EX-99.1 2 c07535exv99w1.htm EXHIBIT 99.1 Exhibit 99.1
Exhibit 99.1
(MERCER LOGO)
For Immediate Release
MERCER INTERNATIONAL INC. REPORTS RECORD 2010 THIRD QUARTER
OPERATING EBITDA OF 65.5 MILLION ($84.7 MILLION)
AND NET INCOME OF 46.1 MILLION ($59.6 MILLION)
NEW YORK, NY, November 1, 2010 — Mercer International Inc. (Nasdaq: MERC, TSX: MRI.U) today reported record results for the third quarter ended September 30, 2010. Operating EBITDA in the quarter significantly increased to a record 65.5 million ($84.7 million) from 13.0 million ($18.6 million) in the third quarter of 2009 and from 62.1 million ($79.1 million) in the second quarter of 2010. Operating EBITDA is defined on page 4 of this press release and reconciled to net income (loss) attributable to common shareholders on page 8 of the financial tables in this press release.
We reported pulp revenues of 224.7 million in the third quarter of 2010, an increase of approximately 54% from the same period of 2009. Additionally, we reported net income attributable to common shareholders of 46.1 million, or 1.17 per basic share for the third quarter of 2010 which included aggregate non-cash, unrealized gains of 10.4 million, or 0.26 per basic share, on the Stendal interest rate derivatives and foreign exchange gains on our debt. In the third quarter of 2009, we reported a net loss attributable to common shareholders of 14.1 million, or 0.39 per basic share, which included a net non-cash, unrealized gain of 0.5 million, or 0.01 per basic share, on the Stendal interest rate derivatives and foreign exchange gains on our debt.
Summary Financial Highlights
                         
    Q3     Q2     Q3  
    2010     2010     2009  
    (in millions of Euros, except where otherwise stated)  
Pulp revenues
  224.7     228.3     145.9  
Energy revenues
    9.7       11.9       10.4  
Operating income (loss)
    51.4       47.9       (0.5 )
Operating EBITDA
    65.5       62.1       13.0  
Gain (loss) on derivative instruments
    0.5       (4.5 )     (3.3 )
Foreign exchange gain (loss) on debt
    9.9       (9.4 )     3.8  
Income tax benefit (provision)
    7.2       (1.3 )     0.1
Net income (loss) attributable to common shareholders
    46.1       12.4       (14.1 )
Net income (loss) per share attributable to common shareholders
                       
Basic
  1.17     0.34     (0.39 )
Diluted
  0.82     0.23     (0.39 )
Common shares outstanding as at the end of the periods indicated
    42,029,660       36,551,325       36,443,487  

 

 


 

Summary Operating Highlights
                         
    Q3     Q2     Q3  
    2010     2010     2009  
Pulp Production (‘000 ADMTs)
    380.9       359.7       345.8  
Scheduled Production Downtime (‘000 ADMTs)
    8.3       17.0       35.4  
Pulp Sales (‘000 ADMTs)
    344.8       365.0       361.6  
NBSK pulp list price in Europe ($/ADMT)
    980       957       693  
NBSK pulp list price in Europe (/ADMT)
    758       752       485  
Average pulp sales realizations (/ADMT)
    642       618       397  
Energy Production (‘000 MWh)
    330.8       382.5       354.4  
Energy Sales (‘000 MWh)
    119.1       144.2       121.8  
Average Spot Currency Exchange Rates:
                       
/ $(1)
    0.7729       0.7865       0.6989  
C$ / $(1)
    1.0385       1.0277       1.0972  
C$ / (2)
    1.3438       1.3073       1.5694  
 
     
(1)  
Average Federal Reserve Bank of New York noon spot rate over the reporting period.
 
(2)  
Average Bank of Canada noon spot rate over the reporting period.
President’s Comments
Mr. Jimmy S.H. Lee, President and Chairman, stated: “The current quarter was a strong quarter as Operating EBITDA and net income increased to record levels, despite scheduled maintenance downtime at our Rosenthal mill.”
Mr. Lee continued: “Although pulp prices were overall generally flat in the third quarter, they remained at near record levels. List prices in Europe at the end of the quarter were approximately $980 per ADMT and list prices in North America and China were approximately $990 and $820 per ADMT, respectively.”
Mr. Lee added: “Our mills continued to perform well in the third quarter with our Stendal and Celgar mills both achieving record pulp production in the period. Additionally, our planned 12-day annual shutdown at our Rosenthal mill was completed in nine days.”
Mr. Lee added: “We are very pleased to have completed the Celgar Energy Project at the end of September. We currently have approximately C$4.1 million (2.9 million) in construction-related holdbacks that we expect to receive in early 2011 under the federal Green Transformation Program. Additionally, we recently received confirmation from B.C. Hydro of commercial operating status for our Celgar Energy Project and that all sales of power generated at the mill will be priced at higher bio-energy rates retroactively from September 28, 2010 onwards. Consequently, we expect energy sales from our Celgar mill to increase materially beginning in the fourth quarter.”

 

 


 

Mr. Lee continued: “In the current quarter, net cash flow provided by operations significantly increased to 38.8 million from 5.3 million in the comparative quarter of 2009 and 17.2 million in the second quarter of 2010. In the current quarter, a build in inventories used cash of 26.0 million, primarily as a result of higher prices, a seasonal build up in fiber supply and certain orders slipping into the fourth quarter. At September 30, 2010, cash and cash equivalents and working capital had increased to 85.1 million and 176.8 million, respectively, from 51.3 million and 99.2 million, respectively, at the end of 2009.”
Mr. Lee concluded: “With our mills running near record levels and no scheduled downtime in the last quarter of 2010, we are well positioned to continue to take advantage of historically strong NBSK pulp prices. Additionally, we anticipate that the sales of surplus energy with the completion of the Celgar Energy Project should provide us with a new, stable revenue source unrelated to pulp pricing. Although there may be some short-term softness in NBSK pulp resulting from the start up of a previously closed NBSK mill and increased hardwood pulp capacity, we believe that steady demand in Europe and North America along with improving Chinese demand and relatively low NBSK pulp inventory levels should result in a reasonably favorable outlook for prices in the medium-term.”
Three Months Ended September 30, 2010 Compared to Three Months Ended September 30, 2009
Pulp revenues for the three months ended September 30, 2010 increased by approximately 54% to 224.7 million from 145.9 million in the comparative period of 2009, due to significantly higher pulp prices and a stronger U.S. dollar relative to the Euro. Revenues from the sale of excess energy decreased slightly to 9.7 million in the third quarter from 10.4 million in the same quarter last year, primarily due to Rosenthal’s scheduled turbine maintenance. During the current quarter, the Rosenthal mill had nine days of downtime for scheduled maintenance and its turbine was down for an additional 51 days of maintenance. During this 51-day period, the Rosenthal mill produced pulp at capacity but purchased energy instead of selling surplus energy.
Pulp production increased to 380,894 ADMTs in the current quarter from 345,833 ADMTs in the same quarter of 2009, primarily due to record levels of production at our Celgar and Stendal mills, partially offset by nine days (approximately 8,000 ADMTs) of scheduled maintenance downtime at our Rosenthal mill. In the comparative quarter of 2009, we had 30 days (approximately 35,000 ADMTs) of scheduled maintenance downtime at our German mills.
Pulp sales volume decreased to 344,777 ADMTs in the current quarter from 361,627 ADMTs in the comparative period of 2009, primarily due to certain orders slipping into the fourth quarter of 2010. Average pulp sales realizations increased by 62% to 642 per ADMT in the third quarter of 2010, compared to 397 per ADMT in the same period last year, primarily due to significantly higher pulp prices and a stronger U.S. dollar relative to the Euro during the current quarter.

 

 


 

Costs and expenses in the third quarter of 2010 increased to 183.0 million from 156.7 million in the comparative period of 2009, primarily due to higher fiber costs and higher energy costs resulting from the turbine maintenance at the Rosenthal mill.
On average, our overall fiber costs in the current quarter of 2010 increased by approximately 32% from the same period in 2009, primarily due to higher fiber costs at our German mills, which increased due to stronger demand from the European board industry, and continuing weak lumber markets which resulted in low timber harvesting rates and reduced availability of wood residuals in Germany.
For the third quarter of 2010, we recorded operating income of 51.4 million, compared to an operating loss of 0.5 million in the comparative quarter of 2009 primarily due to significantly improved pulp prices and a stronger U.S. dollar relative to the Euro.
Interest expense in the third quarter of 2010 increased slightly to 17.8 million from 16.1 million in the comparative quarter of 2009 due to the accretion expense related to the exchange of our convertible notes, which was partially offset by reduced levels of debt associated with our Stendal mill.
Our Stendal mill recorded an unrealized gain of 0.5 million on the mark to market of its interest rate derivatives in the current quarter, compared to an unrealized loss of 3.3 million in the same quarter of last year. We recorded a foreign exchange gain on our debt of 9.9 million in the third quarter of 2010 compared to a foreign exchange gain of 3.8 million in the same period last year.
In the third quarter of 2010, the noncontrolling shareholder’s interest in the Stendal mill’s income was 5.1 million, compared to a loss of 1.9 million in the same quarter last year.
During the quarter, we recorded approximately 7.2 million of net tax recoveries, compared to a nominal net tax recovery of approximately 0.1 million in the same period last year.

 

 


 

In the third quarter of 2010, Operating EBITDA increased to 65.5 million from 13.0 million in the third quarter of 2009 and 62.1 million in the second quarter of 2010. Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and non-recurring capital asset impairment charges. Management uses Operating EBITDA as a benchmark measurement of its own operating results, and as a benchmark relative to its competitors. Management considers it to be a meaningful supplement to operating income as a performance measure primarily because depreciation expense and non-recurring capital asset impairment charges are not an actual cash cost, and depreciation expense varies widely from company to company in a manner that management considers largely independent of the underlying cost efficiency of their operating facilities. In addition, we believe Operating EBITDA is commonly used by securities analysts, investors and other interested parties to evaluate our financial performance.
Operating EBITDA does not reflect the impact of a number of items that affect our net income, including financing costs and the effect of derivative instruments. Operating EBITDA is not a measure of financial performance under GAAP, and should not be considered as an alternative to net income or income from operations as a measure of performance, nor as an alternative to net cash from operating activities as a measure of liquidity. Operating EBITDA has significant limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. For a reconciliation of net income (loss) attributable to common shareholders to Operating EBITDA, see page 8 of the financial tables included in this press release.
We reported net income attributable to common shareholders of 46.1 million, or 1.17 per basic share and 0.82 per diluted share, for the third quarter of 2010 which included aggregate non-cash, unrealized gains of 10.4 million on the Stendal interest rate derivatives and the foreign exchange effect on our debt. In the third quarter of 2009, we reported a net loss attributable to common shareholders of 14.1 million, or 0.39 per basic and diluted share, which included a net non-cash, unrealized gain of 0.5 million on the Stendal interest rate derivatives and the foreign exchange effect on our debt.
Nine Months Ended September 30, 2010 Compared to Nine Months Ended September 30, 2009
Pulp revenues for the nine months ended September 30, 2010 increased by approximately 48% to 624.1 million from 422.4 million in the comparative period of 2009, primarily due to significantly higher pulp prices and a stronger U.S. dollar relative to the Euro. Revenues from the sale of excess energy decreased slightly to 30.8 million from 32.3 million in the same period last year, primarily due to scheduled turbine maintenance at our Rosenthal mill.
Operating EBITDA significantly increased to 159.4 million in the first nine months of 2010 from 17.9 million in the nine months ended September 30, 2009. See the discussion of our results for the third quarter of 2010 for additional information relating to Operating EBITDA and page 8 of the financial tables for a reconciliation to net income (loss) attributable to common shareholders.

 

 


 

We reported net income attributable to common shareholders of 51.0 million, or 1.36 per basic and 0.93 per diluted share, for the first nine months of 2010 which included aggregate non-cash, unrealized losses of 15.2 million on the Stendal interest derivatives and the foreign exchange effect on our debt. In the nine months ended September 30, 2009, we reported a net loss attributable to common shareholders of 64.9 million, or 1.79 per basic and diluted share, which included a net non-cash unrealized loss of 6.4 million on the Stendal interest rate derivatives and the foreign exchange effect on our debt.
Liquidity and Capital Resources
The following table is a summary of selected financial information as at the dates indicated:
                 
    September 30,     December 31,  
    2010     2009  
    (in thousands)  
Financial Position
               
Cash and cash equivalents
  85,126     51,291  
Receivables
    101,920       71,143  
Inventories
    112,385       72,629  
Prepaid expenses and other
    11,986       5,871  
Total current assets
    311,417       200,934  
Total current liabilities
    134,666       101,784  
Working capital
    176,751       99,150  
As at September 30, 2010, we had approximately C$10.0 million and 26.4 million available under our Celgar and Rosenthal facilities, respectively. As at September 30, 2010, approximately 500.7 million was outstanding under our Stendal mill’s loan facility.
Earnings Release Call
In conjunction with this release, Mercer International Inc. will host a conference call, which will be simultaneously broadcast live over the Internet. Management will host the call, which is scheduled for Tuesday, November 2, 2010 at 10:00 AM (Eastern Daylight Time). Listeners can access the conference call live and archived through December 2, 2010, over the Internet at http://investor.shareholder.com/media/eventdetail.cfm?eventid=87619&CompanyID=MERC&e=1&mediaKey=1AE35D7DABC3ECD95E2779DA87354812 or through a link on the Company’s News/Financial page at http://www.mercerint.com/s/NewsReleases.asp. Please allow 15 minutes prior to the call to visit the site and download and install any necessary audio software. A replay of this call will be available approximately two hours after the live call ends until November 9, 2010 at 11:59 PM (Eastern Standard Time). The replay number is (800) 642-1687 for domestic callers or (706) 645-9291 for international callers, and the passcode is 19824459.
Mercer International Inc. is a global pulp manufacturing company. To obtain further information on the company, please visit its web site at http://www.mercerint.com.

 

 


 

The preceding includes forward-looking statements which involve known and unknown risks and uncertainties which may cause our actual results in future periods to differ materially from forecasted results. Among those factors which could cause actual results to differ materially are the following: the highly cyclical nature of our business, raw material costs, our level of indebtedness, competition, foreign exchange and interest rate fluctuations, our use of derivatives, expenditures for capital projects, environmental regulation and compliance, disruptions to our production, market conditions and other risk factors listed from time to time in our SEC reports.
     
APPROVED BY:

Jimmy S.H. Lee
Chairman & President
(604) 684-1099

David M. Gandossi
Executive Vice-President &
Chief Financial Officer
(604) 684-1099
  FD
Investors/Media: Eric Boyriven, Alexandra Tramont
(212) 850-5600
-FINANCIAL TABLES FOLLOW-

 

 


 

MERCER INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands of Euros)
                 
    September 30,     December 31,  
    2010     2009  
ASSETS
               
Current assets
               
Cash and cash equivalents
  85,126     51,291  
Receivables
    101,920       71,143  
Inventories
    112,385       72,629  
Prepaid expenses and other
    11,986       5,871  
 
           
Total current assets
    311,417       200,934  
 
           
 
               
Long-term assets
               
Property, plant and equipment
    851,736       868,558  
Deferred note issuance and other
    6,941       8,186  
Deferred income tax
    12,990       3,426  
Note receivable
    1,723       2,727  
 
           
 
    873,390       882,897  
 
           
Total assets
  1,184,807     1,083,831  
 
           
 
               
LIABILITIES
               
Current liabilities
               
Accounts payable and accrued expenses
  108,130     85,185  
Pension and other post-retirement benefit obligations
    608       567  
Debt
    25,928       16,032  
 
           
Total current liabilities
    134,666       101,784  
 
           
Long-term liabilities
               
Debt
    790,750       813,142  
Unrealized interest rate derivative losses
    63,396       52,873  
Pension and other post-retirement benefit obligations
    19,581       17,902  
Capital leases and other
    10,558       12,157  
 
           
 
    884,285       896,074  
 
           
Total liabilities
  1,018,951     997,858  
 
           
 
               
EQUITY
               
Shareholders’ equity
               
Share capital
    216,791       202,844  
Paid-in capital
    (4,929 )     (6,082 )
Retained earnings (deficit)
    (46,245 )     (97,235 )
Accumulated other comprehensive income (loss)
    26,211       23,695  
 
           
Total shareholders’ equity
    191,828       123,222  
 
           
 
               
Noncontrolling interest (deficit)
    (25,972 )     (37,249 )
 
           
Total equity
    165,856       85,973  
 
           
Total liabilities and equity
  1,184,807     1,083,831  
 
           

 

(1)


 

MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands of Euros, except per share data)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2010     2009     2010     2009  
 
                               
Revenues
                               
Pulp
  224,697     145,857     624,111     422,412  
Energy
    9,721       10,374       30,783       32,275  
 
                       
 
    234,418       156,231       654,894       454,687  
Costs and expenses
                               
Operating costs
    162,293       136,566       470,977       417,596  
Operating depreciation and amortization
    13,987       13,385       41,817       40,325  
 
                       
 
    58,138       6,280       142,100       (3,234 )
Selling, general and administrative expenses
    6,894       6,620       24,944       19,797  
Purchase (sale) of emission allowances
    (167 )     153       (167 )     (389 )
 
                       
Operating income (loss)
    51,411       (493 )     117,323       (22,642 )
 
                       
 
                               
Other income (expense)
                               
Interest expense
    (17,820 )     (16,085 )     (51,141 )     (48,953 )
Investment income (loss)
    93       20       304       (3,044 )
Foreign exchange gain (loss) on debt
    9,927       3,779       (4,675 )     4,533  
Gain (loss) on extinguishment of convertible notes
                (929 )      
Gain (loss) on derivative instruments
    485       (3,327 )     (10,523 )     (10,889 )
 
                       
Total other income (expense)
    (7,315 )     (15,613 )     (66,964 )     (58,353 )
 
                       
Income (loss) before income taxes
    44,096       (16,106 )     50,359       (80,995 )
Income tax benefit (provision) — current
    (2,227 )     (13 )     (3,750 )     (127 )
                                            — deferred
    9,382       70       9,382       4,989  
 
                       
Net income (loss)
    51,251       (16,049 )     55,991       (76,133 )
Less: net loss (income) attributable to noncontrolling interest
    (5,116 )     1,937       (5,001 )     11,195  
 
                       
Net income (loss) attributable to common shareholders
  46,135     (14,112 )   50,990     (64,938 )
 
                       
 
                               
Net income (loss) per share attributable to common shareholders
                               
Basic
  1.17     (0.39 )   1.36     (1.79 )
 
                       
Diluted
  0.82     (0.39 )   0.93     (1.79 )
 
                       

 

(2)


 

MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands of Euros, except per share data)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2010     2009     2010     2009  
Cash flows from (used in) operating activities
                               
Net income (loss) attributable to common shareholders
  46,135     (14,112 )   50,990     (64,938 )
Adjustments to reconcile net income (loss) attributable to common shareholders to cash flows from operating activities
                               
Loss (gain) on derivative instruments
    (485 )     3,327       10,523       10,889  
Foreign exchange (gain) loss on debt
    (9,927 )     (3,779 )     4,675       (4,533 )
Loss (gain) on extinguishment of convertible notes
                929        
Depreciation and amortization
    14,055       13,447       42,052       40,518  
Accretion expense (income)
    1,111             2,056        
Noncontrolling interest
    5,116       (1,937 )     5,001       (11,195 )
Deferred income taxes
    (9,382 )     (70 )     (9,382 )     (4,989 )
Stock compensation expense
    540       383       1,273       376  
Pension and other post-retirement expense, net of funding
    96       314       428       291  
Inventory provisions
                      4,587  
Other
    989       777       2,836       (1,198 )
Changes in current assets and liabilities
                               
Receivables
    19,591       4,455       (26,351 )     29,163  
Inventories
    (26,005 )     2,398       (36,988 )     29,923  
Accounts payable and accrued expenses
    1,814       1,695       15,146       9,635  
Other
    (4,883 )     (1,597 )     (5,477 )     (963 )
 
                       
Net cash from (used in) operating activities
    38,765       5,301       57,711       37,566  
 
                       
 
                               
Cash flows from (used in) investing activities
                               
Purchase of property, plant and equipment
    (8,484 )     (3,994 )     (28,876 )     (19,535 )
Proceeds on sale of property, plant and equipment
    28       111       577       343  
Cash, restricted
          3,531             13,000  
Notes receivable
    216       333       711       574  
 
                       
Net cash from (used in) investing activities
    (8,240 )     (19 )     (27,588 )     (5,618 )
 
                       
 
                               
Cash flows from (used in) financing activities
                               
Repayment of notes payable and debt
    (6,211 )     (18,249 )     (14,477 )     (26,499 )
Repayment of capital lease obligations
    (638 )     (910 )     (2,245 )     (2,128 )
Proceeds from borrowings of notes payable and debt
          1,869       856       11,869  
Proceeds from (repayment of) credit facilities, net
    (4,057 )           1,493       (5,550 )
Proceeds from government grants
    6,778       546       17,337       546  
Payment of deferred note issuance costs
                      (1,969 )
 
                       
Net cash from (used in) financing activities
    (4,128 )     (16,744 )     2,964       (23,731 )
 
                       
 
                               
Effect of exchange rate changes on cash and cash equivalents
    (3,416 )     637       748       606  
 
                       
 
                               
Net increase (decrease) in cash and cash equivalents
    22,981       (10,825 )     33,835       8,823  
Cash and cash equivalents, beginning of period
    62,145       62,100       51,291       42,452  
 
                       
Cash and cash equivalents, end of period
  85,126     51,275     85,126     51,275  
 
                       

 

(3)


 

MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheets
(Unaudited)
(In thousands of Euros)
The terms of the indenture governing our 9.25% senior unsecured notes require that we provide the results of operations and financial condition of Mercer International Inc. and our restricted subsidiaries under the indenture, collectively referred to as the “Restricted Group”. As at and during the three and nine months ended September 30, 2010 and 2009, the Restricted Group was comprised of Mercer International Inc., certain holding subsidiaries and our Rosenthal and Celgar mills. The Restricted Group excludes the Stendal mill.
                                 
    September 30, 2010  
    Restricted     Unrestricted             Consolidated  
    Group     Subsidiaries     Eliminations     Group  
ASSETS
                               
Current assets
                               
Cash and cash equivalents
  48,411     36,715         85,126  
Receivables
    51,792       50,128             101,920  
Inventories
    68,257       44,128             112,385  
Prepaid expenses and other
    6,479       5,507             11,986  
 
                       
Total current assets
    174,939       136,478             311,417  
 
                               
Property, plant and equipment
    363,758       487,978             851,736  
Deferred note issuance and other
    2,608       4,333             6,941  
Deferred income tax
    12,990                   12,990  
Due from unrestricted group
    78,177             (78,177 )      
Note receivable
    1,723                   1,723  
 
                       
Total assets
  634,195     628,789     (78,177 )   1,184,807  
 
                       
 
                               
LIABILITIES
                               
Current liabilities
                               
Accounts payable and accrued expenses
  64,669     43,461         108,130  
Pension and other post-retirement benefit obligations
    608                   608  
Debt
    2,761       23,167             25,928  
 
                       
Total current liabilities
    68,038       66,628             134,666  
 
                               
Debt
    282,335       508,415             790,750  
Due to restricted group
          78,177       (78,177 )      
Unrealized interest rate derivative losses
          63,396             63,396  
Pension and other post-retirement benefit obligations
    19,581                   19,581  
Capital leases and other
    6,616       3,942             10,558  
 
                       
Total liabilities
    376,570       720,558       (78,177 )     1,018,951  
 
                       
 
                               
EQUITY
                               
Total shareholders’ equity (deficit)
    257,625       (65,797 )           191,828  
Noncontrolling interest (deficit)
          (25,972 )           (25,972 )
 
                       
Total liabilities and equity
  634,195     628,789     (78,177 )   1,184,807  
 
                       

 

(4)


 

MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheets
(Unaudited)
(In thousands of Euros)
                                 
    December 31, 2009  
    Restricted     Unrestricted             Consolidated  
    Group     Subsidiaries     Eliminations     Group  
ASSETS
                               
Current assets
                               
Cash and cash equivalents
  20,635     30,656         51,291  
Receivables
    34,588       36,555             71,143  
Inventories
    52,897       19,732             72,629  
Prepaid expenses and other
    3,452       2,419             5,871  
 
                       
Total current assets
    111,572       89,362             200,934  
 
                               
Property, plant and equipment
    362,311       506,247             868,558  
Deferred note issuance and other
    3,388       4,798             8,186  
Deferred income tax
    3,426                   3,426  
Due from unrestricted group
    72,553             (72,553 )      
Note receivable
    2,727                   2,727  
 
                       
Total assets
  555,977     600,407     (72,553 )   1,083,831  
 
                       
 
                               
LIABILITIES
                               
Current liabilities
                               
Accounts payable and accrued expenses
  51,875     33,310         85,185  
Pension and other post-retirement benefit obligations
    567                   567  
Debt
    2,115       13,917             16,032  
 
                       
Total current liabilities
    54,557       47,227             101,784  
 
                               
Debt
    276,604       536,538             813,142  
Due to restricted group
          72,553       (72,553 )      
Unrealized interest rate derivative losses
          52,873             52,873  
Pension and other post-retirement benefit obligations
    17,902                   17,902  
Capital leases and other
    6,667       5,490             12,157  
 
                       
Total liabilities
    355,730       714,681       (72,553 )     997,858  
 
                       
 
                               
EQUITY
                               
Total shareholders’ equity (deficit)
    200,247       (77,025 )           123,222  
Noncontrolling interest (deficit)
          (37,249 )           (37,249 )
 
                       
Total liabilities and equity
  555,977     600,407     (72,553 )   1,083,831  
 
                       

 

(5)


 

MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations
(Unaudited)
(In thousands of Euros)
                                 
    Three Months Ended September 30, 2010  
    Restricted     Unrestricted             Consolidated  
    Group     Subsidiaries     Eliminations     Group  
Revenues
                               
Pulp
  123,518     101,179         224,697  
Energy
    1,535       8,186             9,721  
 
                       
 
    125,053       109,365             234,418  
 
                       
 
                               
Operating costs
    91,528       70,765             162,293  
Operating depreciation and amortization
    7,514       6,473             13,987  
Selling, general and administrative expenses and other
    3,221       3,506             6,727  
 
                       
 
    102,263       80,744             183,007  
 
                       
Operating income (loss)
    22,790       28,621             51,411  
 
                       
 
                               
Other income (expense)
                               
Interest expense
    (8,796 )     (10,213 )     1,189       (17,820 )
Investment income (loss)
    1,246       36       (1,189 )     93  
Foreign exchange gain (loss) on debt
    9,927                   9,927  
Gain (loss) on derivative instruments
          485             485  
 
                       
Total other income (expense)
    2,377       (9,692 )           (7,315 )
 
                       
Income (loss) before income taxes
    25,167       18,929             44,096  
Income tax benefit (provision)
    8,849       (1,694 )           7,155  
 
                       
Net income (loss)
    34,016       17,235             51,251  
Less: net (income) loss attributable to noncontrolling interest
          (5,116 )           (5,116 )
 
                       
Net income (loss) attributable to common shareholders
  34,016     12,119         46,135  
 
                       
                                 
    Three Months Ended September 30, 2009  
    Restricted     Unrestricted             Consolidated  
    Group     Subsidiaries     Eliminations     Group  
Revenues
                               
Pulp
  79,213     66,644         145,857  
Energy
    3,201       7,173             10,374  
 
                       
 
    82,414       73,817             156,231  
 
                       
 
                               
Operating costs
    78,136       58,430             136,566  
Operating depreciation and amortization
    6,816       6,569             13,385  
Selling, general and administrative expenses and other
    4,048       2,725             6,773  
 
                       
 
    89,000       67,724             156,724  
 
                       
Operating income (loss)
    (6,586 )     6,093             (493 )
 
                       
 
                               
Other income (expense)
                               
Interest expense
    (6,546 )     (10,674 )     1,135       (16,085 )
Investment income (loss)
    1,112       43       (1,135 )     20  
Foreign exchange gain (loss) on debt
    3,779                   3,779  
Gain (loss) on derivative instruments
          (3,327 )           (3,327 )
 
                       
Total other income (expense)
    (1,655 )     (13,958 )           (15,613 )
 
                       
Income (loss) before income taxes
    (8,241 )     (7,865 )           (16,106 )
Income tax benefit (provision)
    108       (51 )           57  
 
                       
Net income (loss)
    (8,133 )     (7,916 )           (16,049 )
Less: net (income) loss attributable to noncontrolling interest
          1,937             1,937  
 
                       
Net income (loss) attributable to common shareholders
  (8,133 )   (5,979 )       (14,112 )
 
                       

 

(6)


 

MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations
(Unaudited)
(In thousands of Euros)
                                 
    Nine Months Ended September 30, 2010  
    Restricted     Unrestricted             Consolidated  
    Group     Subsidiaries     Eliminations     Group  
Revenues
                               
Pulp
  354,775     269,336         624,111  
Energy
    8,750       22,033             30,783  
 
                       
 
    363,525       291,369             654,894  
 
                       
 
                               
Operating costs
    269,063       201,914             470,977  
Operating depreciation and amortization
    22,355       19,462             41,817  
Selling, general and administrative expenses and other
    14,792       9,985             24,777  
 
                       
 
    306,210       231,361             537,571  
 
                       
Operating income (loss)
    57,315       60,008             117,323  
 
                       
 
                               
Other income (expense)
                               
Interest expense
    (24,073 )     (30,593 )     3,525       (51,141 )
Investment income (loss)
    3,770       59       (3,525 )     304  
Foreign exchange gain (loss) on debt
    (4,675 )                 (4,675 )
Gain (loss) on extinguishment of convertible notes
    (929 )                 (929 )
Gain (loss) on derivative instruments
          (10,523 )           (10,523 )
 
                       
Total other income (expense)
    (25,907 )     (41,057 )           (66,964 )
 
                       
Income (loss) before income taxes
    31,408       18,951             50,359  
Income tax benefit (provision)
    8,354       (2,722 )           5,632  
 
                       
Net income (loss)
    39,762       16,229             55,991  
Less: net (income) loss attributable to noncontrolling interest
          (5,001 )           (5,001 )
 
                       
Net income (loss) attributable to common shareholders
  39,762     11,228         50,990  
 
                       
                                 
    Nine Months Ended September 30, 2009  
    Restricted     Unrestricted             Consolidated  
    Group     Subsidiaries     Eliminations     Group  
Revenues
                               
Pulp
  230,672     191,740         422,412  
Energy
    11,162       21,113             32,275  
 
                       
 
    241,834       212,853             454,687  
 
                       
 
                               
Operating costs
    232,364       185,232             417,596  
Operating depreciation and amortization
    20,408       19,917             40,325  
Selling, general and administrative expenses and other
    10,665       8,743             19,408  
 
                       
 
    263,437       213,892             477,329  
 
                       
Operating income (loss)
    (21,603 )     (1,039 )           (22,642 )
 
                       
 
                               
Other income (expense)
                               
Interest expense
    (20,775 )     (31,543 )     3,365       (48,953 )
Investment income (loss)
    3,262       (2,941 )     (3,365 )     (3,044 )
Foreign exchange gain (loss) on debt
    4,533                   4,533  
Gain (loss) on derivative instruments
          (10,889 )           (10,889 )
 
                       
Total other income (expense)
    (12,980 )     (45,373 )           (58,353 )
 
                       
Income (loss) before income taxes
    (34,583 )     (46,412 )           (80,995 )
Income tax benefit (provision)
    (833 )     5,695             4,862  
 
                       
Net income (loss)
    (35,416 )     (40,717 )           (76,133 )
Less: net (income) loss attributable to noncontrolling interest
          11,195             11,195  
 
                       
Net income (loss) attributable to common shareholders
  (35,416 )   (29,522 )       (64,938 )
 
                       

 

(7)


 

MERCER INTERNATIONAL INC.
COMPUTATION OF OPERATING EBITDA
(Unaudited)
(In thousands of Euros)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2010     2009     2010     2009  
    (in thousands)     (in thousands)  
Net income (loss) attributable to common shareholders
  46,135     (14,112 )   50,990     (64,938 )
Net income (loss) attributable to noncontrolling interest
    5,116       (1,937 )     5,001       (11,195 )
Income taxes (benefits)
    (7,155 )     (57 )     (5,632 )     (4,862 )
Interest expense
    17,820       16,085       51,141       48,953  
Investment (income) loss
    (93 )     (20 )     (304 )     3,044  
Foreign exchange (gain) loss on debt
    (9,927 )     (3,779 )     4,675       (4,533 )
Loss (gain) on extinguishment of convertible notes
                929        
Loss (gain) on derivative financial instruments
    (485 )     3,327       10,523       10,889  
 
                       
Operating income (loss)
    51,411       (493 )     117,323       (22,642 )
Add: Depreciation and amortization
    14,055       13,447       42,052       40,518  
 
                       
Operating EBITDA(1)
  65,466     12,954     159,375     17,876  
 
                       
 
     
(1)  
Operating EBITDA does not reflect the impact of a number of items that affect our net income (loss) attributable to common shareholders, including financing costs and the effect of derivative instruments. Operating EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States, and should not be considered as an alternative to net income (loss) attributable to common shareholders or income (loss) from operations as a measure of performance, nor as an alternative to net cash from operating activities as a measure of liquidity. Operating EBITDA has significant limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP.
COMPUTATION OF RESTRICTED GROUP OPERATING EBITDA
(Unaudited)
(In thousands of Euros)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2010     2009     2010     2009  
    (in thousands)     (in thousands)  
Restricted Group
                               
Net income (loss) attributable to common shareholders(1)
  34,016     (8,133 )   39,762     (35,416 )
Income taxes (benefits)
    (8,849 )     (108 )     (8,354 )     833  
Interest expense
    8,796       6,546       24,073       20,775  
Investment (income) loss
    (1,246 )     (1,112 )     (3,770 )     (3,262 )
Foreign exchange (gain) loss on debt
    (9,927 )     (3,779 )     4,675       (4,533 )
Loss on extinguishment of convertible notes
                929        
 
                       
Operating income (loss)
    22,790       (6,586 )     57,315       (21,603 )
Add: Depreciation and amortization
    7,582       6,878       22,590       20,601  
 
                       
Operating EBITDA(2)
  30,372     292     79,905     (1,002 )
 
                       
 
     
(1)  
For the Restricted Group, net income (loss) attributable to common shareholders and net income (loss) are the same.
 
(2)  
Operating EBITDA does not reflect the impact of a number of items that affect our net income (loss) attributable to common shareholders, including financing costs and the effect of derivative instruments. Operating EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States, and should not be considered as an alternative to net income (loss) attributable to common shareholders or income (loss) from operations as a measure of performance, nor as an alternative to net cash from operating activities as a measure of liquidity. Operating EBITDA has significant limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP.
# # #

 

(8)