Mercer International (NASDAQ: MERC) reports H1 2026 loss and going concern risks
Mercer International Inc. reported weak results for the three and six months ended June 30, 2026 and disclosed substantial doubt about its ability to continue as a going concern. Second‑quarter revenues were $460,278 thousand, with a net loss of $75,978 thousand; six‑month revenues were $949,582 thousand and the net loss was $127,974 thousand, or $(1.91) per share.
Operating cash flow for the first half used $100,782 thousand, and cash and cash equivalents fell to $78,775 thousand (plus $5,000 thousand restricted cash). Current liabilities were $600,876 thousand, including $329,662 thousand of current debt as of June 30, 2026, and shareholders’ equity swung to a deficit of $97,974 thousand.
A key risk is refinancing: the C$160.0 million Canadian revolving credit facility maturing in January 2027 and a €370.1 million German facility (reclassified as current due to an expected leverage covenant breach) are not projected to be covered by internally generated cash without refinancing or alternative funding. Management has engaged advisors and opened discussions with holders of the 2028 and 2029 senior notes and other stakeholders, but no outcome is assured.
Positive
- None.
Negative
- Going concern warning: management states substantial doubt about the company’s ability to continue as a going concern over the next year due to upcoming credit facility maturities, expected covenant breach, and insufficient projected cash generation.
- Large losses and cash burn: six‑month net loss was $127,974 thousand and operating activities used $100,782 thousand, while cash and cash equivalents declined to $78,775 thousand.
- Leverage and covenant pressure: the €370.1 million German Facility ($230,159 thousand drawn) is classified as current because management expects to miss a leverage ratio covenant in Q4 2026, creating potential default and cross‑default risks.
- Balance sheet deterioration: shareholders’ equity moved from a positive $68,060 thousand at December 31, 2025 to a deficit of $97,974 thousand at June 30, 2026, reflecting accumulated losses and other comprehensive losses.
- Significant inventory impairment: the company recorded inventory impairment charges of $51,000 thousand for the first half of 2026 due to low pulp prices and high fiber costs, weighing on margins.
Filing Explained
A debt waiver restricts distributions and financing flexibility until September 30, before the next German covenant test.
Mercer International Inc.’s
While the leverage ratio exceeds 2.00:1.00, the waiver limits German-facility utilization to
The filing states that the German covenant is not tested until the quarter ending
Key Figures
Key Terms
going concern financial
inventory impairment financial
Segment Operating EBITDA financial
leverage ratio financial covenant financial
sustainability-linked financial
AI-generated analysis. How Rhea-AI works. Not financial advice.
FAQ
What were Mercer International (MERC)’s revenues and net loss for Q2 2026?
Why does Mercer International (MERC) state substantial doubt about continuing as a going concern?
What is the status of Mercer International (MERC)’s major credit facilities and related covenants?
How has Mercer International (MERC)’s balance sheet changed in the first half of 2026?
What were Mercer International (MERC)’s operating cash flows and investment levels in H1 2026?
Is Mercer International (MERC) currently paying dividends on its common stock?
What inventory impairments did Mercer International (MERC) record in 2026?
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______ to _______
Commission File No.:
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “non-accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO
The Registrant had
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2026
(Unaudited)
FORM 10-Q
QUARTERLY REPORT - PAGE 2
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands of U.S. dollars, except per share data)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2025 |
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2026 |
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Revenues |
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Costs and expenses |
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Cost of sales, excluding depreciation and amortization |
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Selling, general and administrative expenses |
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Operating loss |
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Other income (expenses) |
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Interest expense |
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Other income (expenses) |
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Total other expenses, net |
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Loss before income taxes |
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Income tax recovery |
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Net loss |
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Net loss per common share |
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Basic |
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Diluted |
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Dividends declared per common share |
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$ |
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$ |
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$ |
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INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands of U.S. dollars)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2026 |
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2025 |
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2026 |
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2025 |
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Net loss |
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$ |
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$ |
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$ |
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Other comprehensive income (loss) |
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Loss related to defined benefit pension plans, net of tax |
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Foreign currency translation adjustments |
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Other comprehensive income (loss), net of tax |
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Total comprehensive income (loss) |
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$ |
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$ |
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$ |
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$ |
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See accompanying Notes to the Interim Consolidated Financial Statements.
FORM 10-Q
QUARTERLY REPORT - PAGE 3
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
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June 30, |
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December 31, |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Accounts receivable, net |
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Inventories |
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Prepaid expenses and other |
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Total current assets |
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Property, plant and equipment, net |
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Amortizable intangible assets, net |
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Operating lease right-of-use assets |
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Pension asset |
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Deferred income tax assets |
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Other long-term assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities |
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Accounts payable and other |
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$ |
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$ |
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Pension and other post-retirement benefit obligations |
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Current debt |
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Total current liabilities |
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Long-term debt |
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Pension and other post-retirement benefit obligations |
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Operating lease liabilities |
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Deferred income tax liabilities |
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Other long-term liabilities |
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Total liabilities |
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Shareholders’ equity |
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Common shares $ |
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Additional paid-in capital |
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Accumulated deficit |
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Accumulated other comprehensive loss |
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Total shareholders’ equity (deficit) |
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( |
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Total liabilities and shareholders’ equity |
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$ |
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$ |
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Commitments and contingencies (Note 14) |
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See accompanying Notes to the Interim Consolidated Financial Statements.
FORM 10-Q
QUARTERLY REPORT - PAGE 4
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
(Unaudited)
(In thousands of U.S. dollars)
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Common shares |
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Three Months Ended June 30: |
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Number |
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Amount, |
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Additional |
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Retained |
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Accumulated |
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Total |
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Balance as of March 31, 2026 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
( |
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Shares issued on grants of restricted shares |
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( |
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— |
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— |
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— |
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Shares issued on deferred stock units |
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( |
) |
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— |
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— |
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— |
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Stock compensation expense |
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— |
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— |
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( |
) |
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— |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance as of June 30, 2026 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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Balance as of March 31, 2025 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Shares issued on grants of restricted shares |
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( |
) |
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— |
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— |
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— |
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Stock compensation expense |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Dividends declared |
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— |
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— |
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— |
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( |
) |
|
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— |
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( |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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Balance as of June 30, 2025 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Six Months Ended June 30: |
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Balance as of December 31, 2025 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Shares issued on grants of restricted shares |
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( |
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— |
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— |
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— |
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Shares issued on deferred stock units |
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( |
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— |
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— |
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— |
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Stock compensation expense |
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— |
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— |
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( |
) |
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— |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance as of June 30, 2026 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
( |
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Balance as of December 31, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Shares issued on grants of restricted shares |
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( |
) |
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— |
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— |
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— |
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Stock compensation expense |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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( |
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Dividends declared |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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Balance as of June 30, 2025 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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See accompanying Notes to the Interim Consolidated Financial Statements.
FORM 10-Q
QUARTERLY REPORT - PAGE 5
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands of U.S. dollars)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2026 |
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2025 |
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2026 |
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2025 |
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Cash flows from (used in) operating activities |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to cash flows from operating activities |
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Depreciation and amortization |
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Deferred income tax recovery |
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( |
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( |
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( |
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Inventory impairment |
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Defined benefit pension plans and other post-retirement benefit plan expense (income) |
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( |
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Stock-based compensation |
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( |
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( |
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Foreign exchange transaction losses (gains) |
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( |
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( |
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Other |
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Changes in working capital |
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Accounts receivable |
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Inventories |
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( |
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( |
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( |
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( |
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Accounts payable and accrued expenses |
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( |
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( |
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Prepaid expenses and other |
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|
|
|
( |
) |
|||
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Cash flows from (used in) investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Purchase of property, plant and equipment |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Proceeds from government grants |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Cash flows from (used in) financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Proceeds from revolving credit facilities, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dividend payments |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Payment of finance lease obligations |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Net cash from (used in) financing activities |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Net decrease in cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Cash, cash equivalents and restricted cash, beginning of period |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash, cash equivalents and restricted cash, end of period |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Supplemental cash flow disclosure: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash paid for interest |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cash paid for income taxes |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Supplemental schedule of non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Leased production and other equipment |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
See accompanying Notes to the Interim Consolidated Financial Statements.
FORM 10-Q
QUARTERLY REPORT - PAGE 6
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 1. The Company, Going Concern, and Summary of Significant Accounting Policies
Nature of Operations and Basis of Presentation
The interim consolidated financial statements contained herein (the “Interim Consolidated Financial Statements”) include the accounts of Mercer International Inc. (“Mercer Inc.”) and all of its subsidiaries (collectively the “Company”). Mercer Inc. owns
The Interim Consolidated Financial Statements have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). The consolidated balance sheet information as of December 31, 2025 was derived from the Company’s audited Consolidated Financial Statements, but does not contain all of the footnote disclosures from the annual Consolidated Financial Statements. The footnote disclosure included herein has been prepared in accordance with accounting principles generally accepted for interim financial statements in the United States (“GAAP”). The unaudited Interim Consolidated Financial Statements should be read together with the audited Consolidated Financial Statements and accompanying notes included in the Company’s latest Annual Report on Form 10‑K for the fiscal year ended December 31, 2025. In the opinion of the Company, the unaudited Interim Consolidated Financial Statements contained herein have been prepared on a consistent basis with the audited Consolidated Financial Statements and accompanying notes included in the Company’s latest Annual Report on Form 10‑K for the fiscal year ended December 31, 2025 and contain all adjustments necessary for a fair statement of the results of the interim periods included. The results for the periods included herein may not be indicative of the results for the entire year.
In these Interim Consolidated Financial Statements, unless otherwise indicated, all amounts are expressed in United States dollars (“U.S. dollars” or “$”). The symbol “€” refers to euros and the symbol “C$” refers to Canadian dollars.
Going Concern
These Interim Consolidated Financial Statements have been prepared in accordance with GAAP assuming the Company will continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business within one year from the issuance of these Interim Consolidated Financial Statements. However, as further described below, substantial doubt exists regarding the Company’s ability to continue as a going concern for the one-year period from the issuance of these Interim Consolidated Financial Statements.
The January 2027 maturity of the Canadian joint revolving credit facility (the “Canadian Facility”) represents the Company’s primary liquidity requirement over the next 12 months. Currently, the Company is not projected to generate sufficient cash flow to settle this obligation at maturity unless external refinancing or alternative funding is obtained. This situation stems from delayed industry recovery due to an extended cyclical downturn in global pulp prices and prolonged geopolitical conflicts. Additionally, fiber costs for the German pulp mills are experiencing upward pressure driven by regional supply shortages and increased competition for sawmill residuals from energy producers. A default under the Canadian Facility, absent a waiver, could also trigger a cross-default under the Company’s senior notes if lenders under the Canadian Facility exercise their acceleration rights.
As of June 30, 2026, the Company had cash and cash equivalents of $
The Company currently anticipates renegotiating or replacing the Canadian Facility ahead of its maturity and has
FORM 10-Q
QUARTERLY REPORT - PAGE 7
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
engaged advisors to review strategic alternatives and broader financing initiatives. As part of this process, the Company has entered into discussions with holders of the 2028 and 2029 senior notes, as well as other stakeholders across its capital structure, regarding potential financing and other liquidity-enhancing transactions. While management currently believes that it will reach a resolution prior to the maturity or potential acceleration of current debt, there can be no assurance that the Company will successfully renegotiate or amend the facilities, or complete any such financing, refinancing or strategic transactions on acceptable terms, or at all.
The Interim Consolidated Financial Statements do not include any adjustments, which could be material, to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern.
Use of Estimates
Preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant management judgment is required in determining the accounting for, among other things, the Company’s ability to continue as a going concern, future cash flows associated with the Company’s debt covenant compliance and related debt classification and impairment testing for long-lived assets, depreciation and amortization, pension and other post-retirement benefit obligations, deferred income taxes (valuation allowance and permanent reinvestment), revenues under long-term contracts, inventory impairment, legal liabilities and contingencies. Actual results could differ materially from these estimates, and changes in these estimates are recorded when known.
Accounting Pronouncements to be Adopted
Disaggregation of Income Statement Expenses
In November 2024, the FASB issued Accounting Standards Update (“ASU”) 2024-03, which expands disclosures about specific expense categories presented on the face of the statement of operations and addresses requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, and depreciation and amortization) in commonly presented expense captions (such as cost of sales and selling, general and administrative expenses). ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 and interim periods thereafter with early adoption permitted. The Company is currently assessing the impact of ASU 2024-03.
Note 2. Supplemental Financial Statement Information
The following table reconciles cash, cash equivalents and restricted cash reported on the Interim Consolidated Balance Sheets to the total amount presented in the Interim Consolidated Statements of Cash Flows.
|
|
June 30, |
|
|
December 31, |
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash (a) |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
FORM 10-Q
QUARTERLY REPORT - PAGE 8
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 3. Inventories
Inventories as of June 30, 2026 and December 31, 2025, were comprised of the following:
|
|
June 30, |
|
|
December 31, |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Finished goods |
|
|
|
|
|
|
||
Spare parts and other |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
For the three and six months ended June 30, 2026, the Company recorded inventory impairment charges of $
Note 4. Accounts Payable and Other
Accounts payable and other as of June 30, 2026 and December 31, 2025, was comprised of the following:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
Trade payables |
|
$ |
|
|
$ |
|
||
Accrued expenses |
|
|
|
|
|
|
||
Interest payable |
|
|
|
|
|
|
||
Income tax payable |
|
|
|
|
|
|
||
Payroll-related accruals |
|
|
|
|
|
|
||
Deposits for mass timber sales contracts (a) |
|
|
|
|
|
|
||
Wastewater fee (b) |
|
|
|
|
|
|
||
Operating lease liability |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
FORM 10-Q
QUARTERLY REPORT - PAGE 9
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 5. Debt
Debt as of June 30, 2026 and December 31, 2025, was comprised of the following:
|
|
Maturity |
|
June 30, |
|
|
December 31, |
|
||
Senior notes (a) |
|
|
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
||
Credit arrangements |
|
|
|
|
|
|
|
|
||
€ |
|
|
|
|
|
|
|
|||
C$ |
|
|
|
|
|
|
|
|||
€ |
|
|
|
|
|
|
|
|
||
C$ |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
||
Finance lease liability |
|
|
|
|
|
|
|
|
||
Less: unamortized senior note issuance costs |
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
||
Less current portion of debt: |
|
|
|
|
|
|
|
|
||
Finance lease liability |
|
|
|
|
( |
) |
|
|
( |
) |
German Facility |
|
|
|
|
( |
) |
|
|
— |
|
Canadian Facility |
|
|
|
|
( |
) |
|
|
|
|
Current debt |
|
|
|
|
( |
) |
|
|
( |
) |
Long-term debt |
|
|
|
$ |
|
|
$ |
|
||
The maturities of the long-term principal portion of debt as of June 30, 2026 were as follows:
|
|
Senior Notes |
|
|
2028 |
|
$ |
|
|
2029 |
|
|
|
|
|
|
$ |
|
|
Certain of the Company’s debt instruments were issued under agreements which, among other things, may limit its ability and the ability of its subsidiaries to make certain payments, including dividends. These limitations are subject to specific exceptions.
The 2029 Senior Notes can be redeemed at
2028 Senior Notes |
||
12 Month Period Beginning |
|
Percentage |
October 1, 2025 |
|
|
October 1, 2026 |
|
|
October 1, 2027 and thereafter |
|
|
FORM 10-Q
QUARTERLY REPORT - PAGE 10
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Debt Covenants and Waiver
As of June 30, 2026, adjusting for the utilization limit, approximately €
FORM 10-Q
QUARTERLY REPORT - PAGE 11
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 6. Pension and Other Post-Retirement Benefit Obligations
Defined Benefit Plans
Pension benefits are based on employees’ earnings and years of service. The defined benefit plans are funded by contributions from the Company based on actuarial estimates and statutory requirements.
|
|
Three Months Ended June 30, |
|
|||||||||||||
|
|
2026 |
|
|
2025 |
|
||||||||||
|
|
Pension |
|
|
Other Post- |
|
|
Pension |
|
|
Other Post- |
|
||||
Service cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expected return on plan assets |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Amortization of unrecognized items |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net benefit costs (gains) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
|
|
Six Months Ended June 30, |
|
|||||||||||||
|
|
2026 |
|
|
2025 |
|
||||||||||
|
|
Pension |
|
|
Other Post- |
|
|
Pension |
|
|
Other Post- |
|
||||
Service cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expected return on plan assets |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Amortization of unrecognized items |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net benefit costs (gains) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
The components of the net benefit costs (gains) other than service cost are recorded in “Other income (expenses)” in the Interim Consolidated Statements of Operations. The amortization of unrecognized items relates to actuarial losses (gains) and prior service costs.
Defined Contribution Plan
Effective December 31, 2008, the defined benefit plans at the Celgar mill were closed to new members and the service accrual ceased. Effective January 1, 2009, the members began to receive pension benefits, at a fixed contractual rate, under a defined contribution plan. During the three and six months ended June 30, 2026, the Company made contributions of $
FORM 10-Q
QUARTERLY REPORT - PAGE 12
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Multiemployer Plan
The Company participates in a multiemployer plan for the hourly-paid employees at the Celgar mill. The contributions to the plan are determined based on a percentage of pensionable earnings pursuant to a collective bargaining agreement. The Company has no current or future contribution obligations in excess of the contractual contributions. During the three and six months ended June 30, 2026, the Company made contributions of $
Note 7. Income Taxes
The U.S. Federal statutory income tax rate and the Company’s effective income tax rate are as follows:
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||
|
|
2026 |
|
2025 |
|
2026 |
|
2025 |
U.S. Federal statutory rate |
|
|
|
|
||||
Effective income tax rate |
|
|
|
|
||||
The differences between the
Note 8. Shareholders’ Equity
Stock-Based Compensation
The Company’s stock incentive plan consists of stock options, restricted stock units (“RSUs”), deferred stock units (“DSUs”), restricted shares, performance shares, performance share units (“PSUs”) and stock appreciation rights. During the three and six months ended June 30, 2
The following table summarizes non-vested PSU activity during the period:
|
|
|
|
|
|
Number of PSUs |
|
|
Balance as of January 1, 2026 |
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
Forfeited |
|
|
|
|
|
|
( |
) |
Balance as of June 30, 2026 |
|
|
|
|
|
|
|
|
The following table summarizes non-vested restricted share, RSU and DSU activity during the period:
|
|
Number of Equity Based Awards |
|
|
Liability Based Awards |
|
||||||||||
|
|
Restricted Shares |
|
|
RSUs |
|
|
Equity DSUs |
|
|
Cash Only DSUs |
|
||||
Balance as of January 1, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Vested |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Balance as of June 30, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
There were
FORM 10-Q
QUARTERLY REPORT - PAGE 13
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 9. Net Loss Per Common Share
The reconciliation of basic and diluted net loss per common share for the three and six months ended June 30, 2026 and 2025 was as follows:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per common share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic (a) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
The calculation of diluted net loss per common share does not assume the exercise of any instruments that would have an anti-dilutive effect on net loss per common share. Non-vested
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
PSUs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
RSUs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equity DSUs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
FORM 10-Q
QUARTERLY REPORT - PAGE 14
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 10. Accumulated Other Comprehensive Loss
The change in the accumulated other comprehensive loss by component (net of tax) for the three and six months ended June 30, 2026 and 2025 was as follows:
|
|
Foreign Currency Translation Adjustments |
|
|
Defined Benefit Pension and Other Post-Retirement Benefit Items |
|
|
Total |
|
|||
Three Months Ended June 30: |
|
|
|
|
|
|
|
|
|
|||
Balance as of March 31, 2026 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Other comprehensive loss before reclassifications |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Amounts reclassified |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance as of June 30, 2026 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|||
Balance as of March 31, 2025 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Other comprehensive income before reclassifications |
|
|
|
|
|
|
|
|
|
|||
Amounts reclassified |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other comprehensive income (loss) |
|
|
|
|
|
( |
) |
|
|
|
||
Balance as of June 30, 2025 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|||
Six Months Ended June 30: |
|
|
|
|
|
|
|
|
|
|||
Balance as of December 31, 2025 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Other comprehensive loss before reclassifications |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Amounts reclassified |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance as of June 30, 2026 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|||
Balance as of December 31, 2024 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Other comprehensive income before reclassifications |
|
|
|
|
|
|
|
|
|
|||
Amounts reclassified |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other comprehensive income (loss) |
|
|
|
|
|
( |
) |
|
|
|
||
Balance as of June 30, 2025 |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Note 11. Related Party Transactions
For the three and six months ended June 30, 2026, services from the Company’s
For the three and six months ended June 30, 2026, services from the Company’s
The Company maintains a commercial surety bond facility to support its mass timber project bidding and contract performance requirements with an entity owned by a major shareholder of the Company. Under the terms of the arrangement, the Company pays standard commercial premiums to the entity upon the issuance of any surety bonds. As of June 30, 2026, the facility provided up to $
FORM 10-Q
QUARTERLY REPORT - PAGE 15
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Note 12. Segment Information
Total assets and the income or loss items following Segment Operating EBITDA, other than depreciation, amortization and impairment of long-lived assets, are not allocated to the segments, as those items are reviewed separately by management.
FORM 10-Q
QUARTERLY REPORT - PAGE 16
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Information about certain segment data for the three and six months ended June 30, 2026 and 2025 was as follows:
Three Months Ended June 30, 2026 |
|
Pulp |
|
|
Solid Wood |
|
|
Total of Segments (a) |
|
|||
Revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Intersegment revenues |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Less segment expenses: |
|
|
|
|
|
|
|
|
|
|||
Fiber |
|
|
|
|
|
|
|
|
|
|||
Maintenance (b) |
|
|
|
|
|
|
|
|
|
|||
Freight |
|
|
|
|
|
|
|
|
|
|||
Labor (c) |
|
|
|
|
|
|
|
|
|
|||
Chemicals |
|
|
|
|
|
|
|
|
|
|||
Energy |
|
|
|
|
|
|
|
|
|
|||
Other (d) |
|
|
|
|
|
|
|
|
|
|||
Segment Operating EBITDA |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|||
Purchase of property, plant and equipment |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Three Months Ended June 30, 2026 |
|
Pulp |
|
|
Solid Wood |
|
|
Total |
|
|||
Reconciliation to loss before income taxes |
|
|
|
|
|
|
|
|
|
|||
Total of segments’ Segment Operating EBITDA |
|
|
|
|
|
|
|
$ |
( |
) |
||
Segment depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Interest expense |
|
|
|
|
|
|
|
|
( |
) |
||
Other income |
|
|
|
|
|
|
|
|
|
|||
Corporate items and eliminations |
|
|
|
|
|
|
|
|
( |
) |
||
Loss before income taxes |
|
|
|
|
|
|
|
$ |
( |
) |
||
FORM 10-Q
QUARTERLY REPORT - PAGE 17
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Three Months Ended June 30, 2026 |
|
Pulp |
|
|
Solid Wood |
|
|
Corporate |
|
|
Consolidated |
|
||||
Revenues from external customers by major products |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pulp |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Lumber |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Energy and chemicals |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Manufactured products (a) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pallets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Biofuels (b) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Wood residuals |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues from external customers by geography (c) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Foreign countries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Germany |
|
|
|
|
|
|
|
|
|
|
|
|
||||
China |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other countries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
FORM 10-Q
QUARTERLY REPORT - PAGE 18
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Three Months Ended June 30, 2025 |
|
Pulp |
|
|
Solid Wood |
|
|
Total of Segments (a) |
|
|||
Revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Intersegment revenues |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Less segment expenses: |
|
|
|
|
|
|
|
|
|
|||
Fiber |
|
|
|
|
|
|
|
|
|
|||
Maintenance (b) |
|
|
|
|
|
|
|
|
|
|||
Freight |
|
|
|
|
|
|
|
|
|
|||
Labor (c) |
|
|
|
|
|
|
|
|
|
|||
Chemicals |
|
|
|
|
|
|
|
|
|
|||
Energy |
|
|
|
|
|
|
|
|
|
|||
Other (d) |
|
|
|
|
|
|
|
|
|
|||
Segment Operating EBITDA |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|||
Purchase of property, plant and equipment |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Three Months Ended June 30, 2025 |
|
Pulp |
|
|
Solid Wood |
|
|
Total |
|
|||
Reconciliation to loss before income taxes |
|
|
|
|
|
|
|
|
|
|||
Total of segments’ Segment Operating EBITDA |
|
|
|
|
|
|
|
$ |
( |
) |
||
Segment depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Interest expense |
|
|
|
|
|
|
|
|
( |
) |
||
Other expenses |
|
|
|
|
|
|
|
|
( |
) |
||
Corporate items and eliminations |
|
|
|
|
|
|
|
|
( |
) |
||
Loss before income taxes |
|
|
|
|
|
|
|
$ |
( |
) |
||
FORM 10-Q
QUARTERLY REPORT - PAGE 19
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Three Months Ended June 30, 2025 |
|
Pulp |
|
|
Solid Wood |
|
|
Corporate |
|
|
Consolidated |
|
||||
Revenues from external customers by major products |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pulp |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Lumber |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Energy and chemicals |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Manufactured products (a) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pallets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Biofuels (b) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Wood residuals |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues from external customers by geography (c) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Foreign countries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Germany |
|
|
|
|
|
|
|
|
|
|
|
|
||||
China |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other countries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
FORM 10-Q
QUARTERLY REPORT - PAGE 20
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Six Months Ended June 30, 2026 |
|
Pulp |
|
|
Solid Wood |
|
|
Total of Segments (a) |
|
|||
Revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Intersegment revenues |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Less segment expenses: |
|
|
|
|
|
|
|
|
|
|||
Fiber |
|
|
|
|
|
|
|
|
|
|||
Maintenance (b) |
|
|
|
|
|
|
|
|
|
|||
Freight |
|
|
|
|
|
|
|
|
|
|||
Labor (c) |
|
|
|
|
|
|
|
|
|
|||
Chemicals |
|
|
|
|
|
|
|
|
|
|||
Energy |
|
|
|
|
|
|
|
|
|
|||
Other (d) |
|
|
|
|
|
|
|
|
|
|||
Segment Operating EBITDA |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|||
Purchase of property, plant and equipment |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Six Months Ended June 30, 2026 |
|
Pulp |
|
|
Solid Wood |
|
|
Total |
|
|||
Reconciliation to loss before income taxes |
|
|
|
|
|
|
|
|
|
|||
Total of segments’ Segment Operating EBITDA |
|
|
|
|
|
|
|
$ |
( |
) |
||
Segment depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Interest expense |
|
|
|
|
|
|
|
|
( |
) |
||
Other income |
|
|
|
|
|
|
|
|
|
|||
Corporate items and eliminations |
|
|
|
|
|
|
|
|
|
|||
Loss before income taxes |
|
|
|
|
|
|
|
$ |
( |
) |
||
FORM 10-Q
QUARTERLY REPORT - PAGE 21
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Six Months Ended June 30, 2026 |
|
Pulp |
|
|
Solid Wood |
|
|
Corporate |
|
|
Consolidated |
|
||||
Revenues from external customers by major products |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pulp |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Lumber |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Energy and chemicals |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Manufactured products (a) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pallets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Biofuels (b) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Wood residuals |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues from external customers by geography (c) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Foreign countries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Germany |
|
|
|
|
|
|
|
|
|
|
|
|
||||
China |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other countries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
FORM 10-Q
QUARTERLY REPORT - PAGE 22
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Six Months Ended June 30, 2025 |
|
Pulp |
|
|
Solid Wood |
|
|
Total of Segments (a) |
|
|||
Revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Intersegment revenues |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Less segment expenses: |
|
|
|
|
|
|
|
|
|
|||
Fiber |
|
|
|
|
|
|
|
|
|
|||
Maintenance (b) |
|
|
|
|
|
|
|
|
|
|||
Freight |
|
|
|
|
|
|
|
|
|
|||
Labor (c) |
|
|
|
|
|
|
|
|
|
|||
Chemicals |
|
|
|
|
|
|
|
|
|
|||
Energy |
|
|
|
|
|
|
|
|
|
|||
Other (d) |
|
|
|
|
|
|
|
|
|
|||
Segment Operating EBITDA |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|||
Purchase of property, plant and equipment |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Six Months Ended June 30, 2025 |
|
Pulp |
|
|
Solid Wood |
|
|
Total |
|
|||
Reconciliation to loss before income taxes |
|
|
|
|
|
|
|
|
|
|||
Total of segments’ Segment Operating EBITDA |
|
|
|
|
|
|
|
$ |
|
|||
Segment depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Interest expense |
|
|
|
|
|
|
|
|
( |
) |
||
Other expenses |
|
|
|
|
|
|
|
|
( |
) |
||
Corporate items and eliminations |
|
|
|
|
|
|
|
|
( |
) |
||
Loss before income taxes |
|
|
|
|
|
|
|
$ |
( |
) |
||
FORM 10-Q
QUARTERLY REPORT - PAGE 23
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Six Months Ended June 30, 2025 |
|
Pulp |
|
|
Solid Wood |
|
|
Corporate |
|
|
Consolidated |
|
||||
Revenues from external customers by major products |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pulp |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Lumber |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Energy and chemicals |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Manufactured products (a) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pallets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Biofuels (b) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Wood residuals |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues from external customers by geography (c) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Foreign countries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Germany |
|
|
|
|
|
|
|
|
|
|
|
|
||||
China |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other countries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues from external customers |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Note 13. Financial Instruments and Fair Value Measurement
Due to their short-term maturity, the carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, and accounts payable and other approximates their fair value.
|
|
Fair value measurements as of |
|
|||||||||||||
|
|
|
|
June 30, 2026 using: |
|
|
||||||||||
Description |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Revolving credit facilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Senior notes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Fair value measurements as of |
|
|||||||||||||
|
|
|
|
December 31, 2025 using: |
|
|
||||||||||
Description |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Revolving credit facilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Senior notes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The carrying value of the revolving credit facilities classified as Level 2 approximates the fair value, as their variable interest rates, combined with the underlying collateral, reflect current market terms for similar secured instruments.
The fair value of the senior notes classified as Level 2 was determined using quoted prices in a dealer market, or using recent market transactions. The Company’s senior notes are not carried at fair value in the Interim Consolidated Balance Sheets as of June 30, 2026 or December 31, 2025. However, fair value disclosure is required. The carrying value of the Company’s senior notes, net of unamortized note issuance costs, was $
FORM 10-Q
QUARTERLY REPORT - PAGE 24
MERCER INTERNATIONAL INC.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of U.S. dollars, except share and per share data)
Credit Risk
The Company’s exposure to credit losses may increase if its customers’ production and other costs are adversely affected by inflation, interest rate levels and tariffs. Although the Company has historically not experienced significant credit losses, it is possible that there could be a material adverse impact from potential adjustments of the carrying amount of trade receivables if the cash flows of the Company’s customers are adversely impacted by inflation, interest rate levels and tariffs. As of June 30, 2026, the Company has not had significant credit losses.
As of June 30, 2026, the carrying amount of cash and cash equivalents of $
Note 14. Commitments and Contingencies
FORM 10-Q
QUARTERLY REPORT - PAGE 25
NON-GAAP FINANCIAL MEASURES
This quarterly report on Form 10-Q contains “non-GAAP financial measures”, that is, financial measures that either exclude or include amounts that are not excluded or included in the most directly comparable measure calculated and presented in accordance with the generally accepted accounting principles in the United States, referred to as “GAAP”. Specifically, we make use of the non-GAAP financial measure “Operating EBITDA”.
We define Operating EBITDA as operating income (loss) plus depreciation and amortization and long-lived asset impairment charges.
We use Operating EBITDA as a benchmark measurement of our own operating results and as a benchmark relative to our competitors. We consider it to be a meaningful supplement to operating income (loss) as a performance measure primarily because depreciation expense and long-lived asset impairment charges are not actual cash costs, and depreciation expense varies widely from company to company in a manner that we consider 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, income taxes 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, or as an alternative to net cash from (used in) operating activities as a measure of liquidity. Operating EBITDA is an internal measure and therefore may not be comparable to other companies.
Operating EBITDA has significant limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are that Operating EBITDA does not reflect: (i) our cash expenditures, or future requirements, for capital expenditures or contractual commitments; (ii) changes in, or cash requirements for, working capital needs; (iii) the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our outstanding debt; (iv) the impact of realized or marked-to-market changes in our derivative positions, which can be substantial; and (v) the impact of impairment charges against our investments or long-lived assets. Because of these limitations, Operating EBITDA should only be considered as a supplemental performance measure and should not be considered as a measure of liquidity or cash available to us to invest in the growth of our business. Because all companies do not calculate Operating EBITDA in the same manner, Operating EBITDA as calculated by us may differ from Operating EBITDA or EBITDA as calculated by other companies. We compensate for these limitations by using Operating EBITDA as a supplemental measure of our performance and by relying primarily on our GAAP financial statements.
Operating EBITDA is a non-GAAP financial measure at the consolidated level and is considered different from Operating EBITDA at the segment level, referred to as “Segment Operating EBITDA”, which is our single measure of segment profit or loss presented in our financial statements under GAAP. For more information on Segment Operating EBITDA, refer to the segment information note within our consolidated financial statements.
FORM 10-Q
QUARTERLY REPORT - PAGE 26
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In this document: (i) unless the context otherwise requires, references to “we”, “our”, “us”, the “Company” or “Mercer” mean Mercer International Inc. and its subsidiaries; (ii) references to “Mercer Inc.” mean the Company excluding its subsidiaries; (iii) information is provided as of June 30, 2026, unless otherwise stated; (iv) our reporting currency is dollars and references to “€” mean euros and “C$” mean Canadian dollars; (v) “ADMTs” mean air-dried metric tonnes; (vi) “CLT” mean cross-laminated timber; (vii) “glulam” mean glue-laminated timber; (viii) “m3” mean cubic meters; (ix) “NBSK” mean northern bleached softwood kraft; (x) “NBHK” mean northern bleached hardwood kraft; (xi) “MW” mean megawatts and “MWh” mean megawatt hours; (xii) “Mfbm” mean thousand board feet of lumber and “MMfbm” mean million board feet of lumber; and (xiii) our lumber metrics are converted from m3 to Mfbm using a conversion ratio of 1.6 m3 of lumber equaling one Mfbm, which is the ratio commonly used in the industry.
Due to rounding, numbers presented throughout this report may not add up precisely to totals we provide and percentages may not precisely reflect the absolute figure.
The following discussion and analysis of our results of operations and financial condition for the three and six months ended June 30, 2026 should be read in conjunction with our Interim Consolidated Financial Statements and related notes included in this quarterly report, as well as our most recent annual report on Form 10-K for the fiscal year ended December 31, 2025 filed with the Securities and Exchange Commission, referred to as the “SEC”.
Results of Operations
General
We have two reportable operating segments:
Each segment offers primarily different products and requires different manufacturing processes, technology and sales and marketing.
Current Market Environment
In the second quarter of 2026, our NBSK pulp sales realizations were relatively steady compared to the first quarter of 2026. In Europe, third-party list prices held flat as weak demand was offset by scheduled maintenance and curtailments. Similarly, North American third-party published list prices remained flat, with excess regional supply offsetting improving demand. The Chinese market continued to be pressured by an oversupplied paper sector and weak demand linked to prevailing economic and trade uncertainties. Conversely, our NBHK pulp sales realizations increased. This was driven by higher prices in North America, which benefited from global supply constraints, lower inventory levels, and steady demand. However, prices in China were flat as continued regional overcapacity offset the impact of global supply constraints.
In the second quarter of 2026, our lumber sales realizations modestly increased compared to the first quarter of 2026, primarily due to low customer inventory levels and sawmill curtailments in the U.S. While supply also contracted in Europe, continued weak regional demand limited the positive impact on pricing in the market.
As of June 30, 2026, the third-party industry quoted NBSK pulp list prices in Europe and North America were approximately $1,655 per ADMT and $1,570 per ADMT, respectively, and the third-party industry quoted NBSK
FORM 10-Q
QUARTERLY REPORT - PAGE 27
pulp net price in China was approximately $645 per ADMT. Prices for China are net of discounts, allowances and rebates.
In the third quarter of 2026, we currently expect NBSK pulp prices to modestly decrease in all our markets as reduced supply is offset by lower seasonal demand. Conversely, we currently expect NBHK pulp prices to modestly decrease as global supply constraints ease.
In the third quarter of 2026, we currently expect lumber prices to remain stable in Europe as weak demand is offset by reduced supply, and modestly increase in the U.S. due to lower customer inventory levels and capacity curtailments. During the same period, we anticipate pallet prices to remain flat due to continued weak economic conditions in Europe and mass timber prices to remain relatively steady.
Per unit fiber costs for the pulp and solid wood segments increased in the second quarter of 2026 compared to the first quarter of 2026, driven by supply constraints and strong demand in Germany. For the third quarter of 2026, per unit fiber costs are expected to remain elevated at our German mills with a slight increase at our pulp mills. This increase is driven by continued strong demand for wood as an energy source as a result of ongoing geopolitical conflicts. For our sawmills and Canadian pulp mills, per unit fiber costs are expected to modestly decrease as regional curtailments improve their fiber supply.
FORM 10-Q
QUARTERLY REPORT - PAGE 28
Summary Financial Highlights
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
|||||
|
|
(in thousands, other than per share amounts) |
|
|||||||||||||
Statement of Operations Data |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Revenues from external customers |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pulp segment |
|
$ |
325,074 |
|
|
$ |
332,308 |
|
|
$ |
670,057 |
|
|
$ |
713,388 |
|
Solid wood segment |
|
|
134,203 |
|
|
|
117,268 |
|
|
|
265,945 |
|
|
|
239,988 |
|
Corporate and other |
|
|
1,001 |
|
|
|
3,948 |
|
|
|
13,580 |
|
|
|
7,122 |
|
Total revenues |
|
$ |
460,278 |
|
|
$ |
453,524 |
|
|
$ |
949,582 |
|
|
$ |
960,498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pulp Segment Operating EBITDA(1) |
|
$ |
(12,651 |
) |
|
$ |
(10,262 |
) |
|
$ |
(5,754 |
) |
|
$ |
39,610 |
|
Solid wood Segment Operating EBITDA(1) |
|
|
(8,238 |
) |
|
|
(4,861 |
) |
|
|
(13,869 |
) |
|
|
(5,153 |
) |
Corporate and other |
|
|
(104 |
) |
|
|
(5,758 |
) |
|
|
6,478 |
|
|
|
(8,250 |
) |
Operating EBITDA(2) |
|
$ |
(20,993 |
) |
|
$ |
(20,881 |
) |
|
$ |
(13,145 |
) |
|
$ |
26,207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
(75,978 |
) |
|
$ |
(86,071 |
) |
|
$ |
(127,974 |
) |
|
$ |
(108,410 |
) |
Net loss per common share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
(1.13 |
) |
|
$ |
(1.29 |
) |
|
$ |
(1.91 |
) |
|
$ |
(1.62 |
) |
Diluted |
|
$ |
(1.13 |
) |
|
$ |
(1.29 |
) |
|
$ |
(1.91 |
) |
|
$ |
(1.62 |
) |
Common shares outstanding at period end |
|
|
67,019 |
|
|
|
66,983 |
|
|
|
67,019 |
|
|
|
66,983 |
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
|||||
|
|
(in thousands) |
|
|||||||||||||
Net loss |
|
$ |
(75,978 |
) |
|
$ |
(86,071 |
) |
|
$ |
(127,974 |
) |
|
$ |
(108,410 |
) |
Income tax recovery |
|
|
(13,413 |
) |
|
|
(1,864 |
) |
|
|
(21,590 |
) |
|
|
(1,132 |
) |
Interest expense |
|
|
30,920 |
|
|
|
28,411 |
|
|
|
60,021 |
|
|
|
56,566 |
|
Other expenses (income) |
|
|
(503 |
) |
|
|
1,120 |
|
|
|
(2,323 |
) |
|
|
1,305 |
|
Operating loss |
|
|
(58,974 |
) |
|
|
(58,404 |
) |
|
|
(91,866 |
) |
|
|
(51,671 |
) |
Add: Depreciation and amortization |
|
|
37,981 |
|
|
|
37,523 |
|
|
|
78,721 |
|
|
|
77,878 |
|
Operating EBITDA |
|
$ |
(20,993 |
) |
|
$ |
(20,881 |
) |
|
$ |
(13,145 |
) |
|
$ |
26,207 |
|
FORM 10-Q
QUARTERLY REPORT - PAGE 29
Selected Production, Sales and Other Data
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
Pulp Segment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pulp production ('000 ADMTs) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
NBSK |
|
|
390.0 |
|
|
|
403.2 |
|
|
|
752.5 |
|
|
|
773.6 |
|
NBHK |
|
|
65.8 |
|
|
|
53.9 |
|
|
|
169.0 |
|
|
|
142.4 |
|
Annual maintenance downtime ('000 ADMTs) |
|
|
— |
|
|
|
33.2 |
|
|
|
— |
|
|
|
62.9 |
|
Annual maintenance downtime (days) |
|
|
— |
|
|
|
23 |
|
|
|
— |
|
|
|
45 |
|
Pulp sales ('000 ADMTs) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
NBSK |
|
|
368.8 |
|
|
|
361.4 |
|
|
|
753.8 |
|
|
|
749.5 |
|
NBHK |
|
|
81.6 |
|
|
|
65.3 |
|
|
|
167.2 |
|
|
|
155.1 |
|
Average NBSK pulp prices ($/ADMT)(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Europe |
|
|
1,655 |
|
|
|
1,553 |
|
|
|
1,637 |
|
|
|
1,552 |
|
China |
|
|
658 |
|
|
|
734 |
|
|
|
672 |
|
|
|
764 |
|
North America |
|
|
1,577 |
|
|
|
1,820 |
|
|
|
1,570 |
|
|
|
1,787 |
|
Average NBHK pulp prices ($/ADMT)(1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
China |
|
|
602 |
|
|
|
533 |
|
|
|
598 |
|
|
|
556 |
|
North America |
|
|
1,495 |
|
|
|
1,310 |
|
|
|
1,417 |
|
|
|
1,289 |
|
Average pulp sales realizations ($/ADMT)(2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
NBSK |
|
|
682 |
|
|
|
758 |
|
|
|
689 |
|
|
|
771 |
|
NBHK |
|
|
607 |
|
|
|
575 |
|
|
|
585 |
|
|
|
572 |
|
Energy production ('000 MWh) |
|
|
483.0 |
|
|
|
511.1 |
|
|
|
1,027.6 |
|
|
|
1,038.1 |
|
Energy sales ('000 MWh) |
|
|
162.3 |
|
|
|
183.1 |
|
|
|
341.6 |
|
|
|
381.8 |
|
Average energy sales realizations ($/MWh) |
|
|
109 |
|
|
|
83 |
|
|
|
117 |
|
|
|
96 |
|
Solid Wood Segment |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Lumber |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Production (MMfbm) |
|
|
123.8 |
|
|
|
120.2 |
|
|
|
239.8 |
|
|
|
248.2 |
|
Sales (MMfbm) |
|
|
100.3 |
|
|
|
120.6 |
|
|
|
212.5 |
|
|
|
251.5 |
|
Average sales realizations ($/Mfbm) |
|
|
565 |
|
|
|
550 |
|
|
|
549 |
|
|
|
524 |
|
Energy |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Production and sales ('000 MWh) |
|
|
43.3 |
|
|
|
32.7 |
|
|
|
81.3 |
|
|
|
68.8 |
|
Average sales realizations ($/MWh) |
|
|
145 |
|
|
|
130 |
|
|
|
146 |
|
|
|
132 |
|
Manufactured products(3) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Production ('000 m3) |
|
|
11.0 |
|
|
|
7.8 |
|
|
|
18.9 |
|
|
|
14.9 |
|
Sales ('000 m3) |
|
|
11.0 |
|
|
|
8.1 |
|
|
|
21.7 |
|
|
|
14.0 |
|
Average sales realizations ($/m3) |
|
|
2,206 |
|
|
|
1,318 |
|
|
|
2,007 |
|
|
|
1,955 |
|
Pallets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Production ('000 units) |
|
|
2,314.8 |
|
|
|
2,132.9 |
|
|
|
4,748.1 |
|
|
|
4,229.3 |
|
Sales ('000 units) |
|
|
2,418.3 |
|
|
|
2,248.0 |
|
|
|
4,799.6 |
|
|
|
4,376.8 |
|
Average sales realizations ($/unit) |
|
|
13 |
|
|
|
12 |
|
|
|
13 |
|
|
|
11 |
|
Biofuels(4) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Production ('000 tonnes) |
|
|
37.3 |
|
|
|
25.2 |
|
|
|
72.7 |
|
|
|
69.7 |
|
Sales ('000 tonnes) |
|
|
34.6 |
|
|
|
19.6 |
|
|
|
72.6 |
|
|
|
59.9 |
|
Average sales realizations ($/tonne) |
|
|
310 |
|
|
|
260 |
|
|
|
315 |
|
|
|
239 |
|
Average Spot Currency Exchange Rates |
|
|
|
|
|
|
|
|
|
|
|
|
||||
$ / €(5) |
|
|
1.1632 |
|
|
|
1.1342 |
|
|
|
1.1666 |
|
|
|
1.0943 |
|
$ / C$(5) |
|
|
0.7229 |
|
|
|
0.7225 |
|
|
|
0.7260 |
|
|
|
0.7099 |
|
FORM 10-Q
QUARTERLY REPORT - PAGE 30
Consolidated – Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025
Total revenues for the second quarter of 2026 remained relatively steady at $460.3 million compared to $453.5 million in the same period of 2025, as higher sales realizations for our solid wood products and higher pulp sales volumes were mostly offset by lower pulp sales realizations.
Costs and expenses in the second quarter of 2026 were generally flat at $519.3 million compared to $511.9 million in the same period of 2025. In the second quarter of 2026, higher per unit fiber costs were mostly offset by the impact of lower planned maintenance downtime and the benefits of our cost reduction initiatives. In the second quarter of 2026, costs and expenses included a non-cash impairment of $29.0 million primarily against pulp and fiber inventory as a result of low pulp prices and high fiber costs. In the same period of 2025, costs and expenses included a non-cash impairment of $11.0 million against hardwood inventory at our Peace River mill.
In the second quarter of 2026, cost of sales depreciation and amortization was relatively flat at $37.9 million compared to $37.5 million in the same period of 2025.
Selling, general and administrative expenses were relatively steady at $31.6 million in the second quarter of 2026 compared to $30.4 million in the same period of 2025.
In the second quarter of 2026, we had a positive foreign exchange impact of approximately $6.4 million on our operating loss compared to the same period of 2025. This positive impact was primarily due to the effect of a stronger dollar compared to the euro and Canadian dollar on the revaluation of dollar-denominated accounts receivable held at our operations as of June 30, 2026.
In the second quarter of 2026, our operating loss was $59.0 million compared to an operating loss of $58.4 million in the same period of 2025. In the second quarter of 2026, higher per unit fiber costs and lower pulp sales realizations were mostly offset by the impact of lower planned maintenance downtime and the benefits of our cost reduction initiatives. In the second quarter of 2026, our operating loss included a non-cash inventory impairment of $29.0 million compared to $11.0 million in the same period of 2025.
Interest expense increased by approximately 9% to $30.9 million in the second quarter of 2026 from $28.4 million in the same period of 2025. This increase was primarily driven by higher interest rates on borrowings under the German joint revolving credit facility (the “German Facility”), pursuant to the terms of the waiver obtained in the second quarter of 2026.
In the second quarter of 2026, other income was $0.5 million compared to other expenses of $1.1 million in the same period of 2025. Other income in the second quarter of 2026 primarily consisted of interest earned on cash. In the same period of 2025, other expenses primarily consisted of foreign exchange losses on the revaluation of dollar-denominated cash held at our operations as the dollar weakened against the euro at the end of the period, mostly offset by interest earned on cash in the quarter.
In the second quarter of 2026, we had an income tax recovery of $13.4 million, or an effective tax rate of 15%, and in the same period of 2025, we had an income tax recovery of $1.9 million, or an effective tax rate of 2%. Our effective tax rates were different from the statutory rates of the jurisdictions in which we operate, as we do not recognize tax recoveries for certain entities from which we do not expect to realize a tax benefit.
In the second quarter of 2026, our net loss was $76.0 million, or $1.13 per share, compared to $86.1 million, or $1.29 per share, in the same period of 2025.
In the second quarter of 2026, Operating EBITDA was negative $21.0 million compared to negative $20.9 million in the same period of 2025. In the second quarter of 2026, higher per unit fiber costs and lower pulp sales realizations were mostly offset by the impact of lower planned maintenance downtime and the benefits of our cost reduction initiatives. In the second quarter of 2026, Operating EBITDA included a non-cash inventory impairment of $29.0 million compared to $11.0 million in the same period of 2025.
FORM 10-Q
QUARTERLY REPORT - PAGE 31
Strategic Initiatives
In July 2026, it was announced that the Torgau facility would be undertaking strategic actions designed to align its capacity and operational profile to current market conditions, which involve initiatives to streamline its organization and processes, along with adjustments to its product portfolio. These actions include an initial reduction of approximately 100 contractor positions in July 2026 and overall workforce reduction of approximately 350 positions to be completed in stages, and completing in or about the second quarter of 2027.
Pulp Segment – Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025
Selected Financial Information
|
|
|
|
|
|
Three Months Ended June 30, |
|
|||||
|
|
|
|
|
|
2026 |
|
|
2025 |
|
||
|
|
|
|
|
|
(in thousands) |
|
|||||
Pulp revenues |
|
|
|
|
|
$ |
303,340 |
|
|
$ |
313,705 |
|
Energy and chemical revenues |
|
|
|
|
|
$ |
21,734 |
|
|
$ |
18,603 |
|
Segment Operating EBITDA(1) |
|
|
|
|
|
$ |
(12,651 |
) |
|
$ |
(10,262 |
) |
Pulp segment revenues, comprised of pulp, energy and chemical revenues, in the second quarter of 2026 modestly decreased to $325.1 million from $332.3 million in the same period of 2025 due to lower pulp revenues.
Pulp revenues in the second quarter of 2026 modestly decreased to $303.3 million from $313.7 million in the same period of 2025 as a result of lower sales realizations, partially offset by higher sales volume.
Energy and chemical revenues in the second quarter of 2026 increased by approximately 17% to $21.7 million from $18.6 million in the same period of 2025. This increase was primarily due to higher sales realizations, partially offset by lower sales volumes.
Total pulp production in the second quarter of 2026 was relatively flat at 455,769 ADMTs compared to 457,117 ADMTs in the same period of 2025. Our German pulp mills reduced production during the quarter in response to high fiber prices, but this was offset by there being no planned maintenance downtime in the second quarter of 2026 compared to 23 days (approximately 33,200 ADMTs) at our pulp mills in the same period of 2025. Pulp production at our German mills is expected to remain at reduced levels in the third quarter of 2026 due to ongoing high fiber costs.
In the third quarter of 2026, we currently expect a total of 40 days of planned annual maintenance downtime (approximately 42,600 ADMTs) at our pulp mills.
Total pulp sales volumes in the second quarter of 2026 increased by approximately 6% to 450,329 ADMTs from 426,731 ADMTs in the same period of 2025 driven by the timing of sales.
In the second quarter of 2026, the third-party industry quoted average list price for NBSK pulp in Europe increased from the same period of 2025 primarily due to supply constraints. In the second quarter of 2026, the third-party industry quoted average list price in North America and net price in China for NBSK pulp both decreased compared to the same period of 2025. The decrease was primarily due to weak demand driven by the current economic climate and, in China, an oversupplied paper market. Third-party industry quoted average list prices for NBSK pulp in Europe and North America were approximately $1,655 per ADMT and $1,577 per ADMT, respectively, in the second quarter of 2026, compared to approximately $1,553 per ADMT and $1,820 per ADMT, respectively, in the same period of 2025. The third-party industry quoted average net price for NBSK pulp in China was approximately $658 per ADMT in the second quarter of 2026 compared to approximately $734 per ADMT in the same period of 2025. Prices quoted for China are net of discounts, allowances and rebates, whereas quoted prices for Europe and North America are before applicable discounts, allowances and rebates.
FORM 10-Q
QUARTERLY REPORT - PAGE 32
In the second quarter of 2026, the third-party industry quoted average list price in North America and net price in China for NBHK pulp both increased from the same period of 2025, primarily due to global supply constraints. The third-party industry quoted average list price for NBHK pulp in North America was approximately $1,495 per ADMT in the second quarter of 2026 compared to approximately $1,310 per ADMT in the same period of 2025. The third-party industry quoted average net price for NBHK pulp in China was approximately $602 per ADMT in the second quarter of 2026 compared to approximately $533 per ADMT in the same period of 2025.
Our average NBSK pulp sales realizations in the second quarter of 2026 decreased by approximately 10% to $682 per ADMT from $758 per ADMT in the same period of 2025. This decrease was primarily due to lower pricing in North America and China, while higher list prices in Europe were offset by increased customer discounts. In the second quarter of 2026, average NBHK pulp sales realizations increased by approximately 6% to $607 per ADMT from $575 per ADMT in the same period of 2025, driven by higher prices in all our markets.
In the second quarter of 2026, we had a positive foreign exchange impact of approximately $7.8 million on Segment Operating EBITDA compared to the same period of 2025. This positive impact was primarily due to the effect of a stronger dollar compared to the euro and Canadian dollar on the revaluation of dollar-denominated accounts receivable held at our operations as of June 30, 2026.
In the second quarter of 2026, we recorded a non-cash inventory impairment of $26.0 million primarily as a result of low pulp prices and high fiber costs.
In the second quarter of 2026, costs and expenses modestly decreased to $362.9 million from $368.7 million in the same period of 2025. This decrease was primarily due to lower planned maintenance downtime, our cost reduction initiatives and the positive foreign exchange impact from a stronger dollar. These decreases were partially offset by higher per unit fiber costs and higher pulp sales volumes. In the second quarter of 2026, costs and expenses included a non-cash inventory impairment of $26.0 million compared to $11.0 million in the same period of 2025.
Overall average per unit fiber costs in the second quarter of 2026 increased by approximately 14% compared to the same period of 2025 primarily due to higher costs in Germany. These higher costs were driven by reduced supply, and strong demand for wood as an energy source as a result of ongoing geopolitical conflicts. For the third quarter of 2026, per unit fiber costs for our German pulp mills are expected to slightly increase due to continued strong demand. For our Canadian pulp mills, per unit fiber costs are expected to modestly decrease as supply improves.
Transportation costs for our pulp segment in the second quarter of 2026 increased by approximately 14% to $37.4 million from $32.9 million in the same period of 2025, driven by higher sales volumes.
In the second quarter of 2026, Segment Operating EBITDA for our pulp segment was negative $12.7 million compared to negative $10.3 million in the same period of 2025. This decrease primarily resulted from lower pulp sales realizations and higher per unit fiber costs. These adverse effects were partially offset by the impact of lower planned maintenance downtime, the benefits of our cost reduction initiatives, and the positive foreign exchange impact from a stronger dollar. In the second quarter of 2026, Segment Operating EBITDA included a non-cash inventory impairment of $26.0 million compared to $11.0 million in the same period of 2025.
FORM 10-Q
QUARTERLY REPORT - PAGE 33
Solid Wood Segment – Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025
Selected Financial Information
|
|
|
|
|
|
Three Months Ended June 30, |
|
|||||
|
|
|
|
|
|
2026 |
|
|
2025 |
|
||
|
|
|
|
|
|
(in thousands) |
|
|||||
Lumber revenues |
|
|
|
|
|
$ |
56,643 |
|
|
$ |
66,332 |
|
Manufactured products revenues(1) |
|
|
|
|
|
$ |
25,821 |
|
|
$ |
12,418 |
|
Pallet revenues |
|
|
|
|
|
$ |
31,908 |
|
|
$ |
26,586 |
|
Biofuels revenues(2) |
|
|
|
|
|
$ |
10,724 |
|
|
$ |
5,095 |
|
Energy revenues |
|
|
|
|
|
$ |
6,296 |
|
|
$ |
4,242 |
|
Wood residuals revenues |
|
|
|
|
|
$ |
2,811 |
|
|
$ |
2,595 |
|
Segment Operating EBITDA(3) |
|
|
|
|
|
$ |
(8,238 |
) |
|
$ |
(4,861 |
) |
Solid wood segment revenues in the second quarter of 2026 increased by approximately 14% to $134.2 million from $117.3 million in the same period of 2025 as a result of higher revenue from all product categories except for lumber.
In the second quarter of 2026, lumber revenues decreased by approximately 15% to $56.6 million from $66.3 million in the same period of 2025 as a result of lower sales volumes.
In the second quarter of 2026, manufactured products revenues were $25.8 million compared to $12.4 million in the same period of 2025. This increase was primarily driven by higher sales volumes and realizations.
Pallet revenues in the second quarter of 2026 increased by approximately 20% to $31.9 million from $26.6 million in the same period of 2025 due to higher sales realizations and volumes.
Biofuels, energy and wood residuals revenues in the second quarter of 2026 increased by approximately 66% to $19.8 million from $11.9 million in the same period of 2025 due to higher sales realizations and higher sales volumes.
Lumber production in the second quarter of 2026 was relatively stable at 123.8 MMfbm compared to 120.2 MMfbm in the same period of 2025.
Lumber sales volumes in the second quarter of 2026 decreased by approximately 17% to 100.3 MMfbm from 120.6 MMfbm in the same period of 2025 driven by the timing of sales.
Average lumber sales realizations in the second quarter of 2026 modestly increased to $565 per Mfbm from $550 per Mfbm in the same period of 2025. This increase was primarily due to lower customer inventory levels in the U.S. The U.S. market accounted for approximately 49% of our lumber revenues and approximately 43% of our lumber sales volumes in the second quarter of 2026. The balance of our lumber sales were mainly to Europe.
Manufactured products sales realizations increased by approximately 67% to $2,206 per m3 in the second quarter of 2026 from $1,318 per m3 in the same period of 2025 driven by a shift in mass timber construction activity toward higher-value projects.
In the second quarter of 2026, we recorded a non-cash inventory impairment of $3.0 million as a result of high fiber costs in Germany.
Fiber costs were approximately 85% of our lumber cash production costs in the second quarter of 2026. In the second quarter of 2026, per unit fiber costs for lumber production increased by approximately 28% compared to the same period of 2025 due to reduced supply and strong demand. For the third quarter of 2026, we currently expect per unit
FORM 10-Q
QUARTERLY REPORT - PAGE 34
fiber costs to modestly decrease as sawlog availability improves.
Transportation costs for our solid wood segment in the second quarter of 2026 increased by approximately 21% to $16.2 million from $13.4 million in the same period of 2025 primarily as a result of higher freight rates.
In the second quarter of 2026, Segment Operating EBITDA for the solid wood segment was negative $8.2 million compared to negative $4.9 million in the same period of 2025. This decrease primarily resulted from higher per unit fiber costs partially offset by higher sales realizations for all our products.
Consolidated – Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
Total revenues for the first half of 2026 were relatively flat at $949.6 million compared to $960.5 million in the same period of 2025.
Costs and expenses in the first half of 2026 modestly increased to $1,041.4 million from $1,012.2 million in the same period of 2025. This increase was primarily due to the higher per unit fiber costs and the negative foreign exchange impact from a weaker dollar on our euro and Canadian dollar-denominated costs and expenses. These adverse impacts were partially offset by the impact of lower planned maintenance downtime and the benefits of our cost reduction initiatives. In the first half of 2026, costs and expenses included inventory impairment charges of $51.0 million primarily against pulp and fiber inventory as a result of low pulp prices and high fiber costs. In the same period of 2025, costs and expenses included inventory impairment charges of $11.0 million against hardwood inventory at our Peace River mill.
In the first half of 2026, cost of sales depreciation and amortization was relatively steady at $78.6 million compared to $77.7 million in the same period of 2025.
Selling, general and administrative expenses were flat at $60.1 million in the first half of 2026 and the same period of 2025.
In the first half of 2026, we had a negative foreign exchange impact of approximately $15.7 million on our operating loss compared to the same period of 2025. This negative impact was primarily due to the effect of a weaker dollar on our euro and Canadian dollar-denominated costs and expenses.
In the first half of 2026, our operating loss was $91.9 million compared to $51.7 million in the same period of 2025. This increase in operating loss was primarily due to lower pulp sales realizations and higher per unit fiber costs, partially offset by the impact of lower planned maintenance downtime and the benefits of our cost reduction initiatives. In the first half of 2026, our operating loss also included inventory impairment charges of $51.0 million compared to $11.0 million in the same period of 2025.
Interest expense in the first half of 2026 increased by approximately 6% to $60.0 million from $56.6 million in the same period of 2025. This increase was primarily driven by higher borrowings under our revolving credit facilities and higher interest rates on borrowings under the German Facility, pursuant to the terms of the waiver obtained in the second quarter of 2026.
In the first half of 2026, other income was $2.3 million compared to other expenses of $1.3 million in the same period of 2025. Other income in the first half of 2026 primarily consisted of interest earned on cash. In the same period of 2025, other expenses primarily consisted of foreign exchange losses on dollar-denominated cash held at our operations as the dollar weakened against the euro at the end of the period, mostly offset by interest earned on cash.
During the first half of 2026, we had an income tax recovery of $21.6 million, or an effective tax rate of 14%, and in the same period of 2025, we had an income tax recovery of $1.1 million, or an effective tax rate of 1%. Our effective tax rates were different from the statutory rates of the jurisdictions in which we operate as we do not recognize tax recoveries for certain entities from which we do not expect to realize a tax benefit.
In the first half of 2026, our net loss was $128.0 million, or $1.91 per share, compared to $108.4 million, or $1.62 per share, in the same period of 2025.
FORM 10-Q
QUARTERLY REPORT - PAGE 35
In the first half of 2026, Operating EBITDA decreased to negative $13.1 million from positive $26.2 million in the same period of 2025. This decrease primarily resulted from lower pulp sales realizations and higher per unit fiber costs, partially offset by the impact of lower planned maintenance downtime and the benefits of our cost reduction initiatives. In the first half of 2026, Operating EBITDA also included inventory impairment charges of $51.0 million compared to $11.0 million in the same period of 2025.
Pulp Segment – Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
Selected Financial Information
|
|
|
|
|
|
Six Months Ended June 30, |
|
|||||
|
|
|
|
|
|
2026 |
|
|
2025 |
|
||
|
|
|
|
|
|
(in thousands) |
|
|||||
Pulp revenues |
|
|
|
|
|
$ |
622,510 |
|
|
$ |
670,669 |
|
Energy and chemical revenues |
|
|
|
|
|
$ |
47,547 |
|
|
$ |
42,719 |
|
Segment Operating EBITDA(1) |
|
|
|
|
|
$ |
(5,754 |
) |
|
$ |
39,610 |
|
Pulp segment revenues, comprised of pulp, energy and chemical revenues, in the first half of 2026 decreased by approximately 6% to $670.1 million from $713.4 million in the same period of 2025 due to lower pulp revenues.
Pulp revenues in the first half of 2026 decreased by approximately 7% to $622.5 million from $670.7 million in the same period of 2025, primarily as a result of lower sales realizations.
Energy and chemical revenues in the first half of 2026 increased by approximately 11% to $47.5 million from $42.7 million in the same period of 2025, primarily due to higher sales realizations.
Total pulp production in the first half of 2026 was relatively flat at 921,486 ADMTs compared to 916,026 ADMTs in the same period of 2025. Our German pulp mills reduced production in the first half of 2026 in response to high fiber prices, but this was mostly offset by there being no planned maintenance downtime in the first half of 2026 compared to 45 days (approximately 62,900 ADMTs) at our pulp mills in the same period of 2025.
Total pulp sales volumes in the first half of 2026 modestly increased to 921,029 ADMTs from 904,610 ADMTs in the same period of 2025, due to the timing of sales.
In the first half of 2026, the third-party industry quoted average list price for NBSK pulp in Europe increased compared to the same period of 2025 primarily due to supply constraints. In the first half of 2026, the third-party industry quoted average list price in North America and net price in China for NBSK pulp both decreased compared to the same period of 2025. The decrease was primarily due to weak demand driven by the current economic climate and, in China, an oversupplied paper market. Third-party industry quoted average list prices for NBSK pulp in Europe and North America were approximately $1,637 per ADMT and $1,570 per ADMT, respectively, in the first half of 2026 compared to approximately $1,552 per ADMT and $1,787 per ADMT, respectively, in the same period of 2025. The third-party industry quoted average net price for NBSK pulp in China was approximately $672 per ADMT in the first half of 2026 compared to approximately $764 per ADMT in the same period of 2025. Prices quoted for China are net of discounts, allowances and rebates, whereas quoted prices for Europe and North America are before applicable discounts, allowances and rebates.
In the first half of 2026, the third-party industry quoted average list price in North America and net price in China for NBHK pulp both increased from the same period of 2025, primarily due to global supply constraints. The third-party industry quoted average list price for NBHK pulp in North America was approximately $1,417 per ADMT in the first half of 2026 compared to approximately $1,289 per ADMT in the same period of 2025. The third-party industry quoted average net price for NBHK pulp in China was approximately $598 per ADMT in the first half of 2026 compared to approximately $556 per ADMT in the same period of 2025.
FORM 10-Q
QUARTERLY REPORT - PAGE 36
Our average NBSK pulp sales realizations in the first half of 2026 decreased by approximately 11% to $689 per ADMT from $771 per ADMT in the same period of 2025 due to lower prices in North America and China, and higher discounts in Europe. In the first half of 2026, average NBHK pulp sales realizations were relatively flat at $585 per ADMT compared to $572 per ADMT in the same period of 2025.
In the first half of 2026, we had a negative foreign exchange impact of approximately $8.6 million on Segment Operating EBITDA compared to the same period of 2025, primarily due to the effect of a weaker dollar on our euro- and Canadian-dollar-denominated costs and expenses.
In the first half of 2026, we recorded inventory impairment charges of $48.0 million primarily as a result of low pulp prices and high fiber costs. In the first half of 2025, we recorded inventory impairment charges of $11.0 million primarily as a result of low hardwood pulp prices.
Costs and expenses in the first half of 2026 remained flat at $729.8 million compared to $729.6 million in the same period of 2025 as higher per unit fiber costs, the negative foreign exchange impact from a weaker dollar, and higher pulp sales volumes were mostly offset by the impact of lower planned maintenance downtime and the benefits of our cost reduction initiatives. In the first half of 2026, costs and expenses included an inventory impairment charge of $48.0 million compared to $11.0 million in the same period of 2025.
Overall average per unit fiber costs in the first half of 2026 increased by approximately 18% compared to the same period of 2025, primarily due to reduced supply in Germany and Canada, as well as strong demand for wood as an energy source in Germany.
Transportation costs for our pulp segment in the first half of 2026 increased by approximately 9% to $74.3 million from $68.3 million in the same period of 2025 primarily due to higher sales volume.
In the first half of 2026, Segment Operating EBITDA for the pulp segment decreased to negative $5.8 million from positive $39.6 million in the same period of 2025. This decrease primarily resulted from lower pulp sales realizations, higher per unit fiber costs and the negative foreign exchange impact from a weaker dollar. These adverse effects were partially offset by the impact of lower planned maintenance downtime and the benefits of our cost reduction initiatives. In the first half of 2026, Segment Operating EBITDA also included inventory impairment charges of $48.0 million compared to $11.0 million in the same period of 2025.
FORM 10-Q
QUARTERLY REPORT - PAGE 37
Solid Wood Segment – Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
Selected Financial Information
|
|
|
|
|
|
Six Months Ended June 30, |
|
|||||
|
|
|
|
|
|
2026 |
|
|
2025 |
|
||
|
|
|
|
|
|
(in thousands) |
|
|||||
Lumber revenues |
|
|
|
|
|
$ |
116,734 |
|
|
$ |
131,718 |
|
Manufactured products revenues(1) |
|
|
|
|
|
$ |
46,862 |
|
|
$ |
31,242 |
|
Pallet revenues |
|
|
|
|
|
$ |
61,768 |
|
|
$ |
49,763 |
|
Biofuels revenues(2) |
|
|
|
|
|
$ |
22,904 |
|
|
$ |
14,319 |
|
Energy revenues |
|
|
|
|
|
$ |
11,894 |
|
|
$ |
9,108 |
|
Wood residuals revenues |
|
|
|
|
|
$ |
5,783 |
|
|
$ |
3,838 |
|
Segment Operating EBITDA(3) |
|
|
|
|
|
$ |
(13,869 |
) |
|
$ |
(5,153 |
) |
Solid wood segment revenues in the first half of 2026 increased by approximately 11% to $265.9 million from $240.0 million in the same period of 2025 as a result of higher revenue from all product categories except for lumber.
Lumber revenues in the first half of 2026 decreased by approximately 11% to $116.7 million from $131.7 million in the same period of 2025 due to lower sales volumes.
In the first half of 2026, manufactured products revenues increased by approximately 50% to $46.9 million from $31.2 million in the same period of 2025 due to higher sales volumes.
Pallet revenues in the first half of 2026 increased by approximately 24% to $61.8 million from $49.8 million in the same period of 2025 driven by higher sales volumes and realizations.
Biofuels, energy and wood residuals revenues in the first half of 2026 increased by approximately 49% to $40.6 million from $27.3 million in the same period of 2025 as a result of higher sales realizations and volumes.
Lumber production in the first half of 2026 modestly decreased to 239.8 MMfbm from 248.2 MMfbm in the same period of 2025 due to fiber supply constraints.
Lumber sales volumes in the first half of 2026 decreased by approximately 16% to 212.5 MMfbm from 251.5 MMfbm in the same period of 2025, as a result of timing of sales and lower production.
Average lumber sales realizations in the first half of 2026 increased by approximately 5% to $549 per Mfbm from $524 per Mfbm in the same period of 2025. This increase was primarily due to higher prices in Germany in response to higher fiber costs. Prices in the U.S. market were flat. The U.S. market accounted for approximately 47% of our lumber revenues and approximately 42% of our lumber sales volumes in the first half of 2026. The balance of our lumber sales was mainly to Europe.
Manufactured products sales realizations modestly increased to $2,007 per m3 in the first half of 2026 from $1,955 per m3 in the same period of 2025, driven by a shift in mass timber construction activity toward higher-value projects.
In the first half of 2026, we recorded inventory impairment charges of $3.0 million as a result of high fiber costs in Germany.
Fiber costs were approximately 85% of our lumber cash production costs in the first half of 2026. During this period, per unit fiber costs for lumber production increased by approximately 32% compared to the same period of 2025 due to reduced supply and strong demand.
FORM 10-Q
QUARTERLY REPORT - PAGE 38
Transportation costs for our solid wood segment in the first half of 2026 increased by approximately 16% to $31.1 million from $26.7 million in the same period of 2025 as a result of higher freight rates.
In the first half of 2026, Segment Operating EBITDA for the solid wood segment was negative $13.9 million compared to negative $5.2 million in the same period of 2025. This decrease primarily resulted from higher per unit fiber costs partially offset by higher sales realizations for all our products and the benefits of our cost savings initiatives.
Liquidity and Capital Resources
As a result of ongoing economic uncertainty and market conditions, to address our overall liquidity going forward, we have engaged advisors to review strategic alternatives and broader financing initiatives. As part of this process, we are engaged in discussions with holders of our 2028 and 2029 senior notes, as well as other stakeholders across our capital structure, regarding potential financing and other liquidity-enhancing transactions. These discussions remain ongoing and we continue to evaluate a range of alternatives with the objective of achieving a comprehensive solution that supports our long-term business plan. No agreement has been reached with any stakeholder group, and there can be no assurance these discussions will result in any particular transaction or that any transaction, if pursued, will be completed.
For additional details regarding our liquidity position and the factors raising substantial doubt about our ability to continue as a going concern for the one-year period from the date of this report, see Note 1 to our consolidated financial statements and “Sources and Uses of Funds – Going Concern”.
Summary of Cash Flows
|
|
|
|
|
|
Six Months Ended June 30, |
|
|||||
|
|
|
|
|
|
2026 |
|
|
2025 |
|
||
|
|
|
|
|
|
(in thousands) |
|
|||||
Net cash used in operating activities |
|
|
|
|
|
$ |
(100,782 |
) |
|
$ |
(7,515 |
) |
Net cash used in investing activities |
|
|
|
|
|
|
(19,343 |
) |
|
|
(42,633 |
) |
Net cash from financing activities |
|
|
|
|
|
|
17,607 |
|
|
|
15,978 |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
|
|
|
|
|
(512 |
) |
|
|
(4,256 |
) |
Net decrease in cash, cash equivalents and restricted cash |
|
|
|
|
|
$ |
(103,030 |
) |
|
$ |
(38,426 |
) |
We operate in a cyclical industry and our operating cash flows vary accordingly. Our principal operating cash expenditures are for production costs, such as fiber, chemicals, and energy costs, and other material operating costs for maintenance, freight, and labor. Historically, we have met our liquidity needs principally from cash on hand, cash flow from operations, and, if needed, external borrowings, including borrowings under revolving credit facilities and issuances of debt securities. However, ongoing market pressures continue to impact our liquidity. For additional details, see Note 1 to our consolidated financial statements and “Sources and Uses of Funds – Going Concern”.
Working capital levels fluctuate throughout the year and are affected by maintenance downtime, changing sales patterns, seasonality, and the timing of receivables and sales, and the payment of payables and expenses.
Cash Flows from (used in) Operating Activities. In the six months ended June 30, 2026, cash used in operating activities was $100.8 million compared to $7.5 million in the same period of 2025. An increase in accounts receivable used cash of $13.5 million in the six months ended June 30, 2026, and a decrease in accounts receivable provided cash of $14.8 million in the same period of 2025. Adjusting for inventory impairments of $51.0 million, an increase in inventories used cash of $81.7 million in the six months ended June 30, 2026. Adjusting for inventory impairments of $11.0 million, an increase in inventories used cash of $24.1 million in the same period of 2025. An increase in accounts payable and accrued expenses provided cash of $12.6 million in the six months ended June 30, 2026 and $16.4 million in the same period of 2025. A decrease in prepaid expenses and other provided cash of $4.6 million in the six months ended June 30, 2026. An increase in prepaid expenses and other used cash of $8.8 million in the same period of 2025.
Cash Flows from (used in) Investing Activities. In the six months ended June 30, 2026, investing activities used cash of $19.3 million. In the six months ended June 30, 2026, we incurred $25.3 million of capital expenditures primarily related to lime kiln improvement and other strategic projects at our Stendal mill, upgrades to the digester evaporator
FORM 10-Q
QUARTERLY REPORT - PAGE 39
at our Rosenthal mill, and maintenance projects across all mills and facilities. In the six months ended June 30, 2026, we received $4.8 million in government grants for capital projects at our Stendal mill.
In the six months ended June 30, 2025, investing activities used cash of $42.6 million. In the six months ended June 30, 2025, we incurred $44.4 million of capital expenditures primarily related to completion of the wood room project at our Celgar mill, log yard upgrades at our Torgau facility and Friesau mill, sorting line upgrades, and other strategic projects at our mass timber facilities, and maintenance projects across all mills and facilities. In the six months ended June 30, 2025, we received $3.1 million in government grants for capital projects at our mass timber facilities.
Cash Flows from (used in) Financing Activities. In the six months ended June 30, 2026, financing activities provided cash of $17.6 million. In the six months ended June 30, 2026, we borrowed approximately $30.0 million under our revolving credit facilities.
In the six months ended June 30, 2025, financing activities provided cash of $16.0 million. In the six months ended June 30, 2025, we borrowed approximately $25.4 million under our revolving credit facilities, and we paid dividends of $5.0 million.
Balance Sheet Data
The following table is a summary of selected financial information as of the dates indicated:
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
||
|
|
|
|
|
|
(in thousands) |
|
|||||
Cash and cash equivalents |
|
|
|
|
|
$ |
78,775 |
|
|
$ |
186,805 |
|
Working capital(1) |
|
|
|
|
|
$ |
182,474 |
|
|
$ |
582,176 |
|
Total assets |
|
|
|
|
|
$ |
1,869,907 |
|
|
$ |
2,041,420 |
|
Current liabilities(1) |
|
|
|
|
|
$ |
600,876 |
|
|
$ |
283,626 |
|
Long-term liabilities(1) |
|
|
|
|
|
$ |
1,367,005 |
|
|
$ |
1,689,734 |
|
Total shareholders’ equity (deficit) |
|
|
|
|
|
$ |
(97,974 |
) |
|
$ |
68,060 |
|
Sources and Uses of Funds
Our principal sources of funds are cash flows from operations, cash and cash equivalents on hand and available capital from financing activities. Our principal uses of funds consist of operating expenditures, capital expenditures and interest payments on our senior notes.
The following table sets out our total capital expenditures and interest expense for the periods indicated:
|
|
|
|
|
|
Six Months Ended June 30, |
|
|||||
|
|
|
|
|
|
2026 |
|
|
2025 |
|
||
|
|
|
|
|
|
(in thousands) |
|
|||||
Capital expenditures |
|
|
|
|
|
$ |
25,330 |
|
|
$ |
44,413 |
|
Cash paid for interest expense(1) |
|
|
|
|
|
$ |
54,230 |
|
|
$ |
53,415 |
|
Interest expense(2) |
|
|
|
|
|
$ |
60,021 |
|
|
$ |
56,566 |
|
FORM 10-Q
QUARTERLY REPORT - PAGE 40
As of June 30, 2026, we had cash and cash equivalents of $78.8 million. After taking into account the waiver obtained on May 4, 2026 and the €70 million reduction in borrowing capacity thereunder (see “Debt Covenants”), we had approximately $112.9 million available under our revolving credit facilities, bringing aggregate liquidity to approximately $191.7 million as of June 30, 2026.
We currently consider the majority of undistributed earnings of our foreign subsidiaries to be indefinitely reinvested and, accordingly, no U.S. income tax has been provided on such earnings. However, if we were required to repatriate funds to the U.S., we believe that we currently could repatriate the majority thereof without incurring any material amount of taxes as a result of our shareholder advances and U.S. tax reform. However, it is currently not practical to estimate the income tax liability that might be incurred if such earnings were remitted to the U.S. Substantially all of our undistributed earnings are held by our foreign subsidiaries outside of the U.S.
Going Concern
The January 2027 maturity of the Canadian Facility represents our primary liquidity requirement over the next 12 months. Absent a refinancing, this is projected to result in a liquidity shortfall that raises substantial doubt about our ability to continue as a going concern for the one-year period from the date of this report. Additionally, while the German Facility matures in September 2027, it has been classified as current due to a probable covenant breach in the fourth quarter of 2026 and is subject to potential acceleration if unwaived. For additional details regarding the factors raising substantial doubt about our ability to continue as a going concern, see Note 1 to our consolidated financial statements.
Management currently anticipates renegotiating or replacing the Canadian Facility ahead of its maturity and is concurrently evaluating strategic alternatives and broader financing initiatives (for further information, see “Liquidity and Capital Resources” in Part I, Item 2 of this report). While management currently believes we will reach a resolution prior to the maturity or potential acceleration of current debt, there can be no assurance that we will successfully renegotiate or amend the facilities, or complete any such financing, refinancing or strategic transactions on acceptable terms, or at all. If we are unable to resolve these liquidity shortfalls prior to maturity or potential acceleration, we will not have sufficient cash to settle these obligations, which would have a material adverse effect on our business, financial condition, and ability to continue as a going concern.
Subject to and assuming we successfully address the near-term liquidity requirements described above, we believe that our cash flow from operations and available cash, together with access to capital markets, will otherwise be adequate to finance the capital requirements of our ongoing business for the next 12 months. Over the longer term, we may make commitments to additional capital projects or acquisitions to achieve our long-term goals, which will require substantial capital resources. We expect to generate these necessary resources through a combination of future cash flow from operations, cash on hand, asset dispositions, or the issuance of debt and equity securities. However, our ability to meet these long-term business goals and manage our maturing debt remains highly dependent on our ability to continually access and secure outside sources of capital.
Debt Covenants
Certain of our long-term obligations contain various financial tests and covenants customary to these types of arrangements. See our annual report on Form 10-K for the fiscal year ended December 31, 2025.
As of March 31, 2026, our leverage ratio exceeded the 3.50:1.00 maximum permitted under our German Facility, under which $201.2 million was drawn. We secured a waiver dated May 4, 2026 with respect to this financial covenant for the first three quarters of 2026 (the “Waiver”). Management has determined it is probable that the Company will not meet the required leverage ratio with respect to the fourth quarter of 2026. Consequently, in accordance with GAAP, the outstanding balance under the German Facility has been classified as a current liability as of June 30, 2026. However, it has not been declared in default, and the outstanding borrowings are not currently callable by the lender or subject to acceleration.
Pursuant to the Waiver, the lenders under our German Facility waived the requirement to comply with the leverage ratio financial covenant for the first three fiscal quarters of 2026. The Waiver also modified certain covenants, including limiting utilization of the German Facility to €300 million while the leverage ratio exceeds 2.00:1.00, limiting drawdown requests for incremental borrowings to €20 million (until certain liquidity forecasts are provided),
FORM 10-Q
QUARTERLY REPORT - PAGE 41
requiring average liquidity of the Company and its subsidiaries of US$30 million (tested monthly and measured over a rolling 13-week period), restricting capital expenditures of the German borrowers and their subsidiaries to €60 million for fiscal year 2026 without agent consent, and restricting distributions by the German borrowers to the Company until September 30, 2026 (subject to limited exceptions). The interest rate margin under the German Facility was modified to a range of 2.50% to 4.25% based on specified leverage ratio levels. The Waiver also provides, among other things, for a grant of security over certain assets of the German borrowers and guarantors, includes certain reporting requirements and creates additional events of default such as cross-defaults to certain of our other indebtedness, including our outstanding senior notes and Canadian Facility. Further information regarding the Waiver is set forth in our Current Report on Form 8-K dated May 7, 2026, and the Waiver is included as an exhibit to this report.
The Waiver gives us the opportunity to pursue and implement measures and solutions to enhance our liquidity and financial condition in the current economic environment and to assist our positioning for an eventual market recovery. To this end, we are also evaluating strategic alternatives and financing options to address our liquidity needs and goals. Our board of directors has appointed a special committee of independent directors to oversee, review and evaluate the development and implementation of potential liquidity management strategies and other transactions to improve our capital structure. Our other debt agreements remain in compliance and this Waiver does not trigger any cross-default provisions under those agreements. While non-compliance with the leverage ratio financial covenant addressed pursuant to the Waiver did not and does not trigger any cross-default provisions under the Company’s senior notes or Canadian Facility, an unwaived breach with respect to the quarter ending December 31, 2026 could lead to a default and subsequent cross-defaults if the lenders under the German Facility exercise their acceleration rights.
Any further covenant waivers may lead to increased costs, increased interest rates, additional restrictive covenants and other available lender protections as may be agreed with our lenders. There can be no assurance that we would be able to obtain additional waivers in a timely manner, or on acceptable terms. Any inability to secure additional relief could lead to an event of default and the acceleration of amounts due thereunder. Subject to our ability to successfully address the upcoming Canadian Facility maturity and resolve the going concern uncertainties described under “Sources and Uses of Funds – Going Concern”, we intend to meet any resulting liquidity needs through a combination of internal cash generation and continued access to the debt and equity capital markets.
Contractual Obligations and Commitments
There were no material changes outside the ordinary course to any of our material contractual obligations during the six months ended June 30, 2026.
Foreign Currency
Our reporting currency is the dollar. However, we hold certain assets and liabilities in euros and Canadian dollars and the majority of our expenditures are denominated in euros or Canadian dollars. Accordingly, our consolidated financial results are subject to foreign currency exchange rate fluctuations.
We translate foreign denominated assets and liabilities into dollars at the rate of exchange on the balance sheet date. Equity accounts are translated using historical exchange rates. Unrealized gains or losses from these translations are recorded in other comprehensive income (loss) and do not affect our net earnings.
As a result of a stronger dollar versus the euro and Canadian dollar as of June 30, 2026, during the six months ended June 30, 2026, we recorded a non-cash decrease of $37.0 million in the carrying value of our net assets denominated in euros and Canadian dollars, consisting primarily of our property, plant and equipment. This non-cash decrease does not affect our net loss, Operating EBITDA or cash but is reflected in our other comprehensive income (loss) and as a decrease to our total equity. As a result, our accumulated other comprehensive loss increased to $125.1 million.
Based upon the exchange rate as of June 30, 2026, the dollar was approximately 4% stronger against the Canadian dollar and 3% stronger against the euro since December 31, 2025. See “Quantitative and Qualitative Disclosures about Market Risk”.
FORM 10-Q
QUARTERLY REPORT - PAGE 42
Credit Ratings of Senior Notes
We and our senior notes are rated by Standard & Poor’s Ratings Services, referred to as “S&P”, Moody’s Investors Service, Inc., referred to as “Moody’s” and Fitch Ratings, referred to as “Fitch”.
S&P, Moody’s and Fitch base their assessment of the credit risk on our senior notes on the business and financial profile of Mercer Inc. and our restricted subsidiaries under the indentures governing the senior notes. Factors that may affect our credit rating include changes in our operating performance and liquidity. Credit rating downgrades can adversely impact, among other things, future borrowing costs and access to capital markets.
In February 2026, S&P downgraded its rating on our senior notes to CCC+, followed by a further downgrade to CCC by Fitch in May 2026. In July 2026, Moody’s also downgraded our senior notes from Caa2 to Ca and confirmed its outlook as stable.
Credit ratings are not recommendations to buy, sell or hold securities and may be subject to revision or withdrawal by the assigning rating organization. Each rating should be evaluated independently of any other rating.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect both the amount and the timing of the recording of assets, liabilities, revenues, and expenses in the consolidated financial statements and accompanying note disclosures. Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. As the number of variables and assumptions affecting the probable future resolution of the uncertainties increases, these judgments become even more subjective and complex.
Our significant accounting policies are disclosed in Note 1 to our audited annual financial statements included in our annual report on Form 10-K for the fiscal year ended December 31, 2025. While all of the significant accounting policies are important to the consolidated financial statements, some of these policies may be viewed as having a high degree of judgment. On an ongoing basis using currently available information, management reviews its estimates, including those related to accounting for, among other things, the Company’s ability to continue as a going concern, future cash flows associated with the Company’s debt covenant compliance and related debt classification and impairment testing for long-lived assets, depreciation and amortization, pension and other post-retirement benefit obligations, deferred income taxes (valuation allowance and permanent reinvestment), revenues under long-term contracts, inventory impairment, legal liabilities and contingencies. Actual results could differ materially from these estimates and changes in these estimates are recorded when known.
For information about our significant and critical accounting policies, see our annual report on Form 10-K for the fiscal year ended December 31, 2025.
Cautionary Statement Regarding Forward-Looking Information
The statements in this report that are not reported financial results or other historical information are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended.
Generally, forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, or words of similar meaning, or future or conditional verbs, such as “will”, “should”, “could”, or “may”, although not all forward-looking statements contain these identifying words. Forward-looking statements are based on expectations, forecasts and assumptions by our management and involve a number of risks, uncertainties and other factors, many of which are beyond our control, that could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. These factors include, but are not limited to, the following:
Risks Related to our Business
FORM 10-Q
QUARTERLY REPORT - PAGE 43
FORM 10-Q
QUARTERLY REPORT - PAGE 44
Risks Related to our Debt
Risks Related to Macroeconomic Conditions
Legal and Regulatory Risks
Risks Related to Ownership of our Shares
FORM 10-Q
QUARTERLY REPORT - PAGE 45
Given these uncertainties, you should not place undue reliance on our forward-looking statements. The foregoing review of important factors is not exhaustive or necessarily in order of importance and should be read in conjunction with the risks and assumptions including those set forth under “Item 1A. Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2025 and in the other reports and documents we have filed with or furnished to the SEC. We advise you that these cautionary remarks expressly qualify in their entirety all forward-looking statements attributable to us or persons acting on our behalf. Unless required by law, we do not assume any obligation to update forward-looking statements based on unanticipated events or changed expectations. However, you should carefully review the reports and other documents we file from time to time with the SEC.
Cyclical Nature of Business
Revenues
The pulp and lumber businesses are highly cyclical in nature and markets are characterized by periods of supply and demand imbalance, which in turn can materially affect prices. Pulp and lumber markets are sensitive to cyclical changes in the global economy, industry capacity and foreign exchange rates, all of which can have a significant influence on selling prices and our operating results. The length and magnitude of industry cycles have varied over time but generally reflect changes in macroeconomic conditions and levels of industry capacity. Pulp and lumber are commodities that are generally available from other producers. Because commodity products have few distinguishing qualities from producer to producer, competition is generally based upon price, which is primarily determined by supply relative to demand.
Industry capacity can fluctuate as changing industry conditions can influence producers to idle production capacity or permanently close mills. In addition, to avoid substantial cash costs in idling or closing a mill, some producers will choose to operate at a loss, sometimes even a cash loss, which can prolong weak pricing environments due to oversupply. Oversupply of our products can also result from producers introducing new capacity in response to favorable pricing trends. Certain integrated pulp and paper producers have the ability to discontinue paper production by idling their paper machines and selling their pulp production on the market, if market conditions, prices and trends warrant such actions.
Demand for each of pulp and lumber has historically been determined primarily by general global macroeconomic conditions and has been closely tied to overall business activity. Pulp and lumber prices have been and are likely to continue to be volatile and can fluctuate widely over time.
The third-party industry quoted average European list prices for NBSK pulp between 2017 and 2026 have fluctuated between a low of $810 per ADMT in 2017 to a high of $1,655 per ADMT in 2026. In the same period, third-party industry quoted average North American list prices for NBHK pulp have fluctuated between a low of $830 per ADMT in 2017 to a high of $1,620 per ADMT in 2022.
As a key construction material, the pricing and demand for lumber is also significantly influenced by the number of housing starts, especially in the U.S. In the U.S., third-party industry quoted monthly average western spruce/pine/fir (WSPF) 2 x 4 #2&Btr prices between 2017 and 2026 have fluctuated between a low of $310 per Mfbm in 2017 to a high of $1,604 per Mfbm in 2021. Similarly, the demand for CLT and glulam is primarily driven by the wood construction market and increased government policies focused on a low-carbon economy.
Our mills and operations voluntarily subject themselves to third-party certifications in compliance with internationally recognized, sustainable management standards because end use paper and lumber customers have shown an increased interest in understanding the origin of products they purchase. Demand for our products could be adversely affected if we, or our suppliers, are unable to achieve compliance, or are perceived by the public as failing to comply, with these standards or if our customers require compliance with alternate standards for which our operations are not certified.
A pulp producer’s actual sales price realizations are net of customer discounts, rebates and other selling concessions. Accordingly, prices for pulp and lumber are driven by many factors outside our control, and we have little influence over the timing and extent of price changes, which are often volatile. Because market conditions beyond our control determine the prices for pulp and lumber, prices may fall below our cash production costs, requiring us to either incur short-term losses on product sales or cease production at one or more of our mills. Therefore, our profitability depends
FORM 10-Q
QUARTERLY REPORT - PAGE 46
on managing our cost structure, particularly raw materials which represent a significant component of our operating costs and can fluctuate based upon factors beyond our control. If the prices of our products decline, or if prices for our raw materials increase, or both, our results of operations and cash flows could be materially adversely affected.
Costs
Our production costs are influenced by the availability and cost of raw materials, energy and labor, and our plant efficiencies and productivity. Our main raw material is fiber in the form of wood chips, pulp logs, sawlogs and lumber. Wood chip, pulp log and sawlog costs are primarily affected by the supply of, and demand for, lumber and pulp, which are both highly cyclical. Higher fiber prices could affect producer profit margins if they are unable to pass along price increases to pulp and lumber customers or purchasers of surplus energy.
Currency
We have manufacturing operations in Germany, Canada and the U.S. Most of the operating costs and expenses of our German mills are incurred in euros and those of our Canadian mills in Canadian dollars. However, the majority of our sales are in products quoted in dollars. Our results of operations and financial condition are reported in dollars. As a result, our costs generally benefit from a strengthening dollar but are adversely affected by a decrease in the value of the dollar relative to the euro and to the Canadian dollar. Such declines in the dollar relative to the euro and the Canadian dollar reduce our operating margins and the cash flow available to fund our operations and to service our debt. This could have a material adverse effect on our business, financial condition, results of operations and cash flows.
FORM 10-Q
QUARTERLY REPORT - PAGE 47
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks from changes in interest rates and foreign currency exchange rates, particularly the exchange rates between the dollar and the euro and Canadian dollar. Changes in these rates may affect our results of operations and financial condition and, consequently, our fair value. We seek to manage these risks through internal risk management policies as well as the periodic use of derivatives.
For additional information, please refer to “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in our annual report on Form 10-K for the fiscal year ended December 31, 2025.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, referred to as the “Exchange Act”), as of the end of the period covered by this report. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act.
It should be noted that any system of controls is based in part upon certain assumptions designed to obtain reasonable (and not absolute) assurance as to its effectiveness and there can be no assurance that any design will succeed in achieving its stated goals.
Changes in Internal Controls
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
FORM 10-Q
QUARTERLY REPORT - PAGE 48
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are subject to routine litigation incidental to our business, including that which is described in our latest annual report on Form 10-K for the fiscal year ended December 31, 2025. We do not believe that the outcome of such litigation will have a material adverse effect on our business or financial condition.
ITEM 1A. RISK FACTORS
Except as set forth below, there have been no material changes to the factors disclosed in “Item 1A. Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2025 and in our quarterly report on Form 10-Q for the quarter ended March 31, 2026.
Risks Related to our Debt
There is substantial doubt about our ability to continue as a going concern.
Our consolidated financial statements as of and for the period ended June 30, 2026 have been prepared assuming we will continue as a going concern. However, as described in Note 1 to our consolidated financial statements and under “Liquidity and Capital Resources – Going Concern” in Part I, Item 2 of this report, conditions and events exist that raise substantial doubt about our ability to continue as a going concern for the one-year period from the date of this report. The substantial doubt about our ability to continue as a going concern may affect the price of our common stock and our credit ratings, may negatively impact relationships with third parties with whom we do business, including customers, vendors and lenders, and may impact our ability to raise additional capital or implement our business plan.
Our Canadian Facility matures in January 2027 and, as a result, has been classified as a current liability. Absent a renegotiation, replacement or other external refinancing prior to maturity, we are not projected to generate sufficient cash flow to settle this obligation, which we expect would result in a liquidity shortfall. In addition, although our German Facility does not mature until September 2027, the outstanding borrowings thereunder have been reclassified as a current liability because management has determined it is probable that we will not meet the required leverage ratio with respect to the quarter ending December 31, 2026, following the expiration of our existing waiver. During the six months ended June 30, 2026 we incurred a net loss of $128.0 million and used $100.8 million of cash in operating activities.
These conditions have been driven by a delayed industry recovery, including an extended cyclical downturn in global pulp prices, prolonged geopolitical conflicts and elevated fiber costs at our German pulp mills. To address our near-term liquidity requirements, we have engaged advisors to review strategic alternatives and broader financing initiatives. As part of this process, we have entered into discussions with holders of our 2028 and 2029 senior notes, and with other stakeholders across our capital structure regarding potential financing and other liquidity-enhancing transactions.
There can be no assurance that we will successfully renegotiate, amend or replace these facilities, complete any financing, refinancing or other strategic transaction, or otherwise obtain sufficient liquidity, on acceptable terms or at all. If an unwaived covenant breach or other default occurs and the lenders under the German Facility or our other creditors exercise acceleration or other remedies, this could trigger cross-defaults under our other indebtedness, including our outstanding senior notes and our Canadian Facility. If we are unable to resolve these liquidity requirements prior to the applicable maturities or any acceleration, we will not have sufficient cash to settle these obligations, which would have a material adverse effect on our business, financial condition, results of operations and our ability to continue as a going concern.
Investors should also review the risk factors under “Item 1A. Risk Factors - Risks Related to our Debt” in our Form 10-K for the fiscal year ended December 31, 2025, which remain applicable.
FORM 10-Q
QUARTERLY REPORT - PAGE 49
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
FORM 10-Q
QUARTERLY REPORT - PAGE 50
ITEM 6. EXHIBITS
Exhibit No. |
|
Description |
|
|
|
31.1 |
|
Section 302 Certification of Chief Executive Officer |
|
|
|
31.2 |
|
Section 302 Certification of Chief Financial Officer |
|
|
|
32.1* |
|
Section 906 Certification of Chief Executive Officer |
|
|
|
32.2* |
|
Section 906 Certification of Chief Financial Officer |
|
|
|
101 |
|
The following financial information from the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2026 of Mercer International Inc., formatted in Inline Extensible Business Reporting Language (iXBRL): (i) Interim Consolidated Statements of Operations; (ii) Interim Consolidated Statements of Comprehensive Income (Loss); (iii) Interim Consolidated Balance Sheets; (iv) Interim Consolidated Statements of Changes in Shareholders’ Equity (Deficit); (v) Interim Consolidated Statements of Cash Flows; and (vi) Notes to the Interim Consolidated Financial Statements. |
|
|
|
104 |
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The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2026 has been formatted in iXBRL. |
* In accordance with Release No. 33-8212 of the SEC, these Certifications: (i) are “furnished” to the SEC and are not “filed” for the purposes of liability under the Securities Exchange Act of 1934, as amended; and (ii) are not to be subject to automatic incorporation by reference into any of the Company’s registration statements filed under the Securities Act of 1933, as amended, for the purposes of liability thereunder or any offering memorandum, unless the Company specifically incorporates them by reference therein.
FORM 10-Q
QUARTERLY REPORT - PAGE 51
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
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MERCER INTERNATIONAL INC. |
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By: |
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/s/ Richard Short |
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Richard Short |
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Chief Financial Officer and Authorized Officer |
Date: August 6, 2026
FORM 10-Q
QUARTERLY REPORT - PAGE 52