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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File No.: 000-51826

MERCER INTERNATIONAL INC.

(Exact name of Registrant as specified in its charter)


Washington		47-0956945
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)		Identification No.)

Suite 1120, 700 West Pender Street, Vancouver, British Columbia, Canada, V6C 1G8

(Address of office)

(604) 684-1099

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

     Title of each class

     Trading
Symbol(s)

     Name of each exchange on which registered

     Common Stock, par value $1.00 per share

     MERC

     NASDAQ Global Select Market

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ NO ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ NO ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “non-accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

The Registrant had 66,982,506 shares of common stock outstanding as of July 29, 2025.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2025

(Unaudited)

FORM 10-Q

QUARTERLY REPORT - PAGE 2

MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands of U.S. dollars, except per share data)


	Three Months Ended June 30,						Six Months Ended June 30,
	2025			2024			2025			2024
Revenues	$	453,524		$	499,384		$	960,498		$	1,052,814
Costs and expenses
Cost of sales, excluding depreciation and amortization		444,047			439,220			874,294			897,402
Cost of sales depreciation and amortization		37,451			39,877			77,741			80,227
Selling, general and administrative expenses		30,430			29,789			60,134			61,490
Loss on disposal of investment in joint venture		—			—			—			23,645
Goodwill impairment		—			34,277			—			34,277
Operating loss		(58,404	)		(43,779	)		(51,671	)		(44,227	)
Other income (expenses)
Interest expense		(28,411	)		(26,843	)		(56,566	)		(54,402	)
Other income (expenses)		(1,120	)		4,299			(1,305	)		9,238
Total other expenses, net		(29,531	)		(22,544	)		(57,871	)		(45,164	)
Loss before income taxes		(87,935	)		(66,323	)		(109,542	)		(89,391	)
Income tax recovery (provision)		1,864			(1,263	)		1,132			5,102
Net loss	$	(86,071	)	$	(67,586	)	$	(108,410	)	$	(84,289	)
Net loss per common share
Basic	$	(1.29	)	$	(1.01	)	$	(1.62	)	$	(1.26	)
Diluted	$	(1.29	)	$	(1.01	)	$	(1.62	)	$	(1.26	)
Dividends declared per common share	$	0.075		$	0.075		$	0.150		$	0.150

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands of U.S. dollars)


	Three Months Ended June 30,						Six Months Ended June 30,
	2025			2024			2025			2024
Net loss	$	(86,071	)	$	(67,586	)	$	(108,410	)	$	(84,289	)
Other comprehensive income (loss)
Loss related to defined benefit pension plans		(269	)		(184	)		(531	)		(267	)
Income tax provision		—			—			—			(90	)
Loss related to defined benefit pension plans, net of tax		(269	)		(184	)		(531	)		(357	)
Foreign currency translation adjustments		99,249			(14,611	)		133,586			(52,080	)
Other comprehensive income (loss), net of tax		98,980			(14,795	)		133,055			(52,437	)
Total comprehensive income (loss)	$	12,909		$	(82,381	)	$	24,645		$	(136,726	)

See accompanying Notes to the Interim Consolidated Financial Statements.

FORM 10-Q

QUARTERLY REPORT - PAGE 3

MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands of U.S. dollars, except share and per share data)


	June 30, 2025			December 31, 2024
ASSETS
Current assets
Cash and cash equivalents	$	146,499		$	184,925
Accounts receivable, net		335,394			327,345
Inventories		415,444			361,682
Prepaid expenses and other		21,461			17,601
Assets classified as held for sale		18,805			18,451
Total current assets		937,603			910,004
Property, plant and equipment, net		1,338,386			1,254,715
Amortizable intangible assets, net		52,277			49,829
Operating lease right-of-use assets		6,531			7,598
Pension asset		8,707			9,378
Deferred income tax assets		21,469			17,778
Other long-term assets		13,403			13,630
Total assets	$	2,378,376		$	2,262,932
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable and other	$	293,948		$	248,661
Pension and other post-retirement benefit obligations		772			732
Liabilities associated with assets held for sale		7,398			7,145
Total current liabilities		302,118			256,538
Long-term debt		1,526,743			1,473,986
Pension and other post-retirement benefit obligations		12,645			11,134
Operating lease liabilities		3,902			4,793
Deferred income tax liabilities		74,027			74,772
Other long-term liabilities		12,450			11,934
Total liabilities		1,931,885			1,833,157
Shareholders’ equity
Common shares $1 par value; 200,000,000 authorized; 66,983,000 issued and outstanding (2024 – 66,871,000)		66,871			66,850
Additional paid-in capital		364,871			362,782
Retained earnings		112,463			230,912
Accumulated other comprehensive loss		(97,714	)		(230,769	)
Total shareholders’ equity		446,491			429,775
Total liabilities and shareholders’ equity	$	2,378,376		$	2,262,932

Commitments and contingencies (Note 14)

See accompanying Notes to the Interim Consolidated Financial Statements.

FORM 10-Q

QUARTERLY REPORT - PAGE 4

MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

(In thousands of U.S. dollars)


	Common shares
Three Months Ended June 30:	Number (thousands of shares)		Amount, at Par Value		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance as of March 31, 2025		66,871	$	66,850	$	363,637		$	203,558		$	(196,694	)	$	437,351
Shares issued on grants of restricted shares		112		21		(21	)		—			—			—
Stock compensation expense		—		—		1,255			—			—			1,255
Net loss		—		—		—			(86,071	)		—			(86,071	)
Dividends declared		—		—		—			(5,024	)		—			(5,024	)
Other comprehensive income		—		—		—			—			98,980			98,980
Balance as of June 30, 2025		66,983	$	66,871	$	364,871		$	112,463		$	(97,714	)	$	446,491

Balance as of March 31, 2024		66,850	$	66,796	$	360,941		$	314,396		$	(168,494	)	$	573,639
Shares issued on grants of restricted shares		21		54		(54	)		—			—			—
Stock compensation expense		—		—		1,426			—			—			1,426
Net loss		—		—		—			(67,586	)		—			(67,586	)
Dividends declared		—		—		—			(5,015	)		—			(5,015	)
Other comprehensive loss		—		—		—			—			(14,795	)		(14,795	)
Balance as of June 30, 2024		66,871	$	66,850	$	362,313		$	241,795		$	(183,289	)	$	487,669

Six Months Ended June 30:
Balance as of December 31, 2024		66,871	$	66,850	$	362,782		$	230,912		$	(230,769	)	$	429,775
Shares issued on grants of restricted shares		112		21		(21	)		—			—			—
Stock compensation expense		—		—		2,110			—			—			2,110
Net loss		—		—		—			(108,410	)		—			(108,410	)
Dividends declared		—		—		—			(10,039	)		—			(10,039	)
Other comprehensive income		—		—		—			—			133,055			133,055
Balance as of June 30, 2025		66,983	$	66,871	$	364,871		$	112,463		$	(97,714	)	$	446,491

Balance as of December 31, 2023		66,525	$	66,471	$	359,497		$	336,113		$	(126,671	)	$	635,410
Shares issued on grants of restricted shares		21		54		(54	)		—			—			—
Shares issued on grants of performance share units		325		325		(325	)		—			—			—
Stock compensation expense		—		—		3,195			—			—			3,195
Net loss		—		—		—			(84,289	)		—			(84,289	)
Dividends declared		—		—		—			(10,029	)		—			(10,029	)
Disposal of investment in joint venture		—		—		—			—			(4,181	)		(4,181	)
Other comprehensive loss		—		—		—			—			(52,437	)		(52,437	)
Balance as of June 30, 2024		66,871	$	66,850	$	362,313		$	241,795		$	(183,289	)	$	487,669

See accompanying Notes to the Interim Consolidated Financial Statements.

FORM 10-Q

QUARTERLY REPORT - PAGE 5

MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands of U.S. dollars)


	Three Months Ended June 30,						Six Months Ended June 30,
	2025			2024			2025			2024
Cash flows from (used in) operating activities
Net loss	$	(86,071	)	$	(67,586	)	$	(108,410	)	$	(84,289	)
Adjustments to reconcile net loss to cash flows from operating activities
Depreciation and amortization		37,523			39,941			77,878			80,345
Deferred income tax provision (recovery)		(1,632	)		7,322			(11,138	)		(6,104	)
Inventory impairment		11,000			—			11,000			—
Loss on disposal of investment in joint venture		—			—			—			23,645
Goodwill impairment		—			34,277			—			34,277
Defined benefit pension plans and other post-retirement benefit plan expense		175			431			344			641
Stock compensation expense		1,036			1,403			2,042			3,432
Foreign exchange transaction losses (gains)		9,361			(3,382	)		17,779			(6,831	)
Other		3,012			1,389			4,640			2,116
Defined benefit pension plans and other post-retirement benefit plan contributions		—			(288	)		—			(617	)
Changes in working capital
Accounts receivable		31,588			21,929			14,790			(41,800	)
Inventories		(17,175	)		4,506			(24,066	)		4,595
Accounts payable and accrued expenses		(12,046	)		15,718			16,386			18,108
Prepaid expenses and other		18,703			6,525			(8,760	)		5,473
Net cash from (used in) operating activities		(4,526	)		62,185			(7,515	)		32,991
Cash flows from (used in) investing activities
Purchase of property, plant and equipment		(24,331	)		(17,883	)		(44,413	)		(36,344	)
Proceeds from government grants		3,115			—			3,115			787
Other		(1,557	)		(2,271	)		(1,335	)		(2,081	)
Net cash from (used in) investing activities		(22,773	)		(20,154	)		(42,633	)		(37,638	)
Cash flows from (used in) financing activities
Proceeds from (repayment of) revolving credit facilities, net		3,607			(44,965	)		25,361			(35,840	)
Dividend payments		(5,015	)		(5,014	)		(5,015	)		(5,014	)
Payment of finance lease obligations		(2,405	)		(2,687	)		(4,913	)		(4,876	)
Other		545			(614	)		545			(729	)
Net cash from (used in) financing activities		(3,268	)		(53,280	)		15,978			(46,459	)
Effect of exchange rate changes on cash and cash equivalents		(4,407	)		150			(4,256	)		287
Net decrease in cash and cash equivalents		(34,974	)		(11,099	)		(38,426	)		(50,819	)
Cash and cash equivalents, beginning of period		181,473			274,272			184,925			313,992
Cash and cash equivalents, end of period	$	146,499		$	263,173		$	146,499		$	263,173


Supplemental cash flow disclosure:
Cash paid for interest	$	28,209	$	16,813	$	53,415	$	51,529
Cash paid for income taxes	$	12,679	$	4,522	$	29,591	$	12,695
Supplemental schedule of non-cash investing and financing activities:
Leased production and other equipment	$	4,072	$	4,131	$	5,460	$	8,645

See accompanying Notes to the Interim Consolidated Financial Statements.

FORM 10-Q

QUARTERLY REPORT - PAGE 6

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands of U.S. dollars, except share and per share data)

Note 1. The Company and Summary of Significant Accounting Policies

Nature of Operations and Basis of Presentation

The Interim Consolidated Financial Statements contained herein include the accounts of Mercer International Inc. (“Mercer Inc.”) and all of its subsidiaries (collectively the “Company”). Mercer Inc. owns 100% of its subsidiaries. The Company’s shares of common stock are quoted and listed for trading on the NASDAQ Global Select Market.

The Interim Consolidated Financial Statements have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). The consolidated balance sheet information as of December 31, 2024 was derived from the Company’s audited Consolidated Financial Statements, but does not contain all of the footnote disclosures from the annual Consolidated Financial Statements. The footnote disclosure included herein has been prepared in accordance with accounting principles generally accepted for interim financial statements in the United States (“GAAP”). The unaudited Interim Consolidated Financial Statements should be read together with the audited Consolidated Financial Statements and accompanying notes included in the Company’s latest Annual Report on Form 10‑K for the fiscal year ended December 31, 2024. In the opinion of the Company, the unaudited Interim Consolidated Financial Statements contained herein have been prepared on a consistent basis with the audited Consolidated Financial Statements and accompanying notes included in the Company’s latest Annual Report on Form 10‑K for the fiscal year ended December 31, 2024 and contain all adjustments necessary for a fair statement of the results of the interim periods included. The results for the periods included herein may not be indicative of the results for the entire year.

In these Interim Consolidated Financial Statements, unless otherwise indicated, all amounts are expressed in United States dollars (“U.S. dollars” or “$”). The symbol “€” refers to euros and the symbol “C$” refers to Canadian dollars.

Use of Estimates

Preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant management judgment is required in determining the accounting for, among other things, 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. Actual results could differ materially from these estimates and changes in these estimates are recorded when known.

New Accounting Pronouncements

Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU 2023-09, which requires additional disaggregation of the reconciliation between the statutory and effective tax rate for an entity and of income taxes paid. The amendments improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information by jurisdiction. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. The Company continues to assess the impact of ASU 2023-09.

FORM 10-Q

QUARTERLY REPORT - PAGE 7

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands of U.S. dollars, except share and per share data)

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU 2024-03, which expands disclosures about specific expense categories presented on the face of the income statement and addresses requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation and amortization) in commonly presented expense captions (such as cost of sales and selling, general and administrative expenses). ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 and interim periods thereafter with early adoption permitted. The Company is currently assessing the impact of ASU 2024-03.

Note 2. Assets and Liabilities Classified as Held for Sale

The Company continues to actively market the sandalwood business and expects a sale to occur within the next 12 months. Accordingly, the assets and associated liabilities of the business, referred to as the “disposal group”, continue to be classified as held for sale.

The disposal group’s estimated fair value was determined using Level 3 inputs based on preliminary indicative offers from third parties. The following summarizes the major classes of assets and liabilities classified as held for sale as of June 30, 2025.


	June 30, 2025
Cash and cash equivalents	$	6,270
Accounts receivable, net		853
Inventories		16,962
Property, plant and equipment, net		3,248
Operating lease right-of-use-assets		5,182
Sandalwood tree plantations		25,708
Impairment reserve		(39,418	)
Assets classified as held for sale	$	18,805

Accounts payable and other	$	2,342
Operating lease liabilities		5,056
Liabilities associated with assets held for sale	$	7,398

Note 3. Inventories

Inventories as of June 30, 2025 and December 31, 2024, were comprised of the following:


	June 30, 2025		December 31, 2024
Raw materials	$	145,352	$	131,396
Finished goods		124,361		101,121
Spare parts and other		145,731		129,165
	$	415,444	$	361,682

For the three months ended June 30, 2025, the Company recorded inventory impairment charges of $10,000 against raw materials inventory and $1,000 against finished goods inventory as a result of low hardwood pulp prices. The inventory impairment charges are recorded in “Cost of sales, excluding depreciation and amortization” in the Interim Consolidated Statements of Operations.

For the three and six months ended June 30, 2024, there were no inventory impairment charges recorded.

FORM 10-Q

QUARTERLY REPORT - PAGE 8

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands of U.S. dollars, except share and per share data)

Note 4. Accounts Payable and Other

Accounts payable and other as of June 30, 2025 and December 31, 2024, was comprised of the following:


	June 30, 2025		December 31, 2024
Trade payables	$	78,742	$	53,610
Accrued expenses		97,132		73,755
Interest payable		33,523		33,312
Income tax payable		14,616		30,459
Payroll-related accruals		28,003		24,100
Wastewater fee (a)		9,175		6,324
Finance lease liability		11,957		9,415
Operating lease liability		2,700		2,874
Other		18,100		14,812
	$	293,948	$	248,661

(a)

The Company is required to pay certain fees based on wastewater emissions at its German mills. Accrued fees can be reduced upon the mills’ demonstration of reduced wastewater emissions.

Note 5. Debt

Debt as of June 30, 2025 and December 31, 2024, was comprised of the following:


	Maturity	June 30, 2025			December 31, 2024
Senior notes (a)
12.875% senior notes	2028	$	400,000		$	400,000
5.125% senior notes	2029		875,000			875,000

Credit arrangements
€370.1 million German joint revolving credit facility (b)	2027		196,310			168,822
C$160.0 million Canadian joint revolving credit facility (c)	2027		20,891			347
€2.6 million demand loan (d)			—			—

Finance lease liability			54,364			48,214
			1,546,565			1,492,383
Less: unamortized senior note issuance costs			(7,865	)		(8,982	)
Less: finance lease liability due within one year			(11,957	)		(9,415	)
		$	1,526,743		$	1,473,986

The maturities of the principal portion of the senior notes and credit arrangements as of June 30, 2025 were as follows:


	Senior Notes and Credit Arrangements
2026	$	—
2027		217,201
2028		400,000
2029		875,000
	$	1,492,201

Certain of the Company’s debt instruments were issued under agreements which, among other things, may limit its ability and the ability of its subsidiaries to make certain payments, including dividends. These limitations are subject to specific exceptions. As of June 30, 2025, the Company was in compliance with the terms of its debt agreements.

FORM 10-Q

QUARTERLY REPORT - PAGE 9

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands of U.S. dollars, except share and per share data)

(a)

The senior notes which mature on October 1, 2028 (the “2028 Senior Notes”) and on February 1, 2029 (the “2029 Senior Notes” and collectively with the 2028 Senior Notes, the “Senior Notes”) are general unsecured senior obligations of the Company. The Company may redeem all or a part of the Senior Notes upon not less than 10 days’ or more than 60 days’ notice at the redemption price plus accrued and unpaid interest to (but not including) the applicable redemption date.

The following table presents the redemption prices (expressed as percentages of principal amount) and the redemption periods of the Senior Notes:


2028 Senior Notes		2029 Senior Notes
12 Month Period Beginning	Percentage	12 Month Period Beginning	Percentage
October 1, 2025	106.438%	February 1, 2025	101.281%
October 1, 2026	103.219%	February 1, 2026 and thereafter	100.000%
October 1, 2027 and thereafter	100.000%

(b)

A €370.1 million joint revolving credit facility for the German mills that matures in September 2027. Borrowings under the facility are unsecured and bear interest at 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 facility is sustainability linked whereby the interest rate margin is subject to upward or downward adjustments of up to 0.05% per annum if the Company achieves, or fails to achieve, certain specified sustainability targets. As of June 30, 2025, approximately €167.5 million ($196,310) of this facility was drawn and accruing interest at a rate of 3.446%, approximately €27.4 million ($32,065) was supporting bank guarantees and approximately €175.2 million ($205,412) was available.

(c)

A C$160.0 million joint revolving credit facility for the Celgar mill, Peace River mill and certain other Canadian subsidiaries that matures in January 2027. The facility is available 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 Term Canadian Overnight Repo Rate Average 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 Secured Overnight Financing Rate (“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 the applicable Adjusted Term SOFR plus 1.20% to 1.45% per annum. As of June 30, 2025, approximately C$28.5 million ($20,891) of this facility was drawn and accruing interest at a rate of 4.481%, approximately C$0.6 million ($472) was supporting letters of credit and approximately C$117.6 million ($86,152) was available.

(d)

A €2.6 million demand loan for the Rosenthal mill that does not have a maturity date. Borrowings under this facility are unsecured and bear interest at the rate of the three-month Euribor plus 2.50%. As of June 30, 2025, approximately €2.6 million ($2,991) of this facility was supporting bank guarantees and approximately $nil was available.

FORM 10-Q

QUARTERLY REPORT - PAGE 10

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands of U.S. dollars, except share and per share data)

Note 6. Pension and Other Post-Retirement Benefit Obligations

Defined Benefit Plans

Pension benefits are based on employees’ earnings and years of service. The defined benefit plans are funded by contributions from the Company based on actuarial estimates and statutory requirements. The components of the net benefit costs for the Celgar and Peace River defined benefit plans, in aggregate for the three and six months ended June 30, 2025 and 2024 were as follows:


	Three Months Ended June 30,
	2025						2024
	Pension			Other Post- Retirement Benefits			Pension			Other Post- Retirement Benefits
Service cost	$	671		$	36		$	687		$	31
Interest cost		1,015			111			966			115
Expected return on plan assets		(1,389	)		—			(1,184	)		—
Amortization of unrecognized items		(82	)		(187	)		20			(204	)
Net benefit costs (gains)	$	215		$	(40	)	$	489		$	(58	)


	Six Months Ended June 30,
	2025						2024
	Pension			Other Post- Retirement Benefits			Pension			Other Post- Retirement Benefits
Service cost	$	1,318		$	70		$	1,384		$	63
Interest cost		1,995			219			1,946			232
Expected return on plan assets		(2,727	)		—			(2,717	)		—
Amortization of unrecognized items		(163	)		(368	)		144			(411	)
Net benefit costs (gains)	$	423		$	(79	)	$	757		$	(116	)

The components of the net benefit costs (gains) other than service cost are recorded in “Other income (expenses)” in the Interim Consolidated Statements of Operations. The amortization of unrecognized items relates to actuarial losses (gains) and prior service costs.

Defined Contribution Plan

Effective December 31, 2008, the defined benefit plans at the Celgar mill were closed to new members and the service accrual ceased. Effective January 1, 2009, the members began to receive pension benefits, at a fixed contractual rate, under a new defined contribution plan. During the three and six months ended June 30, 2025, the Company made contributions of $402 and $613, respectively, to this plan (2024 – $318 and $638).

Multiemployer Plan

The Company participates in a multiemployer plan for the hourly-paid employees at the Celgar mill. The contributions to the plan are determined based on a percentage of pensionable earnings pursuant to a collective bargaining agreement. The Company has no current or future contribution obligations in excess of the contractual contributions. During the three and six months ended June 30, 2025, the Company made contributions of $683 and $1,389, respectively, to this plan (2024 – $613 and $1,134).

FORM 10-Q

QUARTERLY REPORT - PAGE 11

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands of U.S. dollars, except share and per share data)

Note 7. Income Taxes

Differences between the U.S. Federal statutory rate and the Company’s effective tax rate for the three and six months ended June 30, 2025 and 2024 were as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2025			2024			2025			2024
U.S. Federal statutory rate	21%			21%			21%			21%
Income tax recovery using U.S. Federal statutory rate on loss before income taxes	$	18,467		$	13,928		$	23,004		$	18,772
Tax differential on foreign loss		2,252			3,482			1,325			2,895
Effect of foreign earnings (a)		3,413			(7,806	)		—			(7,806	)
Valuation allowance		(19,896	)		7,767			(27,138	)		5,159
Non-deductible goodwill impairment		—			(10,239	)		—			(10,239	)
True-up of prior year taxes		362			(3,925	)		1,113			(2,689	)
Annual effective tax rate adjustment		(2,600	)		(6,000	)		3,600			(4,300	)
Change in tax rate		(15	)		—			(418	)		1,460
Other, net		(119	)		1,530			(354	)		1,850
Income tax recovery (provision)	$	1,864		$	(1,263	)	$	1,132		$	5,102
Comprised of:
Current income tax recovery (provision)	$	232		$	6,059		$	(10,006	)	$	(1,002	)
Deferred income tax recovery (provision)		1,632			(7,322	)		11,138			6,104
Income tax recovery (provision)	$	1,864		$	(1,263	)	$	1,132		$	5,102

(a)

Primarily due to the impact of the global intangible low-taxed income provision in the Tax Cuts and Jobs Act of 2017.

Note 8. Shareholders’ Equity

Dividends

During the six months ended June 30, 2025, the Company’s board of directors declared the following:


Date Declared	Dividend Per Common Share		Amount
February 20, 2025	$	0.075	$	5,015
May 1, 2025		0.075		5,024
	$	0.150	$	10,039

Stock Based Compensation

The Company’s stock incentive plan consists of stock options, restricted stock units (“RSUs”), deferred stock units (“DSUs”), restricted shares, performance shares, performance share units (“PSUs”) and stock appreciation rights. During the three and six months ended June 30, 2025, there were no issued and outstanding stock options, RSUs, performance shares or stock appreciation rights. In June 2025, the Company registered an additional 2.5 million shares under its stock incentive plan. As of June 30, 2025, after factoring in all allocated shares, there remain approximately 2.6 million common shares available for grant.

FORM 10-Q

QUARTERLY REPORT - PAGE 12

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands of U.S. dollars, except share and per share data)

The following table summarizes non-vested PSU activity during the period:

The following table summarizes non-vested restricted share and DSU activity during the period:


	Equity Based Awards						Liability Based Awards
	Number of Restricted Shares			Number of Equity DSUs			Number of Cash Only DSUs
Balance as of January 1, 2025		21,054			50,397			31,581
Granted		111,732			101,956			55,866
Vested		(21,054	)		(50,397	)		(31,581	)
Balance as of June 30, 2025		111,732			101,956			55,866

There were 93,759 Equity DSUs granted to directors that were vested but not settled as of June 30, 2025.

Note 9. Net Loss Per Common Share

The reconciliation of basic and diluted net loss per common share for the three and six months ended June 30, 2025 and 2024 was as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2025			2024			2025			2024
Net loss
Basic and diluted	$	(86,071	)	$	(67,586	)	$	(108,410	)	$	(84,289	)

Net loss per common share
Basic	$	(1.29	)	$	(1.01	)	$	(1.62	)	$	(1.26	)
Diluted	$	(1.29	)	$	(1.01	)	$	(1.62	)	$	(1.26	)

Weighted average number of common shares outstanding:
Basic (a)		66,914,282			66,816,843			66,903,741			66,729,416
Diluted		66,914,282			66,816,843			66,903,741			66,729,416

(a)

For the three and six months ended June 30, 2025, the weighted average number of common shares outstanding excludes 111,732 restricted shares which have been issued, but have not vested as of June 30, 2025 (2024 – 21,054 restricted shares) and includes vested Equity DSUs.

FORM 10-Q

QUARTERLY REPORT - PAGE 13

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands of U.S. dollars, except share and per share data)

The calculation of diluted net loss per common share does not assume the exercise of any instruments that would have an anti-dilutive effect on net loss per common share. Non-vested instruments excluded from the calculation of net loss per common share because they were anti-dilutive for the three and six months ended June 30, 2025 and 2024 were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
PSUs		5,169,040		4,828,019		5,169,040		4,828,019
Restricted shares		111,732		21,054		111,732		21,054
Equity DSUs		101,956		93,760		101,956		93,760

Note 10. Accumulated Other Comprehensive Loss

The change in the accumulated other comprehensive loss by component (net of tax) for the three and six months ended June 30, 2025 and 2024 was as follows:


	Foreign Currency Translation Adjustments			Defined Benefit Pension and Other Post-Retirement Benefit Items		Total
Three Months Ended June 30:
Balance as of March 31, 2025	$	(215,660	)	$	18,966	$	(196,694	)
Other comprehensive income before reclassifications

Number of PSUs

Balance as of January 1, 2025

(1,452,061

Balance as of June 30, 2025

MERCER INTERNATIONAL INC. 10-Q