• Mercer International Inc. Reports Third Quarter and Nine Months 2022 Results and Announces Quarterly Cash Dividend of $0.075

    Source: Nasdaq GlobeNewswire / 27 Oct 2022 16:30:00   America/New_York

    Selected Highlights

    • Third quarter net income of $66.7 million and Operating EBITDA* of $140.9 million
    • Record year to date net income of $227 million and Operating EBITDA* of $440.4 million
    • Expanded German solid wood business with the acquisition of HIT Torgau

    NEW YORK, Oct. 27, 2022 (GLOBE NEWSWIRE) -- Mercer International Inc. (Nasdaq: MERC) today reported third quarter 2022 Operating EBITDA of $140.9 million similar to $148.1 million in the third quarter of 2021 and $145.1 million in the second quarter of 2022.

    In the third quarter of 2022, net income was $66.7 million (or $1.01 per basic share and $1.00 per diluted share) compared to $69.1 million (or $1.05 per basic share and $1.04 per diluted share) in the third quarter of 2021 and net income of $71.4 million (or $1.08 per basic share and $1.07 per diluted share) in the second quarter of 2022.

    In the first nine months of 2022, Operating EBITDA increased by 40% to $440.4 million from $313.9 million in the same period of 2021. In the first nine months of 2022, net income increased to $227.0 million (or $3.43 per basic share and $3.41 per diluted share) from $96.5 million (or $1.46 per share) in the same period of 2021.

    Mr. Juan Carlos Bueno, the Chief Executive Officer, stated: “I am pleased with our third quarter operating results. Strong energy and pulp prices combined with favorable foreign exchange movements and lower planned major maintenance were the main factors behind our operating results relative to the second quarter.

    We are excited about the addition of the HIT Torgau mill to the Mercer group. This acquisition will increase our lumber capacity to almost one billion board feet and diversifies our product offering with the addition of both pallets and wood pellets. The Torgau mill acquisition also brings additional green energy production capacity to our business. Since the acquisition closed on September 30th, we have focused on integrating this business and also ensuring we begin capitalizing on the estimated $16 million of annual synergies that we have identified.

    Total pulp production in the current quarter decreased by approximately 11% compared to the same quarter of 2021, primarily due to lower production at our Stendal mill, which had a fire in its woodyard. The fire resulted in the mill being down for most of July, and after its restart, it has operated at approximately 90% of its capacity. We currently expect to install replacement equipment at our Stendal mill in the fourth quarter of 2022 and first quarter of 2023. We maintain property and business interruption insurance for the Stendal mill and we expect the property damage and business interruption to be covered.

    Our Friesau sawmill ran well in the third quarter, but significantly weaker lumber prices in the United States negatively impacted both sales prices and volumes compared to the prior quarter of 2022.

    The negative impact of increased key production costs such as fiber, energy and chemicals in the third quarter is expected to continue in the fourth quarter of 2022. In particular, fiber costs in Germany increased because of materially higher demand for wood for energy purposes. Our production costs are primarily incurred in euros and Canadian dollars. However, our pulp and a material portion of our lumber sales are priced in dollars. During the third quarter of 2022, the dollar continued to strengthen against the euro and the Canadian dollar which had a positive impact on our euro and Canadian dollar denominated costs and expenses and partially offset the negative impact of such inflationary pressures. The strengthening of the dollar increased our operating income by approximately $13.8 million compared to the prior quarter of 2022 and by approximately $37.0 million compared to the third quarter of 2021.

    Looking forward to the fourth quarter, we currently expect pulp prices and demand to remain generally strong with some modest price declines as a result of inflationary pressures negatively impacting paper demand. Lumber demand and prices are expected to be generally similar to the third quarter due to continued economic uncertainty caused by inflation and higher interest rates.

    Strong energy demand and prices in Germany are expected to continue in the fourth quarter of 2022. In October, 2022, in response to restricted energy supply and price increases, the EU implemented a temporary mandatory cap on market revenues at €180 per MWh for intra-marginal generators such as renewables, nuclear and lignite producers. The cap applies to both electricity traded in the market as well as bilateral trading and will be in effect from December 1, 2022, to June 30, 2023."

    Mr. Bueno concluded: "With our expanded solid wood operations and product lines combined with our world-class assets, we believe we are well positioned to enhance value for our stakeholders going forward."

    ____________________

    *Operating EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States ("GAAP") and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. See page 6 of the financial tables included in this press release for a reconciliation of net income to Operating EBITDA.

    Consolidated Financial Results

     Q3  Q2  Q3  YTD  YTD  
     2022  2022  2021  2022  2021  
     (in thousands, except per share amounts)  
    Revenues$532,814  $572,326  $469,746  $1,697,881  $1,284,298  
    Operating income$108,723  $114,031  $113,755  $345,105  $216,620  
    Operating EBITDA$140,867  $145,059  $148,070  $440,393  $313,857  
    Loss on early extinguishment of debt$—  $—  $—  $—  $(30,368)(1)
    Net income$66,746  $71,372  $69,118  $227,015  $96,466  
    Net income per common share                    
    Basic$1.01  $1.08  $1.05  $3.43  $1.46  
    Diluted$1.00  $1.07  $1.04  $3.41  $1.46  

    ____________________

    (1) Redemption of 6.50% senior notes due 2024 and 7.375% senior notes due 2025.

    Consolidated – Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021
    Total revenues in the third quarter of 2022 increased by approximately 13% to $532.8 million from $469.7 million in the same quarter of 2021 primarily due to higher energy and pulp sales realizations partially offset by lower sales volumes and lower lumber sales realizations.

    In the third quarter of 2022, energy and chemical revenues increased by approximately 169% to $71.2 million from $26.5 million in the same quarter of 2021 primarily as a result of higher energy prices in Germany, which were more than triple those in the same quarter of 2021. In the third quarter of 2022, our average energy sales realizations in Germany were approximately €388 per MWh compared to about €104 per MWh in the comparative quarter of 2021.

    Costs and expenses in the third quarter of 2022 increased by approximately 19% to $424.1 million from $356.0 million in the third quarter of 2021 driven by higher key production costs, such as fiber, chemicals and energy, and higher freight costs. Such cost increases were partially offset by the positive impact of a stronger dollar on our euro and Canadian dollar denominated costs and expenses.

    In the third quarter of 2022, Operating EBITDA decreased by approximately 5% to $140.9 million from $148.1 million in the same quarter of 2021 primarily due to higher per unit fiber costs, higher other production and freight costs and lower sales volumes partially offset by higher energy and pulp sales realizations and the positive impact of a stronger dollar.

    Segment Results
    Pulp

     Three Months Ended September 30,  
     2022  2021  
     (in thousands)  
    Pulp revenues$395,459  $374,287  
    Energy and chemical revenues$61,198  $22,456  
    Operating income$109,985  $99,918  

    In the third quarter of 2022, pulp segment operating income increased by approximately 10% to $110.0 million from $99.9 million in the same quarter of 2021 primarily due to higher sales realizations and the positive impact of a stronger dollar, partially offset by higher per unit fiber costs, higher other production and freight costs and lower sales volumes.

    Pulp revenues in the third quarter of 2022 increased by approximately 6% to $395.5 million from $374.3 million in the same quarter of 2021 due to higher sales realizations partially offset by lower sales volumes.

    In the third quarter of 2022, third-party industry quoted average list prices for NBSK pulp increased from the same quarter of 2021 primarily as a result of low customer inventory levels. Our average NBSK pulp sales realizations increased by approximately 8% to $911 per ADMT in the third quarter of 2022 from approximately $847 per ADMT in the same quarter of 2021.

    Energy and chemical revenues increased to a record $61.2 million in the third quarter of 2022 from $22.5 million in the same quarter of 2021 due to higher sales realizations. During the third quarter of 2022, we benefitted from strong energy demand and higher energy prices in Germany.

    In the third quarter of 2022 compared to the same quarter of 2021, we had a positive impact of approximately $32.6 million in operating income due to foreign exchange, primarily as a result of the effect of the stronger dollar on costs and expenses.

    Costs and expenses in the third quarter of 2022 increased by approximately 17% to $346.7 million from $296.9 million in the third quarter of 2021 primarily due to higher per unit fiber, chemical, energy and freight costs. The higher costs were partially offset by the positive impact of a stronger dollar and lower pulp sales volumes.

    In the third quarter of 2022 per unit fiber costs increased by approximately 32% from the same quarter of 2021 due to higher per unit fiber costs for all of our mills. Our German mills had higher per unit fiber costs as a result of strong demand from other wood consumers such as heating pellet manufacturers. For our Canadian mills, per unit fiber costs increased due to strong demand in the mills' fiber baskets and for our Celgar mill a decrease in the availability of wood chips due to regional sawmill curtailments. We currently expect per unit fiber costs to increase in the fourth quarter of 2022 with an increase in Germany due to continued strong demand and generally flat per unit fiber costs in Canada.

    Solid Wood

     Three Months Ended September 30,  
     2022  2021  
     (in thousands)  
    Lumber revenues$61,444  $67,605  
    Energy revenues$8,111  $1,801  
    Wood residual revenues$4,711  $1,317  
    Operating income$2,896  $17,949  

      
    In the third quarter of 2022, operating income decreased by approximately 84% to $2.9 million from $17.9 million in the same quarter of 2021 primarily due to higher per unit fiber costs and other production costs, lower lumber sales realizations and sales volumes partially offset by higher energy and wood residuals sales realizations.

    Average lumber sales realizations decreased by approximately 13% to $605 per Mfbm in the third quarter of 2022 from approximately $692 per Mfbm in the same quarter of 2021 due to lower demand in the European market. Demand in both the European and U.S. markets is being negatively impacted by concerns over rising interest rates, inflationary pressures and a weaker economic outlook.

    Fiber costs were approximately 70% of our lumber cash production costs in the third quarter of 2022. In the third quarter of 2022, per unit fiber costs modestly increased compared to the same quarter of 2021. Higher per unit fiber costs in euros due to strong fiber demand in Germany were partially offset by the positive impact of a stronger dollar on our euro denominated fiber costs. We currently expect per unit fiber costs to modestly increase in the fourth quarter of 2022.

    Consolidated – Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021
    Total revenues for the nine months ended September 30, 2022 increased by approximately 32% to $1,697.9 million from $1,284.3 million in the nine months ended September 30, 2021 primarily due to higher sales realizations and higher pulp sales volumes.

    In the nine months ended September 30, 2022, energy and chemical revenues increased by approximately 137% to $165.2 million from $69.7 million in the same period of 2021 primarily as a result of higher energy prices in Germany, which were more than double those in the same period of 2021. In the nine months ended September 30, 2022, our average energy sales realizations in Germany were approximately €241 per MWh compared to about €89 per MWh in the comparative period of 2021.

    Costs and expenses in the nine months ended September 30, 2022 increased by approximately 27% to $1,352.8 million from $1,067.7 million in the nine months ended September 30, 2021 primarily due to higher per unit fiber, freight, energy and chemical costs and a higher pulp sales volume partially offset by the positive impact of a stronger dollar on our euro and Canadian dollar denominated costs and expenses.

    In the nine months ended September 30, 2022, Operating EBITDA increased by approximately 40% to $440.4 million from $313.9 million in the same period of 2021 primarily due to higher sales realizations, the positive impact of a stronger dollar and higher pulp sales volumes partially offset by higher per unit fiber costs and higher other production and freight costs.

    Liquidity
    As of September 30, 2022, we had cash, cash equivalents and a term deposit aggregating $362.3 million and approximately $258.9 million available under our revolving credit facilities providing us with aggregate liquidity of about $621.2 million.

    Quarterly Dividend
    A quarterly dividend of $0.075 per share will be paid on December 29, 2022 to all shareholders of record on December 21, 2022. Future dividends will be subject to Board approval and may be adjusted as business and industry conditions warrant.

    Earnings Release Call
    In conjunction with this release, Mercer International Inc. will host a conference call, which will be simultaneously broadcast live over the Internet. Management will host the call, which is scheduled for October 28, 2022 at 10:00 AM ET. Listeners can access the conference call live and archived for 30 days over the Internet at https://edge.media-server.com/mmc/p/tr7ugjbz or through a link on the company's home page at https://www.mercerint.com. Please allow 15 minutes prior to the call to visit the site and download and install any necessary audio software.

    Mercer International Inc. is a global forest products company with operations in Germany, the USA and Canada with a consolidated annual production capacity of 2.3 million tonnes of pulp, 960 million board feet of lumber, 140 thousand cubic meters of CLT, 17 million pallets and 150,000 metric tonnes of wood pellets. To obtain further information on the company, please visit its website at www.mercerint.com.

    The preceding includes forward looking statements which involve known and unknown risks and uncertainties which may cause our actual results in future periods to differ materially from forecasted results. Words such as "expects", "anticipates", "are optimistic that", "projects", "intends", "designed", "will", "believes", "estimates", "may", "could" and variations of such words and similar expressions are intended to identify such forward-looking statements. Among those factors which could cause actual results to differ materially are the following: the highly cyclical nature of our business, raw material costs, our level of indebtedness, competition, foreign exchange and interest rate fluctuations, our use of derivatives, expenditures for capital projects, environmental regulation and compliance, disruptions to our production, market conditions and other risk factors listed from time to time in our SEC reports.

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

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

    -FINANCIAL TABLES FOLLOW-


    Summary Financial Highlights

     Q3  Q2  Q3  YTD  YTD  
     2022  2022  2021  2022  2021  
     (in thousands, except per share amounts)  
    Pulp segment revenues$456,657  $460,304  $396,743  $1,402,892  $1,046,748  
    Solid wood segment revenues 74,266   110,985   70,723   290,048   232,149  
    Corporate and other revenues 1,891   1,037   2,280   4,941   5,401  
    Total revenues$532,814  $572,326  $469,746  $1,697,881  $1,284,298  
                         
    Pulp segment operating income$109,985  $75,471  $99,918  $271,692  $138,552  
    Solid wood segment operating income 2,896   43,726   17,949   84,923   88,240  
    Corporate and other operating loss (4,158)  (5,166)  (4,112)  (11,510)  (10,172) 
    Total operating income$108,723  $114,031  $113,755  $345,105  $216,620  
                         
    Pulp segment depreciation and amortization$28,174  $27,001  $29,982  $82,859  $84,995  
    Solid wood segment depreciation and amortization 3,733   3,792   4,025   11,719   11,496  
    Corporate and other depreciation and amortization 237   235   308   710   746  
    Total depreciation and amortization$32,144  $31,028  $34,315  $95,288  $97,237  
                         
    Operating EBITDA$140,867  $145,059  $148,070  $440,393  $313,857  
    Loss on early extinguishment of debt$—  $—  $—  $—  $(30,368)(1)
    Income tax provision$(31,294) $(34,126) $(32,490) $(89,656) $(45,873) 
    Net income$66,746  $71,372  $69,118  $227,015  $96,466  
    Net income per common share                    
    Basic$1.01  $1.08  $1.05  $3.43  $1.46  
    Diluted$1.00  $1.07  $1.04  $3.41  $1.46  
    Common shares outstanding at period end 66,167   66,167   66,037   66,167   66,037  

    ____________________

    (1) Redemption of 6.50% senior notes due 2024 and 7.375% senior notes due 2025.


    Summary Operating Highlights

     Q3  Q2  Q3  YTD  YTD  
     2022  2022  2021  2022  2021  
    Pulp Segment                    
    Pulp production ('000 ADMTs)                    
    NBSK 362.9   418.3   443.0   1,216.7   1,195.0  
    NBHK 82.1   51.6   57.8   190.4   143.9  
    Annual maintenance downtime ('000 ADMTs) 17.3   54.2   42.8   71.5   253.7  
    Annual maintenance downtime (days) 17   43   44   60   188  
    Pulp sales ('000 ADMTs)                    
    NBSK 356.6   405.7   402.2   1,267.4   1,151.3  
    NBHK 69.3   65.8   45.7   185.0   145.1  
    Average NBSK pulp prices ($/ADMT)(1)                    
    Europe 1,500   1,437   1,345   1,422   1,223  
    China 969   1,008   832   959   892  
    North America 1,800   1,743   1,542   1,690   1,481  
    Average NBHK pulp prices ($/ADMT)(1)                    
    China 855   815   623   779   694  
    North America 1,620   1,517   1,320   1,483   1,212  
    Average pulp sales realizations ($/ADMT)(2)                    
    NBSK 911   890   847   865   777  
    NBHK 990   843   684   858   604  
    Energy production ('000 MWh)(3) 484.2   496.6   464.5   1,512.4   1,345.6  
    Energy sales ('000 MWh)(3) 174.3   199.3   185.8   568.3   517.8  
    Average energy sales realizations ($/MWh)(3) 339   186   114   233   101  
                         
    Solid Wood Segment                    
    Lumber production (MMfbm) 97.1   112.2   102.1   324.8   336.6  
    Lumber sales (MMfbm) 89.8   111.0   97.7   310.7   315.3  
    Average lumber sales realizations ($/Mfbm) 605  867  692   782  702  
    Energy production and sales ('000 MWh) 20.6   25.5   14.1   70.6   51.4  
    Average energy sales realizations ($/MWh) 394  198  128  260  128  
                         
    Average Spot Currency Exchange Rates                    
    $ / €(4) 1.0066   1.0646   1.1784   1.0636   1.1958  
    $ / C$(4) 0.7659  0.7836  0.7937  0.7796  0.7996  

    ____________________

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


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

      Three Months Ended
    September 30,    		  Nine Months Ended
    September 30,    		  
      2022  2021  2022  2021  
    Revenues $532,814  $469,746  $1,697,881  $1,284,298  
    Costs and expenses                 
    Cost of sales, excluding depreciation and amortization  367,710   302,221   1,187,476   910,244  
    Cost of sales depreciation and amortization  32,122   34,294   95,223   97,175  
    Selling, general and administrative expenses  24,259   19,476   70,077   60,259  
    Operating income  108,723   113,755   345,105   216,620  
    Other income (expenses)                 
    Interest expense  (17,935)  (16,882)  (52,731)  (53,031) 
    Loss on early extinguishment of debt  —   —   —   (30,368) 
    Other income  7,252   4,735   24,297   9,118  
    Total other expenses, net  (10,683)  (12,147)  (28,434)  (74,281) 
    Income before income taxes  98,040   101,608   316,671   142,339  
    Income tax provision  (31,294)  (32,490)  (89,656)  (45,873) 
    Net income $66,746  $69,118  $227,015  $96,466  
    Net income per common share                 
    Basic $1.01  $1.05  $3.43  $1.46  
    Diluted $1.00  $1.04  $3.41  $1.46  
    Dividends declared per common share $0.075  $0.065  $0.225  $0.195  



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

      September 30,  December 31,  
      2022  2021  
    ASSETS         
    Current assets         
    Cash and cash equivalents $287,254  $345,610  
    Term deposit  75,000   —  
    Accounts receivable, net  324,343   345,345  
    Inventories  385,961   356,731  
    Prepaid expenses and other  24,130   16,619  
    Total current assets  1,096,688   1,064,305  
    Property, plant and equipment, net  1,249,056   1,135,631  
    Investment in joint ventures  45,262   49,651  
    Amortizable intangible assets, net  57,406   47,902  
    Goodwill  33,037   —  
    Operating lease right-of-use assets  12,620   9,712  
    Pension asset  3,543   4,136  
    Other long-term assets  46,371   38,718  
    Deferred income tax  —   1,177  
    Total assets $2,543,983  $2,351,232  
    LIABILITIES AND SHAREHOLDERS’ EQUITY         
    Current liabilities         
    Accounts payable and other $322,368  $282,307  
    Pension and other post-retirement benefit obligations  725   817  
    Total current liabilities  323,093   283,124  
    Long-term debt  1,339,086   1,237,545  
    Pension and other post-retirement benefit obligations  18,126   21,252  
    Operating lease liabilities  8,306   6,574  
    Other long-term liabilities  12,163   13,590  
    Deferred income tax  122,860   95,123  
    Total liabilities  1,823,634   1,657,208  
    Shareholders’ equity         
    Common shares $1 par value; 200,000,000 authorized; 66,167,000 issued and outstanding (2021 – 66,037,000)  66,132   65,988  
    Additional paid-in capital  351,438   347,902  
    Retained earnings  583,057   370,927  
    Accumulated other comprehensive loss  (280,278)  (90,793) 
    Total shareholders’ equity  720,349   694,024  
    Total liabilities and shareholders’ equity $2,543,983  $2,351,232  



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

      Three Months Ended
    September 30,    		  Nine Months Ended
    September 30,    		  
      2022  2021  2022  2021  
    Cash flows from (used in) operating activities                 
    Net income $66,746  $69,118  $227,015  $96,466  
    Adjustments to reconcile net income to cash flows from operating activities                 
    Depreciation and amortization  32,144   34,315   95,288   97,237  
    Deferred income tax provision  620   5,005   15,627   7,485  
    Loss on early extinguishment of debt  —   —   —   30,368  
    Defined benefit pension plans and other post-retirement benefit plan expense  424   879   1,301   2,654  
    Stock compensation expense  1,214   1,005   3,680   2,590  
    Foreign exchange transaction gains  (11,283)  (5,721)  (24,702)  (12,361) 
    Other  (3,726)  (844)  (4,497)  (1,104) 
    Defined benefit pension plans and other post-retirement benefit plan contributions  (511)  (1,065)  (2,905)  (3,190) 
    Changes in working capital                 
    Accounts receivable  (17,679)  (31,441)  (4,297)  (27,500) 
    Inventories  (8,803)  (39,512)  (23,870)  (82,275) 
    Accounts payable and accrued expenses  34,323   12,180   37,569   46,783  
    Other  (6,809)  (3,775)  (10,198)  (5,569) 
    Net cash from (used in) operating activities  86,660   40,144   310,011   151,584  
    Cash flows from (used in) investing activities                 
    Purchase of property, plant and equipment  (48,554)  (38,306)  (128,875)  (125,692) 
    Acquisitions, net of cash acquired  (257,367)  (51,258)  (257,367)  (51,258) 
    Insurance proceeds  1,164   1,530   7,574   21,578  
    Purchase of term deposit  —   —   (75,000)  —  
    Purchase of amortizable intangible assets  (69)  (460)  (154)  (1,669) 
    Other  474   2,873   1,126   2,764  
    Net cash from (used in) investing activities  (304,352)  (85,621)  (452,696)  (154,277) 
    Cash flows from (used in) financing activities                 
    Redemption of senior notes  —   —   —   (824,557) 
    Proceeds from issuance of senior notes  —   —   —   875,000  
    Proceeds from (repayment of) revolving credit facilities, net  99,065   3,967   116,503   (53,145) 
    Dividend payments  (4,962)  (4,293)  (9,922)  (8,582) 
    Payment of debt issuance costs  (1,849)  (69)  (3,033)  (14,483) 
    Proceeds from government grants  —   361   1,067   8,893  
    Payment of finance lease obligations  (1,640)  (2,227)  (8,246)  (5,763) 
    Other  (27)  (27)  (593)  3,598  
    Net cash from (used in) financing activities  90,587   (2,288)  95,776   (19,039) 
    Effect of exchange rate changes on cash and cash equivalents  (5,502)  1,961   (11,447)  (636) 
    Net decrease in cash and cash equivalents  (132,607)  (45,804)  (58,356)  (22,368) 
    Cash and cash equivalents, beginning of period  419,861   384,534   345,610   361,098  
    Cash and cash equivalents, end of period $287,254  $338,730  $287,254  $338,730  


    MERCER INTERNATIONAL INC.
    COMPUTATION OF OPERATING EBITDA
    (Unaudited)
    (In thousands)

    Operating EBITDA is defined as operating income plus depreciation and amortization and non-recurring capital asset impairment charges. Management uses Operating EBITDA as a benchmark measurement of its own operating results, and as a benchmark relative to its competitors. Management considers it to be a meaningful supplement to operating income as a performance measure primarily because depreciation expense and non-recurring capital asset impairment charges are not an actual cash cost, and depreciation expense varies widely from company to company in a manner that management considers largely independent of the underlying cost efficiency of our operating facilities. In addition, we believe Operating EBITDA is commonly used by securities analysts, investors and other interested parties to evaluate our financial performance.

    Operating EBITDA does not reflect the impact of a number of items that affect our net income, including financing costs and the effect of derivative instruments. Operating EBITDA is not a measure of financial performance under GAAP, and should not be considered as an alternative to net income or operating income as a measure of performance, nor as an alternative to net cash from (used in) operating activities as a measure of liquidity. The following tables set forth the net income to Operating EBITDA:

     Q3  Q2  Q3  YTD  YTD  
     2022  2022  2021  2022  2021  
    Net income$66,746  $71,372  $69,118  $227,015  $96,466  
    Income tax provision 31,294   34,126   32,490   89,656   45,873  
    Interest expense 17,935   17,332   16,882   52,731   53,031  
    Loss on early extinguishment of debt —   —   —   —   30,368  
    Other income (7,252)  (8,799)  (4,735)  (24,297)  (9,118) 
    Operating income 108,723   114,031   113,755   345,105   216,620  
    Add: Depreciation and amortization 32,144   31,028   34,315   95,288   97,237  
    Operating EBITDA$140,867  $145,059  $148,070  $440,393  $313,857  

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