MERCER INTERNATIONAL INC. (NASDAQ:MERC) Files An 8-K Results of Operations and Financial Condition
ITEM2.02
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RESULTS OF OPERATIONS AND FINANCIAL CONDITION |
In connection with a proposed private offering of senior notes
described in Item 7.01 below, Mercer International Inc. (Mercer
or the Company) prepared a preliminary offering memorandum that
is being disseminated only to eligible investors, in which it
provided the following preliminary results for the year ended
December31, 2016.
Preliminary 2016 Financial Results
On a preliminary basis and based on information available as of
January30, 2017, for the year and the threemonths ended
December31, 2016, the Company estimates that its:
Year Ended December31, 2016
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total revenues declined to approximately $931.6million from |
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operating income was approximately $113.7million, compared |
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net income was in the range of $33.0million to |
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Operating EBITDA was approximately $185.7million, compared |
Three Months Ended December31, 2016
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total revenues declined to approximately $221.7million in |
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operating income was approximately $39.0million in the |
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net income in the fourth quarter of 2016 was in the range |
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Operating EBITDA for the fourth quarter of 2016 was |
On a preliminary basis and based on information available as of
January30, 2017, as at December31, 2016, the Company estimates
that its:
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cash and cash equivalents increased to approximately |
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working capital was approximately $308.7million, compared |
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total assets were approximately $1,158.7million, compared |
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debt was approximately $617.5million, compared to |
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revolving credit facilities were undrawn and the Company |
Other
In addition, in the last two months, NBSK pulp producers
implemented a price increase of $20 per ADMT in China effective
December1, 2016 and a further $20 per ADMT increase in China
effective January1, 2017.
NBSK pulp producers also implemented a $10 per ADMT price
increase in Europe effective January1, 2017. This recent price
increase in Europe will only have a negligible effect on the
Companys revenues because of selling and other concessions.
Although NBSK pulp prices have improved recently, there can be no
assurance that they will not decline in the future as pulp is a
commodity and prices are highly cyclical.
In addition, in 2017, excluding amounts being financed through
government grants, the Company currently expects capital
expenditures to be between approximately $45 to $50million.
Cautionary Note
The Company has not yet closed its books for the year ended
December31, 2016 and its independent auditors have not completed
their audit of the Companys results for the period. Accordingly,
the Companys actual financial results for the year ended
December31, 2016 may differ from the preliminary estimated
results above due to the completion of the Companys financial
closing procedures, final adjustments and other developments that
may arise between now and the time its audited financial results
for the year ended December31, 2016 are finalized.
Accordingly, you should not place undue reliance on these
preliminary estimated financial results.
Non-GAAP Financial Measures
This Current Report on Form 8-K contains certain non-GAAP
financial measures as defined under Securities and Exchange
Commission (SEC) rules, such as Operating EBITDA. Operating
EBITDA is defined as operating income (loss) plus depreciation
and amortization and nonrecurring capital asset impairment
charges. The Company uses Operating EBITDA as a benchmark
measurement of its own operating results and as benchmarks
relative to its competitors. The Company considers it to be a
meaningful supplement to operating income as a performance
measure primarily because depreciation expense and non-recurring
capital asset impairment charges are not actual cash costs, and
depreciation expense varies widely from company to company in a
manner that the Company considers largely independent of the
underlying cost efficiency of its operating facilities. In
addition, the Company believes Operating EBITDA is commonly used
by securities analysts, investors and other interested parties to
evaluate its financial performance. Operating EBITDA does not
reflect the impact of a number of items that affect the Companys
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, or as an alternative to
net cash from operating activities as a measure of liquidity.
Operating EBITDA is an internal measure and therefore may not be
comparable to other companies. The following table sets forth a
reconciliation of the Companys net income attributable to common
shareholders to Operating EBITDA:
| YearEndedDecember31, |
ThreeMonthsEnded December31, |
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| (1) | (1) | |||||||||||||||
| (in millions) | ||||||||||||||||
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Net income attributable to common shareholders |
$ | 33.0-35.0 | $ | 75.5 | $ | 16.6-18.6 | $ | 21.7 | ||||||||
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Income tax provision (benefit) |
24.5-26.5 | 29.4 | 5.2-7.2 | 7.7 | ||||||||||||
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Interest expense |
51.6 | 53.9 | 12.9 | 13.3 | ||||||||||||
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Loss on derivative instruments |
0.2 | 0.9 | – | 0.2 | ||||||||||||
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Foreign exchange loss on intercompany debt |
1.1 | 5.3 | 1.4 | 0.9 | ||||||||||||
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Other expense |
1.3 | 0.6 | 0.9 | 0.4 | ||||||||||||
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Operating income |
113.7 | 165.7 | 39.0 | 44.2 | ||||||||||||
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Add: Depreciation and amortization |
72.0 | 68.3 | 18.8 | 17.4 | ||||||||||||
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Operating EBITDA |
$ | 185.7 | $ | 234.0 | $ | 57.8 | $ | 61.5 | ||||||||
| (1) |
Estimated. |
| ITEM7.01 | REGULATION FD DISCLOSURE. |
The information set forth under Item 2.02 is incorporated under
this Item by reference.
On January30, 2017, the Company issued a press release announcing
its proposed (i)offering of an aggregate of $225.0million
principal amount of senior notes due 2024 (the 2024 Notes); and
(ii)conditional redemption of any and all of the Companys 7.000%
Senior Notes due 2019 (the 2019 Notes), being an aggregate
principal amount of $227.0million.
The net proceeds of the proposed issuance of 2024 Notes, together
with cash on hand, will be used to redeem the Companys currently
outstanding 2019 Notes.
The 2024 Notes will be offered and sold to qualified
institutional buyers in reliance on Rule 144A under the
Securities Act of 1933, as amended (the Securities Act), and
outside the United States to non-U.S. persons in reliance on
Regulation S under the Securities Act.
The Companys press release dated January30, 2017 is attached
hereto as Exhibit 99.1 and is incorporated herein by reference.
The information contained in Item 2.02 and this Item 7.01 in this
Current Report on Form 8-K, including Exhibit 99.1 is being
furnished and shall not be deemed to be filed for the purposes of
Section18 of the Securities Exchange Act of 1934, as amended (the
Exchange Act) or otherwise be subject to the liabilities of that
section, and shall not be deemed to be incorporated by reference
into any of the Companys filings under the Securities Act or the
Exchange Act, whether made before or after the date hereof and
regardless of any general incorporation language in such filings,
except to the extent expressly set forth by specific reference in
such a filing.
This Current Report on Form 8-K does not constitute an offer to
sell, or a solicitation of an offer to buy, the 2024 Notes or any
security, and shall not constitute an offer, solicitation or sale
in any jurisdiction in which such offering would be unlawful.
Forward-Looking Statements
This Current Report on Form 8-K contains forward looking
statements within the meaning of federal securities laws and is
intended to qualify for the safe harbor from liability
established by the Private Securities Litigation Reform Act of
1995. Forward looking statements generally can be identified by
the use of forward looking terminology such as assumptions,
expects, anticipates, projects, intends, designed, will,
believes, estimates, may, could, plans (or the negative of other
derivatives of each of these terms) or similar terminology and
involve unknown risks and uncertainties which may cause the
Companys actual results in future periods to differ materially
from forecasted results. The forward looking statements include,
without limitation, statements regarding preliminary estimated
financial results, the Companys intentions regarding the
consummation of the offering of 2024 Notes, the intended use of
proceeds and the completion of the redemption of the 2019 Notes.
These statements are based on the Companys managements estimates
and assumptions with respect to future events, which include
uncertainty as to its ability to consummate the proposed offering
of debt securities or the redemption of the 2019 Notes, which
estimates are believed to be reasonable, though are inherently
uncertain and difficult to predict. A discussion of factors that
could cause actual results to vary is included in the Companys
Annual Report on Form 10-K, as amended, and other periodic
reports filed with the Securities and Exchange Commission.
| ITEM9.01 | FINANCIAL STATEMENTS AND EXHIBITS. |
(d) Exhibits
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ExhibitNo. |
Description |
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99.1 |
Press release of the Company dated January30, 2017. |
About MERCER INTERNATIONAL INC. (NASDAQ:MERC)
Mercer International Inc. is engaged in producing (northern bleached softwood kraft) NBSK pulp. The Company operates in the pulp industry and produces pulp for resale, known as market pulp, in Germany. It also produces and sells tall oil, which is used as both a chemical additive and as a green energy source. The Company operates over two mills in Eastern Germany and approximately one mill in Western Canada. The Company’s NBSK pulp mills include Rosenthal mill, which is located in the town of Blankenstein, Germany, approximately 300 kilometers south of Berlin; Stendal Mill, which is located near the town of Stendal, Germany, approximately 130 kilometers west of Berlin, and Celgar Mill, which is located near the city of Castlegar, British Columbia, Canada, over 600 kilometers east of Vancouver. The Company’s NBSK pulp mills has an annual production capacity of approximately 1.5 million air-dried metric tons (ADMTs) of NBSK pulp and generates over 305 megawatts (MW) of electricity. MERCER INTERNATIONAL INC. (NASDAQ:MERC) Recent Trading Information
MERCER INTERNATIONAL INC. (NASDAQ:MERC) closed its last trading session up +0.30 at 12.00 with 219,805 shares trading hands.