• Mercer International Inc. Reports Third Quarter and First Nine Months of 2023 Results and Announces Quarterly Cash Dividend of $0.075

    Source: Nasdaq GlobeNewswire / 02 Nov 2023 16:30:12   America/New_York

    Selected Highlights

    • Third quarter Operating EBITDA* of $37.5 million and net loss of $26.0 million
    • Continued strong growth and integration of our mass timber business
    • Enhanced liquidity by completing $200 million 2028 senior note issue and expanding availability under German revolving credit facility by €70 million
    • Quarterly cash dividend of $0.075 per share

    NEW YORK, Nov. 02, 2023 (GLOBE NEWSWIRE) -- Mercer International Inc. (Nasdaq: MERC) today reported that Operating EBITDA in the third quarter was $37.5 million compared to $140.9 million in the same quarter of 2022 and improved from negative $68.7 million in the prior quarter of 2023.

    In the third quarter of 2023, net loss was $26.0 million (or $0.39 per share) compared to net income of $66.7 million (or $1.01 per basic share and $1.00 per diluted share) in the third quarter of 2022 and a net loss of $98.3 million (or $1.48 per share) in the second quarter of 2023.

    In the nine months ended September 30, 2023, Operating EBITDA was negative $3.7 million compared to positive $440.4 million in the same period of 2022. In the nine months ended September 30, 2023, net loss was $154.8 million (or $2.33 per share) compared to net income of $227.0 million (or $3.43 per basic share and $3.41 per diluted share) in the same period of 2022.

    Mr. Juan Carlos Bueno, the Chief Executive Officer, stated: “Our third quarter results were significantly better than the second quarter due to lower fiber and other production costs as inflationary pressures eased. Fiber costs for all our mills decreased in the third quarter from the prior quarter driven by the availability of calamity wood in Germany, our renegotiation of fiber costs for Celgar and the ramp up of our wood room at the Peace River mill.

    During the third quarter of this year, we continued to be negatively impacted by the overall weakness in the pulp and lumber markets. Pulp prices in China showed modest signs of recovery as customers started restocking. At the end of September, softwood pulp prices in China were $67 per tonne higher and hardwood pulp prices were $55 per tonne higher compared to the end of the second quarter. Late in the third quarter we also started to see modest price improvements in Europe and stabilization in North America.

    In the third quarter we had 39 days of downtime (approximately 48,400 ADMTs) at our pulp mills which included 13 days for planned maintenance and 26 days for market curtailment at our Celgar mill. All other mills ran very efficiently during the quarter. In the fourth quarter of 2023, we are planning for a total of 29 days of maintenance downtime (41,200 ADMTs) at our pulp mills.

    Since 2021, we have invested approximately $396.6 million to expand our solid wood activities and product mix to acquire the Mercer Spokane Mass Timber facility, Torgau facility and the recent acquisitions of mass timber facilities in Arkansas and Canada. During the quarter both sales volumes and revenues for our mass timber business increased as we continued the integration activities of these operations. The new operations increased both our production capacity and our product range to include glulam products sought by our customers. We saw strong growth in our mass timber business by securing major customer contracts and building up our order book. The scale of these contracts has significantly ramped up operations. The mass timber business is a key component of our strategy and we expect strong growth for the coming years as we continue to ramp up our operations.

    In September, we reinforced our liquidity position by completing a private offering of the $200 million 2028 senior notes and increasing the availability of our German revolving credit facility by €70 million to €370 million."

    Mr. Bueno concluded: “Although year to date, the pulp and lumber markets have been soft, we are now seeing some improvements, including modestly higher pulp pricing across all our markets and lower costs, particular for fiber. Our team has demonstrated resilience by focusing on the variables we can control such as reducing our inventories and capital spending, and cutting discretionary spending to ensure our cash and liquidity levels continue to be healthy. As a result of our strong liquidity, we are well positioned to continue to execute our strategic plan through this business cycle, while maintaining a strong focus on lowering costs and liquidity.”

    ____________________
    *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

     Q3  Q2  Q3  YTD  YTD 
     2023  2023  2022  2023  2022 
     (in thousands, except per share amounts) 
    Revenues$470,821  $529,863  $532,814  $1,523,350  $1,697,881 
    Operating income (loss)$(3,426) $(108,832) $108,723  $(132,379) $345,105 
    Operating EBITDA$37,527  $(68,680) $140,867  $(3,683) $440,393 
    Net income (loss)$(25,956) $(98,306) $66,746  $(154,840) $227,015 
    Net income (loss) per common share              
    Basic$(0.39) $(1.48) $1.01  $(2.33) $3.43 
    Diluted$(0.39) $(1.48) $1.00  $(2.33) $3.41 
                        

    Consolidated – Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

    Total revenues in the third quarter of 2023 decreased by approximately 12% to $470.8 million from $532.8 million in the same quarter of 2022 primarily due to lower pulp, energy and lumber sales realizations partially offset by higher sales volumes, the inclusion of Torgau, and higher manufactured product sales realizations.

    Costs and expenses in the third quarter of 2023 increased by approximately 12% to $474.2 million from $424.1 million in the third quarter of 2022 primarily due to the inclusion of Torgau and higher sales volumes partially offset by lower per unit fiber, freight and other production costs. In the third quarter of 2023, we received an aggregate of $8.2 million of insurance proceeds relating to the fire last year at our Stendal mill compared to $3.1 million of insurance proceeds in the comparative quarter.

    In the third quarter of 2023, Operating EBITDA was $37.5 million compared to $140.9 million in the same quarter of 2022 primarily due to lower pulp, energy and lumber sales realizations partially offset by lower per unit fiber, freight and other production costs and higher sales volumes.

    Segment Results
    Pulp

     Three Months Ended September 30,
     2023 2022
     (in thousands)
    Pulp revenues$318,102  $395,459 
    Energy and chemical revenues$30,751  $61,198 
    Operating income$21,181  $109,985 
            

    In the third quarter of 2023, pulp segment operating income was $21.2 million compared to $110.0 million in the same quarter of 2022 primarily as a result of lower pulp and energy sales realizations and the negative impact of a weaker dollar partially offset by lower per unit fiber, freight and other production costs, higher sales volumes, and the receipt of insurance proceeds of $8.2 million.

    Our pulp segment revenues decreased by approximately 24% to $348.9 million from $456.7 million in the same quarter of 2022 primarily because of the overall weak pulp market and lower energy revenues.

    Pulp revenues in the third quarter of 2023 decreased by approximately 20% to $318.1 million from $395.5 million in the same quarter of 2022 due to lower sales realizations only partially offset by higher sales volumes.

    Total pulp sales volumes increased by approximately 14% to 487,199 ADMTs in the third quarter of 2023 from 425,854 ADMTs in the same quarter of 2022 primarily because of higher production and the timing of sales.

    In the third quarter of 2023, third party industry quoted average list prices for NBSK pulp were materially lower in all our markets compared to the same quarter of 2022. Our average NBSK pulp sales realizations decreased by approximately 27% to $666 per ADMT in the third quarter of 2023 from approximately $911 per ADMT in the same quarter of 2022. In the third quarter of 2023, our average NBHK pulp sales realizations decreased by approximately 46% compared to the same quarter of 2022.

    Energy and chemical revenues decreased by approximately 50% to $30.8 million in the third quarter of 2023 from $61.2 million in the same quarter of 2022 as a result of lower energy sales realizations partially offset by higher sales volumes.

    Costs and expenses in the third quarter of 2023 decreased by approximately 5% to $327.9 million from $346.7 million in the same quarter of 2022 primarily due to lower per unit fiber, freight and other production costs and the receipt of insurance proceeds in 2023, partially offset by a higher sales volume.

    In the third quarter of 2023 per unit fiber costs decreased by approximately 12% from the same quarter of 2022 due to the sale and revaluation in the current quarter of inventory for which we took an impairment charge in the prior quarter. After giving effect to such impairment, per unit fiber costs increased as a result of strong demand in the mills' fiber baskets and lower wood chip availability for our Celgar mill because of regional sawmill curtailments. We currently expect per unit fiber costs to decrease in the fourth quarter of 2023 driven by improved supply.

    Solid Wood

     Three Months Ended September 30, 
     2023  2022 
     (in thousands) 
    Lumber revenues$50,815  $54,327 
    Energy revenues$5,468  $8,111 
    Manufactured products revenues(1)$20,850  $7,117 
    Pallet revenues$28,807  $— 
    Biofuels revenues(2)$11,387  $— 
    Wood residuals revenues$2,220  $4,711 
    Operating income (loss)$(19,690) $2,896 

    ______________
    (1) Manufactured products primarily includes cross-laminated timber, glulam and finger joint lumber.
    (2) Biofuels includes pellets and briquettes.

    In the third quarter of 2023, operating loss was $19.7 million compared to operating income of $2.9 million in the same quarter of 2022 primarily due to lower lumber and energy sales realizations partially offset by higher manufactured products sales realizations.

    In the third quarter of 2023, solid wood segment revenues increased by approximately 61% to $119.5 million from $74.3 million in the same quarter of 2022 primarily as a result of the inclusion of Torgau and the ramping up of our mass timber operations partially offset by lower lumber and energy revenues.

    In the third quarter of 2023, lumber revenues decreased by approximately 6% to $50.8 million from $54.3 million in the same quarter of 2022 due to lower sales realizations partially offset by higher sales volumes. In the third quarter of 2023, both U.S. and European realized lumber prices were lower because of decreased demand as a result of higher interest rates and an uncertain economic outlook compared to the same quarter of 2022. The U.S. market accounted for approximately 57% of our lumber revenues and approximately 49% of our lumber sales volumes in the third quarter of 2023. The majority of the balance of our lumber sales were to Europe.

    In the third quarter of 2023, our mass timber operations continued the ramp up of their operations and manufactured products revenues increased to $20.9 million from $7.1 million in the comparative quarter of 2022 as a result of both higher sales volumes and realizations.

    Energy and wood residuals revenues in the third quarter of 2023 decreased by approximately 40% to $7.7 million from $12.8 million in the same quarter of 2022 primarily caused by lower sales realizations.

    Pallet revenues of $28.8 million and biofuels revenues of $11.4 million in the third quarter of 2023 are from the inclusion of Torgau.

    In the third quarter of 2023, lumber production modestly decreased to 94.4 MMfbm from 97.1 MMfbm in the same quarter of 2022 as a result of maintenance downtime and the overall weak lumber market partially offset by the inclusion of Torgau.

    Lumber sales volumes increased by approximately 28% to 114.7 MMfbm in the third quarter of 2023 from 89.8 MMfbm in the same quarter of 2022 primarily due to the timing of sales.

    Average lumber sales realizations decreased by approximately 27% to $443 per Mfbm in the third quarter of 2023 from approximately $605 per Mfbm in the same quarter of 2022 as a result of lower demand in both the U.S. and European markets.

    Manufactured products sales realizations increased to $1,752 per m3 in the third quarter of 2023 from $677 per m3 in the same quarter of 2022 as a result of higher CLT sales volumes.

    Fiber costs were approximately 70% of our lumber cash production costs in the third quarter of 2023. In the third quarter of 2023, per unit fiber costs for lumber production modestly decreased compared to the same quarter of 2022 due to an increased supply of beetle damaged wood. We currently expect modestly lower per unit fiber costs in the fourth quarter of 2023 as a result of continuing availability of beetle damaged wood.

    Consolidated - Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

    Total revenues for the nine months ended September 30, 2023 decreased by approximately 10% to $1,523.4 million from $1,697.9 million in the same period of 2022 primarily due to lower pulp, lumber and energy sales realizations partially offset by the inclusion of Torgau and higher sales volumes.

    Costs and expenses in the nine months ended September 30, 2023 increased by approximately 22% to $1,655.7 million from $1,352.8 million in the same period of 2022 primarily caused by the inclusion of Torgau, higher per unit fiber costs, which includes the net inventory impairment charges at our Canadian pulp mills of $56.6 million, higher sales volumes and higher chemical costs. These increases were partially offset by the receipt of $37.7 million of insurance proceeds.

    In the nine months ended September 30, 2023, Operating EBITDA was negative $3.7 million compared to a positive $440.4 million in the same period of 2022 primarily due to lower pulp, lumber and energy sales realizations, higher per unit fiber costs, which includes the net inventory impairment charges at our Canadian pulp mills, and higher chemical costs partially offset by insurance proceeds received and higher sales volumes .

    Liquidity
    During the quarter we increased the availability of our German revolving credit facility by €70.1 million to €370.1 million and completed a private offering of the $200.0 million 2028 senior notes. We utilized approximately $70.0 million of such proceeds to pay down our revolving credit facilities in September and October, 2023.

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

     September 30,  December 31, 
     2023  2022 
     (in thousands) 
    Cash and cash equivalents$343,725  $354,032 
    Working capital$796,634  $800,114 
    Total assets$2,655,001  $2,725,037 
    Long-term liabilities$1,721,683  $1,508,192 
    Total shareholders' equity$665,452  $838,784 
            

    As of September 30, 2023, we had cash and cash equivalents of $343.7 million and approximately $304.7 million available under our revolving credit facilities and as a result aggregate liquidity of about $648.4 million.

    Quarterly Dividend
    A quarterly dividend of $0.075 per share will be paid on December 28, 2023 to all shareholders of record on December 20, 2023. Future dividends will be subject to Board approval and may be adjusted as business and industry conditions warrant.

    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 November 3, 2023 at 10:00 AM ET. Listeners can access the conference call live and archived for 30 days over the Internet at https://edge.media-server.com/mmc/p/qc4iogaa/ 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 web site and download and install any necessary audio software.

    Mercer International Inc. is a global forest products company with operations in Germany, USA and Canada with consolidated annual production capacity of 2.3 million tonnes of pulp, 960 million board feet of lumber, 210 thousand cubic meters of cross-laminated timber, 45 thousand cubic meters of glulam, 17 million pallets and 230,000 metric tonnes of biofuels. To obtain further information on the company, please visit its web site 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", "are optimistic that", "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-

    Summary Financial Highlights

     Q3  Q2  Q3  YTD  YTD 
     2023  2023  2022  2023  2022 
     (in thousands, except per share amounts) 
    Pulp segment revenues$348,853  $402,694  $456,657  $1,151,948  $1,402,892 
    Solid wood segment revenues 119,547   126,050   74,266   366,611   290,048 
    Corporate and other revenues 2,421   1,119   1,891   4,791   4,941 
    Total revenues$470,821  $529,863  $532,814  $1,523,350  $1,697,881 
                   
    Pulp segment operating income (loss)$21,181  $(83,459) $109,985  $(49,507) $271,692 
    Solid wood segment operating income (loss) (19,690)  (22,493)  2,896   (69,252)  84,923 
    Corporate and other operating loss (4,917)  (2,880)  (4,158)  (13,620)  (11,510)
    Total operating income (loss)$(3,426) $(108,832) $108,723  $(132,379) $345,105 
                   
    Pulp segment depreciation and amortization$28,186  $27,783  $28,174  $83,368  $82,859 
    Solid wood segment depreciation and amortization 12,517   12,126   3,733   44,541   11,719 
    Corporate and other depreciation and amortization 250   243   237   787   710 
    Total depreciation and amortization$40,953  $40,152  $32,144  $128,696  $95,288 
                   
    Operating EBITDA$37,527  $(68,680) $140,867  $(3,683) $440,393 
    Income tax recovery (provision)$(3,984) $27,479  $(31,294) $28,851  $(89,656)
    Net income (loss)$(25,956) $(98,306) $66,746  $(154,840) $227,015 
    Net income (loss) per common share              
    Basic$(0.39) $(1.48) $1.01  $(2.33) $3.43 
    Diluted$(0.39) $(1.48) $1.00  $(2.33) $3.41 
    Common shares outstanding at period end 66,525   66,525   66,167   66,525   66,167 
                        

    Summary Operating Highlights

     Q3  Q2  Q3  YTD  YTD 
     2023  2023  2022  2023  2022 
    Pulp Segment              
    Pulp production ('000 ADMTs)              
    NBSK 397.5   450.7   362.9   1,278.2   1,216.7 
    NBHK 82.5   24.9   82.1   179.7   190.4 
    Annual maintenance downtime ('000 ADMTs) 13.3   24.5   17.3   51.2   71.5 
    Annual maintenance downtime (days) 13   25   17   48   60 
    Pulp sales ('000 ADMTs)              
    NBSK 425.1   473.6   356.6   1,277.2   1,267.4 
    NBHK 62.1   63.3   69.3   182.8   185.0 
    Average NBSK pulp prices ($/ADMT)(1)              
    Europe 1,160   1,247   1,500   1,261   1,422 
    China 680   668   969   746   959 
    North America 1,293   1,510   1,800   1,493   1,690 
    Average NBHK pulp prices ($/ADMT)(1)              
    China 530   483   855   574   779 
    North America 1,023   1,277   1,620   1,274   1,483 
    Average pulp sales realizations ($/ADMT)(2)              
    NBSK 666   706   911   735   865 
    NBHK 530   602   990   642   858 
    Energy production ('000 MWh)(3) 524.4   538.3   484.2   1,597.4   1,512.4 
    Energy sales ('000 MWh)(3) 214.8   207.7   174.3   619.4   568.3 
    Average energy sales realizations ($/MWh)(3) 108   101   339   112   233 
    Solid Wood Segment              
    Lumber              
    Production (MMfbm) 94.4   122.3   97.1   350.7   324.8 
    Sales (MMfbm) 114.7   133.9   89.8   388.4   310.7 
    Average sales realizations ($/Mfbm) 443   443   605   438   782 
    Energy              
    Production and sales ('000 MWh) 39.0   41.9   20.6   121.4   70.6 
    Average sales realizations ($/MWh) 140   128   394   136   260 
    Manufactured products(4)              
    Production ('000 cubic meters) 10.9   3.2   15.0   14.9   28.0 
    Sales ('000 cubic meters) 11.0   6.1   10.5   21.4   22.7 
    Average sales realizations ($/cubic meters) 1,752   2,243   677   1,672   756 
    Pallets              
    Production ('000 units) 2,895.1   2,747.2   -   8,522.5   - 
    Sales ('000 units) 2,765.3   2,882.7   -   8,590.4   - 
    Average sales realizations ($/unit) 10   11   -   11   - 
    Biofuels(5)              
    Production ('000 tonnes) 52.1   43.6   -   128.3   - 
    Sales ('000 tonnes) 38.7   40.4   -   105.0   - 
    Average realizations ($/tonne) 294   254   -   284   - 
    Average Spot Currency Exchange Rates              
    $ / €(6) 1.0884   1.0888   1.0066   1.0835   1.0636 
    $ / C$(6) 0.7458   0.7447   0.7659   0.7433   0.7796 

    ______________
    (1) Source: RISI pricing report. Europe and North America are list prices. China are net prices which include discounts, allowances and rebates.
    (2) Sales realizations after customer discounts, rebates and other selling concessions. Incorporates the effect of pulp price variations occurring between the order and shipment dates.
    (3) Does not include our 50% joint venture interest in the Cariboo mill, which is accounted for using the equity method.
    (4) Manufactured products includes cross-laminated timber, glulam and finger joint lumber.
    (5) Biofuels includes pellets and briquettes.
    (6) Average Federal Reserve Bank of New York Noon Buying Rates over the reporting period.

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

      Three Months Ended
    September 30,    		  Nine Months Ended
    September 30,    		 
      2023  2022  2023  2022 
    Revenues $470,821  $532,814  $1,523,350  $1,697,881 
    Costs and expenses            
    Cost of sales, excluding depreciation and amortization  403,267   367,710   1,430,805   1,187,476 
    Cost of sales depreciation and amortization  40,884   32,122   128,485   95,223 
    Selling, general and administrative expenses  30,096   24,259   96,439   70,077 
    Operating income (loss)  (3,426)  108,723   (132,379)  345,105 
    Other income (expenses)            
    Interest expense  (21,863)  (17,935)  (61,001)  (52,731)
    Other income  3,317   7,252   9,689   24,297 
    Total other expenses, net  (18,546)  (10,683)  (51,312)  (28,434)
    Income (loss) before income taxes  (21,972)  98,040   (183,691)  316,671 
    Income tax recovery (provision)  (3,984)  (31,294)  28,851   (89,656)
    Net income (loss) $(25,956) $66,746  $(154,840) $227,015 
    Net income (loss) per common share            
    Basic $(0.39) $1.01  $(2.33) $3.43 
    Diluted $(0.39) $1.00  $(2.33) $3.41 
    Dividends declared per common share $0.075  $0.075  $0.225  $0.225 
                     

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

      September 30,
    2023    		  December 31,
    2022    		 
    ASSETS      
    Current assets      
    Cash and cash equivalents $343,725  $354,032 
    Accounts receivable, net  266,927   351,993 
    Inventories  422,151   450,470 
    Prepaid expenses and other  31,697   21,680 
    Total current assets  1,064,500   1,178,175 
    Property, plant and equipment, net  1,396,747   1,341,322 
    Investment in joint ventures  43,933   45,635 
    Amortizable intangible assets, net  50,322   61,497 
    Goodwill  33,921   30,937 
    Operating lease right-of-use assets  17,351   15,049 
    Pension asset  3,514   4,397 
    Other long-term assets  44,713   48,025 
    Total assets $2,655,001  $2,725,037 
    LIABILITIES AND SHAREHOLDERS’ EQUITY      
    Current liabilities      
    Accounts payable and other $267,343  $377,306 
    Pension and other post-retirement benefit obligations  523   755 
    Total current liabilities  267,866   378,061 
    Long-term debt  1,589,776   1,346,508 
    Pension and other post-retirement benefit obligations  10,768   12,178 
    Operating lease liabilities  11,593   9,475 
    Other long-term liabilities  14,158   14,072 
    Deferred income tax  95,388   125,959 
    Total liabilities  1,989,549   1,886,253 
    Shareholders’ equity      
    Common shares $1 par value; 200,000,000 authorized; 66,525,000 issued and outstanding (2022 – 66,167,000)  66,471   66,132 
    Additional paid-in capital  358,055   354,495 
    Retained earnings  428,319   598,119 
    Accumulated other comprehensive loss  (187,393)  (179,962)
    Total shareholders’ equity  665,452   838,784 
    Total liabilities and shareholders’ equity $2,655,001  $2,725,037 
             

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

      Three Months Ended
    September 30,    		  Nine Months Ended
    September 30,    		 
      2023  2022  2023  2022 
    Cash flows from (used in) operating activities            
    Net income (loss) $(25,956) $66,746  $(154,840) $227,015 
    Adjustments to reconcile net income (loss) to cash flows from operating activities            
    Depreciation and amortization  40,953   32,144   128,696   95,288 
    Deferred income tax provision (recovery)  9,520   620   (34,529)  15,627 
    Inventory impairment (recovery)  (10,000)  —   56,600   — 
    Defined benefit pension plans and other post-retirement benefit plan expense  621   424   1,518   1,301 
    Stock compensation expense  1,754   1,214   4,367   3,680 
    Foreign exchange transaction gains  (4,830)  (11,283)  (4,336)  (24,702)
    Other  459   (3,726)  (6,142)  (4,497)
    Defined benefit pension plans and other post-retirement benefit plan contributions  (251)  (511)  (1,816)  (2,905)
    Changes in working capital            
    Accounts receivable  65,592   (17,679)  89,102   (4,297)
    Inventories  8,543   (8,803)  (19,011)  (23,870)
    Accounts payable and accrued expenses  (100,449)  34,323   (107,630)  37,569 
    Other  (11,290)  (6,809)  (12,265)  (10,198)
    Net cash from (used in) operating activities  (25,334)  86,660   (60,286)  310,011 
    Cash flows from (used in) investing activities            
    Purchase of property, plant and equipment  (37,391)  (48,554)  (110,302)  (128,875)
    Acquisition, net of cash acquired  —   (257,367)  (82,100)  (257,367)
    Property insurance proceeds  2,727   1,164   5,437   7,574 
    Proceeds from government grants  4,642   —   4,642   1,067 
    Purchase of term deposit  —   —   —   (75,000)
    Other  716   405   2,641   972 
    Net cash from (used in) investing activities  (29,306)  (304,352)  (179,682)  (451,629)
    Cash flows from (used in) financing activities            
    Proceeds from issuance of senior notes  200,000   —   200,000   — 
    Proceeds from (repayment of) revolving credit facilities, net  (3,129)  99,065   51,278   116,503 
    Dividend payments  (4,989)  (4,962)  (9,971)  (9,922)
    Payment of debt issuance costs  (4,552)  (1,849)  (4,552)  (3,033)
    Payment of finance lease obligations  (2,058)  (1,640)  (5,845)  (8,246)
    Other  (114)  (27)  (343)  (593)
    Net cash from (used in) financing activities  185,158   90,587   230,567   94,709 
    Effect of exchange rate changes on cash and cash equivalents  (131)  (5,502)  (906)  (11,447)
    Net increase (decrease) in cash and cash equivalents  130,387   (132,607)  (10,307)  (58,356)
    Cash and cash equivalents, beginning of period  213,338   419,861   354,032   345,610 
    Cash and cash equivalents, end of period $343,725  $287,254  $343,725  $287,254 
                     

    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 operating income (loss) as a measure of performance, nor as an alternative to net cash from (used in) operating activities as a measure of liquidity. The following tables set forth the net income (loss) to Operating EBITDA:

     Q3  Q2  Q3  YTD  YTD 
     2023  2023  2022  2023  2022 
    Net income (loss)$(25,956) $(98,306) $66,746  $(154,840) $227,015 
    Income tax provision (recovery) 3,984   (27,479)  31,294   (28,851)  89,656 
    Interest expense 21,863   20,091   17,935   61,001   52,731 
    Other income (3,317)  (3,138)  (7,252)  (9,689)  (24,297)
    Operating income (loss) (3,426)  (108,832)  108,723   (132,379)  345,105 
    Add: Depreciation and amortization 40,953   40,152   32,144   128,696   95,288 
    Operating EBITDA$37,527  $(68,680) $140,867  $(3,683) $440,393 
                        

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

Juan Carlos Bueno
Chief Executive Officer
(604) 684-1099

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