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What changed in MERCER INTERNATIONAL INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of MERCER INTERNATIONAL INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+309 added−308 removedSource: 10-K (2025-02-20) vs 10-K (2024-02-15)

Top changes in MERCER INTERNATIONAL INC.'s 2024 10-K

309 paragraphs added · 308 removed · 260 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeBUSINESS 3 Mercer 3 Corporate S trategy 8 Pulp Industry 9 Solid Wood Industry 12 Generation and Sales of Green Energy and Chemicals 14 Production Costs 16 Sales, Marketing and Distribution 19 Transportation 21 Capital Expenditures 22 Innovation 22 Environmental 23 Climate Change 24 Human Capital 26 Community Involvement 28 Commitment to Sustainability 29 Description of Certain Indebtedness 30 ITEM 1A.
Biggest changeBUSINESS 3 Mercer 3 Corporate Strategy 8 Pulp Industry 9 Solid Wood Industry 12 Generation and Sales of Green Energy and Chemicals 13 Production Costs 15 Sales, Marketing and Distribution 18 Transportation 20 Capital Expenditures 21 Innovation 21 Environmental 22 Climate Change 23 Human Capital 25 Community Involvement 27 Commitment to Sustainability 27 Description of Certain Indebtedness 29 ITEM 1A.
RISK FACTORS 32 Risks Related to our Business 33 Risks Related to our Debt 42 Risks Related to Macro-economic Conditions 43 Legal and Regulatory Risks 45 Risks Related to Ownership of our Shares 47
RISK FACTORS 31 Risks Related to our Business 31 Risks Related to our Debt 40 Risks Related to Macroeconomic Conditions 42 Legal and Regulatory Risks 44 Risks Related to Ownership of our Shares 46

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

82 edited+12 added−7 removed115 unchanged
Biggest changeMost 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.
Biggest changeThese developments could have a material adverse effect on our business, results of operations and financial condition. We are exposed to currency exchange rate fluctuations. We have manufacturing operations in Germany, Canada and the United States. Most of the operating costs and expenses of our German mills are incurred in euros and those of our Canadian mills in Canadian dollars.
Additionally, while NBHK pulp is not a direct competitor to NBSK pulp, if any future increases in pulp supply are not absorbed by demand growth, such supply could put downward pressure on NBSK pulp prices as well.
Additionally, while NBHK pulp is not a direct competitor to NBSK pulp, if any future increases in NBHK pulp supply are not absorbed by demand growth, such supply could put downward pressure on NBSK pulp prices as well.
Interest rates also have a significant impact on residential construction and renovation activity, which in turn influence the demand and price of lumber. Additionally, demand for mass timber products is driven, in part, by commercial and industrial construction demand.
Interest rates also have a significant impact on residential construction and renovation activity, which in turn influence the demand for and price of lumber. Additionally, demand for mass timber products is driven, in part, by commercial and industrial construction demand.
Except for the Stendal mill, the Mercer Spokane facility and Mercer Conway facility, our facilities have been operating for decades and we have not done invasive testing to determine whether or to what extent any such environmental contamination exists.
Except for the Stendal mill, the Mercer Spokane facility and the Mercer Conway facility, our facilities have been operating for decades and we have not done invasive testing to determine whether or to what extent any such environmental contamination exists.
Our high debt levels may have important consequences for us, including, but not limited to the following: • our ability to obtain additional financing for working capital, capital expenditures, general corporate and other purposes or to fund future operations may not be available on terms favorable to us or at all; • a significant amount of our operating cash flow is dedicated to the payment of interest and principal on our indebtedness, thereby diminishing funds that would otherwise be available for our operations and for other purposes; • increasing our vulnerability to current and future adverse economic and industry conditions; • a substantial decrease in net operating cash flows or increase in our expenses could make it more difficult for us to meet our debt service requirements, which could force us to modify our operations; • our leveraged capital structure may place us at a competitive disadvantage by hindering our ability to adjust rapidly to changing market conditions or by making us vulnerable to a downturn in our business or the economy in general; • causing us to offer debt or equity securities on terms that may not be favorable to us or our shareholders; • limiting our flexibility in planning for, or reacting to, changes and opportunities in our business and our industry; and • our level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay the principal or interest due in respect of our indebtedness.
Our high debt levels may have important consequences for us, including, but not limited to the following: • our ability to obtain additional financing for working capital, capital expenditures, general corporate and other purposes or to fund future operations may not be available on terms favorable to us or at all; ( 40 ) • a significant amount of our operating cash flow is dedicated to the payment of interest and principal on our indebtedness, thereby diminishing funds that would otherwise be available for our operations and for other purposes; • increasing our vulnerability to current and future adverse economic and industry conditions; • a substantial decrease in net operating cash flows or increase in our expenses could make it more difficult for us to meet our debt service requirements, which could force us to modify our operations; • our leveraged capital structure may place us at a competitive disadvantage by hindering our ability to adjust rapidly to changing market conditions or by making us vulnerable to a downturn in our business or the economy in general; • causing us to offer debt or equity securities on terms that may not be favorable to us or our shareholders; • limiting our flexibility in planning for, or reacting to, changes and opportunities in our business and our industry; and • our level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay the principal or interest due in respect of our indebtedness.
Additionally, a health epidemic or ( 44 ) pandemic may also heighten other risks disclosed in these risk factors, including, but not limited to, those related to the availability and costs of labor, raw materials and supply chain interruptions. We may incur losses as a result of unforeseen or catastrophic events, including terrorist attacks or natural disasters.
Additionally, a health epidemic or pandemic may also heighten other risks disclosed in these risk factors, including, but not limited to, those related to the availability and costs of labor, raw materials and supply chain interruptions. We may incur losses as a result of unforeseen or catastrophic events, including terrorist attacks or natural disasters.
Demand for CLT and other mass timber products is primarily driven by commercial and industrial construction demand and customers’ desire to take advantage of the characteristics and environmental attributes of such products. A pulp producer's actual sales realizations are third party industry quoted list prices net of customer discounts, rebates and other selling concessions.
Demand for CLT, glulam and other mass timber products is primarily driven by commercial and industrial construction demand and customers’ desire to take advantage of the characteristics and environmental attributes of such products. A pulp producer's actual sales realizations are third-party industry quoted list prices net of customer discounts, rebates and other selling concessions.
Although we have not experienced any material work stoppages in the past, there can be no assurance that we will be able to negotiate acceptable collective agreements or other satisfactory ( 39 ) arrangements with our employees upon the expiration of our collective agreements. This could result in a strike or work stoppage by the affected workers.
Although we have not experienced any material work stoppages in the past, there can be no assurance that we will be able to negotiate acceptable collective agreements or other satisfactory arrangements with our employees upon the expiration of our collective agreements. This could result in a strike or work stoppage by the affected workers.
If our long-lived assets become impaired, we may be required to record non-cash impairment charges that could have a material impact on our results of operations. We review the carrying value of long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.
( 38 ) If our long-lived assets become impaired, we may be required to record non-cash impairment charges that could have a material impact on our results of operations. We review the carrying value of long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.
Our solid wood segment includes the manufacture, sale and distribution of CLT and other mass timber products, that are based on specific requirements of each customer. We believe that future orders of such products will depend on our ability to maintain the performance, quality and timely delivery standards required by customers.
Our solid wood segment includes the manufacture, sale and distribution of CLT, glulam and other mass timber products, that are based on specific requirements of each customer. We believe that future orders of such products will depend on our ability to maintain the performance, quality and timely delivery standards required by customers.
An insufficient supply of fiber or reduction in the quality of fiber we receive would materially adversely affect our business, financial condition, results of operations and cash flows. ( 34 ) In addition to the supply of fiber, we are, to a lesser extent, dependent on the supply of certain chemicals and other inputs used in our production facilities.
An insufficient supply of fiber or reduction in the quality of fiber we receive would materially adversely affect our business, financial condition, results of operations and cash flows. In addition to the supply of fiber, we are, to a lesser extent, dependent on the supply of certain chemicals and other inputs used in our production facilities.
Fiber is a commodity and both prices and supply are cyclical. Fiber pricing is subject to regional ( 33 ) market influences and our costs of fiber may increase in a region as a result of local market shifts. The costs of wood chips, pulp logs and sawlogs are primarily affected by the supply and demand for lumber.
Fiber is a commodity and both prices and supply are cyclical. Fiber pricing is subject to regional market influences and our costs of fiber may increase in a region as a result of local market shifts. The costs of wood chips, pulp logs and sawlogs are primarily affected by the supply and demand for lumber.
Our business is capital intensive and requires that we regularly incur capital expenditures to maintain our equipment, improve efficiencies and, as a result of changes to environmental regulations that require capital expenditures, bring our operations into compliance with such regulations. In addition, we may approve projects in the future that will require significant capital expenditures.
Our business is capital intensive and requires that we regularly incur capital expenditures to maintain our equipment, improve efficiencies and, as a result of changes to environmental regulations that require capital expenditures, bring our operations into compliance with such regulations. We may approve projects in the future that will require significant capital expenditures.
Violations of these laws or regulations could result in sanctions including fines, loss of authorizations needed to conduct our international business, the imposition of tariffs or duties and other penalties, which could adversely impact our business, operating results and financial condition. ( 46 ) Product liability claims could adversely affect our operating results.
Violations of these laws or regulations could result in sanctions including fines, loss of authorizations needed to conduct our international business, the imposition of tariffs or duties and other penalties, which could adversely impact our business, operating results and financial condition. Product liability claims could adversely affect our operating results.
Further, the possibility that one or more of these significant shareholders may sell all or a large portion of their common stock in a short period of time could adversely affect the trading price of our common stock. Also, the interests of these few shareholders may not be in the best interests of all shareholders. ( 47 ) ITEM 1B.
Further, the possibility that one or more of these significant shareholders may sell all or a large portion of their common stock in a short period of time could adversely affect the trading price of our common stock. Also, the interests of these few shareholders may not be in the best interests of all shareholders. ITEM 1B.
Because commodity products have few distinguishing qualities from producer to producer, competition is generally based upon price, which is generally 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.
Because commodity products have few distinguishing qualities from producer to producer, competition is mainly based upon price, which is generally 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.
Unrealized gains or losses from these translations are recognized in other comprehensive income (loss) and do not affect our net earnings, operating income (loss) or Operating EBITDA. ( 43 ) Certain intercompany dollar advances between Mercer Inc. and its foreign subsidiaries are held in euros and Canadian dollars.
Unrealized gains or losses from these translations are recognized in other comprehensive income (loss) and do not affect our net earnings, operating income (loss) or Operating EBITDA. Certain intercompany dollar advances between Mercer Inc. and its foreign subsidiaries are held in euros and Canadian dollars.
No assurance can be given that coverage under insurance policies, to the extent applicable, will be adequate to cover any such claims if they arise in the future. Risks Related to Ownership of our Shares The price of our common stock may be volatile.
No assurance can be given that coverage under insurance policies, to the extent applicable, will be adequate to cover any such claims if they arise in the future. ( 45 ) Risks Related to Ownership of our Shares The price of our common stock may be volatile.
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.
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 ( 42 ) on our business, financial condition, results of operations and cash flows.
( 45 ) We have incurred, and we expect to continue to incur, significant capital, operating and other expenditures as a result of complying with applicable environmental laws and regulations. Further, enactment of new environmental laws or regulations, changes in existing laws or regulations or the interpretation of these laws and regulations might require significant capital expenditures.
We have incurred, and we expect to continue to incur, significant capital, operating and other expenditures as a result of complying with applicable environmental laws and regulations. Further, enactment of new environmental laws or regulations, changes in existing laws or regulations or the interpretation of these laws and regulations might require significant capital expenditures.
In our Western Canadian operations, fiber supply may also be impacted by unsettled land and title claims by, and government relations and actions relating to, Indigenous Nations. Any or a combination of these can affect fiber prices in a region.
In our Western Canadian operations, fiber supply may also be impacted by unsettled land and title claims by, and government relations and actions relating to, Indigenous Nations. Any or a combination of these factors can affect fiber prices in a region.
We may be unable to generate sufficient funds or access other sources of capital to fund unforeseen environmental liabilities or expenditures. We sell surplus green energy in Germany and are subject to changing energy legislation in response to high prices and energy shortages.
We may be unable to generate sufficient funds or access other sources of capital to fund unforeseen environmental liabilities or expenditures. ( 44 ) We sell surplus green energy in Germany and are subject to changing energy legislation in response to high prices and energy shortages.
Our solid wood segment includes the manufacture, sale and distribution of CLT and other mass timber products that may be based on project-specific customer requirements. Some of these sales are based upon fixed-price contracts.
Our solid wood segment includes the manufacture, sale and distribution of CLT, glulam and other mass timber products that may be based on project-specific customer requirements. Some of these sales are based upon fixed-price contracts.
Other risks to our business from climate change include: • a greater susceptibility of northern forests to disease, fire and insect infestation, which could diminish fiber availability; • the disruption of transportation systems and power supply lines due to more severe storms; • the loss of fresh water transportation for logs and pulp due to lower water levels; • decreases in the quantity and quality of processed water for our mills’ operations; • the loss of northern forests in areas in sufficient proximity to our mills to competitively acquire fiber; and ( 36 ) • lower harvest levels decreasing the supply of harvestable timber and, as a consequence, wood residuals.
Other risks to our business from climate change include: • a greater susceptibility of northern forests to disease, fire and insect infestation, which could diminish fiber availability; • the disruption of transportation systems and power supply lines due to more severe storms; • the loss of fresh water transportation for logs and pulp due to lower water levels; • decreases in the quantity and quality of processed water for our mills’ operations; ( 35 ) • the loss of northern forests in areas in sufficient proximity to our mills to competitively acquire fiber; and • lower harvest levels decreasing the supply of harvestable timber and, as a consequence, wood residuals.
( 32 ) Risks Rela ted to our Business Our business is highly cyclical in nature. The forest products industry is highly cyclical in nature and markets are characterized by periods of supply and demand imbalance, which in turn can cause material fluctuations in prices.
Risks Rela ted to our Business Our business is highly cyclical in nature. The forest products industry is highly cyclical in nature and markets are characterized by periods of supply and demand imbalance, which in turn can cause material fluctuations in prices.
( 42 ) Changes in credit ratings issued by nationally recognized statistical rating organizations could adversely affect our cost of financing and have an adverse effect on the market price of our securities.
Changes in credit ratings issued by nationally recognized statistical rating organizations could adversely affect our cost of financing and have an adverse effect on the market price of our securities.
( 38 ) Any such downtime or facility damage could prevent us from meeting customer demand for our products and/or require us to make unplanned capital expenditures.
Any such downtime or facility damage could prevent us from meeting customer demand for our products and/or require us to make unplanned capital expenditures.
The windfall profits tax was equivalent to 90% of the revenue above a "baseline" threshold for energy producers. We cannot predict if either Germany or the European Union will adopt new legal measures if there are further energy shortages and high prices resulting from the Ukraine conflict or otherwise in the future.
The windfall profits tax was equivalent to 90% of the revenue above a “baseline” threshold for energy producers. We cannot predict if either Germany or the European Union will adopt new legal measures if there are further energy shortages and high prices resulting from the Ukraine conflict or otherwise in the future.
As demand for our products has principally historically been determined by general global macro-economic activities, demand and prices for our products have historically decreased substantially during economic slowdowns. A significant economic downturn may affect our sales and profitability. Further, our suppliers and customers may also be adversely affected by an economic downturn.
As demand for our products has principally historically been determined by general global macroeconomic activities, demand and prices for our products have historically decreased substantially during economic slowdowns. A significant economic downturn may affect our sales and profitability. Further, our suppliers and customers may also be adversely affected by an economic downturn.
Furthermore, governments in the United States, the European Union, the United Kingdom, Canada and others have imposed financial and economic sanctions on certain industry segments and various parties in Russia. We are monitoring the conflict including the potential impact of financial and economic sanctions on the global economy and particularly the economies of Europe.
Furthermore, governments in the United States, the European Union, the United Kingdom, Canada and others have imposed financial and economic sanctions on certain industry segments and various parties in Russia. We are monitoring the conflicts including the potential impact of financial and economic sanctions on the global economy and particularly the economies of Europe.
ITEM 1A. RI SK FACTORS The statements in this "Risk Factors" section describe material risks to our business and should be considered carefully. You should review carefully the risk factors listed below, as well as those factors listed in other documents we file with the SEC.
ITEM 1A. RI SK FACTORS The statements in this “Risk Factors” section describe material risks to our business and should be considered carefully. You should review carefully the risk factors listed below, as well as those factors listed in other documents we file with the SEC.
Cyclical fluctuations in the price and supply of our raw materials, particularly fiber, could adversely affect our business. Our main raw material is fiber in the form of wood chips, pulp logs, sawlogs and lumber. Fiber represented approximately 55% of our pulp cash production costs and approximately 75% of our lumber cash production costs in 2023.
Cyclical fluctuations in the price and supply of our raw materials, particularly fiber, could adversely affect our business. Our main raw material is fiber in the form of wood chips, pulp logs, sawlogs and lumber. Fiber represented approximately 55% of our pulp cash production costs and approximately 75% of our lumber cash production costs in 2024.
International Trade Commission requesting an investigation into alleged subsidies provided to Canadian lumber producers. Since then, the U.S. Department of Commerce announced various countervailing and anti-dumping duty rates on Canadian softwood lumber and the United States and Canada have engaged in proceedings under the North American Free Trade Agreement and through the World Trade Organization. In July 2023, the U.S.
International Trade Commission requesting an investigation into alleged subsidies provided to Canadian lumber producers. Since then, the U.S. Department of Commerce announced various countervailing and anti-dumping duty rates on Canadian softwood lumber and the United States and Canada have engaged in proceedings under the North American Free Trade Agreement and through the World Trade ( 32 ) Organization.
Any of our mills could cease operations unexpectedly due to a number of events, including: • unscheduled maintenance outages; • prolonged power failures; • equipment failures; • employee errors or failures; • design error or contractor error; • chemical spill or release or industrial fire; • explosion of a boiler; • disruptions in the transportation infrastructure, including roads, bridges, railway tracks, tunnels, canals and ports; • fires, floods, earthquakes, windstorms, pest infestations, severe weather conditions or other natural catastrophes affecting our production of goods or the supply of raw materials like fiber; • prolonged supply disruption of major inputs; • labor difficulties; • capital projects that require temporary cost increases or curtailment of production; • health pandemics and related restrictions, including the lingering impacts of the COVID-19 pandemic; and • other operational problems.
Any of our mills could cease operations unexpectedly due to a number of events, including: • unscheduled maintenance outages; • prolonged power failures; • equipment failures; • employee errors or failures; • design error or contractor error; • chemical spill or release or industrial fire; • explosion of a boiler; • disruptions in the transportation infrastructure, including roads, bridges, railway tracks, tunnels, canals and ports; • fires, floods, earthquakes, windstorms, pest infestations, severe weather conditions or other natural catastrophes affecting our production of goods or the supply of raw materials like fiber; ( 36 ) • prolonged supply disruption of major inputs; • labor difficulties; • capital projects that require temporary cost increases or curtailment of production; • health pandemics and related restrictions; and • other operational problems.
The fixed price tariff for our Stendal mill expires in December 2024, for our Friesau mill expires in 2029 and for our Torgau facility's four cogeneration power plants range from 2029 to 2034. In October 2022, the Council of the European Union formally adopted emergency measures to address high energy prices resulting from the war in Ukraine.
The fixed price tariff expired in December 2024 for our Stendal mill, and expires in 2029 for our Friesau mill and between 2029 to 2034 for our Torgau facility's four cogeneration power plants. In October 2022, the Council of the European Union formally adopted emergency measures to address high energy prices resulting from the war in Ukraine.
The prices for fiber and energy can be volatile, are affected by inflation and can change rapidly. Additionally, our costs for chemicals and transportation are also subject to inflationary pressure. Also, our costs for service providers, contractors and labor may increase due to inflation and shortages of skilled labor. Continued inflationary pressures would increase our manufacturing costs.
The prices for fiber and energy can be volatile, are affected by inflation and can change rapidly. Additionally, our costs for chemicals, maintenance and freight are also subject to inflationary pressure. Also, our costs for service providers, contractors and labor may increase due to inflation and shortages of skilled labor. Continued inflationary pressures would increase our manufacturing costs.
Demand for each of pulp and lumber has historically been determined primarily by general global macro-economic conditions and has been closely tied to overall business activity. Both pulp and lumber prices have been and are likely to continue to be volatile and can fluctuate widely over time.
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. Both pulp and lumber prices have been and are likely to continue to be volatile and can fluctuate widely over time.
To the extent we or a third party were to experience a material breach of our or such third party's information technology systems that results in the unauthorized access, theft, use, destruction or other compromises of our customers’ or personnel’s data or confidential information stored in such systems, including through cyberattacks or other external or internal methods, it could result in a violation of applicable privacy and other laws, and subject us to litigation and governmental investigations and proceedings, any of which could result in our exposure to material liability.
If we or a third-party were to experience a material breach of our or such third-party's information technology systems that results in the unauthorized access, theft, use, destruction or other compromises of our customers’ or personnel’s data or confidential information stored in such systems, including through cyberattacks or other external or internal methods, it could result in a violation of applicable privacy and other laws and subject us to additional reporting requirements, litigation and governmental investigations and proceedings, any of which could result in our exposure to material liability.
Political uncertainty, an increase in trade protectionism or geo-political conflict could have a material adverse effect on global macro-economic activities and trade and adversely affect our business, results of operations and financial condition. The rise of economic nationalist sentiments, trade protectionism and geo-political security has led to increasing political uncertainty and unpredictability throughout the world.
Political uncertainty, an increase in trade protectionism or geopolitical conflict could have a material adverse effect on global macroeconomic activities and trade and adversely affect our business, results of operations and financial condition. The rise of economic nationalist sentiments, trade protectionism and geopolitical security has led to increasing political uncertainty and unpredictability throughout the world.
The lumber industry is highly cyclical and the slowdown in sawmilling activities in 2022 and 2023 reduced the availability of both wood chips and pulp logs and put upward pressure on fiber costs. There is no assurance that sawmill activity will stabilize or not decline further or that fiber prices will not increase in the future.
The lumber industry is highly cyclical and the slowdown in sawmilling activities in recent years reduced the availability of both wood chips and pulp logs and put upward pressure on fiber costs. There is no assurance that sawmill activity will stabilize or not decline further or that fiber prices will not increase in the future.
The length and magnitude of industry cycles have varied over time but generally reflect changes in macro-economic conditions and levels of industry capacity. Pulp and lumber are commodities that are generally available from other producers.
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.
The global economy has been negatively impacted by increasing tension, uncertainty and tragedy resulting from Russia's invasion of Ukraine. The adverse and uncertain economic conditions resulting therefrom have and may further negatively impact global demand, cause supply chain disruptions and increase costs for transportation, energy and other raw materials.
The global economy has been negatively impacted by increasing tension, uncertainty and tragedy resulting ( 33 ) from Russia's invasion of Ukraine and conflicts in the Middle East. The adverse and uncertain economic conditions resulting therefrom have and may further negatively impact global demand, cause supply chain disruptions and increase costs for transportation, energy and other raw materials.
Risks Related to M acro-eco n omic Conditions A weakening of the global economy, including capital and credit markets, could adversely affect our business and financial results and have a material adverse effect on our liquidity and capital resources.
( 41 ) Risks Related to M acroeco n omic Conditions A weakening of the global economy, including capital and credit markets, could adversely affect our business and financial results and have a material adverse effect on our liquidity and capital resources.
Inflation or a sustained increase in our key production and other costs would lead to higher manufacturing costs which could reduce our margins. Our key production input costs are for fiber, chemicals and energy. Other material costs in our business include labor and transportation.
Inflation or a sustained increase in our key production and other costs would lead to higher manufacturing costs which could reduce our margins. Our key production input costs are fiber, chemicals and energy. Other material costs in our business include maintenance, freight and labor costs.
Such weakened economic activity could reduce demand and prices for our products which could reduce our margins and adversely affect our results of operations. In addition, the effects of rising interest rates and a weakening of global economic activity could heighten and increase many of the other risks described in this Item 1A.
Such weakened economic activity could reduce demand and prices for our products which could reduce our margins and adversely affect our results of operations. In addition, the effects of a high interest rate environment and a weakening of global economic activity could heighten and increase many of the other risks described in this Item 1A.
We use information technologies to manage our operations and various business functions. We rely on various technologies to process, store and report on our business and to communicate electronically between our facilities, personnel, customers and suppliers as well as for administrative functions and many of such technology systems are dependent on one another for their functionality.
We rely on various technologies to process, store and report on our business and to communicate electronically between ( 39 ) our facilities, personnel, customers and suppliers as well as for administrative functions and many of such technology systems are dependent on one another for their functionality.
Interest on borrowings under our revolving credit facilities are at "floating" rates. As a result, increases in interest rates will increase our costs of borrowing and reduce our operating margins.
Interest on borrowings under our revolving credit facilities are at “floating” rates. As a result, increases in interest rates will increase our costs of borrowing and reduce our operating results.
In addition, the reduction in natural gas supply and increase in energy prices in Germany resulting from the Ukraine war has also increased both the demand and prices for wood chips and residuals. This has resulted in higher per unit fiber costs for our German mills.
In addition, the reduction in natural gas supply and increase in energy prices in Germany resulting from the Ukraine war has previously increased both the demand and prices for wood chips and residuals resulting in higher per unit fiber costs for our German mills in recent years.
International security issues and adverse developments in respect thereof such as the war in Ukraine and potentially western security alliances could materially adversely affect global trade and economic activity and cause logistics disruptions or delays.
International security issues and adverse developments in respect thereof such as the war in Ukraine and the conflicts in the Middle East could materially adversely affect global trade and economic activity and cause logistics disruptions or delays.
We have little influence over the timing and extent of price changes. 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 reduce or cease production at one or more of our mills.
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 reduce or cease production at one or more of our mills.
Additionally, there can be no assurance that additional or new trade tensions and tariffs will not arise between various trade partners.
Additionally, there can be no assurance that additional or new trade tensions, imposition of import and export restrictions and tariffs will not arise between various trade partners.
Currently, we are aware of 3.5 million ADMTs of announced net pulp production capacity increases, primarily of hardwood kraft pulp scheduled to come online in 2024. However, we cannot predict whether additional new capacity will be announced or will come online in the future.
( 31 ) Currently, we are aware of approximately 0.4 million ADMTs of announced net pulp production capacity increases, primarily of softwood kraft pulp scheduled to come online in 2025. However, we cannot predict whether additional new capacity will be announced or will come online in the future.
As of December 31, 2023, we had approximately $1,609.4 million of indebtedness outstanding. We may also incur additional indebtedness in the future.
As of December 31, 2024, we had approximately $1,474.0 million of indebtedness outstanding. We may also incur additional indebtedness in the future.
The effects of global, regional, and local weather conditions, and climate change, including the costs of complying with evolving climate change regulations and transition costs relating to a low carbon economy could also adversely impact our results of operations.
The effects of global, regional and local weather conditions, and climate change, including the costs of complying with evolving climate change regulations and transition costs relating to a low carbon economy could also adversely impact our results of operations. Fluctuations in prices and demand for lumber and mass timber products could adversely affect our business.
Any such interruption or breach could result in operational disruptions or the misappropriation of sensitive data that could subject us to civil and criminal penalties, litigation or have a negative impact on our reputation.
Any such interruption or breach could result in operational disruptions or the misappropriation of sensitive data that could subject us to additional reporting requirements, litigation, governmental investigations or proceedings or have a negative impact on our reputation.
Our operations and those of our suppliers are subject to climate change variations which can impact the productivity of forests, the abundance of species, harvest levels and fiber supply.
Our business is subject to risks associated with climate change and social and government responses thereto. Our operations and those of our suppliers are subject to climate change variations which can impact the productivity of forests, the abundance of species, harvest levels and fiber supply.
Legal and R egulatory Risks We are subject to extensive environmental regulation and we could incur substantial costs as a result of compliance with, violations of or liabilities under applicable environmental laws and regulations. Our operations are subject to numerous environmental laws and regulations as well as permits, guidelines and policies relating to the protection of the environment.
( 43 ) Legal and R egulatory Risks We are subject to extensive environmental regulation and we could incur substantial costs as a result of compliance with, violations of or liabilities under applicable environmental laws and regulations.
Governmental responses thereto, including operational restrictions adversely affect our business, operations and financial results. The duration and scope of a health epidemic or pandemic can be difficult to predict and depends on many factors, including the emergence of new variants and the availability, acceptance and effectiveness of preventative measures.
The duration and scope of a health epidemic or pandemic can be difficult to predict and depends on many factors, including the emergence of new variants and the availability, acceptance and effectiveness of preventative measures.
Also, if any of our transportation providers were to cease operations, we may be unable to replace them at a reasonable cost. The occurrence of any of the foregoing events could materially adversely affect our results of operations. ( 40 ) Failures or security breaches of our information technology systems could disrupt our operations and negatively impact our business.
Also, if any of our transportation providers were to cease operations, we may be unable to replace them at a reasonable cost. The occurrence of any of the foregoing events could materially adversely affect our results of operations.
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.
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.
Additionally, in our wood products segment, demand for our CLT and other wood products may be impacted by the entry of new competitors or improved product capabilities, innovation or production capacity by existing competitors, which may adversely affect our market share for such products. Our business is subject to risks associated with climate change and social and government responses thereto.
Additionally, in our solid wood segment, demand for our CLT, glulam and other wood products may be impacted by the entry of new competitors or improved product capabilities, innovation or production capacity by existing competitors, which may adversely affect our market share for such products.
Fluctuations in prices and demand for lumber and mass timber products could adversely affect our business. The financial performance of the Friesau mill and Torgau facility depends on the demand for and selling price of lumber, which is subject to significant fluctuations.
The financial performance of the Friesau mill and Torgau facility depends on the demand for and selling price of lumber, which is subject to significant fluctuations.
Increased trade protectionism could materially adversely affect our business. If the current global economy or outlook is undermined by downside risks and there is a prolonged economic downturn, governments may resort to new or enhanced trade barriers to protect their domestic industries against imports, thereby depressing demand.
Such increases may have an adverse impact on our business, operating schedule and financial condition. If the current global economy or outlook is undermined by downside risks and there is a prolonged economic downturn, governments may resort to new or enhanced trade barriers to protect their domestic industries against imports, thereby depressing demand.
Additionally, both the European Union and Germany have adopted or proposed legislation in response to energy supply shortages and high energy prices, including price caps and "windfall" taxes on energy sales resulting from the war in Ukraine. Such price caps have been extended to January 2025 and the windfall taxes expired in June 2023.
Additionally, both the European Union and Germany adopted or proposed, in response to energy supply shortages and high energy prices, price caps and “windfall” taxes on energy sales resulting from the war in Ukraine. These expired in June 2023 with respect to electricity.
Competition for these acquisitions or investment targets could result in increased acquisition or investment prices, higher risks and a diminished pool of businesses or assets available for acquisition. Acquisitions also frequently result in recording of goodwill and other intangible assets, which are subject to potential impairments in the future that could have a material adverse effect on our operating results.
Acquisitions also frequently result in the recording of goodwill and other intangible assets, which are subject to potential impairments in the future that could have a material adverse effect on our operating results.
These developments could have a material adverse effect on our business, results of operations and financial condition. Health epidemics or pandemics could adversely affect our business and financial results. Health epidemics or pandemics have in the past and may in the future impact macroeconomic conditions, supply chains and other global economic activities.
Health epidemics or pandemics could adversely affect our business and financial results. Health epidemics or pandemics have in the past and may in the future impact macroeconomic conditions, supply chains and other global economic activities. Governmental responses thereto, including operational restrictions adversely affect our business, operations and financial results.
There is increased focus on sustainability reporting and the importance of environmental, social and governance scores from customers, investors and other stakeholders, which may impact our business. Sustainability/environmental, social and governance reporting frameworks are numerous and evolving rapidly.
Evolving sustainability reporting and environmental, social and governance preferences of customers, investors and other stakeholders may impact our business. Sustainability and environmental, social and governance reporting frameworks are numerous and evolving rapidly.
In addition, financial uncertainties and other events in our major international markets, including inflation and other market factors, may negatively impact the global economy and consequently, our results of operations. We are exposed to currency exchange rate fluctuations. We have manufacturing operations in Germany, Canada and the United States.
Financial uncertainties and other events in our major international markets, including inflation and other market factors, may negatively impact the global economy and consequently, our results of operations.
The Council implemented a Regulation containing temporary measures including a mandatory cap on market revenues at €180 per MWh hour for inframarginal generators such as renewables, nuclear and lignite producers, which came into force in February 2023.
The Council adopted a regulation containing temporary measures including a mandatory cap on market revenues at €180 per MWh for inframarginal electricity generators such as renewables, nuclear and lignite producers. In Germany, this was implemented through the adoption of a “windfall” profits tax in December 2022 on electricity producers which expired in June 2023.
Our sales realizations may also be affected by price movements between the order and shipment dates. Global pulp and lumber markets have historically been characterized by considerable swings in prices which have and will result in variability in our earnings. Prices for pulp and lumber are driven by many factors outside our control.
Global pulp and lumber markets have historically been characterized by considerable swings in prices which have and will result in variability in our earnings. Prices for pulp and lumber are driven by many factors outside our control. We have little influence over the timing and extent of price changes.
If we are unable to address any of these risks, our results of operations and financial condition could be materially adversely affected. We are subject to risks related to our employees.
If we are unable to address any of these risks, our results of operations and financial condition could be materially adversely affected. ( 37 ) Our operations require substantial capital and we may be unable to maintain adequate capital resources to provide for such capital requirements.
If we are unable to pass along such operating costs increases to our customers, it could reduce our margins, contribute to earnings volatility and adversely affect our results of operations. Our business, financial condition and results of operations could be adversely affected by disruptions in the global and European economies caused by Russia's invasion of Ukraine.
If we are unable to pass along such operating cost increases to our customers, it could reduce our margins, contribute to earnings volatility and adversely affect our results of operations.
The trend toward consolidation in the forest products industry has led to the formation of sizable global producers that have greater flexibility in pricing and financial resources for marketing, investment, research and development, innovation, and expansion. Additionally, certain of our competitors are fully or more vertically integrated than we are and may have different priorities when operating their respective businesses.
We compete with numerous forest products companies, some of which have greater financial resources. The trend toward consolidation in the forest products industry has led to the formation of sizable global producers that have greater flexibility in pricing and financial resources for marketing, investment, research and development, innovation, and expansion.
Globally, central banks have raised interest rates in response to high inflation rates which could dampen macro-economic conditions and business activity which could reduce demand for our products.
Globally, various central banks raised interest rates in 2022 and 2023 in response to high inflation rates, leading to a relatively high interest rate environment, which could dampen macroeconomic conditions and business activity and reduce demand for our products. As a result of higher than acceptable rates of inflation, many central banks raised interest rates through 2022 and 2023.
Underestimates in the bidding process, changes in the timing of deliveries, design errors or other project delays caused by us, customers or others may adversely impact our operating results. Our operations require substantial capital and we may be unable to maintain adequate capital resources to provide for such capital requirements.
Underestimates in the bidding process, changes in the timing of deliveries, design errors or other project delays caused by us, customers or others may adversely impact our operating results. Failures or security breaches of our information technology systems could disrupt our operations and negatively impact our business. We use information technologies to manage our operations and various business functions.
Some of our competitors may be lower-cost producers in some of the businesses in which we operate.
The forest products industry is also capital intensive, and we require significant investment to remain competitive. Some of our competitors may be lower-cost producers in some of the businesses in which we operate.
Department of Commerce announced the results of its fourth administrative review, setting the countervailing duty at 1.79% and the anti-dumping rate at 6.20%, for combined final duty rates of 7.99% for "all other" Canadian lumber producers. In November 2023, as part of its five-year sunset reviews, the U.S.
In September 2024, the U.S. Department of Commerce published amended final results for its fifth administrative review, setting the countervailing duty at 6.74% and the anti-dumping rate at 7.66%, for combined final duty rates of 14.40% for “all other” Canadian lumber producers. In September 2024, Canada announced that it is challenging the final results of the U.S.
Because the markets for our products are highly competitive, actions by competitors can affect our ability to compete and the volatility of prices at which our products are sold. The forest products industry is also capital intensive, and we require significant investment to remain competitive.
Additionally, certain of our competitors are fully or more vertically integrated than we are and may have different priorities when operating their respective businesses. Because the markets for our products are highly competitive, actions by competitors can affect our ability to compete and the volatility of prices at which our products are sold.
The demand for such paper products has weakened significantly over the last several years ( 37 ) and has accelerated since the COVID-19 pandemic as confinement and work from home has altered consumer habits, which could become permanent and further negatively impact the demand for market pulp.
The demand for such paper products has weakened significantly over the last several years and was negatively impacted by the COVID-19 pandemic, which further altered consumer habits. We are subject to risks related to our employees.
In addition, evolving standards and regulations related to climate change, sustainability and environmental, social and governance reporting may also result in additional expenditures and divert management attention from our business. We have limited control over the operations of the Cariboo mill. Our 50% ownership interest in the Cariboo mill is through an unincorporated joint venture partnership.
In addition, evolving standards and regulations related to climate change, sustainability and environmental, social and governance reporting may also result in additional expenditures and divert management attention from our business. Risks Related to ou r Debt Our level of indebtedness could negatively impact our financial condition, results of operations and liquidity.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Chief Information Officer reports to our Audit Committee on significant incidents periodically. Our Director of Cybersecurity has over 20 years of experience as a cybersecurity and information technology professional and holds the Certified Information Systems Security Professional designation.
Biggest changeOur Chief Information Officer reports to our Audit Committee on significant incidents periodically. Our Chief Information Officer has over 30 years of technology leadership experience and is, among other things, a Certified Information Systems Security Professional and a Certified Secure Infrastructure Specialist. Our Director of Cybersecurity has over 20 years of experience as a cybersecurity and information technology professional.
We seek to align our cybersecurity program with practices recommended under ISO 27001 and by the National Institute of Standards and Technology and the Center for Internet Security Critical Security Controls. When reviewing third party information technology service providers, our engagement process customarily includes, among other things, a review of such providers' cybersecurity measures.
We seek to align our cybersecurity program with practices recommended under ISO 27001 and by the National Institute of Standards and Technology and the Center for Internet Security Critical Security Controls. When reviewing key third-party information technology service providers, our engagement process customarily includes, among other things, a review of such providers’ cybersecurity measures.
Our risk management strategy is focused on three areas: (i) technology, being our hardware and software systems; (ii) processes, being our cybersecurity reporting, testing and other processes; and (iii) people, which refers to our internal cybersecurity personnel, external service providers and individual training and human interaction within our information technology and cybersecurity processes.
Our risk management strategy is ( 46 ) focused on three areas: (i) technology, being our hardware and software systems; (ii) processes, being our cybersecurity reporting, testing and other processes; and (iii) people, which refers to our internal cybersecurity personnel, external service providers and individual training and human interaction within our information technology and cybersecurity processes.
Our Audit Committee and management meet with the Board on a quarterly basis to provide updates on cybersecurity risks, material cyber-attacks and security incidents as they occur, as well as to promote company-wide cyber risk and security awareness.
Our Audit Committee and management meet with the Board on a quarterly basis to provide updates on cybersecurity risks, material cyberattacks and security incidents as they occur, as well as to promote company-wide cyber risk and security awareness.
As the volume and complexity of cyber-attacks continue to evolve, we continue to enhance our security capabilities by continued investment in cyber technologies, further developing our internal cybersecurity personnel and educating our workforce regarding cybersecurity, and leveraging emerging technologies.
As the volume and complexity of cyberattacks continue to evolve, we continue to enhance our security capabilities by continued investment in cyber technologies, further developing our internal cybersecurity personnel and educating our workforce regarding cybersecurity, and leveraging emerging technologies.
Additionally, our Chief Information Officer and Director of Cybersecurity meet periodically with the Board or the Audit Committee to brief them on technology and information security matters. ( 48 ) Our Director of Cybersecurity is informed of any cybersecurity incidents by applicable personnel, and oversees remediation efforts in accordance with our processes.
Additionally, our Chief Information Officer and Director of Cybersecurity meet periodically with the Board or the Audit Committee to brief them on technology and information security matters. Our Director of Cybersecurity is informed of cybersecurity incidents by applicable personnel, and oversees remediation efforts in accordance with our policies and processes.
Additionally, we use third party data, such as Security Scorecard, to review and monitor such providers and as an indicator in respect of our cybersecurity environments. We periodically undertake cybersecurity audits, the results of which are reported to our Audit Committee.
Additionally, we use third-party data, such as Security Scorecard, to review and monitor such providers and as an indicator in respect of our cybersecurity environments. We periodically undertake cybersecurity audits or other independent assessments, the results of which are reported to our Audit Committee.
We have also implemented security monitoring programs designed to alert us of any suspicious activity, and have developed an incident response program in the event of a security breach. We implement various training programs periodically to ensure that our employees and other personnel comply with internal processes and to enhance their cybersecurity awareness.
We have also implemented security monitoring programs designed to alert us of any suspicious activity, and have developed an incident response program in the event of a security breach. We have also engaged a third-party vendor to, among other things, provide continuous monitoring and respond to cybersecurity events.
Additionally, we have engaged third party providers to supplement our response capabilities for both informational and operational technology incidents, as needed. See also Item 1A. "Risk Factors – Risks Related to our Business - Failures or security breaches of our information technology systems could disrupt our operations and negatively impact our business".
“Risk Factors – Risks Related to our Business - Failures or security breaches of our information technology systems could disrupt our operations and negatively impact our business”.
Added
We implement various training programs periodically to ensure that our employees and other personnel comply with internal processes and to enhance their cybersecurity awareness. Additionally, we have engaged third-party providers to supplement our response capabilities for both informational and operational technology incidents, as needed.
Added
As of the date of this filing, we have not identified any cybersecurity threats or incidents that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition.
Added
However, there can be no assurance that we, or our third-party partners or service providers, will not experience a cybersecurity threat or incident in the future that could materially adversely affect our business strategy, results of operations, or financial condition. For further discussion of the risks related to cybersecurity, see also Item 1A.
Added
He has held various leadership positions where he developed, managed and implemented security programs and controls. He also holds, ( 47 ) among other information technology certifications, the Certified Information Systems Security Professional designation.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. P ROPERTIES We own the Stendal, Rosenthal, Celgar, Peace River pulp mills, and their underlying properties and have a 50% joint venture interest in the Cariboo pulp mill.
Biggest changeITEM 2. PROPERTIES We own the Stendal, Rosenthal, Celgar, Peace River pulp mills, and their underlying properties. We also own the Friesau mill and the Torgau, Mercer Spokane, Mercer Conway, Mercer Okanagan facilities and their underlying properties. Stendal Mill.
The facilities at the Celgar mill include: • an approximately 450,000 square feet fiber storage area and approximately 440,000 square feet log storage; • a wood room containing debarking and chipping facilities for pulp logs; • a fiber line, which includes a dual vessel hydraulic digester, a two stage oxygen delignification system and a four stage bleach plant; • two pulp machines, which each include a dryer, a cutter and a baling line; • an approximately 28,000 square feet on-site finished goods storage area and an approximately 29,000 square feet off-site finished goods storage area; • a chemical recovery line, which includes a recovery boiler, evaporation plant, recausticizing plant and lime kiln; • a wastewater treatment system; and • a power station with two turbines capable of producing approximately 100 MW of electrical power.
The facilities at the Celgar mill include: • an approximately 450,000 square feet fiber storage area and an approximately 440,000 square feet log storage area; • a wood room containing debarking and chipping facilities for pulp logs; • a fiber line, which includes a dual vessel hydraulic digester, a two stage oxygen delignification system and a four stage bleach plant; • two pulp machines, which each include a dryer, a cutter and a baling line; • an approximately 28,000 square feet on-site finished goods storage area and an approximately 29,000 square feet off-site finished goods storage area; • a chemical recovery line, which includes a recovery boiler, evaporation plant, recausticizing plant and lime kiln; • a wastewater treatment system; and • a power station with two turbines capable of producing approximately 100 MW of electrical power.
The facilities at the Peace River mill include: • an approximately 1,130,000 square feet fiber storage area and approximately 2,700,000 square feet log storage; • an approximately 189 railcar siding/storage capacity; • a fiber line which includes a dual vessel hydraulic digester, a single stage oxygen delignification system and a four stage bleach plant; • a pulp machine which includes a dryer, cutter and two baling lines; • an approximately 56,000 square feet on-site finished goods storage area; • a chemical recovery line which includes a recovery boiler, evaporation plant, recausticizing plant and a lime kiln; • a fresh water treatment plant; • a wastewater treatment system; and • two turbines capable of producing approximately 65 MW of electrical power.
The facilities at the Peace River mill include: • an approximately 1,130,000 square feet fiber storage area and an approximately 2,700,000 square feet log storage area; • an approximately 189 railcar siding/storage capacity; • a fiber line which includes a dual vessel hydraulic digester, a single stage oxygen delignification system and a four stage bleach plant; • a pulp machine, which includes a dryer, cutter and two baling lines; • an approximately 56,000 square feet on-site finished goods storage area; • a chemical recovery line, which includes a recovery boiler, evaporation plant, recausticizing plant and a lime kiln; • a fresh water treatment plant; • a wastewater treatment system; and • two turbines capable of producing approximately 65 MW of electrical power.
The mill is adjacent to the Elbe River and has access to harbor facilities for water transportation. The mill is a single line mill with a current annual design production capacity of approximately 740,000 ADMTs of kraft pulp. The Stendal mill is self-sufficient in steam and electrical power.
The mill is adjacent to the Elbe River and has access to harbor facilities for water transportation. The mill is a single line mill with a current annual production capacity of approximately 740,000 ADMTs of kraft pulp. The Stendal mill is self-sufficient in steam and electrical power.
Its facilities include: • a Transverse High Grader sorting line; • an industry-first glulam press; • a Lineal High Grader Sorting Line; • a finger jointing line; • a hydraulic CLT press; • three CNC machines; and • one planer. Mercer Okanagan Facility.
Its facilities include: • a Transverse High Grader sorting line; • an industry-first glulam press; • a Lineal High Grader Sorting Line; • a finger jointing line; • a hydraulic CLT press; • three CNC machines; and • one Rex planer. Mercer Okanagan Facility.
The facilities at the Friesau mill include: • an approximately 1,000,000 square feet roundwood storage area; • three log debarking and two sorting lines; • two Linck sawlines; • 42 lumber kilns capable of matching sawmill production; • three continuous kilns; • two planer lines; • an approximately 663,800 square feet finished goods storage area; and • a biomass fueled cogeneration power plant capable of producing 13 MW of electrical power.
The facilities at the Friesau mill include: • an approximately 1,000,000 square feet roundwood storage area; • three log debarking and two sorting lines; • two Linck sawlines; • 34 lumber kilns capable of matching sawmill production; • three continuous kilns; • two planer lines; • an approximately 663,800 square feet finished goods storage area; and • a biomass fueled cogeneration power plant capable of producing 13 MW of electrical power.
Friesau Mill. The Friesau mill is situated on a 150 acre site in the town of Saalburg-Ebersdorf, Germany, approximately 185 miles south of Berlin and only 10 miles from the Rosenthal mill. It is a two line sawmill with an annual production capacity of approximately 550 MMfbm of lumber on a continuously operating ( 50 ) basis.
Friesau Mill. The Friesau mill is situated on a 150 acre site in the town of Saalburg-Ebersdorf, Germany, approximately 185 miles south of Berlin and only 10 miles from the Rosenthal mill. It is a two-line sawmill ( 49 ) with an annual production capacity of approximately 550 MMfbm of lumber on a continuously operating basis.
The facilities at the mill include: • an approximately 740,000 square feet fiber and roundwood storage area; • debarking and chipping facilities for pulp logs; • a fiber line, which includes 12 SuperBatch™ digesters and bleaching facilities; • a pulp machine, which includes a dryer, a cutter and two baling lines; • an approximately 105,000 square feet finished goods storage area; • a chemical recovery line, which includes a recovery boiler, evaporation plant, recausticizing plant and lime kiln; • a fresh water plant; • a wastewater treatment plant; and • a power station with two turbines capable of producing 148 MW of electrical power.
The facilities at the mill include: • an approximately 740,000 square feet fiber and roundwood storage area; • debarking and chipping facilities for pulp logs; • a fiber line, which includes 12 SuperBatch™ digesters and bleaching facilities; • a pulp machine, which includes a dryer, a cutter and two baling lines; • an approximately 105,000 square feet finished goods storage area; • a chemical recovery line, which includes a recovery boiler, evaporation plant, recausticizing plant and lime kiln; • a tall oil plant; • a turpentine plant; • a methanol plant; • a fresh water plant; • a wastewater treatment plant; and • a power station with two turbines capable of producing 148 MW of electrical power.
Its facilities include: • a Transverse High Grader sorting line; • a Lineal High Grader Sorting Line; • a finger jointing line; • a continuous kiln; • a pneumatic CLT press; • three CNC machines; and • three Gilbert planers. ( 51 ) Mercer Conway Facility.
Its facilities include: • a Transverse High Grader sorting line; • a Lineal High Grader Sorting Line; • a finger jointing line; • a continuous kiln; • a pneumatic CLT press; • three CNC machines; and • three Gilbert planers. ( 50 ) Mercer Conway Facility.
The facilities at the Torgau mill include: • four logyards totaling approximately 1,000,000 square feet with log debarking and sorting lines; • four sawlines (one Linck, one EWD and two Hew sawlines with Kallfass sorting lines) and one milling line; • EPAL pallet production with eight Coralli and one Storti line; • two progressive kilns and nine drying kilns capable of matching pallet and sawmill production; • one planer line; • pellet production with six Münch presses as well as two Salmatec presses; • briquette production with 12 lines (Nielsen); • two storage silos for pellets with a total capacity of 5,000 cubic tonnes; and • four biomass fueled cogeneration power plants capable of producing 15 MW of electrical power.
Its facilities include: • four logyards totaling approximately 1,000,000 square feet with log debarking and sorting lines; • three sawlines (one Linck, one EWD and one Hew sawline with Kallfass sorting lines) and one milling line; • EPAL pallet production with eight Coralli and one Storti line; • two progressive kilns and nine drying kilns capable of matching pallet and sawmill production; • one planer line; • pellet production with six Münch presses as well as two Salmatec presses; • briquette production with 12 lines (Nielsen); • two storage silos for pellets with a total capacity of 5,000 cubic tonnes; and • four biomass fueled cogeneration power plants capable of producing 15 MW of electrical power.
The facilities at the mill include: • an approximately 425,000 square feet fiber storage area; • debarking and chipping facilities for pulp logs; • an approximately 625,000 square feet roundwood yard; • a fiber line, which includes a Kamyr continuous digester and bleaching facilities; • a pulp machine, which includes a dryer, a cutter and a baling line; • an approximately 60,000 square feet finished goods storage area; • a chemical recovery line, which includes a recovery boiler, evaporation plant, recausticizing plant and lime kiln; • a fresh water plant; ( 49 ) • a wastewater treatment plant; and • a power station with a turbine capable of producing 57 MW of electrical power from steam produced by the recovery boiler and a power boiler.
The facilities at the mill include: • an approximately 425,000 square feet fiber storage area; • debarking and chipping facilities for pulp logs; • an approximately 625,000 square feet roundwood yard; • a fiber line, which includes a Kamyr continuous digester and bleaching facilities; • a pulp machine, which includes a dryer, a cutter and a baling line; • an approximately 60,000 square feet finished goods storage area; • a chemical recovery line, which includes a recovery boiler, evaporation plant, recausticizing plant and lime kiln; • a fresh water plant; ( 48 ) • a wastewater treatment plant; • a tall oil plant; • a lignin plant; and • a power station with a turbine capable of producing 57 MW of electrical power.
It is an integrated production site with two sawmills (with two lines each) with an annual lumber capacity of approximately 410 MMfbm and a pallet production capacity of 17 million pallets and two biofuel plants (wood pellets and briquettes) with a total capacity of 230,000 tonnes. The mill also sells electrical power to the regional power grid.
It is an integrated production site with two sawmills with an annual lumber capacity of approximately 410 MMfbm and a pallet production capacity of 17 million pallets and two biofuel plants (wood pellets and briquettes) with a total capacity of 230,000 tonnes. The mill also sells electrical power to the regional power grid. The mill is self-sufficient in thermal power.
Mercer Torgau also owns a wood processing facility in Dahlen, Germany that produces garden products. Mercer Spokane Facility. The Mercer Spokane facility is situated on approximately 54 acres of land near Spokane, Washington. The Mercer Spokane facility has an annual production capacity of approximately 140,000 m 3 or 13 million square feet of 5-ply CLT panels.
Mercer Spokane Facility. The Mercer Spokane facility is situated on approximately 54 acres of land near Spokane, Washington. The Mercer Spokane facility has an annual production capacity of approximately 140,000 m 3 or 13 million square feet of 5-ply CLT panels.
Removed
We also own the Friesau mill, Mercer Spokane facility, the Torgau facility, a timber processing and value-add pallet production facility in Torgau, Germany and a wood processing facility in Dahlen, Germany that produces garden products. We also acquired in June 2023, the Mercer Conway facility and Mercer Okanagan facility, which produce mass timber. Stendal Mill.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS We are subject to routine litigation incidental to our business. We do not believe that the outcome of such litigation will have a material adverse effect on our business or financial condition. ITEM 4. MINE SAF ETY DISCLOSURES Not applicable. ( 52 ) PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS We are subject to routine litigation incidental to our business. We do not believe that the outcome of such litigation will have a material adverse effect on our business or financial condition. ITEM 4. MINE SAF ETY DISCLOSURES Not applicable. ( 51 ) PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeComparison of Cumulative Total Return Assumes $100 Invested December 31, 2018 Assumes Dividends Reinvested Fiscal Year Ending December 31, 2023 2018 2019 2020 2021 2022 2023 Mercer International Inc. $ 100.00 $ 122.69 $ 107.03 $ 127.82 $ 127.03 $ 107.09 S&P SmallCap 600 Index $ 100.00 $ 122.78 $ 136.64 $ 173.29 $ 145.39 $ 168.73 SIC Code Index $ 100.00 $ 85.22 $ 90.59 $ 97.24 $ 117.68 $ 74.74 Peer Group (1) $ 100.00 $ 121.07 $ 141.18 $ 138.45 $ 120.15 $ 138.31 Prior Peer Group (1) $ 100.00 $ 123.43 $ 142.05 $ 150.49 $ 135.98 $ 150.59 (1) The Peer Group is comprised of Borregaard ASA, Canfor Pulp Products Inc., Empresas CMPC S.A., ENCE Energía y Celulosa S.A., International Paper, Klabin S.A., Metsä Board Oyj, Rayonier Advanced Materials Inc., Rottneros AB, Stora Enso Oyj, Suzano S.A., Svenska Cellulosa AB SCA, UPM-Kymmene Oyj, and West Fraser Timber Co.
Biggest changeComparison of Cumulative Total Return Assumes $100 Invested December 31, 2019 Assumes Dividends Reinvested Fiscal Year Ending December 31, 2024 2019 2020 2021 2022 2023 2024 Mercer International Inc. $ 100.00 $ 87.24 $ 104.19 $ 103.54 $ 87.29 $ 62.33 S&P SmallCap 600 Index $ 100.00 $ 111.29 $ 141.13 $ 118.41 $ 137.42 $ 149.37 SIC Code Index $ 100.00 $ 106.31 $ 114.10 $ 138.09 $ 87.71 $ 96.95 Peer Group (1) $ 100.00 $ 116.61 $ 114.36 $ 99.24 $ 114.24 $ 106.38 (1) The Peer Group is determined by our Human Resources Committee and is comprised of Borregaard ASA, Canfor Pulp Products Inc., Empresas CMPC S.A., ENCE Energía y Celulosa S.A., International Paper, Klabin S.A., Metsä Board Oyj, Rayonier Advanced Materials Inc., Rottneros AB, Stora Enso Oyj, Suzano S.A., Svenska Cellulosa AB SCA, UPM-Kymmene Oyj, and West Fraser Timber Co.
In addition, we believe Operating EBITDA is commonly used by securities analysts, investors and other interested parties to evaluate our financial performance. Operating EBITDA does not reflect the impact of a number of items that affect our net income (loss), including financing costs and the effect of derivative instruments.
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.
The 2022 Stock Incentive Plan replaced the Company’s 2010 stock incentive plan (the “2010 Stock Incentive Plan”). However, the 2010 Stock Incentive Plan will govern prior awards until all awards granted under the 2010 Stock Incentive Plan have been exercised, forfeited, cancelled, expired, or otherwise terminated in accordance with the terms thereof.
The 2022 Stock Incentive Plan replaced the Company’s 2010 stock incentive plan (the “2010 Stock Incentive Plan”). However, the 2010 Stock Incentive Plan will govern prior awards until all awards granted under the 2010 Stock Incentive Plan have been exercised, forfeited, cancelled, expired, or otherwise terminated in accordance with the ( 52 ) terms thereof.
The Company may grant up to a maximum of 2.5 million common shares under the 2022 Stock Incentive Plan. ( 53 ) (e) Performance Graph.
The Company may grant up to a maximum of 2.5 million common shares under the 2022 Stock Incentive Plan. (e) Performance Graph.
( 54 ) NON-GAAP FINA NCIAL MEASURES This Annual Report on Form 10-K 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”.
Ltd. ( 53 ) NON-GAAP FINA NCIAL MEASURES This Annual Report on Form 10-K 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”.
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 non-recurring impairment charges against our investments or assets.
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.
(2) Represents the number of shares of our common stock remaining available for issuance under the 2022 Stock Incentive Plan as of December 31, 2023.
(2) Represents the number of shares of our common stock remaining available for issuance under the 2022 Stock Incentive Plan as of December 31, 2024.
In May 2022, the Company adopted an amended and restated stock incentive plan (the “2022 Stock Incentive Plan”) which provides for stock options, restricted stock units, which under the prior plan were called “restricted stock rights”, deferred stock units, restricted shares, performance shares, performance share units, and stock appreciation rights to be awarded to employees, consultants and non-employee directors.
In May 2022, our board of directors adopted an amended and restated stock incentive plan (the “2022 Stock Incentive Plan”) which provides for stock options, restricted stock units, which under the prior plan were called “restricted stock rights”, deferred stock units, restricted shares, performance shares, performance share units, and stock appreciation rights to be awarded to employees, consultants and non-employee directors.
The following graph shows a five-year comparison of cumulative total shareholder return, calculated on an assumed dividend reinvested basis, for our common stock, the S&P SmallCap 600 Index, a group of peer companies, referred to as the “Peer Group”, a group of peer companies previously used by us, referred to as the "Prior Peer Group", and Standard Industrial Classification Code Index or “SIC” (SIC Code 2611 - pulp mills), referred to as the “SIC Code Index”.
The following graph shows a five-year comparison of cumulative total shareholder return, calculated on an assumed dividend reinvested basis, for our common stock, the S&P SmallCap 600 Index, a group of peer companies, referred to as the “Peer Group”, and Standard Industrial Classification Code Index or “SIC” (SIC Code 2611 - pulp mills), referred to as the “SIC Code Index”.
The graph assumes $100 was invested in each of our common stock, the S&P SmallCap 600 Index, the Peer Group, the Prior Peer Group and the SIC Code Index on December 31, 2018. Data points on the graph are annual.
The graph assumes $100 was invested in each of our common stock, the S&P SmallCap 600 Index, the Peer Group and the SIC Code Index on December 31, 2019. Data points on the graph are annual.
We consider them to be meaningful supplements to operating income (loss) as performance measures primarily because depreciation expense and non-recurring capital asset impairment charges are not actual cash costs and depreciation expense varies widely from company to company in a manner that we consider largely independent of the underlying cost efficiency of our operating facilities.
We consider them to be meaningful supplements to operating income (loss) as performance measures 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.
Specifically, we make use of the non-GAAP measures “Operating EBITDA” and “Operating EBITDA margin”. Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and non-recurring capital asset impairment charges. Operating EBITDA margin is Operating EBITDA expressed as a percentage of revenues.
Specifically, we make use of the non-GAAP financial measures “Operating EBITDA” and “Operating EBITDA margin”. We define Operating EBITDA as operating income (loss) plus depreciation and amortization and long-lived asset impairment charges. Operating EBITDA margin is Operating EBITDA expressed as a percentage of revenues.
On February 15, 2024, we announced that our board of directors declared a quarterly dividend of $0.075 per share to be paid to holders of our common stock on April 4, 2024 to shareholders of record on March 27, 2024.
On February 20, 2025, we announced that our board of directors declared a quarterly dividend of $0.075 per share to be paid to holders of our common stock on April 2, 2025 to shareholders of record on March 26, 2025.
In 2023, our board of directors approved four quarterly dividend payments of $0.075 per share each, paid on April 5, July 6, October 4 and December 28, 2023.
In 2024, our board of directors approved four quarterly dividend payments of $0.075 per share each, paid on April 4, July 3, October 3 and December 26.
The following table sets forth information as of December 31, 2023 with respect to the shares of our common stock that may be issued under our existing equity compensation plans: Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted-average exercise price of outstanding options, warrants and rights (b) ($) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) Plan Category Equity compensation plans approved by shareholders (1)(2) — — 2,238,320 Equity compensation plans not approved by shareholders — — — (1) Excludes 54,227 outstanding restricted shares and 27,591 deferred stock units, all of which vest in 2024 and 3,672,227 outstanding performance share units, 1,073,184 of which had vested as of December 31, 2023.
The following table sets forth information as of December 31, 2024 with respect to the shares of our common stock that may be issued under our existing equity compensation plans: Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted-average exercise price of outstanding options, warrants and rights (b) ($) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) Plan Category Equity compensation plans approved by shareholders (1)(2) — — 1,136,333 Equity compensation plans not approved by shareholders — — — (1) Excludes 21,054 outstanding restricted shares and 93,760 deferred stock units, 43,363 of which had vested as of December 31, 2024 and 4,379,461 outstanding performance share units, 1,142,097 of which had vested as of December 31, 2024.
As of February 13, 2024, there were approximately 176 holders of record of our shares and a total of 66,524,866 shares were outstanding. (c) Dividend Information.
As of February 18, 2025, there were approximately 172 holders of record of our shares and a total of 66,870,774 shares were outstanding. (c) Dividend Information.
The underlying shares of common stock relating to the vested performance share units will be issued in February 2024. Of the remaining 2,599,043 performance share units, 1,205,667 will vest in 2024 and 1,393,376 will vest in 2025.
The underlying shares of common stock relating to the vested performance share units will be issued in February 2025. Of the remaining 3,237,364 performance share units, 1,263,178 will vest in 2026 and 1,974,186 will vest in 2027.
Removed
The Peer Group, was determined by our Human Resources Committee as part of its compensation review and relevant comparator criteria, and is identical to the Prior Peer Group, with the exception of the addition of Empresas CMPC S.A., International Paper, Klabin S.A., Metsä Board Oyj and Svenska Cellulosa AB SCA and the removal of Resolute Forest Products as its shares are no longer publicly traded.
Added
Operating EBITDA and Operating EBITDA margin are non-GAAP financial measures at the consolidated level and are 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.
Added
For more information on Segment Operating EBITDA, refer to the segment information note within our consolidated financial statements. ( 54 ) ITEM 6. [ RESERVED]

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 56 Results of Operations 56 Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 60 Sensiti vities 63 Liquidity and Capital Resources 64 Balance Sheet Data 66 Sources and Uses of Funds 66 Credit Facilities and Debt Covenants 67 Foreign Currency 68 Credit Ratings of Senior Notes 68 Critical Accounting Policies 68 New Accounting Standards 73 ITEM 7A.
Biggest changeMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 55 Results of Operations 55 Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 59 Sensiti vities 62 Liquidity and Capital Resources 63 Balance Sheet Data 65 Sources and Uses of Funds 65 Credit Facilities and Debt Covenants 66 Foreign Currency 67 Credit Ratings of Senior Notes 67 Critical Accounting Policies 67 New Accounting Standards 72 ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 73 Foreign Currency Exchange Risk 74 Product Price Risk 74 ( i ) Fiber Price Risk 75 Inflation Risk 75 Interest Rate Risk 75 Credit Risk 76 Risk Management and Derivatives 76 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 76
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 72 Foreign Currency Exchange Risk 72 Product Price Risk 73 ( i ) Fiber Price Risk 73 Inflation Risk 73 Interest Rate Risk 73 Credit Risk 74 Risk Management and Derivatives 74 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 75

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table provides a reconciliation of net income (loss) to operating income (loss) and Operating EBITDA for the years indicated: Year Ended December 31, 2023 2022 (1) (in thousands) Net income (loss) $ (242,056 ) $ 247,039 Income tax provision (recovery) (27,767 ) 98,264 Interest expense 88,246 71,499 Other income (7,197 ) (24,434 ) Operating income (loss) (188,774 ) 392,368 Add: Depreciation and amortization 172,502 144,153 Add: Impairment of sandalwood business held for sale 33,734 — Operating EBITDA $ 17,462 $ 536,521 ( 58 ) Selected Production, Sales and Other Data Year Ended December 31, 2023 2022 (1) Pulp Segment Pulp production ('000 ADMTs) NBSK 1,714.4 1,607.6 NBHK 251.2 271.0 Annual maintenance downtime ('000 ADMTs) 82.9 111.0 Annual maintenance downtime (days) 71 80 Pulp sales ('000 ADMTs) NBSK 1,689.0 1,660.8 NBHK 262.2 257.0 Average NBSK pulp prices ($/ADMT) (2) Europe 1,257 1,427 China 747 949 North America 1,448 1,704 Average NBHK pulp prices ($/ADMT) (2) China 592 794 North America 1,227 1,514 Average pulp sales realizations ($/ADMT) (3) NBSK 729 876 NBHK 627 869 Energy production ('000 MWh) (4) 2,142.0 2,028.1 Energy sales ('000 MWh) (4) 832.6 751.7 Average energy sales realizations ($/MWh) (4) 107 214 (5) Solid Wood Segment Lumber Production (MMfbm) 462.3 442.2 Sales (MMfbm) 500.5 409.9 Average sales realizations ($/Mfbm) 435 703 Energy Production and sales ('000 MWh) 160.2 109.6 Average sales realizations ($/MWh) 134 224 (5) Manufactured products (6) Production ('000 m 3 ) 25.1 36.3 Sales ('000 m 3 ) 33.4 28.8 Average sales realizations ($/m 3 ) 1,514 715 Pallets Production ('000 units) 10,707.2 2,568.4 Sales ('000 units) 11,041.2 2,646.3 Average sales realizations ($/unit) 11 14 Biofuels (7) Production ('000 tonnes) 167.2 45.7 Sales ('000 tonnes) 144.8 49.8 Average sales realizations ($/tonne) 281 355 Average Spot Currency Exchange Rates $ / € (8) 1.0817 1.0534 $ / C$ (8) 0.7412 0.7691 (1) Includes results of the Torgau facility since September 30, 2022.
Biggest changeThe following table provides a reconciliation of net loss to operating income (loss) and Operating EBITDA for the years indicated: Year Ended December 31, 2024 2023 (in thousands) Net loss $ (85,141 ) $ (242,056 ) Income tax recovery (1,774 ) (27,767 ) Interest expense 109,150 88,246 Other income (7,228 ) (7,197 ) Operating income (loss) 15,007 (188,774 ) Add: Depreciation and amortization 170,793 172,502 Add: Impairment of sandalwood business held for sale — 33,734 Add: Loss on disposal of investment in joint venture 23,645 — Add: Goodwill impairment 34,277 — Operating EBITDA $ 243,722 $ 17,462 ( 57 ) Selected Production, Sales and Other Data Year Ended December 31, 2024 2023 Pulp Segment Pulp production ('000 ADMTs) NBSK 1,589.1 1,714.4 NBHK 254.0 251.2 Annual maintenance downtime ('000 ADMTs) 86.9 82.9 Annual maintenance downtime (days) 57 71 Pulp sales ('000 ADMTs) NBSK 1,647.5 1,689.0 NBHK 252.3 262.2 Average NBSK pulp prices ($/ADMT) (1) Europe 1,519 1,257 China 774 747 North America 1,646 1,448 Average NBHK pulp prices ($/ADMT) (1) China 645 592 North America 1,356 1,227 Average pulp sales realizations ($/ADMT) (2) NBSK 784 729 NBHK 637 627 Energy production ('000 MWh) (3) 2,125.3 2,142.0 Energy sales ('000 MWh) (3) 797.2 832.6 Average energy sales realizations ($/MWh) (3) 91 107 Solid Wood Segment Lumber Production (MMfbm) 475.6 462.3 Sales (MMfbm) 470.4 500.5 Average sales realizations ($/Mfbm) 462 435 Energy Production and sales ('000 MWh) 126.3 160.2 Average sales realizations ($/MWh) 131 134 Manufactured products (4) Production ('000 m 3 ) 34.0 25.1 Sales ('000 m 3 ) 30.7 33.4 Average sales realizations ($/m 3 ) 3,006 1,514 Pallets Production ('000 units) 10,243.5 10,707.2 Sales ('000 units) 10,089.2 11,041.2 Average sales realizations ($/unit) 10 11 Biofuels (5) Production ('000 tonnes) 160.4 167.2 Sales ('000 tonnes) 184.4 144.8 Average sales realizations ($/tonne) 217 281 Average Spot Currency Exchange Rates $ / € (6) 1.0820 1.0817 $ / C$ (6) 0.7302 0.7412 (1) Source: RISI pricing report.
On an ongoing basis using currently available information, management reviews its estimates, including those related to accounting for, among other things, future cash flows associated with impairment testing for goodwill and long-lived assets, depreciation and amortization, pension and other post-retirement benefit obligations, deferred income taxes (valuation allowance and permanent reinvestment), the allocation of the purchase price in a business combination to the assets acquired and liabilities assumed, revenues under long-term contracts, inventory impairment, assets and liabilities classified as held for sale and the fair value of disposal groups and legal liabilities and contingencies.
On an ongoing basis using currently available information, management reviews its estimates, including those related to accounting for, among other things, future cash flows associated with impairment testing for goodwill and long-lived assets, depreciation and amortization, pension and other post-retirement benefit obligations, deferred income taxes (valuation allowance and permanent reinvestment), the allocation of the purchase price in a business combination to the assets acquired and liabilities assumed, revenues under long-term contracts, inventory impairment, assets and liabilities classified as held for sale and the fair value of disposal groups, legal liabilities and contingencies.
In determining the expected return on assets, we consider the historical long-term returns, expected asset mix and the active management premium. For the mortality rate we use actuarially-determined mortality tables that are consistent with our historical mortality experience and future expectations for mortality of the employees who participate in our pension and other post-retirement benefit plans.
In determining the expected return on assets, we consider the historical long-term returns, expected asset mix and the active management premium. For the mortality rate we use actuarially-determined mortality tables that are consistent with our historical mortality experience and future expectations for mortality of the employees who participate in our pension ( 69 ) and other post-retirement benefit plans.
The estimates used to calculate the fair value of assets (and disposal groups) classified as held for sale may change from period over period based on operating results, market conditions, and other factors. Changes in these assumptions and estimates could materially affect the determination of fair value and if applicable, the preliminary impairment charges recognized.
The estimates used to calculate the fair value of assets (and disposal groups) classified as held for sale may change from period over period based on operating results, market conditions, and other factors. Changes in these assumptions and estimates could materially affect the determination of fair value and, if applicable, impairment charges recognized.
In 2023, we paid dividends of $20.0 million and incurred aggregate debt issuance costs of $4.9 million related to the issuance of senior notes and the increase of borrowing capacity under our German Revolving Facility.
In 2023, we paid dividends of $20.0 million and incurred aggregate debt issuance costs of $4.9 million related to the issuance of senior notes and the increase in our maximum borrowing capacity under our German Revolving Facility.
If market conditions improve or tax planning opportunities arise in the future, we may reduce our valuation allowance, resulting in future tax benefits. If market conditions deteriorate in the future, we may increase our valuation allowance, resulting in future tax expenses. Any change in tax laws may change the valuation allowances in future periods.
If market conditions improve or tax planning opportunities arise in the future, we may reduce our valuation allowance, resulting in future income tax benefits. If market conditions deteriorate in the future, we may increase our valuation allowance, resulting in future income tax expenses. Any change in tax laws may change the valuation allowances in future periods.
( 72 ) Estimating net realizable value requires us to apply judgment and is based on current and expected selling prices in the ordinary course of business, less reasonably predictable costs of completion.
Estimating net realizable value requires us to apply judgment and is based on current and expected selling prices in the ordinary course of business, less reasonably predictable costs of completion.
Similarly, the demand for CLT is primarily driven by the wood construction market and increased government policies focused on a low-carbon economy. European and U.S. lumber markets differ.
Similarly, the demand for CLT is primarily driven by the wood construction market and government policies focused on a low-carbon economy. European and U.S. lumber markets differ.
The Canadian Revolving Facility includes a covenant that so long as the excess amount under the facility is less than the greater of 10% of the line cap thereunder and C$14.0 million, in either case, for five consecutive days or less than the greater of 7.5% of the line cap and C$10.0 million, at any time, and which requires the borrowers to comply, on a combined basis, with a 1.00:1.00 fixed charge coverage ratio.
The Canadian Revolving Facility includes a covenant which requires the borrowers to comply, on a combined basis, with a 1.00:1.00 fixed charge coverage ratio as long as the excess amount under the facility is less than the greater of 10% of the line cap thereunder and C$14.0 million, in either case, for five consecutive days or less than the greater of 7.5% of the line cap and C$10.0 million, at any time.
We assess the realization of these deferred tax assets at each reporting period to determine whether it is more likely than not that the deferred tax assets will be realized.
We assess the realization of these deferred income tax assets at each reporting period to determine whether it is more likely than not that the deferred income tax assets will be realized.
For our solid wood segment, based upon our 2023 cash production costs and assuming all other factors remained constant, each 1% change in per unit cash production cost yields a change in annual cash production costs of approximately $4.3 million. Seasonal Influences. We are exposed to fluctuations in quarterly sales volumes and expenses due to seasonal factors.
For our solid wood segment, based upon our 2024 cash production costs and assuming all other factors remained constant, each 1% change in per unit cash production cost yields a change in annual cash production costs of approximately $4.3 million. Seasonal Influences. We are exposed to fluctuations in quarterly sales volumes and expenses due to seasonal factors.
Significant judgment is required when evaluating the positive and negative evidence, specifically the Company’s estimates of future earnings. The weight given to negative and positive evidence is commensurate with the extent to which it can be objectively verified. Operating results during the most recent three-year period are generally given more weight than expectations of future profitability, which are inherently uncertain.
Significant judgment is required when evaluating the positive and negative evidence, specifically our estimates of future earnings. The weight given to negative and positive evidence is commensurate with the extent to which it can be objectively verified. Operating results during the most recent three-year period are generally given more weight than expectations of future profitability, which are inherently uncertain.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS O F FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of our operations for the years ended December 31, 2023 and 2022 is based upon and should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS O F FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of our operations for the years ended December 31, 2024 and 2023 is based upon and should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report.
In the European market, lumber is generally customized in terms of dimensions and finishing, whereas the U.S. market is driven primarily by demand from new housing starts ( 56 ) and home renovation activities and dimensions and finishing are generally standardized and competition is primarily price driven. Energy and chemical production and sales are key revenue sources for us.
In the European market, lumber is generally customized in terms ( 55 ) of dimensions and finishing, whereas the U.S. market is driven primarily by demand from new housing starts and home renovation activities and dimensions and finishing are generally standardized and competition is primarily price driven. Energy and chemical production and sales are key revenue sources for us.
Based on our 2023 energy and chemical revenues and assuming all other factors remained constant, each $0.01 change in the value of the dollar relative to the Canadian dollar yields a total change in energy and chemical revenues of approximately $0.2 million. Inflation. Our key production input costs are for fiber, chemicals and energy.
Based on our 2024 energy and chemical revenues and assuming all other factors remained constant, each $0.01 change in the value of the dollar relative to the Canadian dollar yields a total change in energy and chemical revenues of approximately $0.2 million. Inflation. Our key production input costs are for fiber, chemicals and energy.
Our significant accounting policies are disclosed in Note 1 to our audited annual consolidated financial statements included in Part IV of this Annual Report. While all of the significant accounting policies are ( 68 ) important to the consolidated financial statements, some of these policies may be viewed as having a high degree of judgment.
Our significant accounting policies are disclosed in Note 1 to our audited annual consolidated financial ( 67 ) statements included in Part IV of this Annual Report. 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.
Our assessment includes a review of all available positive and negative evidence, including, but not limited to, the following: • the history of the tax loss carryforwards and their expiry dates; • future reversals of temporary differences; ( 71 ) • our historical and projected earnings; and • tax planning opportunities.
Our assessment includes a review of all available positive and negative evidence, including, but not limited to, the following: • the history of the income tax loss carryforwards and their expiry dates; • future reversals of temporary differences; • our historical and projected earnings; and • tax planning opportunities.
Once our evaluation of the evidence is complete, if we believe that it is more likely than not that some of the deferred tax assets will not be realized, based on currently available information, an income tax valuation allowance is recorded against the deferred tax assets.
Once our evaluation of the evidence is complete, if we believe that it is more likely than not that some of the deferred income tax assets will not be realized, based on currently available information, a valuation allowance is recorded against the deferred income tax assets.
For our solid wood segment, based upon our 2023 fiber costs and assuming all other factors remained constant, each 1% change in per unit fiber cost yields a change in annual operating costs of approximately $2.4 million. Foreign Exchange. Our operating costs are in euros for our German mills and Canadian dollars for our Canadian mills.
For our solid wood segment, based upon our 2024 fiber costs and assuming all other factors remained constant, each 1% change in per unit fiber cost yields a change in annual operating costs of approximately $2.4 million. Foreign Exchange. Our operating costs are primarily in euros for our German mills and Canadian dollars for our Canadian mills.
In the U.S., third party industry quoted monthly average western spruce/pine/fir (“WSPF”) 2 x 4 #2&Btr prices between 2014 and 2023 have fluctuated between a low of $245 per Mfbm in 2015 to a high of $1,604 per Mfbm in 2021.
In the U.S., third-party industry quoted monthly average western spruce/pine/fir (“WSPF”) 2 x 4 #2&Btr prices between 2015 and 2024 have fluctuated between a low of $245 per Mfbm in 2015 to a high of $1,604 per Mfbm in 2021.
S&P and Moody’s 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. As of December 31, 2023, all of our subsidiaries were restricted subsidiaries.
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. As of December 31, 2024, all of our subsidiaries were restricted subsidiaries.
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 costs could affect producer profit margins if they are unable to pass along price increases to pulp, lumber, pallet and biofuel customers or purchasers of surplus energy.
Fiber costs are primarily affected by the supply of, and demand for, lumber and pulp, which are both highly cyclical. Higher fiber costs could affect producer profit margins if they are unable to pass along price increases to pulp, lumber, pallet and biofuel customers or purchasers of surplus energy.
Revenues Under Long-Term Contracts We have revenue from long-term contracts which is recognized over the contract term as the work progresses. The timing of revenue recognition involves a judgmental process of estimating costs and profit for the performance obligation. Cost of sales is recognized as incurred.
( 70 ) Revenues Under Long-Term Contracts We have revenues from long-term contracts which are recognized over the contract term as the work progresses towards completion. The timing of revenue recognition involves a judgmental process of estimating costs and profit for the performance obligation. Cost of sales is recognized as incurred.
As a result, our earnings are sensitive to pulp price changes. Based upon our 2023 sales volume and assuming all other factors remained constant, each $10.00 per tonne change in pulp third party industry quoted list prices yields a change in pulp revenues of approximately $14.7 million. Lumber Price. Lumber markets are highly competitive and cyclical in nature.
Based upon our 2024 sales volume and assuming all other factors remained constant, each $10.00 per tonne change in pulp third-party industry quoted list prices yields a change in pulp revenues of approximately $13.5 million. Lumber Price. Lumber markets are highly competitive and cyclical in nature. As a result, our earnings are sensitive to lumber price changes.
Pricing and demand are influenced by global macro-economic conditions, changes in consumption and industry capacity, the level of customer and producer inventories and fluctuations in exchange rates.
Pricing and demand are influenced by global macroeconomic conditions, changes in consumption and industry capacity, the level of customer and producer inventories and fluctuations in exchange rates.
Our tax assets are net of a $78.7 million valuation allowance. Our deferred tax assets are comprised primarily of tax loss and interest carryforwards and deductible temporary differences, all of which will reduce taxable income in the future.
Our deferred income tax assets are net of a $81.8 million valuation allowance. Our deferred income tax assets are comprised primarily of income tax loss and interest carryforwards and deductible temporary differences, all of which will reduce taxable income in the future.
Based on our 2023 energy, chemical, pallet, biofuel, wood residual and European lumber revenues and assuming all other factors remained constant, each $0.01 change in the value of the dollar relative to the euro yields a total change in revenues of approximately $3.3 million.
Based on our 2024 energy, chemical, pallet, biofuel, wood residual and European lumber revenues and assuming all other factors remained constant, each $0.01 change in the value of the dollar relative to the euro yields a total change in revenues of approximately $2.9 million.
Other material costs in our business include labor and transportation. As a result, our operating costs are sensitive to inflation. For our pulp segment, based upon our 2023 cash production costs and assuming all other factors remained constant, each 1% change in per unit cash production cost yields a change in annual cash production costs of approximately $11.5 million.
Other material costs in our business include labor and transportation. As a result, our operating costs are sensitive to inflation. For our pulp segment, based upon our 2024 cash production costs and assuming all other factors remained constant, each 1% change in per unit cash production cost yields a change in annual cash production costs of approximately $10.3 million.
The following inputs are used to determine our net obligations and our net periodic benefit costs each year and the determination of these inputs requires judgment: • discount rate – used to determine the net present value of our pension and other post-retirement benefit obligations and to determine the interest cost component of our net periodic pension and other post-retirement benefit costs; ( 70 ) • return on assets – used to estimate the growth in the value of invested assets that are available to satisfy pension obligations and to determine the expected return on the plan assets component of our net periodic pension costs; • mortality rate – used to estimate the impact of mortality on pension and other post-retirement benefit obligations; • rate of compensation increase – used to calculate the impact future pay increases will have on pension benefit obligations; and • health care cost trend rate – used to calculate the impact of future health care costs on other post-retirement benefit obligations.
Judgment is required for the following inputs which are used to determine our net obligations and our net periodic benefit costs each year: • discount rate – used to determine the net present value of our pension and other post-retirement benefit obligations and to determine the interest cost component of our net periodic pension and other post-retirement benefit costs; • return on assets – used to estimate the growth in the value of invested assets that are available to satisfy pension obligations and to determine the expected return on the plan assets component of our net periodic pension costs; • mortality rate – used to estimate the impact of mortality on pension and other post-retirement benefit obligations; • rate of compensation increase – used to calculate the impact future pay increases will have on pension benefit obligations; and • health care cost trend rate – used to calculate the impact of future health care costs on other post-retirement benefit obligations.
Cash Flows from Investing Activities Cash from (used in) investing activities includes: • acquisitions of property, plant and equipment and businesses; • proceeds from the sale of assets; and • purchases and sales of short-term investments.
Cash Flows from Investing Activities Cash from (used in) investing activities includes: • acquisitions of property, plant and equipment and businesses; • proceeds from the sale of assets; and • purchases and sales of short-term investments. In 2024, investing activities used cash of $67.0 million.
Changes in estimated revenues, cost of sales and the related effect on operating income (loss) are recognized using a cumulative catch-up adjustment which recognizes in the current period the cumulative effect of the changes on current and prior periods based on the contract’s percentage-of-completion.
Changes in estimated revenues, cost of sales and the related effect on our earnings are recognized using a cumulative catch-up adjustment which recognizes in the current period the cumulative effect of the changes on current and prior periods based on the contract’s percentage-of-completion.
Based on our 2023 operating costs and assuming all other factors remained constant, each $0.01 change in the value of the dollar relative to the Canadian dollar yields a total change in annual operating costs of approximately $9.7 million.
Based on our 2024 operating costs and assuming all other factors remained constant, each $0.01 change in the value of the dollar relative to the Canadian dollar yields a total change in annual operating costs of approximately $8.3 million.
Based on our 2023 operating costs and assuming all other factors remained constant, each $0.01 change in the value of the dollar relative to the euro yields a total change in annual operating costs of approximately $11.3 million.
Based on our 2024 operating costs and assuming all other factors remained constant, each $0.01 change in the value of the dollar relative to the euro yields a total change in annual operating costs of approximately $10.4 million.
In 2023, our pulp mills had 132 days of downtime (approximately 152,500 ADMTs) which included a total of 71 days of annual maintenance downtime and 61 days for market curtailments at the Peace River, Cariboo and Celgar mills.
In 2023, our pulp mills had 132 days of downtime (approximately 152,500 ADMTs) which included 71 days of planned annual maintenance and 61 days for curtailments at the Peace River, CPP and Celgar mills.
Third party industry quoted average net prices for NBHK pulp in China were approximately $592 per ADMT in 2023 compared to approximately $794 per ADMT in 2022.
Third-party industry quoted ( 60 ) average net prices for NBHK pulp in China were approximately $645 per ADMT in 2024 compared to approximately $592 per ADMT in 2023.
As a corollary to changes in exchange rates between the dollar and the euro and Canadian dollar, a stronger dollar generally increases costs to our customers and results in downward pressure on pulp and lumber prices. Conversely, a weakening dollar generally supports higher pulp and lumber pricing.
As a corollary to changes in exchange rates between the dollar and the euro and Canadian dollar, a stronger dollar generally increases costs to our customers and results in downward pressure on pulp prices. Conversely, a weakening dollar generally supports higher pulp pricing. However, there is invariably a time lag between changes in currency exchange rates and prices.
The third party industry quoted average European list prices for NBSK pulp between 2014 and 2023 have fluctuated between a low of $790 per ADMT in 2016 to a high of $1,500 per ADMT in 2022.
The third-party industry quoted average European list prices for NBSK pulp between 2015 and 2024 have fluctuated between a low of $790 per ADMT in 2016 to a high of $1,635 per ADMT in 2024.
Cash Flows from Operating Activities Cash from (used in) operations includes: • cash received from customers; • cash paid to employees and suppliers; • cash paid for interest on our debt; and • cash paid or received for taxes. Cash used in operating activities was $69.0 million in 2023 compared to cash provided of $360.7 million in 2022.
Cash Flows from Operating Activities Cash from (used in) operations includes: • cash received from customers; • cash paid to employees and suppliers; • cash paid for interest on our debt; and • cash paid or received for taxes. In 2024, operating activities provided cash of $90.2 million compared to using cash of $69.0 million in 2023.
(6) Manufactured products primarily includes CLT, glulam and finger joint lumber. (7) Biofuels includes pellets and briquettes. (8) Average Federal Reserve Bank of New York Noon Buying Rates over the reporting period.
(4) Manufactured products primarily includes CLT and glulam. (5) Biofuels includes pellets and briquettes. (6) Average Federal Reserve Bank of New York Noon Buying Rates over the reporting period.
However, there is invariably a time lag between changes in currency exchange rates and prices. This lag can vary and is not predictable with any precision. Production costs also depend on the total volume of production. High operating rates and production efficiencies permit us to lower our average per unit cost by spreading fixed costs over more units.
This lag can vary and is not predictable with any precision. Production costs also depend on the total volume of production. High operating rates and production efficiencies permit us to lower our average per unit cost by spreading fixed costs over more units.
Cash Flows from Financing Activities Cash from (used in) financing activities includes: • issuances and payments of debt; • borrowings and payments under revolving lines of credit; and ( 65 ) • payments of cash dividends and repurchases of stock.
Cash Flows from Financing Activities Cash from (used in) financing activities includes: • issuances and payments of debt; • borrowings and payments under revolving lines of credit; and ( 64 ) • payments of cash dividends and repurchases of stock. In 2024, financing activities used cash of $152.8 million.
Our 2023 net periodic pension and other post-retirement benefit cost was $5.2 million. The amounts recorded for the net pension and other post-retirement obligations include various judgments and uncertainties.
Our 2024 net periodic pension and other post-retirement benefit cost was $1.3 million. The amounts recorded for the net pension and other post-retirement obligations include various judgments and uncertainties.
Based upon the exchange rate as of December 31, 2023, the dollar was approximately 4% weaker against the euro and 2% weaker against the Canadian dollar since December 31, 2022. See Item 7A. “Quantitative and Qualitative Disclosures about Market Risk”.
Based upon the exchange rate as of December 31, 2024, the dollar was approximately 6% stronger against the euro and 8% stronger against the Canadian dollar since December 31, 2023. See Item 7A. “Quantitative and Qualitative Disclosures about Market Risk”.
The U.S. market accounted for approximately 55% of our lumber revenues and approximately 48% of our lumber sales volumes in 2023. The majority of the balance of our lumber sales were to Europe.
The U.S. market accounted for approximately 47% of our lumber revenues and approximately 41% of our lumber sales volumes in 2024. The majority of the balance of our lumber sales were to Europe.
We recognize the net funded status of the plans and we record net periodic benefit costs associated with these net obligations. As of December 31, 2023, we had pension and other post-retirement benefit obligations aggregating $96.5 million and accumulated pension plan assets with a fair value of $88.8 million.
We recognize the net funded status of the plans and we record net periodic benefit costs associated with these net obligations. As of December 31, 2024, we had pension and other post-retirement benefit obligations aggregating $91.6 million and accumulated pension plan assets with a fair value of $89.1 million.
This non-cash increase does not affect our net loss, Operating EBITDA or cash but is reflected in our other comprehensive income and as an increase to our total equity. As a result, our accumulated other comprehensive loss decreased to $126.7 million.
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 $230.8 million.
As a result of the weakening of the dollar versus the euro and Canadian dollar as of December 31, 2023, we recorded a non-cash increase of $49.5 million in the carrying value of our net assets denominated in euros and Canadian dollars, consisting primarily of our property, plant and equipment.
As a result of the strengthening of the dollar versus the euro and Canadian dollar as of December 31, 2024, we recorded a non-cash decrease of $104.4 million in the carrying value of our net assets denominated in euros and Canadian dollars, consisting primarily of our property, plant and equipment.
Please refer to Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022 for a discussion of our results of operations for 2021 and financial position as of December 31, 2021. This Annual Report contains forward-looking statements that involve risks and uncertainties.
Please refer to Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023 for a discussion of our results of operations for 2022 and financial position as of December 31, 2022.
Equity accounts are translated using historical exchange rates. Unrealized gains or losses from these translations are recognized in our other comprehensive income (loss) and do not affect our net earnings.
Unrealized gains or losses from these translations are recognized in our other comprehensive income (loss) and do not affect our net earnings.
Each rating should be evaluated independently of any other rating. Critical Accoun ting 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 recording of assets, liabilities, revenues and expenses in the consolidated financial statements and accompanying note disclosures.
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 recording of assets, liabilities, revenues and expenses in the consolidated financial statements and accompanying note disclosures.
(2) Issued in September 2023. For a description of such indebtedness, see Item 1. “Business – Description of Certain Indebtedness”. Certain of our long-term obligations contain various financial tests and covenants customary to these types of arrangements.
(2) $200.0 million issued in September 2023. An add-on offering of $200.0 million was completed in October 2024. For a description of such indebtedness, see Item 1. “Business – Description of Certain Indebtedness”. Certain of our long-term obligations contain various financial tests and covenants customary to these types of arrangements.
In 2023, we had an income tax recovery of $27.8 million, or an effective tax rate of approximately 10%, as we do not recognize a tax recovery for certain entities for which we do not currently expect to realize a tax benefit. In 2022, the provision for income taxes was $98.3 million, or an effective tax rate of 28%.
In 2023, we had an income tax recovery of $27.8 million, or an effective tax rate of 10%, as we do not recognize a tax recovery for certain entities for which we do not expect to realize a tax benefit.
Credit Facilities and Debt Covenants We had the following principal amounts outstanding under our credit facilities and Senior Notes as of the dates indicated: As of December 31, 2023 2022 (in thousands) German Revolving Facility (1) $ 161,330 $ 109,326 Rosenthal €2.6 million loan $ — $ — Canadian Revolving Facility $ 47,255 $ 31,749 2026 Senior Notes $ 300,000 $ 300,000 2028 Senior Notes (2) $ 200,000 $ — 2029 Senior Notes $ 875,000 $ 875,000 (1) In September 2022, replaced the prior €200.0 million facility for our German subsidiaries.
Credit Facilities and Debt Covenants We had the following principal amounts outstanding under our credit facilities and Senior Notes as of the dates indicated: As of December 31, 2024 2023 (in thousands) German Revolving Facility $ 168,822 $ 161,330 Rosenthal €2.6 million loan $ — $ — Canadian Revolving Facility $ 347 $ 47,255 2026 Senior Notes (1) $ — $ 300,000 2028 Senior Notes (2) $ 400,000 $ 200,000 2029 Senior Notes $ 875,000 $ 875,000 (1) Redeemed in October 2024.
We estimate that annual maintenance downtime in 2023 adversely impacted our operating loss by approximately $62.0 million, comprised of approximately $45.6 million in direct out-of-pocket expenses and the balance in reduced production.
We estimate that annual maintenance downtime in 2024 adversely impacted our Segment Operating EBITDA by approximately $78.0 million, comprised of approximately $56.1 million in direct out-of-pocket expenses and the balance in reduced production.
In 2023, capital expenditures primarily related to costs to complete the rebuild of the wood chip conveying system at our Stendal mill and the Rosenthal lignin plant, upgrades to the wood rooms at our Canadian mills and maintenance and optimization projects at our German mills and the Mercer Spokane facility.
In 2023, we acquired the Structurlam Mass Timber Corporation and its subsidiaries for $82.1 million and incurred capital expenditures of $136.3 million primarily related to costs to complete the rebuild of the wood chip conveying system at our Stendal mill and the Rosenthal lignin plant, upgrades to the wood rooms at our Canadian mills and maintenance and optimization projects at our German mills and Mercer Spokane facility.
( 69 ) Long-Lived Assets As of December 31, 2023, we had long-lived assets recorded in our Consolidated Balance Sheet of $1,462.6 million. These long-lived assets include property, plant and equipment, net and amortizable intangible assets, net. In 2023, we recorded depreciation and amortization of $172.5 million and no impairment charges.
Long-Lived Assets As of December 31, 2024, we had long-lived assets recorded in our Consolidated Balance Sheet of $1,304.5 million. These long-lived assets include property, plant and equipment, net and amortizable intangible assets, net. In 2024, we recorded depreciation and amortization of $170.8 million and no impairment charges. Depreciation and amortization and impairment charges are based on accounting estimates.
Interest on our 2026 Senior Notes is payable semi-annually ( 67 ) in arrears on January 15 and July 15, at the rate of 5.50% and they mature in January 2026. Interest on our 2028 Senior Notes is payable semi-annually in arrears on April 1 and October 1, at the rate of 12.875% and they mature in October 2028.
Interest on our 2028 Senior Notes is payable semi-annually ( 66 ) in arrears on April 1 and October 1, at the rate of 12.875% and they mature in October 2028. Interest on our 2029 Senior Notes is payable semi-annually in arrears on February 1 and August 1, at the rate of 5.125% and they mature in February 2029.
The fair value of assets (and disposal groups) held for sale are estimated based on preliminary indicative offers from third parties or through the use of a discounted cash flow model.
Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates, and market factors. The fair value of assets (and disposal groups) held for sale are estimated based on preliminary indicative offers from third parties or through the use of a discounted cash flow model.
Depreciation and amortization and impairment charges are based on accounting estimates. The calculation of depreciation and amortization of long-lived assets requires us to apply judgment in selecting the remaining useful lives of the assets. The remaining useful life of an asset must address both physical and economic considerations.
The calculation of depreciation and amortization of long-lived assets requires us to apply judgment in selecting the remaining useful lives of the assets. The remaining useful life of an asset must address both physical and economic considerations. The remaining economic life of a long-lived asset may be shorter than its physical life.
Assessing probability of loss and estimating probable losses requires analysis of multiple factors, including, but not limited to, the following: • historical experience; • judgments about the potential actions of third-party claimants and courts; and • recommendations of legal counsel. Contingent liabilities are based on the best information available and actual losses in any future period are inherently uncertain.
Assessing probability of loss and estimating probable losses requires analysis of multiple factors, including, but not limited to, the following: • historical experience; • judgments about the potential actions of third-party claimants and courts; and • recommendations of legal counsel.
In 2023, manufactured products sales realizations increased to $1,514 per m 3 from $715 per m 3 in 2022 as a result of higher CLT and glulam sales volumes which generate higher sales realizations relative to other manufactured products. Fiber costs were approximately 75% of our lumber cash production costs in 2023.
Manufactured products sales realizations increased to $3,006 per m 3 in 2024 from $1,514 per m 3 in 2023 as a result of higher CLT and glulam sales volumes, which generate higher sales realizations relative to other manufactured products.
In 2023, financing activities provided cash of $228.6 million primarily from the proceeds of the issuance of $200.0 million 2028 Senior Notes and borrowing approximately $61.3 million under our revolving credit facilities.
In 2023, we received proceeds from the issuance of $200.0 million of 2028 Senior Notes and borrowed approximately $61.3 million under our revolving credit facilities.
Balance Sh eet Data The following table is a summary of selected financial information for the dates indicated: As of December 31, 2023 2022 (in thousands) Cash and cash equivalents $ 313,992 $ 354,032 Working capital $ 806,468 $ 800,114 Total assets $ 2,662,578 $ 2,725,037 Long-term liabilities $ 1,740,731 $ 1,508,192 Total shareholders' equity $ 635,410 $ 838,784 Sources and U ses of Funds Our principal sources of funds are cash flows from operations and cash and cash equivalents on hand.
Balance Sheet Data The following table is a summary of selected financial information for the dates indicated: As of December 31, 2024 2023 (in thousands) Cash and cash equivalents $ 184,925 $ 313,992 Working capital $ 653,466 $ 806,468 Total assets $ 2,262,932 $ 2,662,578 Long-term liabilities $ 1,576,619 $ 1,740,731 Total shareholders' equity $ 429,775 $ 635,410 Sources and Uses of Funds Our principal sources of funds are cash flows from operations and cash and cash equivalents on hand.
For our pulp segment, based upon our 2023 fiber costs and assuming all other factors remained constant, each 1% change in per unit fiber cost yields a change in annual operating costs of approximately $6.3 million.
Fiber is a commodity and both prices and supply are cyclical. As a result, our operating costs are sensitive to fiber cost changes. For our pulp segment, based upon our 2024 fiber costs and assuming all other factors remained constant, each 1% change in per unit fiber cost yields a change in annual operating costs of approximately $5.6 million.
In 2023, we received $12.2 million of property insurance proceeds for the July 2022 fire at our Stendal mill and we received $5.6 million of government grants mainly for the Peace River wood room project. Investing activities in 2022 used cash of $424.6 million primarily related to the acquisition of Torgau for $256.6 million and capital expenditures of $178.7 million.
In 2023, we received $12.2 million of property insurance proceeds for the 2022 fire at our Stendal mill and we received $5.6 million of government grants mainly for the Peace River wood room project.
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.
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.
The remaining economic life of a long-lived asset may be shorter than its physical life. The pulp industry has historically been characterized by considerable uncertainty in business conditions. Estimates of future economic conditions for our long-lived assets and therefore, their remaining useful economic life, require considerable judgment.
The pulp industry has historically been characterized by considerable uncertainty in business conditions. Estimates of future economic conditions for our long-lived assets and therefore, their remaining useful economic life, require considerable judgment. If our estimate of the remaining useful life changes, such a change is accounted for prospectively in our determination of depreciation and amortization.
When an indicator that the carrying value of an Asset Group may not be recoverable is triggered, we compare the carrying value of the Asset Group to its forecasted undiscounted future cash flows.
We evaluate an Asset Group for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable, such as continuing operating losses. When an indicator that the carrying value of an Asset Group may not be recoverable is triggered, we compare the carrying value of the Asset Group to its forecasted undiscounted future cash flows.
Pulp revenues decreased by approximately 17% to $1,402.6 million in 2023 from $1,686.4 million in 2022 primarily due to lower sales realizations partially offset by modestly higher sales volumes. Energy and chemical revenues decreased by approximately 37% to $113.5 million in 2023 from $179.7 million in 2022 primarily due to lower sales realizations partially offset by higher sales volumes.
Pulp revenues increased by approximately 4% to $1,460.5 million in 2024 from $1,402.6 million in 2023 primarily due to higher sales realizations partially offset by slightly lower sales volumes. Energy and chemical revenues decreased by approximately 22% to $88.1 million in 2024 from $113.5 million in 2023 primarily as a result of lower sales realizations.
We operate in a cyclical industry and our operating cash flows vary accordingly. Our principal operating cash expenditures are for fiber, labor, chemicals and debt service. ( 64 ) Working capital levels fluctuate throughout the year and are affected by maintenance downtime, changing sales patterns, seasonality and the timing of receivables and the payment of payables and expenses.
Our principal operating cash ( 63 ) expenditures are for production costs, such as fiber, chemicals and energy costs, and other material operating costs for maintenance, freight and labor. Working capital levels fluctuate throughout the year and are affected by maintenance downtime, changing sales patterns, seasonality and the timing of receivables and the payment of payables and expenses.
( 66 ) 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.
In 2025, excluding amounts being financed through government grants, we currently expect capital expenditures to be approximately $100.0 million to $120.0 million. ( 65 ) 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.
Average NBSK pulp sales realizations decreased by approximately 17% to $729 per ADMT in 2023 from $876 per ADMT in 2022 and NBHK pulp sales realizations decreased by approximately 28% to $627 per ADMT in 2023 from $869 per ADMT in 2022.
Average NBSK pulp sales realizations increased by approximately 8% to $784 per ADMT in 2024 from $729 per ADMT in 2023 and average NBHK pulp sales realizations modestly increased to $637 per ADMT in 2024 from $627 per ADMT in 2023.
Third party industry quoted average net prices for NBSK pulp in China were approximately $747 per ADMT in 2023 compared to approximately $949 per ADMT in 2022. Third party industry quoted average list prices for NBHK pulp in North America were approximately $1,227 per ADMT in 2023 compared to approximately $1,514 per ADMT in 2022.
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. Third-party industry quoted average list prices for NBHK pulp in North America were approximately $1,356 per ADMT in 2024 compared to approximately $1,227 per ADMT in 2023.
Interest expense in 2023 increased by approximately 23% to $88.2 million from $71.5 million in 2022 primarily as a result of higher borrowings on our revolving credit facilities, higher interest rates and the issuance of $200.0 million of senior notes in September 2023. Other income decreased to $7.2 million in 2023 from $24.4 million in 2022.
Interest expense in 2024 increased by approximately 24% to $109.2 million from $88.2 million in 2023 primarily as a result of the issuance of $200.0 million of additional 2028 Senior Notes in September 2023. Other income was $7.2 million in each of 2024 and 2023. Other income in 2024 and 2023 primarily consisted of interest earned on cash.
These increases were partially offset by lower per unit energy and freight costs and the receipt of $46.4 million of insurance proceeds in 2023 relating to the 2021 turbine downtime at the Rosenthal mill and the July 2022 fire at the Stendal mill. In 2022, we received insurance proceeds of $17.3 million related to the Stendal fire.
In 2023, we received insurance proceeds of $46.4 million relating to the 2021 turbine downtime at the Rosenthal mill and the 2022 fire at the Stendal mill.
A decrease in accounts receivable provided cash of $52.5 million in 2023 and an increase in accounts receivable used cash of $20.5 million in 2022. An increase in inventories used cash of $15.8 million, adjusting for net inventory impairments of $58.6 million, in 2023 and $63.2 million in 2022.
Adjusting for inventory impairments of $9.0 million, a decrease in inventories provided cash of $23.9 million in 2024 and adjusting for inventory impairments of $58.6 million, an increase in inventories used cash of $15.8 million in 2023. A decrease in accounts payable and accrued expenses used cash of $17.7 million in 2024 and $98.2 million in 2023.
For example, a one-percentage point change in any one of the following assumptions would have increased (decreased) our 2023 net periodic benefit cost and our accrued benefit obligation as follows: Net periodic benefit cost Accrued benefit obligation 1% increase 1% decrease 1% increase 1% decrease (in thousands) Assumptions Discount rate $ 9 $ 62 $ (9,175 ) $ 11,479 Return on assets $ (870 ) $ 880 $ — $ — Rate of compensation $ 406 $ (389 ) $ 2,481 $ (2,932 ) Health care cost trend rate $ 116 $ (112 ) $ 436 $ (469 ) Deferred Taxes As of December 31, 2023, we had $97.3 million in deferred tax liabilities and a $0.7 million deferred tax asset, resulting in a net deferred tax liability of $96.7 million.
For example, a one-percentage point change in any one of the following assumptions would have increased (decreased) our 2024 net periodic benefit cost and our accrued benefit obligation as follows: Net periodic benefit cost Accrued benefit obligation 1% increase 1% decrease 1% increase 1% decrease (in thousands) Assumptions Discount rate $ (292 ) $ 351 $ (16,260 ) $ 13,026 Return on assets $ (869 ) $ 870 $ — $ — Rate of compensation $ 557 $ (206 ) $ 2,276 $ (2,694 ) Health care cost trend rate $ 103 $ (98 ) $ 441 $ (478 ) Deferred Income Taxes As of December 31, 2024, we had a deferred income tax liability of $74.8 million and a deferred income tax asset of $17.8 million, resulting in a net deferred income tax liability of $57.0 million.
(2) See “Non-GAAP Financial Measures” for a description of Operating EBITDA and Operating EBITDA margin, their limitations and why we consider them to be useful measures.
Refer to the segment information note in our consolidated financial statements for more information. (2) Operating EBITDA and Operating EBITDA margin are non-GAAP measures. See “Non-GAAP Financial Measures” for their descriptions, limitations and why we consider them to be useful measures.
Our sales to China are closer to a net price with significantly lower or little discounts and rebates. The market for lumber is cyclical and generally driven by macroeconomic conditions, producer inventories and fluctuations in exchange rates.
Our sales to China and Asia are generally based closer to third-party industry quoted prices, which are quoted on a net basis, inclusive of discounts, allowances, rebates and other selling concessions. The market for lumber is cyclical and generally driven by macroeconomic conditions, producer inventories and fluctuations in exchange rates.
Credit Ratings o f Senior Notes We and our Senior Notes are rated by Standard & Poor’s Rating Services, referred to as “S&P”, and Moody’s Investors Service, Inc., referred to as “Moody’s”. In September 2023, S&P lowered its outlook to negative from stable and downgraded its rating on our Senior Notes to B from B+.
Credit Ratings of Senior Notes We and our Senior Notes are rated by Standard & Poor’s Rating Services, referred to as “S&P”, Moody’s Investors Service, Inc., referred to as “Moody’s” and Fitch Ratings, referred to as “Fitch”.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe following table provides information about our exposure to foreign currency exchange rate fluctuations for the carrying amount of financial instruments sensitive to such fluctuations as of December 31, 2023 and expected cash flows from these instruments: As of December 31, 2023 Expected maturity date Carrying Value Fair Value 2024 2025 2026 2027 2028 Thereafter (in thousands) Financial Instruments in euros Cash and cash equivalents 24,236 24,236 24,236 — — — — — Accounts receivable, net 87,582 87,582 87,582 — — — — — Accounts payable and other 120,290 120,290 120,290 — — — — — Finance lease liabilities 39,165 39,165 6,120 5,497 5,645 5,705 5,278 10,920 Operating lease liabilities 6,415 6,415 3,008 2,053 935 393 17 9 Long-term debt 146,000 146,000 — — — 146,000 — — in Canadian dollars Cash and cash equivalents 12,046 12,046 12,046 — — — — — Accounts receivable, net 15,071 15,071 15,071 — — — — — Accounts payable and other 72,294 72,294 72,294 — — — — — Finance lease liabilities 6,708 6,708 1,395 1,216 1,170 1,200 991 736 Operating lease liabilities 4,155 4,155 876 813 700 629 600 537 Long-term debt 62,500 62,500 — — — 62,500 — — Product Pr ice Risk Historically, economic and market shifts, fluctuations in capacity and changes in foreign currency exchange rates have created cyclical changes in prices, sales volume and margins for our principal products, being kraft pulp and lumber.
Biggest change( 72 ) The following table provides information about our exposure to foreign currency exchange rate fluctuations for the carrying amount of financial instruments sensitive to such fluctuations as of December 31, 2024 and expected cash flows from these instruments: As of December 31, 2024 Expected maturity date Carrying Value Fair Value 2025 2026 2027 2028 2029 Thereafter (in thousands) Financial Instruments in euros Cash and cash equivalents 30,756 30,756 30,756 — — — — — Accounts receivable, net 95,118 95,118 95,118 — — — — — Accounts payable and other 107,874 107,874 107,874 — — — — — Long-term debt 162,501 162,501 — — 162,501 — — — in Canadian dollars Cash and cash equivalents 19,477 19,477 19,477 — — — — — Accounts receivable, net 5,595 5,595 5,595 — — — — — Accounts payable and other 68,406 68,406 68,406 — — — — — Long-term debt 500 500 — — 500 — — — Product Price Risk Historically, economic and market shifts, fluctuations in capacity and changes in foreign currency exchange rates have created cyclical changes in prices, sales volume and margins for our principal products, being kraft pulp and lumber.
In general, our products are commodities that are widely available from other producers ( 74 ) and, because these products have few distinguishing qualities from producer to producer, competition is based primarily on price which is determined by supply relative to demand.
In general, our products are commodities that are widely available from other producers and, because these products have few distinguishing qualities from producer to producer, competition is based primarily on price which is determined by supply relative to demand.
( 75 ) Credit Risk Our credit risk is primarily attributable to cash held in bank accounts and accounts receivable. We maintain cash balances in foreign financial institutions in excess of insured limits.
Credit Risk Our credit risk is primarily attributable to cash held in bank accounts and accounts receivable. We maintain cash balances in foreign financial institutions in excess of insured limits.
Fiber is a market-priced commodity and, as such, is subject to fluctuations in prices based on supply and demand. Increases in the prices of fiber will tend to increase our operating costs and reduce our operating margins. Infla tion Risk Our key production input costs are for fiber, chemicals and energy.
Fiber is a market-priced commodity and, as such, is subject to fluctuations in prices based on supply and demand. Increases in the prices of fiber will tend to increase our operating costs and reduce our operating margins. Inflation Risk Our key production input costs are for fiber, chemicals and energy.
(2) 2028 Senior Notes bearing interest at 12.875%, principal amount $200.0 million. (3) 2029 Senior Notes bearing interest at 5.125%, principal amount $875.0 million. (4) The German Revolving Facility bearing interest by way of: Euribor plus a variable margin ranging from 1.40% to 2.35% dependent on conditions including but not limited to a prescribed leverage ratio.
(2) 2029 Senior Notes bearing interest at 5.125%, principal amount $875.0 million. (3) The German Revolving Facility bearing interest by way of: Euribor plus a variable margin ranging from 1.40% to 2.35% dependent on conditions including but not limited to a prescribed leverage ratio.
The overall levels of demand for the products we manufacture, and consequently our sales and profitability, reflect fluctuations in end user demand. Fiber Pr ice Risk Fiber in the form of wood chips, pulp logs, sawlogs and lumber represents our largest operating cost.
The overall levels of demand for the products we manufacture, and consequently our sales and profitability, reflect fluctuations in end user demand. Fiber Price Risk Fiber in the form of wood chips, pulp logs, sawlogs and lumber represents our largest operating cost.
ITEM 7A. QUANTITATIVE AND QUALITA TIVE DISCLOSURES ABOUT MARKET RISK We are exposed to risks associated with fluctuations in: • foreign currency exchange rates; • prices for the products we manufacture; • fiber costs; • credit risk; • inflation; and • interest rates.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to risks associated with fluctuations in: • foreign currency exchange rates; • prices for the products we manufacture; • fiber costs; • inflation; • interest rates; and • credit risk.
(5) The Canadian Revolving Facility bearing interest by way of: (i) Canadian denominated advances, which bear interest at a designated prime rate per annum; (ii) banker’s acceptance equivalent loans, which bear interest at the applicable Canadian dollar banker’s acceptance plus 1.20% to 1.45% per annum; (iii) dollar denominated base rate advances at the greater of the federal funds rate plus 0.50%, an Adjusted Term SOFR for a one month tenor plus 1.00% and the bank’s applicable reference rate for U.S. dollar loans; and (iv) dollar SOFR advances, which bear interest at Adjusted Term SOFR plus 1.20% to 1.45% per annum.
(4) The Canadian Revolving Facility bearing interest by way of: (i) Canadian dollar denominated advances, which bear interest at a designated prime rate per annum; (ii) Canadian dollar denominated advances, which bear interest at the applicable Adjusted CORRA plus 1.20% to 1.45% per annum; (iii) dollar denominated base rate advances at the greater of the federal funds rate plus 0.50%, an Adjusted Term SOFR for a one month tenor plus 1.00% and the bank’s applicable reference rate for dollar denominated loans; and (iv) dollar denominated SOFR advances, which bear interest at Adjusted Term SOFR plus 1.20% to 1.45% per annum.
As of December 31, 2023 and December 31, 2022, we had no outstanding derivatives. However, in the future, we may from time to time use foreign exchange derivatives to convert some of our costs (including currency swaps relating to our long-term indebtedness) from euros or Canadian dollars to dollars as our principal product is priced in dollars.
However, in the future, we may from time to time use foreign exchange derivatives to convert some of our costs (including currency swaps relating to our long-term indebtedness) from euros or Canadian dollars to dollars as our principal product is priced in dollars.
However, these strategies may not be effective in all market environments or against all types of risks. Unexpected market developments may affect our risk management strategies during this time, and unanticipated developments could impact our risk management strategies in the future. If any of the variety of instruments and strategies we utilize is not effective, we may incur significant losses.
However, these strategies may not be effective in all market environments or against all types of risks. Unexpected market developments may affect our risk management strategies during this time, and unanticipated ( 74 ) developments could impact our risk management strategies in the future.
The following table provides information about our exposure to interest rate fluctuations for the financial instruments sensitive to such fluctuations as of December 31, 2023 and expected cash flows from these instruments: As of December 31, 2023 Expected maturity date Total Fair Value 2024 2025 2026 2027 2028 Thereafter (in thousands other than percentages) Liabilities Long-term debt: Fixed rate ($) (1) 300,000 287,235 — — 300,000 — — — Interest rate 5.500% 5.500% 5.500% Fixed rate ($) (2) 200,000 218,610 — — — — 200,000 — Interest rate 12.875% 12.875% 12.875% Fixed rate ($) (3) 875,000 751,581 — — — — — 875,000 Interest rate 5.125% 5.125% 5.125% Variable rate ($) (4) 161,330 161,330 — — — 161,330 — — Interest rate 5.296% 5.296% 5.296% Variable rate ($) (5) 47,255 47,255 — — — 47,255 — — Interest rate 6.614% 6.614% 6.614% (1) 2026 Senior Notes bearing interest at 5.50%, principal amount $300.0 million.
( 73 ) The following table provides information about our exposure to interest rate fluctuations for the financial instruments sensitive to such fluctuations as of December 31, 2024 and expected cash flows from these instruments: As of December 31, 2024 Expected maturity date Total Fair Value 2025 2026 2027 2028 2029 Thereafter (in thousands other than percentages) Liabilities Long-term debt: Fixed rate ($) (1) 400,000 430,580 — — — 400,000 — — Interest rate 12.875% 12.875% 12.875% Fixed rate ($) (2) 875,000 756,341 — — — — 875,000 — Interest rate 5.125% 5.125% 5.125% Variable rate ($) (3) 168,822 168,822 — — 168,822 — — — Interest rate 4.470% 4.470% 4.470% Variable rate ($) (4) 347 347 — — 347 — — — Interest rate 5.450% 5.450% 5.450% (1) 2028 Senior Notes bearing interest at 12.875%, principal amount $400.0 million.
( 73 ) For a discussion of our earnings sensitivities to foreign exchange rates, pulp and lumber prices, fiber costs and inflation, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Sensitivities” on page 63 hereof.
For a discussion of our earnings sensitivities to pulp and lumber prices, fiber costs, foreign exchange rates and inflation, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Sensitivities” on page 62 hereof. Foreign Currency Exchange Risk We compete with producers from around the world, particularly Europe and North America, in our product lines.
Foreign Currency Exchange Risk We compete with producers from around the world, particularly Europe and North America, in our product lines. We sell our principal product, pulp, mainly in transactions denominated in dollars but sell certain other products including energy, chemicals, pallets, biofuels, wood residuals and European lumber in local currencies, being euros and Canadian dollars.
We sell pulp, U.S. lumber and mass timber products mainly in transactions denominated in dollars but sell certain other products including energy, chemicals, pallets, biofuels, wood residuals and European lumber in local currencies, being euros and Canadian dollars.
Other material costs in our business include labor and transportation. As a result, our operating costs are sensitive to inflation. Increases in inflation will tend to increase our operating costs and reduce our operating margins. Interest R ate Risk Fluctuations in interest rates may affect the fair value of fixed interest rate financial instruments which are sensitive to such fluctuations.
Other material costs in our business include maintenance, freight and labor costs. As a result, our operating costs are sensitive to inflation. Increases in inflation will tend to increase our operating costs and reduce our operating margins.
Added
Interest Rate Risk Fluctuations in interest rates may affect the fair value of fixed interest rate financial instruments which are sensitive to such fluctuations.
Added
If any of the variety of instruments and strategies we utilize is not effective, we may incur significant losses. As of December 31, 2024 and December 31, 2023, we had no outstanding derivatives.

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