruments | (3,447) | (3,200) | (9,224) | (16,830) |
| Depreciation and amortization | 19,397 | 19,476 | 59,035 | 58,363 |
| Deferred income taxes | (30,305) | (133) | (25,424) | 5,871 |
| Stock compensation expense | 592 | 821 | 923 | 1,573 |
| Pension and other post-retirement expense, net of funding | (507) | 165 | (82) | 602 |
| Other | 5,890 | 616 | 7,394 | 3,444 |
| Changes in working capital | ||||
| Receivables | (14,439) | (870) | (17,254) | 14,952 |
| Inventories | (147) | (20,058) | 5,186 | (9,690) |
| Accounts payable and accrued expenses | 19 | 11,973 | 14,199 | 23,831 |
| Other | (172) | 76 | (2,846) | (8,449) |
| Net cash from (used in) operating activities | 36,849 | 6,540 | 117,817 | 59,490 |
| Cash flows from (used in) investing activities | ||||
| Purchase of property, plant and equipment | (9,418) | (9,298) | (22,135) | (38,692) |
| Purchase of intangible assets | (1,135) | -- | (3,590) | -- |
| Other | (418) | 307 | (145) | 327 |
| Net cash from (used in) investing activities | (10,971) | (8,991) | (25,870) | (38,365) |
| Cash flows from (used in) financing activities | ||||
| Repayment of debt | (14,683) | (29,994) | (45,224) | (56,414) |
| Proceeds from issuance of notes and borrowings of debt | -- | 52,250 | -- | 74,473 |
| Proceeds from issuance of shares | (84) | -- | 53,858 | -- |
| Repayment of capital lease obligations | (580) | (526) | (1,772) | (1,972) |
| Proceeds from sale and lease-back transactions | -- | -- | 1,047 | -- |
| Proceeds from (repayment of) credit facilities, net | -- | (16,094) | -- | 966 |
| Payment of note issuance costs | (592) | (2,364) | (592) | (2,364) |
| Proceeds from government grants | 2,028 | -- | 6,086 | 5,413 |
| Net cash from (used in) financing activities | (13,911) | 3,272 | 13,403 | 20,102 |
| Effect of exchange rate changes on cash and cash equivalents | (13,067) | 5,865 | (13,155) | 2,917 |
| Net increase (decrease) in cash and cash equivalents | (1,100) | 6,686 | 92,195 | 44,144 |
| Cash and cash equivalents, beginning of period | 241,023 | 174,897 | 147,728 | 137,439 |
| Cash and cash equivalents, end of period | $ 239,923 | $ 181,583 | $ 239,923 | $ 181,583 |
MERCER INTERNATIONAL INC. RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE Combined Condensed Balance Sheets (Unaudited) (In thousands)
The terms of the indenture governing our 9.5% senior unsecured notes requires 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, 2014 and 2013, 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, 2014 | ||||
| Restricted | Unrestricted | Consolidated | ||
| Group | Subsidiaries | Eliminations | Group | |
| ASSETS | ||||
| Current assets | ||||
| Cash and cash equivalents | $ 137,218 | $ 102,705 | $ -- | $ 239,923 |
| Receivables | 73,567 | 65,759 | -- | 139,326 |
| Inventories | 96,399 | 57,805 | -- | 154,204 |
| Prepaid expenses and other | 6,553 | 3,499 | -- | 10,052 |
| Deferred income tax | 3,645 | 6,980 | -- | 10,625 |
| Total current assets | 317,382 | 236,748 | -- | 554,130 |
| Long-term assets | ||||
| Property, plant and equipment | 380,964 | 543,029 | -- | 923,993 |
| Deferred note issuance costs and other | 10,409 | 9,993 | -- | 20,402 |
| Deferred income tax | 15,286 | 34,105 | -- | 49,391 |
| Due from unrestricted group | 148,387 | -- | (148,387) | -- |
| Total assets | $ 872,428 | $ 823,875 | $ (148,387) | $ 1,547,916 |
| LIABILITIES | ||||
| Current liabilities | ||||
| Accounts payable and other | $ 59,214 | $ 51,937 | $ -- | $ 111,151 |
| Pension and other post-retirement benefit obligations | 1,262 | -- | -- | 1,262 |
| Debt | -- | 32,308 | -- | 32,308 |
| Total current liabilities | 60,476 | 84,245 | -- | 144,721 |
| Long-term liabilities | ||||
| Debt | 335,995 | 479,150 | -- | 815,145 |
| Due to restricted group | -- | 148,387 | (148,387) | -- |
| Interest rate derivative liability | -- | 34,036 | -- | 34,036 |
| Pension and other post-retirement benefit obligations | 32,999 | -- | -- | 32,999 |
| Capital leases and other | 8,222 | 12,948 | -- | 21,170 |
| Deferred income tax | 24,729 | -- | -- | 24,729 |
| Total liabilities | 462,421 | 758,766 | (148,387) | 1,072,800 |
| EQUITY | ||||
| Total shareholders' equity (deficit) | 410,007 | 65,109 | -- | 475,116 |
| Total liabilities and equity | $ 872,428 | $ 823,875 | $ (148,387) | $ 1,547,916 |
| MERCER INTERNATIONAL INC. | ||||
| RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE | ||||
| Combined Condensed Balance Sheets | ||||
| (Unaudited) | ||||
| (In thousands) | ||||
| December 31, 2013 | ||||
| Restricted | Unrestricted | Consolidated | ||
| Group | Subsidiaries | Eliminations | Group | |
| ASSETS | ||||
| Current assets | ||||
| Cash and cash equivalents | $ 82,910 | $ 64,818 | $ -- | $ 147,728 |
| Receivables | 75,987 | 59,906 | -- | 135,893 |
| Inventories | 93,807 | 77,101 | -- | 170,908 |
| Prepaid expenses and other | 7,742 | 3,176 | -- | 10,918 |
| Deferred income tax | 3,273 | 3,053 | -- | 6,326 |
| Total current assets | 263,719 | 208,054 | -- | 471,773 |
| Long-term assets | ||||
| Property, plant and equipment | 420,373 | 618,258 | -- | 1,038,631 |
| Deferred note issuance costs and other | 10,987 | 10,011 | -- | 20,998 |
| Deferred income tax | 9,894 | 7,263 | -- | 17,157 |
| Due from unrestricted group | 153,851 | -- | (153,851) | -- |
| Total assets | $ 858,824 | $ 843,586 | $ (153,851) | $ 1,548,559 |
| LIABILITIES | ||||
| Current liabilities | ||||
| Accounts payable and other | $ 49,891 | $ 53,923 | $ -- | $ 103,814 |
| Pension and other post-retirement benefit obligations | 1,330 | -- | -- | 1,330 |
| Debt | 749 | 59,606 | -- | 60,355 |
| Total current liabilities | 51,970 | 113,529 | -- | 165,499 |
| Long-term liabilities | ||||
| Debt | 336,382 | 582,635 | -- | 919,017 |
| Due to restricted group | -- | 153,851 | (153,851) | -- |
| Interest rate derivative liability | -- | 46,517 | -- | 46,517 |
| Pension and other post-retirement benefit obligations | 35,466 | -- | -- | 35,466 |
| Capital leases and other | 8,523 | 10,770 | -- | 19,293 |
| Deferred income tax | 14,450 | -- | -- | 14,450 |
| Total liabilities | 446,791 | 907,302 | (153,851) | 1,200,242 |
| EQUITY | ||||
| Total shareholders' equity (deficit) | 412,033 | (52,955) | -- | 359,078 |
| Noncontrolling interest (deficit) | -- | (10,761) | -- | (10,761) |
| Total liabilities and equity | $ 858,824 | $ 843,586 | $ (153,851) | $ 1,548,559 |
| MERCER INTERNATIONAL INC. | ||||
| RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE | ||||
| Combined Condensed Statements of Operations | ||||
| (Unaudited) | ||||
| (In thousands) | ||||
| Three Months Ended September 30, 2014 | ||||
| Restricted | Unrestricted | Consolidated | ||
| Group | Subsidiaries | Eliminations | Group | |
| Revenues | ||||
| Pulp | $ 151,050 | $ 125,909 | $ -- | $ 276,959 |
| Energy and chemicals | 8,119 | 16,532 | -- | 24,651 |
| 159,169 | 142,441 | -- | 301,610 | |
| Operating costs | 119,790 | 103,041 | -- | 222,831 |
| Operating depreciation and amortization | 10,507 | 8,807 | -- | 19,314 |
| Selling, general and administrative expenses | 6,748 | 4,531 | -- | 11,279 |
| 137,045 | 116,379 | -- | 253,424 | |
| Operating income | 22,124 | 26,062 | -- | 48,186 |
| Other income (expense) | ||||
| Interest expense | (8,559) | (9,032) | 135 | (17,456) |
| Gain on settlement of debt | -- | 31,851 | -- | 31,851 |
| Gain (loss) on derivative instruments | -- | 3,447 | -- | 3,447 |
| Other income (expense) | (3,457) | 184 | (135) | (3,408) |
| Total other income (expense) | (12,016) | 26,450 | -- | 14,434 |
| Income (loss) before income taxes | 10,108 | 52,512 | -- | 62,620 |
| Income tax benefit (provision) | (1,136) | 30,335 | -- | 29,199 |
| Net income (loss) | 8,972 | 82,847 | -- | 91,819 |
| Less: net income attributable to noncontrolling interest | -- | (3,482) | -- | (3,482) |
| Net income (loss) attributable to common shareholders | $ 8,972 | $ 79,365 | $ -- | $ 88,337 |
| Three Months Ended September 30, 2013 | ||||
| Restricted | Unrestricted | Consolidated | ||
| Group | Subsidiaries | Eliminations | Group | |
| Revenues | ||||
| Pulp | $ 140,193 | $ 106,464 | $ -- | $ 246,657 |
| Energy and chemicals | 7,871 | 14,690 | -- | 22,561 |
| 148,064 | 121,154 | -- | 269,218 | |
| Operating costs | 120,408 | 99,752 | -- | 220,160 |
| Operating depreciation and amortization | 10,777 | 8,617 | -- | 19,394 |
| Selling, general and administrative expenses | 7,433 | 5,072 | -- | 12,505 |
| Restructuring expenses | 3,855 | -- | 3,855 | |
| 142,473 | 113,441 | -- | 255,914 | |
| Operating income | 5,591 | 7,713 | -- | 13,304 |
| Other income (expense) | ||||
| Interest expense | (8,204) | (11,232) | 2,182 | (17,254) |
| Gain (loss) on derivative instruments | (1,400) | 4,045 | -- | 2,645 |
| Other income (expense) | 2,371 | 37 | (2,182) | 226 |
| Total other income (expense) | (7,233) | (7,150) | -- | (14,383) |
| Income (loss) before income taxes | (1,642) | 563 | -- | (1,079) |
| Income tax benefit (provision) | (1,439) | 192 | -- | (1,247) |
| Net income (loss) | (3,081) | 755 | -- | (2,326) |
| Less: net income attributable to noncontrolling interest | -- | (640) | -- | (640) |
| Net income (loss) attributable to common shareholders | $ (3,081) | $ 115 | $ -- | $ (2,966) |
| MERCER INTERNATIONAL INC. | ||||
| RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE | ||||
| Combined Condensed Statements of Operations | ||||
| (Unaudited) | ||||
| (In thousands) | ||||
| Nine Months Ended September 30, 2014 | ||||
| Restricted Group | Unrestricted Subsidiaries | Eliminations | Consolidated Group | |
| Revenues | ||||
| Pulp | $ 428,479 | $ 386,468 | $ -- | $ 814,947 |
| Energy and chemicals | 24,649 | 52,891 | -- | 77,540 |
| 453,128 | 439,359 | -- | 892,487 | |
| Operating costs | 353,201 | 336,399 | -- | 689,600 |
| Operating depreciation and amortization | 31,712 | 27,072 | -- | 58,784 |
| Selling, general and administrative expenses | 21,846 | 12,807 | -- | 34,653 |
| 406,759 | 376,278 | -- | 783,037 | |
| Operating income | 46,369 | 63,081 | -- | 109,450 |
| Other income (expense) | ||||
| Interest expense | (25,625) | (26,861) | 415 | (52,071) |
| Gain on settlement of debt | -- | 31,851 | -- | 31,851 |
| Gain (loss) on derivative instruments | -- | 9,224 | -- | 9,224 |
| Other income (expense) | (3,319) | 250 | (415) | (3,484) |
| Total other income (expense) | (28,944) | 14,464 | -- | (14,480) |
| Income (loss) before income taxes | 17,425 | 77,545 | -- | 94,970 |
| Income tax benefit (provision) | (6,921) | 29,712 | -- | 22,791 |
| Net income (loss) | 10,504 | 107,257 | -- | 117,761 |
| Less: net income attributable to noncontrolling interest | -- | (7,812) | -- | (7,812) |
| Net income (loss) attributable to common shareholders | $ 10,504 | $ 99,445 | $ -- | $ 109,949 |
| Nine Months Ended September 30, 2013 | ||||
| Restricted | Unrestricted | Consolidated | ||
| Group | Subsidiaries | Eliminations | Group | |
| Revenues | ||||
| Pulp | $ 410,500 | $ 327,141 | $ -- | $ 737,641 |
| Energy and chemicals | 25,118 | 42,944 | -- | 68,062 |
| 435,618 | 370,085 | -- | 805,703 | |
| Operating costs | 374,033 | 308,474 | -- | 682,507 |
| Operating depreciation and amortization | 32,383 | 25,728 | -- | 58,111 |
| Selling, general and administrative expenses | 22,355 | 14,133 | -- | 36,488 |
| Restructuring expenses | 3,855 | -- | -- | 3,855 |
| 432,626 | 348,335 | -- | 780,961 | |
| Operating income | 2,992 | 21,750 | -- | 24,742 |
| Other income (expense) | ||||
| Interest expense | (23,634) | (34,662) | 6,512 | (51,784) |
| Gain (loss) on derivative instruments | (2,407) | 18,337 | -- | 15,930 |
| Other income (expense) | 6,516 | 138 | (6,512) | 142 |
| Total other income (expense) | (19,525) | (16,187) | -- | (35,712) |
| Income (loss) before income taxes | (16,533) | 5,563 | -- | (10,970) |
| Income tax benefit (provision) | (3,576) | 369 | -- | (3,207) |
| Net income (loss) | (20,109) | 5,932 | -- | (14,177) |
| Less: net income attributable to noncontrolling interest | -- | (2,365) | -- | (2,365) |
| Net income (loss) attributable to common shareholders | $ (20,109) | $ 3,567 | $ -- | $ (16,542) |
| MERCER INTERNATIONAL INC. | |||
| RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE | |||
| Combined Condensed Statements of Cash Flows | |||
| (Unaudited) | |||
| (In thousands) | |||
| Three Months Ended September 30, 2014 | |||
| Restricted | Unrestricted | Consolidated | |
| Group | Subsidiaries | Group | |
| Cash flows from (used in) operating activities | |||
| Net income (loss) | $ 8,972 | $ 82,847 | $ 91,819 |
| Adjustments to reconcile net income (loss) to cash flows from operating activities | |||
| Gain on settlement of debt | -- | (31,851) | (31,851) |
| Unrealized loss (gain) on derivative instruments | -- | (3,447) | (3,447) |
| Depreciation and amortization | 10,590 | 8,807 | 19,397 |
| Deferred income taxes | 980 | (31,285) | (30,305) |
| Stock compensation expense | 592 | -- | 592 |
| Pension and other post-retirement expense, net of funding | (507) | -- | (507) |
| Other | 3,400 | 2,490 | 5,890 |
| Changes in working capital | |||
| Receivables | (8,241) | (6,198) | (14,439) |
| Inventories | 1,732 | (1,879) | (147) |
| Accounts payable and accrued expenses | 1,333 | (1,314) | 19 |
| Other(1) | (4,034) | 3,862 | (172) |
| Net cash from (used in) operating activities | 14,817 | 22,032 | 36,849 |
| Cash flows from (used in) investing activities | |||
| Purchase of property, plant and equipment | (8,450) | (968) | (9,418) |
| Capital contribution | (20,000) | 20,000 | -- |
| Purchase of intangible assets | (688) | (447) | (1,135) |
| Other | (417) | (1) | (418) |
| Net cash from (used in) investing activities | (29,555) | 18,584 | (10,971) |
| Cash flows from (used in) financing activities | |||
| Repayment of debt | -- | (14,683) | (14,683) |
| Proceeds from issuance of shares | (84) | -- | (84) |
| Repayment of capital lease obligations | (187) | (393) | (580) |
| Payment of note issuance costs | -- | (592) | (592) |
| Proceeds from government grants | -- | 2,028 | 2,028 |
| Net cash from (used in) financing activities | (271) | (13,640) | (13,911) |
| Effect of exchange rate changes on cash and cash equivalents | (5,191) | (7,876) | (13,067) |
| Net increase (decrease) in cash and cash equivalents | (20,200) | 19,100 | (1,100) |
| Cash and cash equivalents, beginning of period | 157,418 | 83,605 | 241,023 |
| Cash and cash equivalents, end of period | $ 137,218 | $ 102,705 | $ 239,923 |
| (1) Includes intercompany working capital related transactions. | |||
| MERCER INTERNATIONAL INC. | |||
| RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE | |||
| Combined Condensed Statements of Cash Flows | |||
| (Unaudited) | |||
| (In thousands) | |||
| Three Months Ended September 30, 2013 | |||
| Restricted | Unrestricted | Consolidated | |
| Group | Subsidiaries | Group | |
| Cash flows from (used in) operating activities | |||
| Net income (loss) | $ (3,081) | $ 755 | $ (2,326) |
| Adjustments to reconcile net income (loss) to cash flows from operating activities | |||
| Unrealized loss (gain) on derivative instruments | 845 | (4,045) | (3,200) |
| Depreciation and amortization | 10,859 | 8,617 | 19,476 |
| Deferred income taxes | (145) | 12 | (133) |
| Stock compensation expense | 821 | -- | 821 |
| Pension and other post-retirement expense, net of funding | 165 | -- | 165 |
| Other | 102 | 514 | 616 |
| Changes in working capital | |||
| Receivables | (4,373) | 3,503 | (870) |
| Inventories | (7,037) | (13,021) | (20,058) |
| Accounts payable and accrued expenses | 3,350 | 8,623 | 11,973 |
| Other(1) | (3,537) | 3,613 | 76 |
| Net cash from (used in) operating activities | (2,031) | 8,571 | 6,540 |
| Cash flows from (used in) investing activities | |||
| Purchase of property, plant and equipment | (2,917) | (6,381) | (9,298) |
| Acquisition of noncontrolling interest | (20,000) | 20,000 | -- |
| Other | 256 | 51 | 307 |
| Net cash from (used in) investing activities | (22,661) | 13,670 | (8,991) |
| Cash flows from (used in) financing activities | |||
| Repayment of debt | (721) | (29,273) | (29,994) |
| Proceeds from issuance of notes and borrowings of debt | 52,250 | -- | 52,250 |
| Repayment of capital lease obligations | (162) | (364) | (526) |
| Proceeds from (repayment of) credit facilities, net | (16,094) | -- | (16,094) |
| Payment of note issuance costs | (1,721) | (643) | (2,364) |
| Net cash from (used in) financing activities | 33,552 | (30,280) | 3,272 |
| Effect of exchange rate changes on cash and cash equivalents | 2,371 | 3,494 | 5,865 |
| Net increase (decrease) in cash and cash equivalents | 11,231 | (4,545) | 6,686 |
| Cash and cash equivalents, beginning of period | 90,376 | 84,521 | 174,897 |
| Cash and cash equivalents, end of period | $ 101,607 | $ 79,976 | $ 181,583 |
| (1) Includes intercompany working capital related transactions. | |||
| MERCER INTERNATIONAL INC. | |||
| RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE | |||
| Combined Condensed Statements of Cash Flows | |||
| (Unaudited) | |||
| (In thousands) | |||
| Nine Months Ended September 30, 2014 | |||
| Restricted Group | Unrestricted Subsidiaries | Consolidated Group | |
| Cash flows from (used in) operating activities | |||
| Net income (loss) | $ 10,504 | $ 107,257 | $ 117,761 |
| Adjustments to reconcile net income (loss) to cash flows from operating activities | |||
| Gain on settlement of debt | -- | (31,851) | (31,851) |
| Unrealized loss (gain) on derivative instruments | -- | (9,224) | (9,224) |
| Depreciation and amortization | 31,963 | 27,072 | 59,035 |
| Deferred income taxes | 5,861 | (31,285) | (25,424) |
| Stock compensation expense | 923 | -- | 923 |
| Pension and other post-retirement expense, net of funding | (82) | -- | (82) |
| Other | 3,983 | 3,411 | 7,394 |
| Changes in working capital | |||
| Receivables | (3,529) | (13,725) | (17,254) |
| Inventories | (8,610) | 13,796 | 5,186 |
| Accounts payable and accrued expenses | 13,619 | 580 | 14,199 |
| Other(1) | (10,597) | 7,751 | (2,846) |
| Net cash from (used in) operating activities | 44,035 | 73,782 | 117,817 |
| Cash flows from (used in) investing activities | |||
| Purchase of property, plant and equipment | (16,981) | (5,154) | (22,135) |
| Capital contribution | (20,000) | 20,000 | -- |
| Purchase of intangible assets | (1,891) | (1,699) | (3,590) |
| Other | (202) | 57 | (145) |
| Net cash from (used in) investing activities | (39,074) | 13,204 | (25,870) |
| Cash flows from (used in) financing activities | |||
| Repayment of debt | (744) | (44,480) | (45,224) |
| Proceeds from issuance of shares | 53,858 | -- | 53,858 |
| Repayment of capital lease obligations | (661) | (1,111) | (1,772) |
| Proceeds from sale and lease-back transactions | 1,047 | -- | 1,047 |
| Payment of note issuance costs | -- | (592) | (592) |
| Proceeds from government grants | 832 | 5,254 | 6,086 |
| Net cash from (used in) financing activities | 54,332 | (40,929) | 13,403 |
| Effect of exchange rate changes on cash and cash equivalents | (4,985) | (8,170) | (13,155) |
| Net increase (decrease) in cash and cash equivalents | 54,308 | 37,887 | 92,195 |
| Cash and cash equivalents, beginning of year | 82,910 | 64,818 | 147,728 |
| Cash and cash equivalents, end of year | $ 137,218 | $ 102,705 | $ 239,923 |
| (1) Includes intercompany working capital related transactions. | |||
| MERCER INTERNATIONAL INC. | |||
| RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE | |||
| Combined Condensed Statements of Cash Flows | |||
| (Unaudited) | |||
| (In thousands) | |||
| Nine Months Ended September 30, 2013 | |||
| Restricted | Unrestricted | Consolidated | |
| Group | Subsidiaries | Group | |
| Cash flows from (used in) operating activities | |||
| Net income (loss) | $ (20,109) | $ 5,932 | $ (14,177) |
| Adjustments to reconcile net income (loss) to cash flows from operating activities | |||
| Unrealized loss (gain) on derivative instruments | 1,507 | (18,337) | (16,830) |
| Depreciation and amortization | 32,635 | 25,728 | 58,363 |
| Deferred income taxes | 1,725 | 4,146 | 5,871 |
| Stock compensation expense | 1,573 | -- | 1,573 |
| Pension and other post-retirement expense, net of funding | 602 | -- | 602 |
| Other | 1,025 | 2,419 | 3,444 |
| Changes in working capital | |||
| Receivables | 9,451 | 5,501 | 14,952 |
| Inventories | 3,958 | (13,648) | (9,690) |
| Accounts payable and accrued expenses | 14,681 | 9,150 | 23,831 |
| Other(1) | (14,886) | 6,437 | (8,449) |
| Net cash from (used in) operating activities | 32,162 | 27,328 | 59,490 |
| Cash flows from (used in) investing activities | |||
| Purchase of property, plant and equipment | (9,810) | (28,882) | (38,692) |
| Acquisition of noncontrolling interest | (20,000) | 20,000 | -- |
| Other | 273 | 54 | 327 |
| Net cash from (used in) investing activities | (29,537) | (8,828) | (38,365) |
| Cash flows from (used in) financing activities | |||
| Repayment of debt | (1,457) | (54,957) | (56,414) |
| Proceeds from issuance of notes and borrowings of debt | 52,250 | 22,223 | 74,473 |
| Repayment of capital lease obligations | (482) | (1,490) | (1,972) |
| Proceeds from (repayment of) credit facilities, net | 966 | -- | 966 |
| Payment of note issuance costs | (1,721) | (643) | (2,364) |
| Proceeds from government grants | -- | 5,413 | 5,413 |
| Net cash from (used in) financing activities | 49,556 | (29,454) | 20,102 |
| Effect of exchange rate changes on cash and cash equivalents | 1,019 | 1,898 | 2,917 |
| Net increase (decrease) in cash and cash equivalents | 53,200 | (9,056) | 44,144 |
| Cash and cash equivalents, beginning of period | 48,407 | 89,032 | 137,439 |
| Cash and cash equivalents, end of period | $ 101,607 | $ 79,976 | $ 181,583 |
| (1) Includes intercompany working capital related transactions. | |||
MERCER INTERNATIONAL INC.
COMPUTATION OF OPERATING EBITDA (Unaudited) (In thousands)
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 September 30, | Nine Months Ended September 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| Net income (loss) attributable to common shareholders | $ 88,337 | $ (2,966) | $ 109,949 | $ (16,542) |
| Net income attributable to noncontrolling interest | 3,482 | 640 | 7,812 | 2,365 |
| Income tax (benefit) provision | (29,199) | 1,247 | (22,791) | 3,207 |
| Interest expense | 17,456 | 17,254 | 52,071 | 51,784 |
| (Gain) loss on settlement of debt | (31,851) | ‑ | (31,851) | ‑ |
| (Gain) loss on derivative instruments | (3,447) | (2,645) | (9,224) | (15,930) |
| Other (income) expense | 3,408 | (226) | 3,484 | (142) |
| Operating income | 48,186 | 13,304 | 109,450 | 24,742 |
| Add: Depreciation and amortization | 19,397 | 19,476 | 59,035 | 58,363 |
| Operating EBITDA | $ 67,583 | $ 32,780 | $ 168,485 | $ 83,105 |
| Three Months Ended September 30, | Nine Months Ended September 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| Restricted Group | ||||
| Net income (loss) | $ 8,972 | $ (3,081) | $ 10,504 | $ (20,109) |
| Income tax provision | 1,136 | 1,439 | 6,921 | 3,576 |
| Interest expense | 8,559 | 8,204 | 25,625 | 23,634 |
| Loss on derivative instruments | ‑ | 1,400 | ‑ | 2,407 |
| Other (income) expense | 3,457 | (2,371) | 3,319 | (6,516) |
| Operating income | 22,124 | 5,591 | 46,369 | 2,992 |
| Add: Depreciation and amortization | 10,590 | 10,859 | 31,963 | 32,635 |
| Operating EBITDA | $ 32,714 | $ 16,450 | $ 78,332 | $ 35,627 |
CONTACT: APPROVED BY:
Jimmy S.H. Lee
Chairman, CEO & President
(604) 684-1099
David M. Gandossi
Executive Vice-President,
Chief Financial Officer & Secretary
(604) 684-1099
Source: Mercer International Inc.