SEC Company Response from MERCER INTERNATIONAL INC. (MERC) (CIK 0001333274) (MERC) — Jan 4, 2019
MERCER INTERNATIONAL INC. (MERC) (CIK 0001333274)
Date: Jan. 4, 2019 · CIK: 0001333274 · Accession: 0001193125-19-002402
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 000-51826
Referenced dates: December 7, 2018
Letter
VIA EDGAR SECURITIES AND EXCHANGE COMMISSION Division of Corporation Finance Attention: Brad Skinner, Senior Assistant Chief Accountant Jennifer O’Brien, Staff Accountant Office of Natural Resources
Dear Sirs/Mesdames:
Re: Mercer International Inc. (the “Company”)
Form 10-K for the year ended December 31, 2017 (the “2017 10-K”)
Filed February 16, 2018
File No. 000-51826
We act as counsel for the Company and write in connection with the letter dated December 7, 2018 (the “Comment Letter”) from the Securities and Exchange Commission (the “Commission”) commenting on the 2017 10-K. On behalf of the Company, we provide the following response to your comments.
For your ease of reference, we have reproduced the numbering in the Comment Letter and have set out below, in italics, the text of your question followed by the Company’s response thereto.
Form 10-K for Fiscal Year Ended December 31,
Business
Cash Production Costs, page 19
1. Revise your disclosure to clearly demonstrate how cash production costs per ADMT is calculated. Your revised disclosure should reconcile total cash production costs (numerator) to amounts disclosed in your consolidated statements of operations.
Page
The Company acknowledges your comment and advises that in future filings, where cash production costs are disclosed, it will include a reconciliation of total cash production costs to the Company’s cost of sales, excluding depreciation and amortization, as presented in its consolidated financial statements. Such disclosure will be in substantially the following form:
“The following table sets forth our consolidated cash production costs and cash production costs per ADMT for our pulp segment, and a reconciliation of such amounts to cost of sales, excluding depreciation and amortization, as presented in our consolidated financial statements, are set out in the following table for the periods indicated:
Year Ended December 31,
(per ADMT )(3)
(per ADMT )(3)
(per ADMT )(3)
Fiber
$ 399,013
$
$ 376,839
$
$ 416,694
$
Labor
82,150
74,867
74,443
Chemicals
80,541
72,188
73,862
Energy
29,609
28,396
25,721
Other
116,997
77,093
85,582
Pulp segment cash production costs(1)
708,310
$
629,383
$
676,302
$
Pulp segment other direct costs(2)
78,218
71,356
76,201
Pulp segment cost of sales, excluding depreciation and amortization
786,528
700,739
752,503
Wood products segment and corporate and other cost of sales, excluding depreciation and amortization
93,130
1,136
1,020
Intercompany eliminations
(12,139 )
—
—
Cost of sales, excluding depreciation and amortization
$ 867,519
$ 701,875
$ 753,523
(1) Cash production costs exclude depreciation and amortization.
(2) Other direct costs primarily consist of freight and the net change in finished goods inventory.
(3) Cash production costs per ADMT are cash production costs divided by pulp production for the year.”
Financial Statements
Consolidated Statements of Operations, page 104
2. Explain to us how you have considered the requirement to disclose cost of sales on the face [sic] your statement of operations. See Rule 5-03(b)(2) of Regulation S-X.
Rule 5-03(b)(2) of Regulation S-X requires, among other things, separate disclosure of: “(a) costs of tangible goods sold, (b) operating expenses of public utilities or others, (c) expenses applicable to rental income, (d) cost of services, and (e) expenses applicable to other revenues.”
In the Company’s consolidated statements of operations for the year ended December 31, 2017, included in the 2017 10-K, the Company presented “Operating costs, excluding depreciation and amortization” and “Operating depreciation and amortization”. Such line items represent the costs of the tangible good sold by the Company as set forth in paragraph (a) of Rule 5-03(b)(2) of Regulation S-X. The Company respectfully submits that the disclosure in the 2017 10-K meets the requirement to disclose costs of sales on the face of the Company’s consolidated statement of operations as:
•
it views the term “operating costs” to be interchangeable with the term “cost of tangible goods sold” in terms of the nature of the costs that are classified in such line item; and
•
it does not incur the types of expenses set forth in paragraphs (b) through (e) of Rule 5-03(b)(2) of Regulation S-X.
Page
In addition, the Company advises that in future filings, it proposes to refer to “Operating costs, excluding depreciation and amortization” as “Cost of sales, excluding depreciation and amortization” and “Operating depreciation and amortization” as “Cost of sales depreciation and amortization”.
Supplemental Financial Information (Unaudited), page 138
3. The amount you have reported as gross profit appears to be operating income. Explain to us how this presentation meets the requirements of Item 302(a)(1) of Regulation S-K.
The Company has reviewed Item 302(a)(1) of Regulation S-K, which requires, among other things, disclosure of “gross profit (net sales less costs and expenses associated directly with or allocated to products sold or services rendered)”. The Company advises that the amount reported as gross profit under “Supplemental Financial Information” in the 2017 10-K was equal to operating income, which includes selling, general and administrative costs. As such costs are generally not considered to be costs directly associated with or allocated to products sold, the Company advises that in future filings it will disclose gross profit, which will be equal to operating income, less selling, general and administrative costs and any other costs and expenses that are not associated with or allocated to products sold or services rendered.
We trust the foregoing to be in order, but should you have any questions or concerns, please do not hesitate to contact the undersigned at (604) 692-3022 or Rod Talaifar of our office at (604) 692-3023.
Yours truly,
SANGRA MOLLER LLP
/s/ H.S. Sangra
Per:
H.S. Sangra
/s/ Rod Talaifar
Per:
Rod Talaifar
/s/ Jason Yick
Per:
Jason Yick
New York State Bar No. 4839049
cc. Mercer International Inc.
Attention: David K. Ure
Show Raw Text
CORRESP 1 filename1.htm CORRESP 1000 Cathedral Place Reply Attention of: 925 West Georgia Street Vancouver, British Columbia Canada V6C 3L2 Telephone: (604) 662-8808 Facsimile: (604) 669-8803 www.sangramoller.com Our File No.: 5000255 Direct Line: (604) 692-3022 Email: hsangra@sangramoller.com January 4, 2019 VIA EDGAR SECURITIES AND EXCHANGE COMMISSION Division of Corporation Finance 100 F Street, N.E. Washington, D.C. 20549 Attention: Brad Skinner, Senior Assistant Chief Accountant Jennifer O’Brien, Staff Accountant Office of Natural Resources Dear Sirs/Mesdames: Re: Mercer International Inc. (the “Company”) Form 10-K for the year ended December 31, 2017 (the “2017 10-K”) Filed February 16, 2018 File No. 000-51826 We act as counsel for the Company and write in connection with the letter dated December 7, 2018 (the “Comment Letter”) from the Securities and Exchange Commission (the “Commission”) commenting on the 2017 10-K. On behalf of the Company, we provide the following response to your comments. For your ease of reference, we have reproduced the numbering in the Comment Letter and have set out below, in italics, the text of your question followed by the Company’s response thereto. Form 10-K for Fiscal Year Ended December 31, 2017 Business Cash Production Costs, page 19 1. Revise your disclosure to clearly demonstrate how cash production costs per ADMT is calculated. Your revised disclosure should reconcile total cash production costs (numerator) to amounts disclosed in your consolidated statements of operations. Page 2 The Company acknowledges your comment and advises that in future filings, where cash production costs are disclosed, it will include a reconciliation of total cash production costs to the Company’s cost of sales, excluding depreciation and amortization, as presented in its consolidated financial statements. Such disclosure will be in substantially the following form: “The following table sets forth our consolidated cash production costs and cash production costs per ADMT for our pulp segment, and a reconciliation of such amounts to cost of sales, excluding depreciation and amortization, as presented in our consolidated financial statements, are set out in the following table for the periods indicated: Year Ended December 31, 2017 2016 2015 (per ADMT )(3) (per ADMT )(3) (per ADMT )(3) Fiber $ 399,013 $ 265 $ 376,839 $ 264 $ 416,694 $ 286 Labor 82,150 55 74,867 52 74,443 51 Chemicals 80,541 53 72,188 51 73,862 51 Energy 29,609 20 28,396 20 25,721 18 Other 116,997 78 77,093 54 85,582 59 Pulp segment cash production costs(1) 708,310 $ 471 629,383 $ 441 676,302 $ 465 Pulp segment other direct costs(2) 78,218 71,356 76,201 Pulp segment cost of sales, excluding depreciation and amortization 786,528 700,739 752,503 Wood products segment and corporate and other cost of sales, excluding depreciation and amortization 93,130 1,136 1,020 Intercompany eliminations (12,139 ) — — Cost of sales, excluding depreciation and amortization $ 867,519 $ 701,875 $ 753,523 (1) Cash production costs exclude depreciation and amortization. (2) Other direct costs primarily consist of freight and the net change in finished goods inventory. (3) Cash production costs per ADMT are cash production costs divided by pulp production for the year.” Financial Statements Consolidated Statements of Operations, page 104 2. Explain to us how you have considered the requirement to disclose cost of sales on the face [sic] your statement of operations. See Rule 5-03(b)(2) of Regulation S-X. Rule 5-03(b)(2) of Regulation S-X requires, among other things, separate disclosure of: “(a) costs of tangible goods sold, (b) operating expenses of public utilities or others, (c) expenses applicable to rental income, (d) cost of services, and (e) expenses applicable to other revenues.” In the Company’s consolidated statements of operations for the year ended December 31, 2017, included in the 2017 10-K, the Company presented “Operating costs, excluding depreciation and amortization” and “Operating depreciation and amortization”. Such line items represent the costs of the tangible good sold by the Company as set forth in paragraph (a) of Rule 5-03(b)(2) of Regulation S-X. The Company respectfully submits that the disclosure in the 2017 10-K meets the requirement to disclose costs of sales on the face of the Company’s consolidated statement of operations as: • it views the term “operating costs” to be interchangeable with the term “cost of tangible goods sold” in terms of the nature of the costs that are classified in such line item; and • it does not incur the types of expenses set forth in paragraphs (b) through (e) of Rule 5-03(b)(2) of Regulation S-X. Page 3 In addition, the Company advises that in future filings, it proposes to refer to “Operating costs, excluding depreciation and amortization” as “Cost of sales, excluding depreciation and amortization” and “Operating depreciation and amortization” as “Cost of sales depreciation and amortization”. Supplemental Financial Information (Unaudited), page 138 3. The amount you have reported as gross profit appears to be operating income. Explain to us how this presentation meets the requirements of Item 302(a)(1) of Regulation S-K. The Company has reviewed Item 302(a)(1) of Regulation S-K, which requires, among other things, disclosure of “gross profit (net sales less costs and expenses associated directly with or allocated to products sold or services rendered)”. The Company advises that the amount reported as gross profit under “Supplemental Financial Information” in the 2017 10-K was equal to operating income, which includes selling, general and administrative costs. As such costs are generally not considered to be costs directly associated with or allocated to products sold, the Company advises that in future filings it will disclose gross profit, which will be equal to operating income, less selling, general and administrative costs and any other costs and expenses that are not associated with or allocated to products sold or services rendered. We trust the foregoing to be in order, but should you have any questions or concerns, please do not hesitate to contact the undersigned at (604) 692-3022 or Rod Talaifar of our office at (604) 692-3023. Yours truly, SANGRA MOLLER LLP /s/ H.S. Sangra Per: H.S. Sangra /s/ Rod Talaifar Per: Rod Talaifar /s/ Jason Yick Per: Jason Yick New York State Bar No. 4839049 cc. Mercer International Inc. Attention: David K. Ure