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

*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 m^3 in the third quarter of 2023 from $677 per m^3 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                                        

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

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