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Mercer International Inc. Reports Fourth Quarter and Year End Results and Announces Quarterly Cash Dividend of $0.1375

/EIN News/ -- Selected Highlights

  • 2019 Operating EBITDA of $210.4 million and net loss of $9.6 million
  • Fourth quarter pulp segment annual maintenance downtime of 54 days significantly contributed to negative Operating EBITDA* of $34.2 million and a net loss of $72.7 million

NEW YORK, Feb. 13, 2020 (GLOBE NEWSWIRE) -- Mercer International Inc. (Nasdaq: MERC) today reported fourth quarter 2019 Operating EBITDA decreased to negative $34.2 million from positive $118.1 million in the fourth quarter of 2018 and from $50.8 million in the third quarter of 2019. In the fourth quarter of 2019, net loss was $72.7 million, or $1.11 per share, compared to net income of $45.0 million, or $0.69 per basic share and $0.68 per diluted share, in the fourth quarter of 2018 and net income of $1.2 million, or $0.02 per share in the third quarter of 2019. 

In 2019, Operating EBITDA declined to $210.4 million from $364.6 million and the net loss was $9.6 million (or $0.15 per share) compared to net income of $128.6 million (or $1.96 per diluted share) in 2018.

Mr. David M. Gandossi, the Chief Executive Officer, stated: "Our fourth quarter results reflect significant annual maintenance activities in our pulp segment and weakness in the pulp markets. High producer inventories, particularly of hardwood pulp, resulted in pricing pressure on both hardwood and softwood. We believe that pricing for both pulps were bottoming going into 2020 and we expect that improving market conditions will support modest upward pricing pressure during 2020. However, there may be near-term headwinds on pulp prices and demand in China as a result of the current ongoing coronavirus outbreak. In the first quarter of 2020, we have three days of scheduled downtime at one of our pulp mills.

In the current quarter our wood segment benefitted from lower fiber costs which largely contributed to it achieving record quarterly operating income of $5.3 million."
____________________
*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 6 of the financial tables included in this press release for a reconciliation of net income (loss) to Operating EBITDA.

Consolidated Financial Results: Impacted by annual maintenance downtime and lower sales realizations

  Q4     Q3     Q4     Year     Year    
  2019     2019     2018(1)     2019     2018(1)    
                               
  (in thousands, except per share amounts)    
Revenues $ 331,172     $ 383,536     $ 412,225     $ 1,624,411     $ 1,457,718    
Operating income (loss) $ (66,106 )   $ 18,747     $ 90,997     $ 84,003     $ 267,867    
Operating EBITDA $ (34,159 )   $ 50,799     $ 118,083     $ 210,397     $ 364,596    
Loss on settlement of debt (2) $ (4,750 )   $     $     $ (4,750 )   $ (21,515 )  
Legal cost award $     $     $     $     $ (6,951 )  
Acquisition commitment fee $     $     $ (5,250 )   $     $ (5,250 )  
Net income (loss) $ (72,721 )   $ 1,207     $ 45,009     $ (9,639 )   $ 128,589    
Net income (loss) per common share                                        
Basic $ (1.11 )   $ 0.02     $ 0.69     $ (0.15 )   $ 1.97    
Diluted $ (1.11 )   $ 0.02     $ 0.68     $ (0.15 )   $ 1.96    

  ______________

  (1) Results of Mercer Peace River Pulp Ltd. ("MPR") included from December 10, 2018.
  (2) Redemption of 7.75% senior notes due 2022.

Consolidated –Three Months Ended December 31, 2019 Compared to Three Months Ended December 31, 2018

In the fourth quarter of 2019 our operating EBITDA decreased to negative $34.2 million from positive $50.8 million in the third quarter of 2019, and from $118.1 million in the same quarter of 2018. The decrease in the current quarter compared to the prior quarter of 2019 was primarily due to higher annual maintenance costs, the negative impact of a weaker dollar at the end of the year compared to the euro and Canadian dollar on the dollar denominated cash and receivables balances held at our mills and lower pulp sales realizations. Compared to the same quarter of 2018 lower pulp sales realizations and higher annual maintenance costs were partially offset by lower per unit fiber costs and the reversal of $13.7 million in accrued wastewater fees as a result of completing certain approved capital projects.

Segment Results

Pulp: Significantly impacted by annual maintenance downtime 

  Three Months Ended December 31,    
  2019     2018(1)    
  (in thousands)    
Pulp revenues $ 275,517     $ 345,128    
Energy and chemical revenues $ 15,273     $ 24,240    
Operating income (loss) $ (66,574 )   $ 94,532    

______________

(1)      Results of MPR included from December 10, 2018.

In the fourth quarter of 2019 the pulp segment had an operating loss of $66.6 million compared to operating income of $94.5 million in the same quarter of 2018. The decrease was primarily due to lower pulp sales realizations and higher annual maintenance costs partially offset by lower per unit fiber costs and the reversal of $13.7 million in accrued wastewater fees.  In the current quarter of 2019, the NBSK pulp realized sales price decreased by approximately 30% to $581 per ADMT from $830 per ADMT in the same quarter of the prior year due to high producer inventory levels. NBSK sales volumes increased by approximately 6% to 416,569 ADMTs in the current quarter from 392,729 ADMTs in the same quarter of 2018 due to the inclusion of MPR for a full quarter and strong demand from China.

In the current quarter, the pulp mills had 54 days (approximately 86,500 ADMTs) of annual maintenance downtime compared to 3 days (approximately 5,700 ADMTs) of annual maintenance downtime in the same quarter of the prior year. We estimate that annual maintenance downtime in the current quarter adversely impacted our operating income by approximately $74.1 million, comprised of approximately $54.5 million in direct out-of-pocket expenses and the balance in reduced production. Many of our competitors that report their results using International Financial Reporting Standards capitalize their direct costs of maintenance downtime.

Per unit fiber costs decreased in the current quarter by approximately 17% from the same quarter of 2018 due to lower per unit fiber costs for our German mills. In Germany, fiber costs benefitted from the continuing availability of beetle damaged wood.  Fiber costs in Canada remained at high levels due to strong fiber demand in Celgar's fiber procurement basket.

As a result of higher per unit fiber costs for our Canadian mills and the decline in pulp sales realizations in the current quarter of 2019, we recorded a non-cash write down of inventory carrying values at our Canadian mills of $9.2 million.

Wood Products: Strong production and lower costs    

  Three Months Ended December 31,    
  2019     2018    
             
  (in thousands)    
Lumber revenues $ 35,071     $ 37,234    
Energy revenues $ 2,646     $ 2,817    
Wood residual revenues $ 1,871     $ 2,328    
Operating income $ 5,274     $ 669    

In the fourth quarter of 2019 the wood products segment operating income increased to $5.3 million compared to $0.7 million in the same quarter of 2018. The increase reflects record productivity, improved grade outturn and a greater mix of U.S. dimension products, combined with lower per unit fiber costs. In the current quarter per unit fiber costs decreased by approximately 29% from the same quarter of 2018 primarily as a result of the availability of beetle damaged wood. Average lumber sales realizations decreased by approximately 6% to $347 per Mfbm in the fourth quarter of 2019 from approximately $369 per Mfbm in the same quarter of 2018 primarily due to lower pricing in Europe partially offset by higher pricing in the U.S. due to increased demand. European lumber pricing declined due to an increase in the supply of lumber processed from beetle damaged wood which generally obtains lower prices. 

Consolidated –Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Total revenues in 2019 increased by approximately 11% to $1,624.4 million from $1,457.7 million in 2018 primarily due to the inclusion of the results of MPR for a full year and higher pulp and energy sales volumes partially offset by lower sales realizations.

Costs and expenses in 2019 increased by approximately 29% to $1,540.4 million from $1,189.9 million in 2018 due to the inclusion of MPR costs for a full year, higher pulp sales volumes and higher annual maintenance costs partially offset by lower per unit fiber costs, the positive impact of a stronger dollar primarily on our euro denominated costs and expenses and the reversal of $20.9 million in accrued wastewater fees at our German pulp mills.

In 2019, we redeemed $100.0 million of 2022 Senior Notes at a cost, including premium, of $103.9 million and recorded a loss on such redemption of $4.8 million (being $0.07 per share). In 2018, we redeemed $300.0 million of 2022 Senior Notes at a cost, including premium, of $317.4 million and recorded a loss on such redemption of $21.5 million (being $0.33 per share).

Interest expense in 2019 increased to $75.8 million from $51.5 million in 2018 primarily as a result of the issuance in December 2018 of $350.0 million of our 2025 Senior Notes to finance the acquisition of MPR.

In 2018, we incurred expenses of $7.0 million in connection with a legal cost award and $5.3 million in an acquisition commitment fee related to our acquisition of MPR.

In 2019, after giving effect to costs of $4.8 million, or $0.07 per share, for the loss on the redemption of senior notes our net loss was $9.6 million, or $0.15 per share. In 2018 we had net income of $128.6 million, or $1.97 per basic and $1.96 per diluted share, after giving effect to costs of $33.7 million, or $0.52 per basic and $0.51 per diluted share, for the loss on the redemption of senior notes, the legal cost award and the acquisition commitment fee.

In 2019, Operating EBITDA decreased by approximately 42% to $210.4 million from $364.6 million in 2018 as lower sales realizations and higher annual maintenance costs were only partially offset by lower per unit fiber costs, a $20.9 million reversal of accrued wastewater fees and the positive impact of a stronger dollar primarily on our euro denominated costs and expenses.

Segment Results

Selected Pulp Segment Financial Information

  Year Ended December 31,    
  2019     2018(1)    
             
  (in thousands)    
Pulp revenues $ 1,370,742     $ 1,190,588    
Energy and chemical revenues $ 86,381     $ 77,616    
Depreciation and amortization $ 117,108     $ 87,628    
Operating income $ 90,583     $ 274,356    

                                

(1)      Results of MPR included from December 10, 2018.

Selected Wood Products Segment Financial Information

  Year Ended December 31,    
  2019     2018    
             
  (in thousands)    
Lumber revenues $ 142,243     $ 168,663    
Energy revenues $ 9,721     $ 10,831    
Wood residual revenues $ 7,973     $ 9,542    
Depreciation and amortization $ 7,966     $ 8,485    
Operating income $ 7,349     $ 6,203    

Liquidity

The following table is a summary of selected financial information as of the dates indicated:

  December 31,    
  2019     2018    
             
  (in thousands)    
Cash and cash equivalents $ 351,085     $ 240,491    
Working capital $ 588,385     $ 615,311    
Total assets $ 2,065,720     $ 1,975,735    
Long-term liabilities $ 1,259,005     $ 1,198,918    
Total equity $ 550,403     $ 581,429    

 

As of December 31, 2019, we had approximately $287.2 million available under our revolving credit facilities.

Outlook

Going into 2020, we currently expect continued steady demand to improve markets over the year. Until recently, the combination of steady demand and falling inventories, along with the supply restrictions created by the shut of an NBSK mill in Nova Scotia and the industry strike in Finland was putting upward pressure on prices. However, the current ongoing coronavirus outbreak could create inland logistics restrictions or other disruptions that may, over time, begin to slow down paper manufacturing in China and put pressure on pulp pricing and demand. We are currently unable to determine the full impact at this time. We continue to closely monitor this developing situation.

We currently expect modestly higher lumber prices in the near term due to stronger demand in the U.S.

Quarterly Dividend

A quarterly dividend of $0.1375 per share will be paid on April 1, 2020 to all shareholders of record on March 25, 2020. Future dividends will be subject to Board approval and may be adjusted as business and industry conditions warrant.

Director Appointment

We are also pleased to announce the appointment of Rainer Rettig to our board of directors effective February 14, 2020. Mr. Rettig is currently the head of the Circular Economy Program of Covestro AG (formerly known as Bayer Material Science, a subgroup of Bayer AG), one of the world’s leading manufacturers of high-tech polymer materials. Since 1989, Mr. Rettig has served various senior roles at Bayer AG and Bayer Material Science. Mr. Rettig holds a Ph.D in polymer chemistry and polymer processing from the Technical University of Darmstadt in Germany.  

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 February 14, 2020 at 10:00 AM (Eastern Standard Time). Listeners can access the conference call live and archived for 30 days over the Internet at https://edge.media-server.com/mmc/p/aw3cd9fe or through a link on the company's home page at https://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 forest products company with operations in Germany and Canada with consolidated annual production capacity of 2.2 million tonnes of pulp and 550 million board feet of lumber. To obtain further information on the company, please visit its website at https://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.

APPROVED BY:

Jimmy S.H. Lee
Executive Chairman
(604) 684-1099

David M. Gandossi
Chief Executive Officer
(604) 684-1099


Summary Financial Highlights                                  
                                         
  Q4   Q3   Q4   Year   Year  
  2019   2019   2018(1)   2019   2018(1)  
                               
  (in thousands, except per share amounts)    
Pulp segment revenues $ 290,790     $ 345,060     $ 369,368     $ 1,457,123     $ 1,268,204    
Wood products segment revenues   39,588       36,458       42,379       159,937       189,036    
Corporate and other revenues   794       2,018       478       7,351       478    
Total revenues $ 331,172     $ 383,536     $ 412,225     $ 1,624,411     $ 1,457,718    
                                         
Pulp segment operating income (loss) $ (66,574 )   $ 21,386     $ 94,532     $ 90,583     $ 274,356    
Wood products segment operating income   5,274       544       669       7,349       6,203    
Corporate and other operating loss   (4,806 )     (3,183 )     (4,204 )     (13,929 )     (12,692 )  
Total operating income (loss) $ (66,106 )   $ 18,747     $ 90,997     $ 84,003     $ 267,867    
                                         
Pulp segment depreciation and amortization $ 29,492     $ 29,744     $ 24,176     $ 117,108     $ 87,628    
Wood products segment depreciation and amortization   2,029       2,016       2,625       7,966       8,485    
Corporate and other depreciation and amortization   426       292       285       1,320       616    
Total depreciation and amortization $ 31,947     $ 32,052     $ 27,086     $ 126,394     $ 96,729    
                                         
Operating EBITDA $ (34,159 )   $ 50,799     $ 118,083     $ 210,397     $ 364,596    
Loss on settlement of debt (2) $ (4,750 )   $     $     $ (4,750 )   $ (21,515 )  
Legal cost award $     $     $     $     $ (6,951 )  
Acquisition commitment fee $     $     $ (5,250 )   $     $ (5,250 )  
Benefit (provision) for income taxes $ 15,875     $ (244 )   $ (20,457 )   $ (19,226 )   $ (48,681 )  
Net income (loss) $ (72,721 )   $ 1,207     $ 45,009     $ (9,639 )   $ 128,589    
Net income (loss) per common share                                        
Basic $ (1.11 )   $ 0.02     $ 0.69     $ (0.15 )   $ 1.97    
Diluted $ (1.11 )   $ 0.02     $ 0.68     $ (0.15 )   $ 1.96    
Common shares outstanding at period end   65,629       65,629       65,202       65,629       65,202    
______________                                      
(1)  Results of MPR included from December 10, 2018.                                
(2)  Redemption of 7.75% senior notes due 2022.                                


Summary Operating Highlights                                  
                                         
  Q4   Q3   Q4   Year   Year  
  2019   2019   2018(1)   2019   2018(1)  
Pulp Segment                                        
Pulp production ('000 ADMTs)                                        
NBSK   381.3       441.7       413.6       1,736.4       1,451.3    
NBHK   60.9       75.3       21.3       304.2       21.3    
Annual maintenance downtime ('000 ADMTs)   86.5       14.1       5.7       108.1       75.6    
Annual maintenance downtime (days)   54       13       3       82       54    
Pulp sales ('000 ADMTs)                                        
NBSK   416.6       451.2       392.7       1,773.2       1,418.0    
NBHK   65.3       91.0       22.9       325.7       22.9    
Average NBSK pulp list prices ($/ADMT)(2)                                        
Europe   822       860       1,205       946       1,183    
China   588       585       805       634       878    
North America   1,115       1,170       1,428       1,239       1,337    
Average NBHK pulp list prices ($/ADMT)(2)                                        
China   475       507       763       576       790    
North America   893       970       1,213       1,036       1,152    
Average pulp sales realizations ($/ADMT)(3)                                        
NBSK   581       609       830       663       821    
NBHK   476       499       707       567       707    
Energy production ('000 MWh)(4)   432.9       572.5       504.6       2,141.2       1,625.2    
Energy sales ('000 MWh)(4)   154.5       224.7       213.9       822.8       615.2    
Average energy sales realizations ($/MWh)   88       89       99       91       103    
                                         
Wood Products Segment                                        
Lumber production (MMfbm)   106.7     96.6       104.7       414.7     398.7    
Lumber sales (MMfbm)   101.1       97.0     100.9       408.8       412.9    
Average lumber sales realizations ($/Mfbm)   347     337     369       348     408    
Energy production and sales ('000 MWh)   23.1     13.9     23.8       83.5     86.3    
Average energy sales realizations ($/MWh)   114     116     118       116     125    
                                         
Average Spot Currency Exchange Rates                                        
$ / €(5)   1.1075       1.1120     1.1414       1.1194     1.1817    
$ / C$(5)   0.7578     0.7573       0.7577       0.7537     0.7722    
______________                                      
(1)  Results of MPR included from the date of acquisition on December 10, 2018. 
(2)  Source: RISI pricing report. 
(3)  Sales realizations after customer discounts, rebates and other selling concessions. Incorporates the effect of pulp price variations occurring between the order and shipment dates. 
(4)  Excludes energy production and sales relating to our 50% joint venture interest in the Cariboo mill which is accounted for as an equity investment. 
(5)  Average Federal Reserve Bank of New York Noon Buying Rates over the reporting period. 


MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)

  Three Months Ended   For the Year Ended  
December 31,
December 31,
  2019   2018(1)   2019   2018(1)  
Revenues $ 331,172     $ 412,225     $ 1,624,411     $ 1,457,718    
Costs and expenses                                
Cost of sales, excluding depreciation and amortization   346,020       276,673       1,340,380       1,032,101    
Cost of sales depreciation and amortization   31,693       26,976       125,801       96,288    
Selling, general and administrative expenses   19,565       17,579       74,227       61,462    
Operating income (loss)   (66,106 )     90,997       84,003       267,867    
Other income (expenses)                                
Interest expense   (20,647 )     (15,492 )     (75,750 )     (51,464 )  
Loss on settlement of debt   (4,750 )           (4,750 )     (21,515 )  
Legal cost award                     (6,951 )  
Acquisition commitment fee         (5,250 )           (5,250 )  
Other income (expenses)   2,907       (4,789 )     6,084       (5,417 )  
Total other expenses, net   (22,490 )     (25,531 )     (74,416 )     (90,597 )  
Income (loss) before provision for income taxes   (88,596 )     65,466       9,587       177,270    
Benefit (provision) for income taxes   15,875       (20,457 )     (19,226 )     (48,681 )  
Net income (loss) $ (72,721 )   $ 45,009     $ (9,639 )   $ 128,589    
Net income (loss) per common share                                
Basic $ (1.11 )   $ 0.69     $ (0.15 )   $ 1.97    
Diluted $ (1.11 )   $ 0.68     $ (0.15 )   $ 1.96    
Dividends declared per common share $ 0.1375     $ 0.1250     $ 0.5375     $ 0.5000    
______________                              
(1)  Results of MPR included from December 10, 2018.                        


MERCER INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)

    December 31,  
    2019   2018  
ASSETS                  
Current assets                  
Cash and cash equivalents   $ 351,085     $ 240,491    
Accounts receivable     208,740       252,692    
Inventories     272,599       303,813    
Prepaid expenses and other     12,273       13,703    
Total current assets     844,697       810,699    
Property, plant and equipment, net     1,074,242       1,029,257    
Investment in joint ventures     53,122       62,574    
Amortizable intangible assets, net     53,371       53,927    
Operating lease right-of-use assets     13,004          
Other long-term assets     26,038       17,904    
Deferred income tax     1,246       1,374    
Total assets   $ 2,065,720     $ 1,975,735    
LIABILITIES AND SHAREHOLDERS’ EQUITY                  
Current liabilities                  
Accounts payable and other   $ 255,544     $ 194,484    
Pension and other post-retirement benefit obligations     768       904    
Total current liabilities     256,312       195,388    
Debt     1,087,932       1,041,389    
Pension and other post-retirement benefit obligations     25,489       25,829    
Finance lease liabilities     31,103       24,669    
Operating lease liabilities     10,520          
Other long-term liabilities     14,114       13,924    
Deferred income tax     89,847       93,107    
Total liabilities     1,515,317       1,394,306    
Shareholders’ equity                  
Common shares $1 par value; 200,000,000 authorized; 65,629,000 issued and outstanding (2018 – 65,202,000)     65,598       65,171    
Additional paid-in capital     344,994       342,438    
Retained earnings     256,371       301,990    
Accumulated other comprehensive loss     (116,560 )     (128,170 )  
Total shareholders’ equity     550,403       581,429    
Total liabilities and shareholders’ equity   $ 2,065,720     $ 1,975,735    
                   


MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

  For the Year Ended December 31,  
  2019   2018   2017  
Cash flows from (used in) operating activities                        
Net income (loss) $ (9,639 )   $ 128,589     $ 70,483    
Adjustments to reconcile net income (loss) to cash flows from operating activities                        
Depreciation and amortization   126,394       96,729       85,294    
Deferred income tax provision (benefit)   (7,873 )     16,596       22,056    
Inventory impairment   9,200                
Loss on settlement of debt   4,750       21,515       10,696    
Defined benefit pension plans and other post-retirement benefit plan expense   3,449       1,868       2,179    
Stock compensation expense   3,036       3,940       2,890    
Foreign exchange transaction losses (gains)   7,116       746       (875 )  
Other   5,834       2,419       3,372    
Defined benefit pension plans and other post-retirement benefit plan contributions   (4,467 )     (1,133 )     (2,031 )  
Changes in working capital                        
Accounts receivable   41,369       (10,370 )     (64,949 )  
Inventories   24,683       (58,082 )     (19,994 )  
Accounts payable and accrued expenses   45,256       37,959       37,170    
Other   (4,825 )     (4,108 )     (4,365 )  
Net cash from (used in) operating activities   244,283       236,668       141,926    
Cash flows from (used in) investing activities                        
Purchase of property, plant and equipment   (132,034 )     (87,012 )     (57,915 )  
Purchase of amortizable intangible assets   (623 )     (600 )     (1,777 )  
Acquisitions   (6,380 )     (380,312 )     (61,627 )  
Other   (321 )     445       (232 )  
Net cash from (used in) investing activities   (139,358 )     (467,479 )     (121,551 )  
Cash flows from (used in) financing activities                        
Redemption of senior notes   (103,875 )     (317,439 )     (234,945 )  
Proceeds from issuance of senior notes   205,500       350,000       550,000    
Proceeds from (repayment of) revolving credit facilities, net   (58,404 )     36,560       22,281    
Dividend payments   (35,279 )     (40,724 )     (29,866 )  
Payment of interest rate derivative liability               (6,887 )  
Repurchase of common shares   (754 )              
Payment of debt issuance costs   (4,213 )     (10,074 )     (11,620 )  
Proceeds from government grants   6,467             600    
Other   (3,344 )     (3,462 )     (812 )  
Net cash from (used in) financing activities   6,098       14,861       288,751    
Effect of exchange rate changes on cash, cash equivalents and restricted cash   (429 )     (4,297 )     10,716    
Net increase (decrease) in cash, cash equivalents and restricted cash   110,594       (220,247 )     319,842    
Cash, cash equivalents and restricted cash, beginning of year   240,491       460,738       140,896    
Cash, cash equivalents and restricted cash, end of year $ 351,085     $ 240,491     $ 460,738    
                         


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 our 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) to Operating EBITDA:
                                         
  Q4     Q3     Q4     Year     Year    
  2019     2019     2018     2019     2018    
Net income (loss) $ (72,721 )   $ 1,207     $ 45,009     $ (9,639 )   $ 128,589    
Provision (benefit) for income taxes   (15,875 )     244       20,457       19,226       48,681    
Interest expense   20,647       18,183       15,492       75,750       51,464    
Loss on settlement of debt   4,750                   4,750       21,515    
Legal cost award                           6,951    
Acquisition commitment fee               5,250             5,250    
Other (income) expenses   (2,907 )     (887 )     4,789       (6,084 )     5,417    
Operating income (loss)   (66,106 )     18,747       90,997       84,003       267,867    
Add: Depreciation and amortization   31,947       32,052       27,086       126,394       96,729    
Operating EBITDA $ (34,159 )   $ 50,799     $ 118,083     $ 210,397     $ 364,596    

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