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Methanex Reports Lower Earnings in the First Quarter of 2015; Methanol Prices Strengthening

April 29, 2015

VANCOUVER, BRITISH COLUMBIA--(Marketwired - April 29, 2015) - For the first quarter of 2015, Methanex (TSX:MX)(NASDAQ:MEOH) reported Adjusted EBITDA1 of $97 million and Adjusted net income1 of $21 million ($0.23 per share on a diluted basis1). This compares with Adjusted EBITDA1 of $150 million and Adjusted net income1 of $80 million ($0.85 per share on a diluted basis1) for the fourth quarter of 2014.

John Floren, President and CEO of Methanex commented, "Our first quarter earnings reflect lower average realized methanol pricing compared to the fourth quarter of 2014. Early in the quarter, a continuing decline in energy prices as well as seasonally lower demand into chemical applications resulted in further downward pressure on methanol prices. We have subsequently seen methanol prices strengthen primarily as a result of tightening industry supply and higher energy and related product prices. Higher energy prices have raised the affordability for methanol into energy applications and boosted methanol demand, particularly for olefins production."

Mr. Floren continued, "The decline in earnings versus Q4 was also attributable to lower than expected produced product sales volume resulting from unplanned outages at our New Zealand and Egypt sites. Our Egypt facility was not in production for most of the quarter and remains offline due to gas restrictions. Certain one-time items also impacted earnings this quarter, including a make-whole payment related to the early retirement of a bond due in August 2015 and foreign exchange losses, which we expect will be offset by lower finance and operating costs in future quarters."

Mr. Floren added, "After the successful start-up at the end of January, our Geismar 1 plant has operated at full rates. The plant produced 180,000 tonnes in the first quarter of 2015 and we expect to see the full impact of this additional production in our second quarter results. We continue to make excellent progress on the construction of our one million tonne Geismar 2 plant, and remain on target for methanol production in late Q1 2016."

"During the quarter, we returned over $70 million in cash to shareholders in the form of dividends and share repurchases. We also recalled and repaid early our $150 million bond which was due in August, 2015. We announced today that our Board of Directors has approved a new 5% normal course issuer bid share repurchase program, along with a 10% increase in our quarterly dividend. With cash on hand, an undrawn credit facility, robust balance sheet, and strong future cash flow generation capability, we are well positioned to meet our financial commitments, invest to grow the Company and return excess cash to shareholders."

A conference call is scheduled for April 30, 2015 at 12:00 noon ET (9:00 am PT) to review these first quarter results. To access the call, dial the conferencing operator ten minutes prior to the start of the call at (416) 340-8530, or toll free at (800) 769-8320. A playback version of the conference call will be available until May 21, 2015 at (905) 694-9451, or toll free at (800) 408-3053. The passcode for the playback version is 7387008. Presentation slides summarizing the Q1 2015 results and a simultaneous audio-only webcast of the conference call can be accessed from our website at www.methanex.com. The webcast will be available on the website for three weeks following the call.

Methanex is a Vancouver-based, publicly traded company and is the world's largest producer and supplier of methanol to major international markets. Methanex shares are listed for trading on the Toronto Stock Exchange in Canada under the trading symbol "MX" and on the NASDAQ Global Market in the United States under the trading symbol "MEOH".

FORWARD-LOOKING INFORMATION WARNING

This first quarter 2015 press release contains forward-looking statements with respect to us and the chemical industry. Refer to Forward-Looking Information Warning in the attached first quarter 2015 Management's Discussion and Analysis for more information.

1 Adjusted EBITDA, Adjusted net income and Adjusted net income per common share are non-GAAP measures which do not have any standardized meaning prescribed by GAAP. These measures represent the amounts that are attributable to Methanex Corporation shareholders and are calculated by excluding the mark-to-market impact of share-based compensation as a result of changes in our share price and the impact of certain items associated with specific identified events. Refer to the Additional Information - Supplemental Non-GAAP Measures section of the attached Interim Report for the three months ended March 31, 2015 for reconciliations to the most comparable GAAP measures.

Interim Report for the Three Months Ended March 31, 2015

Share Information

Methanex Corporation's common shares are listed for trading on the Toronto Stock Exchange under the symbol MX and on the Nasdaq Global Market under the symbol MEOH.

Transfer Agents & Registrars
CST Trust Company
320 Bay Street
Toronto, Ontario Canada M5H 4A6
Toll free in North America: 1-800-387-0825

Investor Information

All financial reports, news releases and corporate information can be accessed on our website at www.methanex.com.

Contact Information
Methanex Investor Relations
1800 - 200 Burrard Street
Vancouver, BC Canada V6C 3M1
E-mail: invest@methanex.com
Methanex Toll-Free: 1-800-661-8851

At April 29, 2015 the Company had 91,082,312 common shares issued and outstanding and stock options exercisable for 1,844,289 additional common shares.

FIRST QUARTER MANAGEMENT'S DISCUSSION AND ANALYSIS

Except where otherwise noted, all currency amounts are stated in United States dollars.

FINANCIAL AND OPERATIONAL HIGHLIGHTS

  • A reconciliation from net income attributable to Methanex shareholders to Adjusted net income1 and the calculation of Adjusted net income per common share1 is as follows:
Three Months Ended
($ millions except number of shares and per share amounts) Mar 31
2015
Dec 31
2014
Mar 31
2014
Net income attributable to Methanex shareholders $ 9 $ 133 $ 145
Mark-to-market impact of share-based compensation, net of tax 12 (53 ) 15
Adjusted net income 1 $ 21 $ 80 $ 160
Diluted weighted average shares outstanding (millions) 92 94 97
Adjusted net income per common share 1 $ 0.23 $ 0.85 $ 1.65
  • We recorded Adjusted EBITDA1 of $97 million for the first quarter of 2015 compared with $150 million for the fourth quarter of 2014. The decrease in Adjusted EBITDA1 was primarily due to a decrease in our average realized price to $337 per tonne for the first quarter of 2015 from $390 per tonne for the fourth quarter of 2014.
  • Production for the first quarter of 2015 was 1,264,000 tonnes compared with 1,207,000 tonnes for the fourth quarter of 2014. Refer to the Production Summary section.
  • Sales of Methanex-produced methanol were 1,237,000 tonnes in the first quarter of 2015 compared with 1,249,000 in the fourth quarter of 2014.
  • Earnings during the quarter were negatively impacted by $9 million in foreign exchange losses recorded on our non-U.S. dollar net working capital due to the strengthening US dollar, approximately $3 million in finance costs related to the prepayment of a $150 million bond originally due in August 2015 and increased costs and lost margin associated with production outages.
  • The Geismar 1 facility had a successful start-up in late January 2015 and has since operated at full rates, producing 180,000 tonnes. The first methanol deliveries from Geismar 1 began in early March. We are targeting to produce methanol from Geismar 2 in late Q1 2016.
  • During the first quarter of 2015 we paid a $0.25 per share dividend to shareholders for a total of $23 million.
  • During the first quarter of 2015, we continued to repurchase common shares under a normal course issuer bid which expires on May 5, 2015. We repurchased 5.3 million shares under this bid to March 31, 2015 and 5.7 million shares to April 29, 2015.
  • We announced today that the Board of Directors has approved a new 5% normal course issuer bid under which the Company may repurchase up to 4.6 million common shares, representing approximately 5% of the shares issued and outstanding as at April 29, 2015.
  • We also announced today that the Board of Directors has approved a 10% increase to our quarterly dividend to shareholders, from US$0.25 per share to US$0.275 per share.

1 These items are non-GAAP measures that do not have any standardized meaning prescribed by GAAP and therefore are unlikely to be comparable to similar measures presented by other companies. Refer to the Additional Information - Supplemental Non-GAAP Measures section for a description of each non-GAAP measure and reconciliations to the most comparable GAAP measures.

This First Quarter 2015 Management's Discussion and Analysis ("MD&A") dated April 29, 2015 for Methanex Corporation ("the Company") should be read in conjunction with the Company's condensed consolidated interim financial statements for the three month period ended March 31, 2015 as well as the 2014 Annual Consolidated Financial Statements and MD&A included in the Methanex 2014 Annual Report. Unless otherwise indicated, the financial information presented in this interim report is prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The Methanex 2014 Annual Report and additional information relating to Methanex is available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

FINANCIAL AND OPERATIONAL DATA

Three Months Ended
($ millions, except per share amounts and where noted) Mar 31
2015
Dec 31
2014
Mar 31
2014
Production (thousands of tonnes) (attributable to Methanex shareholders) 1,264 1,207 1,226
Sales volume (thousands of tonnes):
Methanex-produced methanol (attributable to Methanex shareholders) 1,237 1,249 1,228
Purchased methanol 652 694 654
Commission sales 185 248 296
Total sales volume 1 2,074 2,191 2,178
Methanex average non-discounted posted price ($ per tonne) 2 382 453 613
Average realized price ($ per tonne) 3 337 390 524
Adjusted revenue (attributable to Methanex shareholders) 4 625 744 966
Adjusted EBITDA (attributable to Methanex shareholders) 4 97 150 255
Cash flows from operating activities 37 211 179
Adjusted net income (attributable to Methanex shareholders) 4 21 80 160
Net income attributable to Methanex shareholders 9 133 145
Adjusted net income per common share (attributable to
Methanex shareholders) 4 0.23 0.85 1.65
Basic net income per common share (attributable to Methanex shareholders) 0.09 1.43 1.51
Diluted net income per common share (attributable to Methanex shareholders) 0.09 1.11 1.50
Common share information (millions of shares):
Weighted average number of common shares 92 93 96
Diluted weighted average number of common shares 92 94 97
Number of common shares outstanding, end of period 91 92 97
1 Methanex-produced methanol includes volume produced by Chile using natural gas supplied from Argentina under a tolling arrangement ("Tolling Volume"). For the 1st quarter of 2015, Tolling Volume was 40,000 tonnes. Commission sales represent volume marketed on a commission basis related to 36.9% of the Atlas methanol facility and the portion of the Egypt methanol facility that we do not own.
2 Methanex average non-discounted posted price represents the average of our non-discounted posted prices in North America, Europe and Asia Pacific weighted by sales volume. Current and historical pricing information is available at http://www.methanex.com/.
3 Average realized price is calculated as revenue, excluding commissions earned and the Egypt non-controlling interest share of revenue but including an amount representing our share of Atlas revenue, divided by the total sales volume of Methanex-produced (attributable to Methanex shareholders) and purchased methanol but excluding Tolling Volume.
4 These items are non-GAAP measures that do not have any standardized meaning prescribed by GAAP and therefore are unlikely to be comparable to similar measures presented by other companies. Refer to the Additional Information - Supplemental Non-GAAP Measures section for a description of each non-GAAP measure and reconciliations to the most comparable GAAP measures.
PRODUCTION SUMMARY
Q1 2015 Q4 2014 Q1 2014
(thousands of tonnes) Operating
Capacity
1
Production Production Production
New Zealand 2 608 481 542 500
Atlas (Trinidad) (63.1% interest) 281 209 233 249
Titan (Trinidad) 218 186 127 149
Geismar 1 and 2 (Louisiana, USA)3 250 180 - -
Egypt (50% interest) 158 8 128 139
Medicine Hat (Canada) 140 127 115 122
Chile I and IV 100 73 62 67
1,755 1,264 1,207 1,226
1 Operating capacity includes only those facilities which are currently capable of operating, assuming access to natural gas feedstock and excludes any portion of an asset that is underutilized due to a lack of natural gas feedstock over a prolonged period of time. Our current annual operating capacity is 7.0 million tonnes, including 0.4 million tonnes related to our Chile operations. The operating capacity of our production facilities may be higher than original nameplate capacity as, over time, these figures have been adjusted to reflect ongoing operating efficiencies at these facilities. Actual production for a facility in any given year may be higher or lower than operating capacity due to a number of factors, including natural gas composition or the age of the facility's catalyst.
2 The operating capacity of New Zealand represents the two Motunui facilities and the Waitara Valley facility (refer to New Zealand section below).
3 We commenced methanol production from Geismar 1 during the first quarter of 2015. The Geismar 2 facility is currently under construction and will contribute one million tonnes annually to operating capacity once complete.

New Zealand

Our New Zealand methanol facilities produced 481,000 tonnes of methanol in the first quarter of 2015 compared with 542,000 tonnes in the fourth quarter of 2014. Mechanical issues at Waitara Valley and one of our two Motunui facilities resulted in lost production of approximately 80,000 tonnes during the first quarter of 2015. The New Zealand facilities are capable of producing up to 2.4 million tonnes annually, depending on natural gas composition.

Trinidad

In Trinidad, we own 100% of the Titan facility with an annual production capacity of 875,000 tonnes and have a 63.1% interest in the Atlas facility with an annual production capacity of 1,125,000 tonnes (63.1% interest). Production in Trinidad during the quarter was impacted by gas curtailments at both plants. The Titan facility produced 186,000 tonnes in the first quarter of 2015 compared with 127,000 tonnes in the fourth quarter of 2014. The Atlas facility produced 209,000 tonnes (63.1% interest) in the first quarter of 2015 compared with 233,000 tonnes (63.1% interest) in the fourth quarter of 2014. The Atlas facility also experienced an eleven day outage during the first quarter of 2015 due to a mechanical issue.

We continue to experience some natural gas curtailments to our Trinidad facilities due to a mismatch between upstream commitments to supply the Natural Gas Company of Trinidad and Tobago (NGC) and downstream demand from NGC's customers including Atlas and Titan, which becomes apparent when an upstream supplier has a technical issue or planned maintenance that reduces gas delivery. We are engaged with key stakeholders to find a solution to this issue, but in the meantime expect to continue to experience gas curtailments to the Trinidad site.

Egypt

On a 100% basis, the Egypt methanol facility produced 16,000 tonnes in the first quarter of 2015 (Methanex share of 8,000 tonnes) compared with 256,000 tonnes (Methanex share of 128,000 tonnes) in the fourth quarter of 2014. The Egypt facility did not operate for most of the first quarter of 2015 primarily due to gas curtailments. During the quarter, there was also a mechanical issue.

The Egypt facility has experienced periodic natural gas supply restrictions since mid-2012. Gas restrictions became more significant in 2014. In the first quarter of 2015 we operated the plant for 6 days and have not operated in April 2015. Based on the best information we have available we expect that, in the short term, the plant will operate at reduced rates on an intermittent basis when gas is available and that we will be required to shut down during the summer months when electricity demand is at its peak. We cannot predict when the gas supply situation will improve, but are optimistic that recent developments for upstream gas supply in Egypt will result in improved gas deliveries in the medium term.

Medicine Hat, Canada

During the first quarter of 2015, we produced 127,000 tonnes at our Medicine Hat facility compared with 115,000 tonnes during the fourth quarter of 2014. Production from the Medicine Hat facility was lower than operating capacity during the first quarter of 2015 due to continuing production constraints. The facility is expected to remain constrained until a planned 2015 refurbishment is completed.

Chile

During the first quarter of 2015, we produced 73,000 tonnes in Chile operating the facility, supported by natural gas supplies from both Chile and Argentina through a tolling arrangement.

The future of our Chile operations is primarily dependent on the level of natural gas exploration and development in southern Chile and our ability to secure a sustainable natural gas supply to our facilities on economic terms from Chile and Argentina.

Geismar, United States

In late January 2015, the Geismar 1 plant commenced production and since start up has been operating at full rates, producing 180,000 tonnes during the first quarter of 2015 with the first shipments to customers commencing in early March. We continue to make excellent progress on the construction of Geismar 2 and we are targeting to be producing methanol in late Q1 2016. Once complete, the Geismar 2 facility will add approximately one million incremental tonnes to our annual operating capacity.

FINANCIAL RESULTS

For the first quarter of 2015 we recorded Adjusted EBITDA of $97 million and Adjusted net income of $21 million ($0.23 per share on a diluted basis). This compares with Adjusted EBITDA of $150 million and Adjusted net income of $80 million ($0.85 per share on a diluted basis) for the fourth quarter of 2014.

For the first quarter of 2015, we reported net income attributable to Methanex shareholders of $9 million ($0.09 per share on a diluted basis) compared with net income attributable to Methanex shareholders for the fourth quarter of 2014 of $133 million ($1.11 income per share on a diluted basis).

We calculate Adjusted EBITDA and Adjusted net income by including amounts related to our equity share of the Atlas (63.1% interest) and Egypt (50% interest) facilities and by excluding the mark-to-market impact of share-based compensation as a result of changes in our share price and the impact of certain items associated with specific identified events. Refer to the Additional Information - Supplemental Non-GAAP Measures section for a further discussion on how we calculate these measures. Our analysis of depreciation and amortization, finance costs, finance income and other expenses and income taxes is consistent with the presentation of our consolidated statements of income and excludes amounts related to Atlas.

A reconciliation from net income attributable to Methanex shareholders to Adjusted net income and the calculation of Adjusted net income per common share is as follows:

Three Months Ended
($ millions except number of shares and per share amounts) Mar 31
2015
Dec 31
2014
Mar 31
2014
Net income attributable to Methanex shareholders $ 9 $ 133 $ 145
Mark-to-market impact of share-based compensation, net of tax 12 (53 ) 15
Adjusted net income 1 $ 21 $ 80 $ 160
Diluted weighted average shares outstanding (millions) 92 94 97
Adjusted net income per common share 1 $ 0.23 $ 0.85 $ 1.65
1 These items are non-GAAP measures that do not have any standardized meaning prescribed by GAAP and therefore are unlikely to be comparable to similar measures presented by other companies. Refer to the Additional Information - Supplemental Non-GAAP Measures section for a description of each non-GAAP measure and reconciliations to the most comparable GAAP measures.

We review our financial results by analyzing changes in Adjusted EBITDA, mark-to-market impact of share-based compensation, depreciation and amortization, finance costs, finance income and other expenses and income taxes. A summary of our consolidated statements of income is as follows:

Three Months Ended
($ millions) Mar 31
2015
Dec 31
2014
Mar 31
2014
Consolidated statements of income:
Revenue $ 577 $ 733 $ 968
Cost of sales and operating expenses (502 ) (510 ) (710 )
Mark-to-market impact of share-based compensation 14 (64 ) 18
Adjusted EBITDA (attributable to associate) 22 9 17
Amounts excluded from Adjusted EBITDA attributable to non-controlling interests (14 ) (18 ) (38 )
Adjusted EBITDA (attributable to Methanex shareholders) 1 97 150 255
Mark-to-market impact of share-based compensation (14 ) 64 (18 )
Depreciation and amortization (47 ) (36 ) (35 )
Finance costs (21 ) (9 ) (11 )
Finance income and other expenses (9 ) (3 ) -
Income tax (recovery) expense 5 (38 ) (52 )
Earnings of associate adjustment 2 (12 ) (6 ) (9 )
Non-controlling interests adjustment 2 10 11 15
Net income attributable to Methanex shareholders $ 9 $ 133 $ 145
Net income $ 13 $ 140 $ 168
1 This item is a non-GAAP measure that does not have any standardized meaning prescribed by GAAP and therefore is unlikely to be comparable to similar measures presented by other companies. Refer to the Additional Information - Supplemental Non-GAAP Measures section for a description of the non-GAAP measure and reconciliation to the most comparable GAAP measure.
2 These adjustments represent depreciation and amortization, finance costs, finance income and other expenses and income taxes associated with our 63.1% interest in the Atlas methanol facility and the non-controlling interests.

Adjusted EBITDA (attributable to Methanex shareholders)

Our operations consist of a single operating segment - the production and sale of methanol. We review the results of operations by analyzing changes in the components of Adjusted EBITDA. For a discussion of the definitions used in our Adjusted EBITDA analysis, refer to the How We Analyze Our Business section.

The changes in Adjusted EBITDA resulted from changes in the following:

($ millions) Q1 2015
compared with
Q4 2014
Q1 2015
compared with
Q1 2014
Average realized price $ (97 ) $ (346 )
Sales volume (8 ) 1
Total cash costs 52 187
Decrease in Adjusted EBITDA $ (53 ) $ (158 )

Average realized price

Three Months Ended
($ per tonne) Mar 31
2015
Dec 31
2014
Mar 31
2014
Methanex average non-discounted posted price 382 453 613
Methanex average realized price 337 390 524

Methanex's average realized price for the first quarter of 2015 was lower compared to the fourth quarter of 2014. Non-discounted posted prices moved lower early in the quarter, pressured primarily by lower oil prices which lowered the affordability for the use of methanol into certain energy applications. Posted prices stabilized later in the quarter, increasing in Asia Pacific (refer to the Supply/Demand Fundamentals section for more information). Our average non-discounted posted price for the first quarter of 2015 was $382 per tonne compared with $453 per tonne for the fourth quarter of 2014 and $613 per tonne for the first quarter of 2014. Our average realized price for the first quarter of 2015 was $337 per tonne compared with $390 per tonne for the fourth quarter of 2014 and $524 per tonne for the first quarter of 2014. The weighted average discount realized in the first quarter of 2015 was lower than in the fourth quarter of 2014 as a result of stabilizing prices. The change in average realized price for the first quarter of 2015 decreased Adjusted EBITDA by $97 million compared with the fourth quarter of 2014 and decreased Adjusted EBITDA by $346 million compared with the first quarter of 2014.

Sales volume

Methanol sales volume excluding commission sales volume was lower in the first quarter of 2015 compared with the fourth quarter of 2014 by 54,000 tonnes and higher compared with the first quarter of 2014 by 7,000 tonnes. Lower methanol sales volume excluding commission sales volume in the first quarter of 2015 compared with the fourth quarter of 2014 decreased Adjusted EBITDA by $8 million.

Total cash costs

The primary drivers of changes in our total cash costs are changes in the cost of methanol we produce at our facilities (Methanex-produced methanol) and changes in the cost of methanol we purchase from others (purchased methanol). All of our production facilities except Medicine Hat are underpinned by natural gas purchase agreements with pricing terms that include base and variable price components linked to the price of methanol. We supplement our production with methanol produced by others through methanol offtake contracts and purchases on the spot market to meet customer needs and support our marketing efforts within the major global markets.

We have adopted the first-in, first-out method of accounting for inventories and it generally takes between 30 and 60 days to sell the methanol we produce or purchase. Accordingly, the changes in Adjusted EBITDA as a result of changes in Methanex-produced and purchased methanol costs primarily depend on changes in methanol pricing and the timing of inventory flows.

In a rising price environment, our margins at a given price are higher than in a stable price environment as a result of timing of methanol purchases and production versus sales. Conversely, the opposite applies when methanol prices are decreasing.

The impact on Adjusted EBITDA from changes in our cash costs are explained below:

($ millions) Q1 2015
compared with
Q4 2014
Q1 2015
compared with
Q1 2014
Methanex-produced methanol costs $ 12 $ 61
Proportion of Methanex-produced methanol sales 3 -
Purchased methanol costs 37 121
Other, net - 5
Increase in Adjusted EBITDA $ 52 $ 187

Methanex-produced methanol costs

We purchase natural gas for the New Zealand, Trinidad, Geismar, Egypt and Chile methanol facilities under natural gas purchase agreements where the unique terms of each contract include a base price and a variable price component linked to the price of methanol. This reduces our commodity price risk exposure. The variable price component of each gas contract is adjusted by a formula related to methanol prices above a certain level. For the first quarter of 2015 compared with the fourth quarter of 2014 and with the first quarter of 2014, Methanex-produced methanol costs were lower by $12 million and $61 million, respectively, primarily due to the impact of lower realized methanol prices on the variable portion of our natural gas costs, timing of inventory flows, and changes in the mix of production sold from inventory. Our Titan gas contract expired at the end of 2014 and we have agreed to extend the contract for a further five years. The Titan gas costs have increased as a result of the renewal terms.

Proportion of Methanex-produced methanol sales

The cost of purchased methanol is directly linked to the selling price for methanol at the time of purchase and the cost of purchased methanol is generally higher than the cost of Methanex-produced methanol. Accordingly, an increase in the proportion of Methanex-produced methanol sales results in a decrease in our overall cost structure for a given period. For the first quarter of 2015 compared with the fourth quarter of 2014, a higher proportion of Methanex-produced methanol sales increased Adjusted EBITDA by $3 million.

Purchased methanol costs

Changes in purchased methanol costs for all periods presented are primarily as a result of changes in methanol pricing.

Other, net

For the three month period ended March 31, 2015 compared to the three month periods ended December 31, 2014 and March 31, 2014, other costs were lower by nil and $5 million, respectively. The change in other, net for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 primarily relates to lower logistics costs.

Mark-to-Market Impact of Share-based Compensation

We grant share-based awards as an element of compensation. Share-based awards granted include stock options, share appreciation rights, tandem share appreciation rights, deferred share units, restricted share units and performance share units. For all the share-based awards, share-based compensation is recognized over the related vesting period for the proportion of the service that has been rendered at each reporting date. Share-based compensation includes an amount related to the grant-date value and a mark-to-market impact as a result of subsequent changes in the fair value of the share-based awards primarily driven by the Company's share price. The grant-date value amount is included in Adjusted EBITDA and Adjusted net income. The mark-to-market impact of share-based compensation as a result of changes in our share price is excluded from Adjusted EBITDA and Adjusted net income and analyzed separately.

Three Months Ended
($ millions except share price) Mar 31
2015
Dec 31
2014
Mar 31
2014
Methanex Corporation share price 1 $ 53.57 $ 45.83 $ 63.94
Grant-date fair value expense included in Adjusted EBITDA and Adjusted net income 8 3 7
Mark-to-market impact due to change in share price 14 (64 ) 18
Total share-based compensation expense (recovery), before tax $ 22 $ (61 ) $ 25
1 US dollar share price of Methanex Corporation as quoted on NASDAQ Global Market on the last trading day of the respective period.

The Methanex Corporation share price increased from US $45.83 per share at December 31, 2014 to US $53.57 per share at March 31, 2015. As a result of this increase, we recorded a $14 million mark-to-market expense on share-based compensation in the first quarter of 2015 compared with a $64 million mark-to-market recovery in the fourth quarter of 2014 and an $18 million expense in the first quarter of 2014.

Depreciation and Amortization

Depreciation and amortization was $48 million for the first quarter of 2015 compared with $36 million for the fourth quarter of 2014 and $35 million for the first quarter of 2014. Depreciation and amortization was higher in the first quarter of 2015 compared with the fourth quarter of 2014 and the first quarter of 2014 primarily due to higher unabsorbed depreciation recognized for production sites impacted by natural gas restrictions and production outages and the commencement of depreciation associated with the start up of our Geismar 1 facility during the first quarter of 2015.

Finance Costs

Three Months Ended
($ millions) Mar 31
2015
Dec 31
2014
Mar 31
2014
Finance costs before capitalized interest $ 27 $ 19 $ 16
Less capitalized interest (6 ) (10 ) (5 )
Finance costs $ 21 $ 9 $ 11

Finance costs before capitalized interest primarily relate to interest expense on the unsecured notes, limited recourse debt facilities, and finance leases. Finance costs were higher during the first quarter of 2015 compared with the fourth quarter of 2014 due to a $3 million make-whole payment in conjunction with the early repayment of $150 million of senior notes with a maturity date of August 2015, approximately $4 million additional interest on bonds that were issued late in the fourth quarter of 2014, as well as an increase in finance costs related to leased assets that were put into use on the start up of our Geismar 1 facility. Capitalized interest relates to interest costs capitalized for the Geismar project. The Geismar 1 facility commenced production during the first quarter of 2015 and accordingly, we ceased capitalizing interest costs related to Geismar 1 from the date that the facility commenced commercial operations.

Finance Income and Other Expenses

Three Months Ended
($ millions) Mar 31
2015
Dec 31
2014
Mar 31
2014
Finance income and other expenses $ (9 ) $ (3 ) $ -

The change in finance income and other expenses for all periods presented was primarily due to the impact of changes in foreign exchange rates. The U.S. dollar was significantly stronger against most major currencies during the first quarter of 2015 compared to the fourth quarter of 2014 and the first quarter of 2014. This resulted in higher foreign exchange losses on the translation of non-U.S. dollar denominated net working capital, primarily in Canada and Europe. The stronger U.S. dollar has an offsetting positive impact on earnings due to operating costs incurred in currencies other than the U.S. dollar, principally the Canadian dollar, the Chilean peso, the Trinidad and Tobago dollar, the New Zealand dollar, the euro, the Egyptian pound and the Chinese yuan.

Income Taxes

A summary of our income taxes for the first quarter of 2015 compared with the fourth quarter of 2014 is as follows:

Three Months Ended
March 31, 2015
Three Months Ended
December 31, 2014
($ millions, except where noted) Net Income Adjusted Net
Income
1
Net Income Adjusted Net
Income 1
Amount before income tax $ 8 $ 24 $ 179 $ 103
Income tax recovery (expense) 5 (3 ) (38 ) (23 )
$ 13 $ 21 $ 141 $ 80
Effective tax rate -73% 11% 21% 23%
1 This item is a non-GAAP measure that does not have any standardized meaning prescribed by GAAP and therefore is unlikely to be comparable to similar measures presented by other companies. Refer to the Additional Information - Supplemental Non-GAAP Measures section for a description of the non-GAAP measure and reconciliation to the most comparable GAAP measure.

We earn the majority of our earnings in Trinidad, Chile, Canada, New Zealand, the United States and Egypt. In Trinidad and Chile, the statutory tax rate is 35%. The statutory rates in Canada and New Zealand are 26% and 28%, respectively. The United States statutory tax rate is 36% and the Egypt statutory tax rate is 30%. As the Atlas entity is accounted for using the equity method, any income taxes related to Atlas are included in earnings of associate and therefore excluded from total income taxes. The effective tax rate differs from period to period depending on the source of earnings.

For the first quarter of 2015, the effective tax rate based on adjusted net income was 11% compared with 23% for the fourth quarter of 2014. Adjusted net income represents the amount that is attributable to Methanex shareholders and excludes the mark-to-market impact of share-based compensation and the impact of certain items associated with specific identified events.

SUPPLY/DEMAND FUNDAMENTALS

Entering the second quarter of 2015, we estimate that methanol demand, excluding methanol demand from integrated methanol to olefins facilities, is approximately 60 million tonnes on an annualized basis.

Methanex Non-Discounted Regional Posted Prices 1
(US$ per tonne) Apr
2015
Mar
2015
Feb
2015
Jan
2015
United States 416 416 416 449
Europe 2 400 400 400 420
Asia Pacific 365 330 315 355
1 Discounts from our posted prices are offered to customers based on various factors.
2 EUR365 for Q2 2015 (March 2015 - EUR339) converted to United States dollars.

Our average realized price in the first quarter of 2015 declined to $337 per tonne from $390 per tonne achieved in the fourth quarter of 2014. Contract pricing continued to move lower in the first two months of the quarter. Oil pricing also continued to decline through January, lowering the affordability for the use of methanol into certain energy applications (notably DME, methanol-to-gasoline, and methanol-to-propylene), and this put downward pressure on methanol pricing. However, methanol prices moved higher later in the quarter, most notably in China, aided by stronger oil and related product pricing, including ethylene, propylene and LPG. At the end of Q1 2015, China spot pricing was approximately $80 per tonne higher than its January low and has continued to move higher into April 2015. A somewhat tighter supply environment due to plant outages in North America and Asia has also contributed to the upward movement in methanol pricing. For the month of April, we rolled our North America contract price at $416 per tonne, and increased our Asia Pacific contract price by $35 to $365 per tonne. We also increased our European contract price from EUR339 to EUR365 per tonne. We recently announced increases in our May contract prices up $26 per tonne in North America to $442 per tonne and up $25 per tonne in Asia Pacific to $390 per tonne.

We continue to see stable demand growth from chemical applications in China and the rest of the world. We estimate that traditional chemical derivatives consume about 60% of global methanol and growth is correlated to GDP and industrial production growth rates. Energy demand has continued to grow, buoyed by a recovery in oil and related product prices. There are now eight completed MTO / MTP plants in China which are dependent on merchant methanol supply, and these have the capacity to consume almost 9 million tonnes of methanol annually. There are also a number of other MTO / MTP plants at various stages of construction which are anticipated to be completed in the 2015-2016 timeframe. The future operating rates and methanol consumption from these facilities will depend on a number of factors, including pricing for their various final products. Direct methanol blending into gasoline in China has remained strong and we believe that future growth in this application is supported by numerous provincial fuel-blending standards. Fuel blending continues to gain interest outside of China with several countries currently conducting demonstration programs to test the use of methanol-blended fuels.

The methanol price will ultimately depend on the strength of the global economy, industry operating rates, global energy prices, new supply additions and the strength of global demand. Over the next few years, there is a modest level of new capacity expected to come on-stream. We have recently started up our first one million tonne Geismar 1 facility in Louisiana, and are targeting to be producing methanol from the second one million tonne Geismar 2 facility in late Q1 2016. In addition, a 1.3 million tonne Celanese plant is currently under construction in Clear Lake, Texas. OCI N.V. has also announced plans to commence construction on a 1.8 million tonne plant in Beaumont, Texas. We expect that production from new capacity in China will be consumed in that country.

LIQUIDITY AND CAPITAL RESOURCES

Cash flows from operating activities in the first quarter of 2015 decreased by $174 million to $37 million compared with $211 million for the fourth quarter of 2014 and decreased by $142 million compared to $179 million for the first quarter of 2014. The changes in cash flows from operating activities resulted from changes in the following:

($ millions) Q1 2015
compared with
Q4 2014
Q1 2015
compared with
Q1 2014
Change in Adjusted EBITDA (attributable to Methanex shareholders) $ (53 ) $ (158 )
Exclude change in Adjusted EBITDA of associate (Atlas) (13 ) (5 )
Dividends received from associate 32 32
Cash flows attributable to non-controlling interests (4 ) (24 )
Non-cash working capital (111 ) 15
Income taxes paid (12 ) (15 )
Share-based payments (15 ) 18
Other 2 (5 )
Decrease in cash flows from operating activities $ (174 ) $ (142 )

During the first quarter of 2015 we paid a quarterly dividend of $0.25 per share, or $23 million. Additionally, on April 29, 2015, the Board of Directors approved a 10% increase to our quarterly dividend to shareholders, from $0.25 to $0.275 per share per quarter.

During the first quarter of 2015, we repurchased 1.0 million shares under the normal course issuer bid that expires on May 5, 2015. We repurchased 5.3 million shares under this bid to March 31, 2015 and 5.7 million shares to April 29, 2015.

On April 29, 2015, the Board of Directors approved a new 5% normal course issuer bid under which the Company may repurchase up to 4.6 million common shares, representing approximately 5% of the shares issued and outstanding as at April 29, 2015.

We operate in a highly competitive commodity industry and believe it is appropriate to maintain a conservative balance sheet and financial flexibility. At March 31, 2015, our cash balance was $627 million, including $81 million related to the 50% non-controlling interest in Egypt. We invest our cash only in highly rated instruments that have maturities of three months or less to ensure preservation of capital and appropriate liquidity.

Our planned capital maintenance expenditure program directed towards maintenance, turnarounds and catalyst changes for existing operations is currently estimated to be $90 million to the end of 2015. The estimated remaining capital expenditures related to our Geismar project are approximately $265 million to be expended over the next 12 months.

We believe we are well positioned to meet our financial commitments, invest to grow the Company and continue to deliver on our commitment to return excess cash to shareholders.

SHORT-TERM OUTLOOK

Our posted methanol prices decreased in the first two months of 2015 and stabilized in March. A recovery in oil and other energy product prices that has continued into the second quarter has contributed to significantly higher global spot methanol prices, particularly in Asia. We increased our posted contract price in Asia by $35 per tonne in April while contract pricing in the U.S. and Europe remained relatively flat on a U.S. dollar equivalent basis. We recently announced our May contract prices for North America, up by $26 per tonne to $442 per tonne and up by a further $25 per tonne in Asia Pacific to $390 per tonne. Global methanol demand remains robust particularly for methanol into olefins production, and this, combined with a relatively tighter supply environment, is contributing to the continued recovery in methanol prices. Methanol prices will ultimately depend on the strength of the global economy, industry operating rates, global energy prices, new supply additions and the strength of global demand. We believe that our financial position and financial flexibility, outstanding global supply network and competitive-cost position will provide a sound basis for Methanex to continue to be the leader in the methanol industry and to invest to grow the Company.

CONTROLS AND PROCEDURES

For the three months ended March 31, 2015, no changes were made in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ADOPTION OF IFRS 9 "FINANCIAL INSTRUMENTS" (2014)

The Company adopted IFRS 9 "Financial Instruments" (2014) as issued in July 2014 ("IFRS 9") with a date of initial application of January 1, 2015. IFRS 9 replaces the sections of IAS 39 "Financial Instruments: Recognition and Measurement" that relate to the classification, measurement and impairment of financial instruments and hedge accounting.

IFRS 9 replaces the financial asset classes to: amortized cost, fair value through profit and loss and fair value through other comprehensive income. The classification of financial assets is dependent on the business model for managing those financial assets and the assets' contractual cash flow characteristics. This determination is made at initial recognition. As a result of adopting IFRS 9, all of the Company's financial assets as at December 31, 2014 have been reclassified from loans and receivables at amortized cost to financial assets at amortized cost. There were no changes in the carrying values of the Company's financial instruments for the reclassifications resulting from the adoption of IFRS 9. The classification and measurement guidance was adopted retrospectively in accordance with the transition provisions of IFRS 9, with no restatement of prior periods.

The Company also adopted the new hedge accounting guidance in IFRS 9. The new hedge accounting guidance replaces strict quantitative tests of effectiveness with less restrictive quantitative assessments which address how well the hedging instrument accomplishes the Company's risk management objectives for financial and non-financial risk exposures.

Upon adoption of IFRS 9, all of the Company's existing hedging relationships that qualified for hedge accounting under IAS 39 were reassessed with respect to the new hedge accounting requirements in IFRS 9. The hedging relationships have continued under IFRS 9. The hedge accounting requirements in IFRS 9 have been applied prospectively in accordance with the transition provisions of IFRS 9.

ADDITIONAL INFORMATION - SUPPLEMENTAL NON-GAAP MEASURES

In addition to providing measures prepared in accordance with International Financial Reporting Standards (IFRS), we present certain supplemental non-GAAP measures. These are Adjusted EBITDA, Adjusted net income, Adjusted net income per common share, Adjusted Revenue and operating income. These measures do not have any standardized meaning prescribed by generally accepted accounting principles (GAAP) and therefore are unlikely to be comparable to similar measures presented by other companies. These supplemental non-GAAP measures are provided to assist readers in determining our ability to generate cash from operations and improve the comparability of our results from one period to another. We believe these measures are useful in assessing operating performance and liquidity of the Company's ongoing business on an overall basis. We also believe Adjusted EBITDA is frequently used by securities analysts and investors when comparing our results with those of other companies.

Adjusted EBITDA (attributable to Methanex shareholders)

Adjusted EBITDA differs from the most comparable GAAP measure, net income attributable to Methanex shareholders, because it excludes depreciation and amortization, finance costs, finance income and other expenses, income tax expense and mark-to-market impact of share-based compensation. Adjusted EBITDA includes an amount representing our 63.1% interest in the Atlas facility and our 50% interest in the methanol facility in Egypt.

Adjusted EBITDA and Adjusted net income exclude the mark-to-market impact of share-based compensation related to the impact of changes in our share price on share appreciation rights, tandem share appreciation rights, deferred share units, restricted share units and performance share units. The mark-to-market impact related to performance share units that is excluded from Adjusted EBITDA and Adjusted net income is calculated as the difference between the grant date value determined using a Methanex total shareholder return factor of 100% and the fair value recorded at each period end. As share-based awards will be settled in future periods, the ultimate value of the units is unknown at the date of grant and therefore the grant date value recognized in Adjusted EBITDA and Adjusted net income may differ from the total settlement cost.

The following table shows a reconciliation from net income attributable to Methanex shareholders to Adjusted EBITDA:

Three Months Ended
($ millions) Mar 31
2015
Dec 31
2014
Mar 31
2014
Net income attributable to Methanex shareholders $ 9 $ 133 $ 145
Mark-to-market impact of share-based compensation 14 (64 ) 18
Depreciation and amortization 47 36 35
Finance costs 21 9 11
Finance income and other expenses 9 3 -
Income tax recovery (expense) (5 ) 38 52
Earnings of associate adjustment 1 12 6 9
Non-controlling interests adjustment 1 (10 ) (11 ) (15 )
Adjusted EBITDA (attributable to Methanex shareholders) $ 97 $ 150 $ 255
1 These adjustments represent depreciation and amortization, finance costs, finance income and other expenses and income tax expense associated with our 63.1% interest in the Atlas methanol facility and the non-controlling interests.

Adjusted Net Income and Adjusted Net Income per Common Share

Adjusted net income and Adjusted net income per common share are non-GAAP measures because they exclude the mark-to-market impact of share-based compensation and the impact of certain items associated with specific identified events. The following table shows a reconciliation of net income attributable to Methanex shareholders to Adjusted net income and the calculation of Adjusted net income per common share:

Three Months Ended
($ millions except number of shares and per share amounts) Mar 31
2015
Dec 31
2014
Mar 31
2014
Net income attributable to Methanex shareholders $ 9 $ 133 $ 145
Mark-to-market impact of share-based compensation 14 (64 ) 18
Income tax expense (recovery) related to above items (2 ) 11 (3 )
Adjusted net income $ 21 $ 80 $ 160
Diluted weighted average shares outstanding (millions) 92 94 97
Adjusted net income per common share $ 0.23 $ 0.85 $ 1.65

Adjusted Revenue (attributable to Methanex shareholders)

A reconciliation from revenue to Adjusted revenue is as follows:

Three Months Ended
($ millions) Mar 31
2015
Dec 31
2014
Mar 31
2014
Revenue $ 577 $ 733 $ 968
Methanex share of Atlas revenue 1 68 60 78
Egypt non-controlling interest share of revenue 1 (22 ) (46 ) (76 )
Other adjustments 2 (3 ) (4 )
Adjusted Revenue (attributable to Methanex shareholders) $ 625 $ 744 $ 966
1 Excludes intercompany transactions with the Company.

Operating Income

Operating income is reconciled directly to a GAAP measure in our consolidated statements of income.

QUARTERLY FINANCIAL DATA (UNAUDITED)

A summary of selected financial information for the prior eight quarters is as follows:

Three Months Ended
($ millions, except per share amounts) Mar 31
2015
Dec 31
2014
Sep 30
2014
Jun 30
2014
Revenue $ 577 $ 733 $ 730 $ 792
Adjusted EBITDA 1 2 97 150 137 160
Net income 1 9 133 52 125
Adjusted net income 1 2 21 80 66 91
Basic net income per common share 1 0.09 1.43 0.55 1.30
Diluted net income per common share 1 0.09 1.11 0.54 1.24
Adjusted net income per share 1 2 0.23 0.85 0.69 0.94
Three Months Ended
($ millions, except per share amounts) Mar 31
2014
Dec 31
2013
Sep 30
2013
Jun 30
2013
Revenue $ 968 $ 881 $ 758 $ 733
Adjusted EBITDA 1 2 255 245 184 157
Net income 1 145 128 87 54
Adjusted net income 1 2 160 167 117 99
Basic net income per common share 1 1.51 1.33 0.91 0.57
Diluted net income per common share 1 1.50 1.32 0.90 0.56
Adjusted net income per share 1 2 1.65 1.72 1.22 1.02
1 Attributable to Methanex Corporation shareholders.
2 These items are non-GAAP measures that do not have any standardized meaning prescribed by GAAP and therefore are unlikely to be comparable to similar measures presented by other companies. Refer to the Additional Information - Supplemental Non-GAAP Measures section for a description of each non-GAAP measure and reconciliations to the most comparable GAAP measures.

FORWARD-LOOKING INFORMATION WARNING

This First Quarter 2015 Management's Discussion and Analysis ("MD&A") as well as comments made during the First Quarter 2015 investor conference call contain forward-looking statements with respect to us and our industry. These statements relate to future events or our future performance. All statements other than statements of historical fact are forward-looking statements. Statements that include the words "believes," "expects," "may," "will," "should," "potential," "estimates," "anticipates," "aim," "goal" or other comparable terminology and similar statements of a future or forward-looking nature identify forward-looking statements.

More particularly and without limitation, any statements regarding the following are forward-looking statements:

  • expected demand for methanol and its derivatives,
  • expected new methanol supply or restart of idled capacity and timing for start-up of the same,
  • expected shutdowns (either temporary or permanent) or restarts of existing methanol supply (including our own facilities), including, without limitation, the timing and length of planned maintenance outages,
  • expected methanol and energy prices,
  • expected levels of methanol purchases from traders or other third parties,
  • expected levels, timing and availability of economically priced natural gas supply to each of our plants,
  • capital committed by third parties towards future natural gas exploration and development in the vicinity of our plants,
  • our expected capital expenditures,
  • anticipated operating rates of our plants,
  • expected operating costs, including natural gas feedstock costs and logistics costs,
  • expected tax rates or resolutions to tax disputes,
  • expected cash flows, earnings capability and share price,
  • availability of committed credit facilities and other financing,
  • our ability to meet covenants or obtain or continue to obtain waivers associated with our long-term debt obligations, including, without limitation, the Egypt limited recourse debt facilities that have conditions associated with the payment of cash or other distributions and the finalization of certain land title registrations and related mortgages which require actions by Egyptian governmental entities,
  • expected impact on our results of operations in Egypt or our financial condition as a consequence of civil unrest or actions taken or inaction by the Government of Egypt and its agencies,
  • our shareholder distribution strategy and anticipated distributions to shareholders,
  • commercial viability and timing of, or our ability to execute, future projects, plant restarts, capacity expansions, plant relocations, or other business initiatives or opportunities, including the completion of the Geismar project,
  • our financial strength and ability to meet future financial commitments,
  • expected global or regional economic activity (including industrial production levels),
  • expected outcomes of litigation or other disputes, claims and assessments, and
  • expected actions of governments, government agencies, gas suppliers, courts, tribunals or other third parties.

We believe that we have a reasonable basis for making such forward-looking statements. The forward-looking statements in this document are based on our experience, our perception of trends, current conditions and expected future developments as well as other factors. Certain material factors or assumptions were applied in drawing the conclusions or making the forecasts or projections that are included in these forward-looking statements, including, without limitation, future expectations and assumptions concerning the following:

  • the supply of, demand for and price of methanol, methanol derivatives, natural gas, coal, oil and oil derivatives,
  • our ability to procure natural gas feedstock on commercially acceptable terms,
  • operating rates of our facilities,
  • receipt or issuance of third-party consents or approvals, including, without limitation, governmental registrations of land title and related mortgages in Egypt and governmental approvals related to rights to purchase natural gas,
  • the establishment of new fuel standards,
  • operating costs, including natural gas feedstock and logistics costs, capital costs, tax rates, cash flows, foreign exchange rates and interest rates,
  • the availability of committed credit facilities and other financing,
  • timing of completion and cost of our Geismar project,
  • global and regional economic activity (including industrial production levels),
  • absence of a material negative impact from major natural disasters,
  • absence of a material negative impact from changes in laws or regulations,
  • absence of a material negative impact from political instability in the countries in which we operate, and
  • enforcement of contractual arrangements and ability to perform contractual obligations by customers, natural gas and other suppliers and other third parties.

However, forward-looking statements, by their nature, involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. The risks and uncertainties primarily include those attendant with producing and marketing methanol and successfully carrying out major capital expenditure projects in various jurisdictions, including, without limitation:

  • conditions in the methanol and other industries including fluctuations in the supply, demand and price for methanol and its derivatives, including demand for methanol for energy uses,
  • the price of natural gas, coal, oil and oil derivatives,
  • our ability to obtain natural gas feedstock on commercially acceptable terms to underpin current operations and future production growth opportunities,
  • the ability to carry out corporate initiatives and strategies,
  • actions of competitors, suppliers and financial institutions,
  • conditions within the natural gas delivery systems that may prevent delivery of our natural gas supply requirements,
  • our ability to meet timeline and budget targets for our Geismar project, including cost pressures arising from labour costs,
  • competing demand for natural gas, especially with respect to domestic needs for gas and electricity in Chile and Egypt,
  • actions of governments and governmental authorities, including, without limitation, the implementation of policies or other measures that could impact the supply of or demand for methanol or its derivatives,
  • changes in laws or regulations,
  • import or export restrictions, anti-dumping measures, increases in duties, taxes and government royalties, and other actions by governments that may adversely affect our operations or existing contractual arrangements,
  • world-wide economic conditions, and
  • other risks described in our 2014 Management's Discussion and Analysis and this First Quarter 2015 Management's Discussion and Analysis.

Having in mind these and other factors, investors and other readers are cautioned not to place undue reliance on forward-looking statements. They are not a substitute for the exercise of one's own due diligence and judgment. The outcomes implied by forward-looking statements may not occur and we do not undertake to update forward-looking statements except as required by applicable securities laws.

HOW WE ANALYZE OUR BUSINESS

Our operations consist of a single operating segment - the production and sale of methanol. We review our results of operations by analyzing changes in the components of Adjusted EBITDA (refer to the Additional Information - Supplemental Non-GAAP Measures section for a description of each non-GAAP measure and reconciliations to the most comparable GAAP measures).

In addition to the methanol that we produce at our facilities ("Methanex-produced methanol"), we also purchase and re-sell methanol produced by others ("purchased methanol") and we sell methanol on a commission basis. We analyze the results of all methanol sales together, excluding commission sales volume. The key drivers of changes in Adjusted EBITDA are average realized price, cash costs and sales volume which are defined and calculated as follows:

PRICE The change in Adjusted EBITDA as a result of changes in average realized price is calculated as the difference from period to period in the selling price of methanol multiplied by the current period total methanol sales volume excluding commission sales volume plus the difference from period to period in commission revenue.
CASH COST The change in Adjusted EBITDA as a result of changes in cash costs is calculated as the difference from period to period in cash costs per tonne multiplied by the current period total methanol sales volume excluding commission sales volume in the current period. The cash costs per tonne is the weighted average of the cash cost per tonne of Methanex-produced methanol and the cash cost per tonne of purchased methanol. The cash cost per tonne of Methanex-produced methanol includes absorbed fixed cash costs per tonne and variable cash costs per tonne. The cash cost per tonne of purchased methanol consists principally of the cost of methanol itself. In addition, the change in Adjusted EBITDA as a result of changes in cash costs includes the changes from period to period in unabsorbed fixed production costs, consolidated selling, general and administrative expenses and fixed storage and handling costs.
VOLUME The change in Adjusted EBITDA as a result of changes in sales volume is calculated as the difference from period to period in total methanol sales volume excluding commission sales volume multiplied by the margin per tonne for the prior period. The margin per tonne for the prior period is the weighted average margin per tonne of Methanex-produced methanol and margin per tonne of purchased methanol. The margin per tonne for Methanex-produced methanol is calculated as the selling price per tonne of methanol less absorbed fixed cash costs per tonne and variable cash costs per tonne. The margin per tonne for purchased methanol is calculated as the selling price per tonne of methanol less the cost of purchased methanol per tonne.

We own 63.1% of the Atlas methanol facility and market the remaining 36.9% of its production through a commission offtake agreement. A contractual agreement between us and our partners establishes joint control over Atlas. As a result, we account for this investment using the equity method of accounting, which results in 63.1% of the net assets and net earnings of Atlas being presented separately in the consolidated statements of financial position and consolidated statements of income, respectively. For purposes of analyzing our business, Adjusted EBITDA, Adjusted net income and Adjusted net income per common share include an amount representing our 63.1% equity share in Atlas.

We own 50% of the 1.26 million tonne per year Egypt methanol facility and market the remaining 50% of its production through a commission offtake agreement. We account for this investment using consolidation accounting, which results in 100% of the revenues and expenses being included in our financial statements with the other investors' interests in the methanol facility being presented as "non-controlling interests". For purposes of analyzing our business, Adjusted EBITDA, Adjusted net income and Adjusted net income per common share exclude the amount associated with the other investors' non-controlling interests.

Methanex Corporation

Consolidated Statements of Income (unaudited)

(thousands of U.S. dollars, except number of common shares and per share amounts)

Three Months Ended
Mar 31
2015
Mar 31
2014
Revenue $ 576,739 $ 968,478
Cost of sales and operating expenses (501,971 ) (709,687 )
Depreciation and amortization (46,957 ) (34,811 )
Operating income 27,811 223,980
Earnings of associate (note 4) 10,175 7,291
Finance costs (note 6) (21,542 ) (10,838 )
Finance income and other expenses (9,159 ) (363 )
Income before income taxes 7,285 220,070
Income tax (expense) recovery:
Current (6,107 ) (26,378 )
Deferred 11,440 (25,353 )
5,333 (51,731 )
Net income $