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Mercer International Inc. Reports Fourth Quarter and Year End 2023 Results and Announces Quarterly Cash Dividend of $0.075
Source: Nasdaq GlobeNewswire / 15 Feb 2024 16:30:00 America/New_York
Selected Highlights
- Fourth quarter Operating EBITDA* of $21.1 million and net loss of $87.2 million
- Full year 2023 Operating EBITDA of $17.5 million and net loss of $242.1 million
- Continued to ramp up and build out the order book of our mass timber business in 2023
- Quarterly cash dividend of $0.075 per share
NEW YORK, Feb. 15, 2024 (GLOBE NEWSWIRE) -- Mercer International Inc. (Nasdaq: MERC) today reported that Operating EBITDA in the fourth quarter of 2023 was $21.1 million compared to $96.1 million in the same quarter of 2022 and $37.5 million in the third quarter of 2023.
In the fourth quarter of 2023, net loss was $87.2 million (or $1.31 per share), which included a non-cash impairment of $33.7 million (or $0.51 per share) relating to the classification of our sandalwood business as held for sale, compared to net income of $20.0 million (or $0.30 per share) in the fourth quarter of 2022 and net loss of $26.0 million (or $0.39 per share) in the third quarter of 2023.
In 2023, Operating EBITDA was $17.5 million compared to $536.5 million in 2022. Net loss was $242.1 million (or $3.65 per share) in 2023 compared to net income of $247.0 million (or $3.74 per basic share and $3.71 per diluted share) in 2022.
Mr. Juan Carlos Bueno, the Chief Executive Officer, stated: “In the fourth quarter, our operating results were positively impacted by an improved pulp pricing environment. However, our results decreased relative to the preceding quarter because of greater planned maintenance downtime in the fourth quarter and because in the third quarter there were positive impacts from the recognition of non-cash items and sales of previously impaired inventory.
In the fourth quarter, we saw improved pulp pricing for both NBSK and NBHK across all our markets as customers restocked inventories. We currently believe this pricing momentum will continue into 2024 with modest price increases expected in the first quarter. We continued to be negatively impacted by the overall weakness in the lumber market as slightly higher prices in the U.S. were offset by lower prices in Europe.
We recognized a non‐cash impairment of $33.7 million against our sandalwood business in the fourth quarter of 2023 as we made the strategic decision to pursue a sale of this business to focus on our core strategy, resulting in these assets and associated liabilities being valued at fair market value and classified as held for sale as at the end of 2023.
In the fourth quarter of 2023, all our mills ran very efficiently and we had 23 days of scheduled maintenance downtime (approximately 31,600 ADMTs) at our pulp mills. In the first quarter of 2024, we have no scheduled maintenance downtime at our pulp mills.
Overall per unit fiber costs for our pulp segment were stable in the fourth quarter compared to the third quarter. Per unit fiber costs for our solid wood segment decreased due to the availability of lower cost beetle damaged wood in Germany.
In 2023, we saw strong growth in our mass timber business as we secured major customer contracts and continued to build out our order book. We began 2024 with a mass timber order book of almost $100 million. We are pleased that this business has exceeded our expectations to date, including by contributing positively to our Operating EBITDA in the fourth quarter.”
Mr. Bueno concluded: “We have seen pulp pricing and fiber supply conditions improve and currently expect this to continue in 2024. While market conditions have improved, our team remains disciplined on controlling costs, including by limiting discretionary spending and managing working capital to ensure our cash and liquidity levels remain healthy. We finished 2023 with approximately $610 million in aggregate liquidity and believe we are well positioned to ensure the integrity of our balance sheet through the business cycle.”
Current Market Environment
We currently expect improved pulp pricing in 2024, led by Europe, where third-party quoted list prices for NBSK pulp increased to $1,350 per ADMT in January 2024 with additional modest increases expected to continue in the first half of 2024 as a result of stronger demand due to the easing of inflationary pressures. For China and North America we currently expect prices to be generally stable in the first part of 2024, with reduced supply offset by continued weak demand. For NBHK pulp we currently expect stable prices in the first half of 2024.
In our solid wood segment, we currently expect a modest increase in U.S. lumber prices in the first half of 2024 driven by increased housing activity and low customer inventory levels. In Europe, we expect lumber prices to be relatively flat as demand remains weak due to continued high interest rates and economic uncertainty. We currently expect mass timber prices to be stable in the first half of 2024.
Consolidated Financial Results
Q4 Q3 Q4 YTD YTD 2023 2023 2022 2023 2022(1) (in thousands, except per share amounts) Revenues $ 470,494 $ 470,821 $ 583,056 $ 1,993,844 $ 2,280,937 Operating income (loss) $ (56,395 ) $ (3,426 ) $ 47,263 $ (188,774 ) $ 392,368 Operating EBITDA $ 21,145 $ 37,527 $ 96,128 $ 17,462 $ 536,521 Net income (loss) $ (87,216 ) $ (25,956 ) $ 20,024 $ (242,056 ) $ 247,039 Net income (loss) per common share Basic $ (1.31 ) $ (0.39 ) $ 0.30 $ (3.65 ) $ 3.74 Diluted $ (1.31 ) $ (0.39 ) $ 0.30 $ (3.65 ) $ 3.71 ______________ (1) Includes results of the Torgau facility since September 30, 2022. Consolidated – Three Months Ended December 31, 2023 Compared to Three Months Ended December 31, 2022
Total revenues in the fourth quarter of 2023 decreased by approximately 19% to $470.5 million from $583.1 million in the same quarter of 2022 primarily due to lower pulp and energy sales realizations partially offset by higher pulp sales volumes.
Costs and expenses in the fourth quarter of 2023 decreased modestly to $526.9 million from $535.8 million in the same quarter of 2022 primarily as a result of lower per unit fiber, energy, freight and chemical costs partially offset by a $33.7 million non-cash impairment recognized in connection with the classification of our sandalwood business as held for sale and higher pulp sales volumes.
In the fourth quarter of 2023, Operating EBITDA was $21.1 million compared to $96.1 million in the same quarter of 2022 primarily due to lower pulp and energy sales realizations partially offset by lower per unit production and freight costs.
Segment Results
PulpThree Months Ended December 31, 2023 2022 (in thousands) Pulp revenues $ 340,687 $ 425,421 Energy and chemical revenues $ 23,495 $ 37,804 Operating income $ 1,245 $ 68,972
In the fourth quarter of 2023, pulp segment operating income was $1.2 million compared to $69.0 million in the same quarter of 2022 primarily as a result of lower pulp and energy sales realizations partially offset by lower per unit fiber, energy, chemical and freight costs.Our pulp segment revenues decreased by approximately 21% to $364.2 million in the fourth quarter of 2023 from $463.2 million in the same quarter of 2022 primarily due to the relatively weaker pulp market and lower energy revenues.
Pulp revenues in the fourth quarter of 2023 decreased by approximately 20% to $340.7 million from $425.4 million in the same quarter of 2022 due to lower sales realizations partially offset by higher sales volumes.
In the fourth 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 22% to $709 per ADMT in the fourth quarter of 2023 from $913 per ADMT in the same quarter of 2022. In the fourth quarter of 2023, our average NBHK pulp sales realizations decreased by approximately 34% to $593 per ADMT from $896 per ADMT in the same quarter of 2022.
Total pulp sales volumes increased by approximately 6% to 491,156 ADMTs in the fourth quarter of 2023 from 465,318 ADMTs in the same quarter of 2022 primarily because of higher production.
Energy and chemical revenues decreased by approximately 38% to $23.5 million in the fourth quarter of 2023 from $37.8 million in the same quarter of 2022 as a result of lower sales realizations partially offset by higher sales volumes.
Costs and expenses in the fourth quarter of 2023 decreased by approximately 8% to $363.2 million from $394.3 million in the same quarter of 2022 primarily due to lower per unit fiber, energy, chemical and freight costs partially offset by higher pulp sales volumes.
In the fourth quarter of 2023, per unit fiber costs decreased by approximately 7% from the same quarter of 2022 driven by stable supply and the benefits from our Peace River woodroom. We currently expect modestly lower per unit fiber costs in the first quarter of 2024 due to stable supply.
Solid Wood
Three Months Ended December 31, 2023 2022 (in thousands) Lumber revenues $ 47,821 $ 45,041 Energy revenues $ 4,928 $ 7,310 Manufactured products revenues(1) $ 16,252 $ 5,583 Pallet revenues $ 23,767 $ 36,063 Biofuels revenues(2) $ 10,916 $ 17,691 Wood residuals revenues $ 1,759 $ 6,722 Operating loss $ (18,411 ) $ (14,281 ) ______________ (1) Manufactured products primarily includes cross-laminated timber, glulam and finger joint lumber. (2) Biofuels includes pellets and briquettes. In the fourth quarter of 2023, solid wood segment operating loss was $18.4 million compared to $14.3 million in the same quarter of 2022 primarily due to lower solid wood products' sales realizations, with the exception of manufactured products, partially offset by lower per unit fiber costs.
In the fourth quarter of 2023, solid wood segment revenues decreased by approximately 11% to $105.4 million from $118.4 million in the same quarter of 2022 primarily as a result of lower pallet, biofuels, energy and wood residuals sales realizations partially offset by higher manufactured products revenues.
In the fourth quarter of 2023, lumber revenues increased by approximately 6% to $47.8 million from $45.0 million in the same quarter of 2022 as higher sales volumes were only partially offset by modestly lower sales realizations. Average lumber sales realizations decreased by approximately 6% to $427 per Mfbm in the fourth quarter of 2023 from approximately $454 per Mfbm in the same quarter of 2022 as a result of weaker demand in the European market driven by higher interest rates and an uncertain economic outlook. In the U.S. market, sales realizations were flat in the fourth quarter of 2023 compared to the same quarter of 2022. The U.S. market accounted for approximately 49% of our lumber revenues and approximately 39% of our lumber sales volumes in the fourth quarter of 2023. The remaining balance of our lumber sales were primarily to Europe.
Lumber sales volumes increased by approximately 13% to 112.0 MMfbm in the fourth quarter of 2023 from 99.2 MMfbm in the same quarter of 2022 primarily due to the timing of sales.
In the fourth quarter of 2023, we continued to ramp up our mass timber operations and manufactured products revenues increased to $16.3 million from $5.6 million in the same quarter of 2022 as a result of both higher sales realizations and sales volumes. Manufactured products sales realizations increased to $1,234 per m3 in the fourth quarter of 2023 from $561 per m3 in the same quarter of 2022 as a result of higher cross-laminated timber and glulam sales volumes.
Energy and wood residuals revenues in the fourth quarter of 2023 decreased by approximately 52% to $6.7 million from $14.0 million in the same quarter of 2022 primarily due to lower sales realizations.
Pallet revenues in the fourth quarter of 2023 decreased by approximately 34% to $23.8 million from $36.1 million in the same quarter of 2022 primarily due to lower sales realizations and sales volumes. Biofuels in the fourth quarter of 2023 decreased by approximately 38% to $10.9 million from $17.7 million in the same quarter of 2022 primarily due to lower sales volumes and realizations.
In the fourth quarter of 2023, lumber production decreased by approximately 5% to 111.6 MMfbm from 117.3 MMfbm in the same quarter of 2022 as a result of maintenance downtime.
Fiber costs were approximately 70% of our lumber cash production costs in the fourth quarter of 2023. In the fourth quarter of 2023, per unit fiber costs for lumber production decreased by approximately 19% compared to the same quarter of 2022 due to an increased supply of beetle damaged wood in Germany. We currently expect modestly lower per unit fiber costs in the first quarter of 2024 as a result of the continuing availability of beetle damaged wood partially offset by stronger demand.
Consolidated – Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
Total revenues in 2023 decreased by approximately 13% to $1,993.8 million from $2,280.9 million in 2022 primarily due to lower pulp, lumber and energy sales realizations partially offset by the inclusion of Torgau for a full year and higher sales volumes.
Costs and expenses in 2023 increased by approximately 16% to $2,182.6 million from $1,888.6 million in 2022 primarily as a result of the inclusion of Torgau for a full year, higher per unit fiber costs, a $33.7 million impairment recognized in connection with the classification of our sandalwood business as held for sale and higher sales volumes. These increases were partially offset by lower per unit energy and freight costs and the receipt of $46.4 million of insurance proceeds in 2023 relating to the 2021 turbine downtime at the Rosenthal mill and the July 2022 fire at the Stendal mill. In 2022, we received insurance proceeds of $17.3 million related to the Stendal fire.
In 2023, Operating EBITDA was $17.5 million compared to $536.5 million in 2022 primarily due to lower pulp, lumber and energy sales realizations and higher per unit fiber costs partially offset by lower per unit energy and freight costs and higher insurance proceeds received.
Liquidity
As of December 31, 2023, we had cash and cash equivalents of $314.0 million and approximately $296.3 million available under our revolving credit facilities and as a result aggregate liquidity of about $610 million.
The following table is a summary of selected financial information as of the dates indicated:
As of December 31, 2023 2022 (in thousands) Cash and cash equivalents $ 313,992 $ 354,032 Working capital $ 806,468 $ 800,114 Total assets $ 2,662,578 $ 2,725,037 Long-term liabilities $ 1,740,731 $ 1,508,192 Total shareholders' equity $ 635,410 $ 838,784
Quarterly DividendA quarterly dividend of $0.075 per share will be paid on April 4, 2024 to all shareholders of record on March 27, 2024. 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 February 16, 2024 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/6gsbsf2n 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 website 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 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", "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.
APPROVED BY:
Jimmy S.H. Lee
Executive Chairman
(604) 684-1099Juan Carlos Bueno
Chief Executive Officer
(604) 684-1099-FINANCIAL TABLES FOLLOW-
Summary Financial Highlights
Q4 Q3 Q4 YTD YTD 2023 2023 2022 2023 2022(1) (in thousands, except per share amounts) Pulp segment revenues $ 364,182 $ 348,853 $ 463,225 $ 1,516,130 $ 1,866,117 Solid wood segment revenues 105,443 119,547 118,410 472,054 408,458 Corporate and other revenues 869 2,421 1,421 5,660 6,362 Total revenues $ 470,494 $ 470,821 $ 583,056 $ 1,993,844 $ 2,280,937 Pulp segment operating income (loss) $ 1,245 $ 21,181 $ 68,972 $ (48,262 ) $ 340,664 Solid wood segment operating income (loss) (18,411 ) (19,690 ) (14,281 ) (87,663 ) 70,642 Corporate and other operating loss (39,229 ) (4,917 ) (7,428 ) (52,849 ) (18,938 ) Total operating income (loss) $ (56,395 ) $ (3,426 ) $ 47,263 $ (188,774 ) $ 392,368 Pulp segment depreciation and amortization $ 30,783 $ 28,186 $ 29,199 $ 114,151 $ 112,058 Solid wood segment depreciation and amortization 12,779 12,517 19,451 57,320 31,170 Corporate and other depreciation and amortization 244 250 215 1,031 925 Total depreciation and amortization $ 43,806 $ 40,953 $ 48,865 $ 172,502 $ 144,153 Operating EBITDA $ 21,145 $ 37,527 $ 96,128 $ 17,462 $ 536,521 Impairment of sandalwood business held for sale $ 33,734 $ — $ — $ 33,734 $ — Income tax recovery (provision) $ (1,084 ) $ (3,984 ) $ (8,608 ) $ 27,767 $ (98,264 ) Net income (loss) $ (87,216 ) $ (25,956 ) $ 20,024 $ (242,056 ) $ 247,039 Net income (loss) per common share Basic $ (1.31 ) $ (0.39 ) $ 0.30 $ (3.65 ) $ 3.74 Diluted $ (1.31 ) $ (0.39 ) $ 0.30 $ (3.65 ) $ 3.71 Common shares outstanding at period end 66,525 66,525 66,167 66,525 66,167 ______________ (1) Includes results of the Torgau facility since September 30, 2022. Summary Operating Highlights
Q4 Q3 Q4 YTD YTD 2023 2023 2022 2023 2022(1) Pulp Segment Pulp production ('000 ADMTs) NBSK 436.2 397.5 390.9 1,714.4 1,607.6 NBHK 71.5 82.5 80.6 251.2 271.0 Annual maintenance downtime ('000 ADMTs) 31.6 13.3 39.5 82.9 111.0 Annual maintenance downtime (days) 23 13 21 71 80 Pulp sales ('000 ADMTs) NBSK 411.8 425.1 393.4 1,689.0 1,660.8 NBHK 79.4 62.1 72.0 262.2 257.0 Average NBSK pulp prices ($/ADMT)(2) Europe 1,245 1,160 1,442 1,257 1,427 China 748 680 920 747 949 North America 1,312 1,293 1,745 1,448 1,704 Average NBHK pulp prices ($/ADMT)(2) China 643 530 837 592 794 North America 1,083 1,023 1,608 1,227 1,514 Average pulp sales realizations ($/ADMT)(3) NBSK 709 666 913 729 876 NBHK 593 530 896 627 869 Energy production ('000 MWh)(4) 544.6 524.4 515.8 2,142.0 2,028.1 Energy sales ('000 MWh)(4) 213.2 214.8 183.4 832.6 751.7 Average energy sales realizations ($/MWh)(4) 92 108 156 (5) 107 214 (5) Solid Wood Segment Lumber Production (MMfbm) 111.6 94.4 117.3 462.3 442.2 Sales (MMfbm) 112.0 114.7 99.2 500.5 409.9 Average sales realizations ($/Mfbm) 427 443 454 435 703 Energy Production and sales ('000 MWh) 38.7 39.0 39.0 160.2 109.6 Average sales realizations ($/MWh) 127 140 159 (5) 134 224 (5) Manufactured products(6) Production ('000 cubic meters) 10.2 10.9 8.3 25.1 36.3 Sales ('000 cubic meters) 12.1 11.0 6.1 33.4 28.8 Average sales realizations ($/cubic meters) 1,234 1,752 561 1,514 715 Pallets Production ('000 units) 2,184.7 2,895.1 2,568.4 10,707.2 2,568.4 Sales ('000 units) 2,450.7 2,765.3 2,646.3 11,041.2 2,646.3 Average sales realizations ($/unit) 10 10 14 11 14 Biofuels(7) Production ('000 tonnes) 38.9 52.1 45.7 167.2 45.7 Sales ('000 tonnes) 39.9 38.7 49.8 144.8 49.8 Average sales realizations ($/tonne) 274 294 355 281 355 Average Spot Currency Exchange Rates $ / €(8) 1.0761 1.0884 1.0218 1.0817 1.0534 $ / C$(8) 0.7347 0.7458 0.7366 0.7412 0.7691 ______________ (1) Includes results of the Torgau facility since September 30, 2022. (2) Source: RISI pricing report. Europe and North America are list prices. China are net prices which include discounts, allowances and rebates. (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) Does not include our 50% joint venture interest in the Cariboo mill, which is accounted for using the equity method. (5) Energy sales realizations for the year ended December 31, 2022 are net of the German energy windfall tax of $6.7 million for the pulp segment and $1.1 million for the solid wood segment. (6) Manufactured products includes cross-laminated timber, glulam and finger joint lumber. (7) Biofuels includes pellets and briquettes. (8) 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
December 31,For the Year Ended
December 31,2023 2022 2023 2022 Revenues $ 470,494 $ 583,056 $ 1,993,844 $ 2,280,937 Costs and expenses Cost of sales, excluding depreciation and amortization 422,677 451,196 1,853,482 1,638,672 Cost of sales depreciation and amortization 43,738 48,841 172,223 144,064 Selling, general and administrative expenses 26,740 35,756 123,179 105,833 Impairment of sandalwood business held for sale 33,734 — 33,734 — Operating income (loss) (56,395 ) 47,263 (188,774 ) 392,368 Other income (expenses) Interest expense (27,245 ) (18,768 ) (88,246 ) (71,499 ) Other income (expenses) (2,492 ) 137 7,197 24,434 Total other expenses, net (29,737 ) (18,631 ) (81,049 ) (47,065 ) Income (loss) before income taxes (86,132 ) 28,632 (269,823 ) 345,303 Income tax recovery (provision) (1,084 ) (8,608 ) 27,767 (98,264 ) Net income (loss) $ (87,216 ) $ 20,024 $ (242,056 ) $ 247,039 Net income (loss) per common share Basic $ (1.31 ) $ 0.30 $ (3.65 ) $ 3.74 Diluted $ (1.31 ) $ 0.30 $ (3.65 ) $ 3.71 Dividends declared per common share $ 0.075 $ 0.075 $ 0.300 $ 0.300 MERCER INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and per share data)December 31, 2023 2022 ASSETS Current assets Cash and cash equivalents $ 313,992 $ 354,032 Accounts receivable, net 306,166 351,993 Inventories 414,161 450,470 Prepaid expenses and other 23,461 21,680 Assets classified as held for sale 35,125 — Total current assets 1,092,905 1,178,175 Property, plant and equipment, net 1,409,937 1,341,322 Investment in joint ventures 41,665 45,635 Amortizable intangible assets, net 52,641 61,497 Goodwill 35,381 30,937 Operating lease right-of-use assets 11,725 15,049 Pension asset 5,588 4,397 Other long-term assets 12,736 48,025 Total assets $ 2,662,578 $ 2,725,037 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Accounts payable and other $ 278,986 $ 377,306 Pension and other post-retirement benefit obligations 826 755 Liabilities associated with assets held for sale 6,625 — Total current liabilities 286,437 378,061 Long-term debt 1,609,425 1,346,508 Pension and other post-retirement benefit obligations 12,483 12,178 Operating lease liabilities 7,755 9,475 Other long-term liabilities 13,744 14,072 Deferred income tax 97,324 125,959 Total liabilities 2,027,168 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 359,497 354,495 Retained earnings 336,113 598,119 Accumulated other comprehensive loss (126,671 ) (179,962 ) Total shareholders’ equity 635,410 838,784 Total liabilities and shareholders’ equity $ 2,662,578 $ 2,725,037 MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)For the Year Ended December 31, 2023 2022 2021 Cash flows from (used in) operating activities Net income (loss) $ (242,056 ) $ 247,039 $ 170,988 Adjustments to reconcile net income (loss) to cash flows from operating activities Depreciation and amortization 172,502 144,153 132,199 Deferred income tax provision (recovery) (36,392 ) 7,003 18,791 Inventory impairment 58,600 — — Impairment of sandalwood business held for sale 33,734 — — Loss on early extinguishment of debt — — 30,368 Defined benefit pension plans and other post-retirement benefit plan expense 5,214 1,708 2,831 Stock compensation expense 5,922 6,737 2,394 Foreign exchange transaction losses (gains) 3,905 (16,802 ) (16,597 ) Other (5,092 ) (1,241 ) 384 Defined benefit pension plans and other post-retirement benefit plan contributions (1,152 ) (2,942 ) (4,258 ) Changes in working capital Accounts receivable 52,507 (20,476 ) (121,579 ) Inventories (15,836 ) (63,184 ) (96,442 ) Accounts payable and accrued expenses (98,182 ) 66,796 75,589 Other (2,679 ) (8,131 ) (12,454 ) Net cash from (used in) operating activities (69,005 ) 360,660 182,214 Cash flows from (used in) investing activities Purchase of property, plant and equipment (136,324 ) (178,742 ) (159,440 ) Acquisition, net of cash acquired (82,100 ) (256,604 ) (51,258 ) Property insurance proceeds 12,203 8,616 21,540 Proceeds from government grants 5,569 1,067 9,333 Purchase of term deposit — (75,000 ) — Proceeds from sale of term deposit — 75,519 — Other 785 534 2,031 Net cash from (used in) investing activities (199,867 ) (424,610 ) (177,794 ) Cash flows from (used in) financing activities Redemption of senior notes — — (824,557 ) Proceeds from issuance of senior notes 200,000 — 875,000 Proceeds from (repayment of) revolving credit facilities, net 61,272 115,330 (33,396 ) Dividend payments (19,950 ) (19,847 ) (17,167 ) Payment of debt issuance costs (4,865 ) (3,871 ) (14,483 ) Payment of finance lease obligations (7,785 ) (10,003 ) (7,850 ) Other (48 ) (711 ) 3,616 Net cash from (used in) financing activities 228,624 80,898 (18,837 ) Effect of exchange rate changes on cash and cash equivalents 208 (8,526 ) (1,071 ) Net increase (decrease) in cash and cash equivalents (40,040 ) 8,422 (15,488 ) Cash and cash equivalents, beginning of year 354,032 345,610 361,098 Cash and cash equivalents, end of year $ 313,992 $ 354,032 $ 345,610 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:
Q4 Q3 Q4 YTD YTD 2023 2023 2022 2023 2022(1) Net income (loss) $ (87,216 ) $ (25,956 ) $ 20,024 $ (242,056 ) $ 247,039 Income tax provision (recovery) 1,084 3,984 8,608 (27,767 ) 98,264 Interest expense 27,245 21,863 18,768 88,246 71,499 Other expenses (income) 2,492 (3,317 ) (137 ) (7,197 ) (24,434 ) Operating income (loss) (56,395 ) (3,426 ) 47,263 (188,774 ) 392,368 Add: Depreciation and amortization 43,806 40,953 48,865 172,502 144,153 Add: Impairment of sandalwood business held for sale 33,734 — — 33,734 — Operating EBITDA $ 21,145 $ 37,527 $ 96,128 $ 17,462 $ 536,521 ______________ (1) Includes results of the Torgau facility since September 30, 2022. 
