10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2014

OR

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

For the transition period from                  to                 

Commission File No.: 000-51826

MERCER INTERNATIONAL INC.

(Exact name of Registrant as specified in its charter)

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

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

        (Address of office)

(604) 684-1099

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months or for such shorter period that the registrant was required to submit and post such files). YES x    NO ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer  ¨     Accelerated Filer  x Non-Accelerated Filer ¨ Smaller Reporting Company ¨

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

The Registrant had 64,273,288 shares of common stock outstanding as at July 31, 2014.

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2014

(Unaudited)

FORM 10-Q

QUARTERLY REPORT - PAGE 2

MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands of U.S. dollars)

	June 30,		December 31,
	2014		2013
ASSETS
Current assets
Cash and cash equivalents	$	241,023	$	147,728
Receivables		134,749		135,893
Inventories (Note 2)		165,072		170,908
Prepaid expenses and other		10,100		10,918
Deferred income tax		7,016		6,326
Total current assets		557,960		471,773
Long-term assets
Property, plant and equipment		1,006,906		1,038,631
Deferred note issuance costs and other		20,600		20,998
Deferred income tax		23,362		17,157
		1,050,868		1,076,786
Total assets	$	1,608,828	$	1,548,559
LIABILITIES
Current liabilities
Accounts payable and other	$	115,643	$	103,814
Pension and other post-retirement benefit obligations (Note 4)		1,325		1,330
Debt (Note 3)		62,182		60,355
Total current liabilities		179,150		165,499
Long-term liabilities
Debt (Note 3)		882,443		919,017
Interest rate derivative liability (Note 10)		40,447		46,517
Pension and other post-retirement benefit obligations (Note 4)		35,370		35,466
Capital leases and other		19,576		19,293
Deferred income tax		26,229		14,450
		1,004,065		1,034,743
Total liabilities		1,183,215		1,200,242
EQUITY
Shareholders’ equity
Share capital (Note 5)		386,081		328,549
Paid-in capital		(15,356)		(11,756)
Retained earnings		32,427		10,815
Accumulated other comprehensive income (Note 9)		28,892		31,470
Total shareholders’ equity		432,044		359,078
Noncontrolling interest (deficit)		(6,431)		(10,761)
Total equity		425,613		348,317
Total liabilities and equity	$	1,608,828	$	1,548,559
Commitments and contingencies (Note 12)
Subsequent events (Note 12(a), 12(b), 13)

The accompanying notes are an integral part of these consolidated financial statements.

FORM 10-Q

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MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Revenues
Pulp	$	259,482	$	253,166	$	537,988	$	490,984
Energy and chemicals		25,710		21,534		52,889		45,501
		285,192		274,700		590,877		536,485
Costs and expenses
Operating costs		230,465		244,363		466,769		462,347
Operating depreciation and amortization		19,768		19,267		39,470		38,717
		34,959		11,070		84,638		35,421
Selling, general and administrative expenses		12,938		12,239		23,374		23,983
Operating income (loss)		22,021		(1,169)		61,264		11,438
Other income (expense)
Interest expense		(17,165)		(17,170)		(34,615)		(34,530)
Gain (loss) on derivative instruments (Note 10)		2,549		6,921		5,777		13,285
Other income (expense)		(82)		8		(76)		(84)
Total other income (expense)		(14,698)		(10,241)		(28,914)		(21,329)
Income (loss) before income taxes		7,323		(11,410)		32,350		(9,891)
Income tax benefit (provision)
Current		(1,405)		(275)		(1,527)		4,044
Deferred		(3,153)		(540)		(4,881)		(6,004)
Net income (loss)		2,765		(12,225)		25,942		(11,851)
Less: net income attributable to noncontrolling interest		(2,194)		(790)		(4,330)		(1,725)
Net income (loss) attributable to common shareholders	$	571	$	(13,015)	$	21,612	$	(13,576)
Net income (loss) per share attributable to common shareholders (Note 7)
Basic and diluted	$	0.01	$	(0.23)	$	0.36	$	(0.24)

The accompanying notes are an integral part of these consolidated financial statements.

FORM 10-Q

QUARTERLY REPORT - PAGE 4

MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands of U.S. dollars)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Net income (loss)	$	2,765	$	(12,225)	$	25,942	$	(11,851)
Other comprehensive income (loss), net of taxes
Foreign currency translation adjustment (net of tax effect of       $45, ($378), $48, $380)		6,153		(5,280)		(2,979)		(19,449)
Change in unrecognized losses and prior service costs related       to defined benefit plans (net of tax effect of $nil in all       periods)		390		979		390		856
Change in unrealized gains (losses) on marketable securities       (net of tax effect of $nil in all periods)		(36)		(35)		11		(22)
Other comprehensive income (loss), net of taxes		6,507		(4,336)		(2,578)		(18,615)
Total comprehensive income (loss)		9,272		(16,561)		23,364		(30,466)
Comprehensive income attributable to noncontrolling interest		(2,194)		(790)		(4,330)		(1,725)
Comprehensive income (loss) attributable to common shareholders	$	7,078	$	(17,351)	$	19,034	$	(32,191)

INTERIM CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

(Unaudited)

(In thousands of U.S. dollars)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Net income (loss) attributable to common shareholders	$	571	$	(13,015)	$	21,612	$	(13,576)
Retained earnings, beginning of period		31,856		36,629		10,815		37,190
Retained earnings, end of period	$	32,427	$	23,614	$	32,427	$	23,614

The accompanying notes are an integral part of these consolidated financial statements.

FORM 10-Q

QUARTERLY REPORT - PAGE 5

MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands of U.S. dollars)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Cash flows from (used in) operating activities
Net income (loss)	$	2,765	$	(12,225)	$	25,942	$	(11,851)
Adjustments to reconcile net income (loss) to cash flows from operating activities
Unrealized loss (gain) on derivative instruments		(2,549)		(7,431)		(5,777)		(13,630)
Depreciation and amortization		19,851		19,354		39,638		38,887
Deferred income taxes		3,153		540		4,881		6,004
Stock compensation expense		600		396		331		752
Pension and other post-retirement expense, net of       funding		214		277		425		437
Other		852		1,266		1,504		2,828
Changes in working capital
Receivables		14,517		28,635		(2,815)		15,822
Inventories		(13,390)		2,781		5,333		10,368
Accounts payable and accrued expenses		(8,062)		(2,134)		14,180		11,858
Other		3,338		(7,492)		(2,674)		(8,525)
Net cash from (used in) operating activities		21,289		23,967		80,968		52,950
Cash flows from (used in) investing activities
Purchase of property, plant and equipment		(6,151)		(14,349)		(12,717)		(29,394)
Purchase of intangible assets		(715)		-		(2,455)		-
Proceeds on sale of property, plant and equipment		94		3		273		20
Net cash from (used in) investing activities		(6,772)		(14,346)		(14,899)		(29,374)
Cash flows from (used in) financing activities
Repayment of debt		-		-		(30,541)		(26,420)
Proceeds from borrowings of debt		-		9,090		-		22,223
Proceeds from issuance of shares		53,942		-		53,942		-
Repayment of capital lease obligations		(532)		(522)		(1,192)		(1,446)
Proceeds from sale and lease-back transactions		-		-		1,047		-
Proceeds from (repayment of) credit facilities, net		-		9,112		-		17,060
Proceeds from government grants		761		4,441		4,058		5,413
Net cash from (used in) financing activities		54,171		22,121		27,314		16,830
Effect of exchange rate changes on cash and cash equivalents		226		1,040		(88)		(2,948)
Net increase (decrease) in cash and cash equivalents		68,914		32,782		93,295		37,458
Cash and cash equivalents, beginning of period		172,109		142,115		147,728		137,439
Cash and cash equivalents, end of period	$	241,023	$	174,897	$	241,023	$	174,897

The accompanying notes are an integral part of these consolidated financial statements.

FORM 10-Q

QUARTERLY REPORT - PAGE 6

MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Unaudited)

(In thousands of U.S. dollars)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest	$	29,653	$	28,504	$	32,889	$	32,135
Income taxes	$	1,020	$	1,129	$	1,818	$	2,007
Supplemental schedule of non-cash investing and financing activities
Acquisition of production and other equipment under capital lease obligations	$	-	$	321	$	618	$	545
Increase (decrease) in accounts payable and accrued purchases for property, plant and equipment	$	1,904	$	620	$	(2,294)	$	(3,208)
Increase (decrease) in receivables of government grants for long-term assets	$	(148)	$	-	$	(2,962)	$	-

The accompanying notes are an integral part of these consolidated financial statements.

FORM 10-Q

QUARTERLY REPORT - PAGE 7

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 1. The Company and Summary of Significant Accounting Policies

Basis of Presentation

The interim consolidated financial statements contained herein include the accounts of Mercer International Inc. (“Mercer Inc.”) and its wholly-owned and majority-owned subsidiaries (collectively the “Company”). The Company’s shares of common stock are quoted and listed for trading on both the NASDAQ Global Market and the Toronto Stock Exchange.

The interim consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). The year-end Consolidated Balance Sheet data was derived from audited financial statements. The footnote disclosure included herein has been prepared in accordance with accounting principles generally accepted for interim financial statements in the United States (“GAAP”). The interim consolidated financial statements should be read together with the audited consolidated financial statements and accompanying notes included in the Company’s latest annual report on Form 10-K for the fiscal year ended December 31, 2013. In the opinion of the Company, the unaudited interim consolidated financial statements contained herein contain all adjustments necessary for a fair statement of the results of the interim periods included. The results for the periods included herein may not be indicative of the results for the entire year.

The Company has three pulp mills that are aggregated into one reportable business segment, market pulp. Accordingly, the results presented are those of the reportable business segment.

In these interim consolidated financial statements, unless otherwise indicated, all amounts are expressed in United States dollars (“U.S. dollars” or “$”). The symbol “€” refers to Euros and the symbol “C$” refers to Canadian dollars.

Use of Estimates

Preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant management judgment is required in determining the accounting for, among other things, doubtful accounts and reserves, depreciation and amortization, future cash flows associated with impairment testing for long-lived assets, derivative financial instruments, legal liabilities, asset retirement obligations, pensions and post-retirement benefit obligations, income taxes, contingencies, and inventory obsolescence and provisions. Actual results could differ materially from these estimates, and changes in these estimates are recorded when known.

New Accounting Standards

In March 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-05, an update to Foreign Currency Matters, which indicates that a cumulative translation adjustment is attached to the parent’s investment in a foreign entity and should be released in a manner consistent with the derecognition guidance on investments in entities. Thus, the entire amount of the cumulative translation adjustment associated with the foreign entity would be released when there has been (i) a sale of a subsidiary or group of net assets within a foreign entity and the sale represents the substantially complete liquidation of the investment in the foreign entity; (ii) a loss of a controlling financial interest in an investment in a foreign entity; or (iii) a step acquisition for a foreign entity. The update does not change the requirement to release a pro-rata portion of the cumulative translation adjustment of the foreign entity into earnings for a partial sale of an equity method investment in a foreign entity. The amendments are effective for interim and annual periods beginning after December 15, 2013 and did not have an impact on the Company’s interim consolidated financial statements.

FORM 10-Q

QUARTERLY REPORT - PAGE 8

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 1. The Company and Summary of Significant Accounting Policies (continued)

In July 2013, the FASB issued ASU 2013-11, which provides guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss (“NOL”) carryforward, a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 requires entities to present an unrecognized tax benefit as a reduction of a deferred tax asset for a NOL or tax credit carryforward whenever the NOL or tax credit carryforward would be available to reduce the additional taxable income or tax due if the tax position is disallowed. This accounting standard update requires entities to assess whether to net the unrecognized tax benefit with a deferred tax asset as of the reporting date. The amendments are effective for interim and annual periods beginning after December 15, 2013. The Company has determined these changes did not have an impact on the interim consolidated financial statements.

In May 2014 the FASB issued ASU 2014-09, “Revenue Recognition - Revenue from Contracts with Customers” (ASU 2014-09) that requires companies to recognize revenue when a customer obtains control rather than when companies have transferred substantially all risks and rewards of a good or service. This update is effective for annual reporting periods beginning on or after December 15, 2016 and interim periods therein and requires expanded disclosures. The Company is currently assessing the impact the adoption of ASU 2014-09 will have on its consolidated financial statements.

Note 2. Inventories

	June 30,		December 31,
	2014		2013
Raw materials	$	62,151	$	66,356
Finished goods		52,185		54,982
Spare parts and other		50,736		49,570
	$	165,072	$	170,908

Note 3. Debt

Debt consists of the following:

	June 30,		December 31,
	2014		2013
Note payable to bank, included in a total loan credit facility of €828.0 million to finance the construction related to the Stendal mill (a)	$	537,890	$	568,945
Senior notes, interest at 9.50% accrued and payable semi-annually, unsecured (b)		336,124		336,382
Credit agreement with a lender with respect to a revolving credit facility of C$40.0 million (c)		-		-
Term bank facility for a project at the Stendal mill of €17.0 million (d)		18,812		21,179
Loans payable to the noncontrolling shareholder of the Stendal mill (e)		51,799		52,117
Investment loan agreement with a lender with respect to a project at the Rosenthal mill of €4.4 million (f)		-		749
Credit agreement with a bank with respect to a revolving credit facility of €25.0 million (g)		-		-
Credit agreement with a bank with respect to a revolving credit facility of €5.0 million (h)		-		-
		944,625		979,372
Less: current portion		(62,182)		(60,355)
Debt, less current portion	$	882,443	$	919,017

FORM 10-Q

QUARTERLY REPORT - PAGE 9

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 3. Debt (continued)

As of June 30, 2014, the maturities of debt are as follows:

Matures	Amount
2014	$	29,610
2015		65,143
2016		65,143
2017		784,729
2018		-
Thereafter		-
	$	944,625

Certain of the Company’s debt instruments were issued under an indenture which, among other things, restricts its ability and the ability of its restricted subsidiaries to make certain payments. These limitations are subject to specific exceptions. As at June 30, 2014, the Company was in compliance with the terms of the indenture.

(a) Note payable to bank, included in a total loan facility of €828.0 million to finance the construction related to the Stendal mill (“Stendal Loan Facility”), interest at rates varying from Euribor plus 0.90% to Euribor plus 1.80% (rates on amounts of borrowing at June 30, 2014 range from 1.47% to 2.22%), principal due in required installments beginning September 30, 2006 until September 30, 2017, collateralized by the gross assets of the Stendal mill, with 48% and 32% guaranteed by the Federal Republic of Germany and the State of Saxony-Anhalt, respectively, of up to €332.9 million of the outstanding principal, subject to a debt service reserve account (“DSRA”) for purposes of paying amounts due in the following 12 months under the terms of the Stendal Loan Facility; payment of dividends is only permitted if certain cash flow requirements are met. See Note 10 – Derivative Transactions for a discussion of the Company’s variable-to-fixed interest rate swap that was put in place to effectively fix the interest rate on the Stendal Loan Facility.

On March 13, 2009, the Company finalized an agreement with its lenders to amend its Stendal Loan Facility. The amendment deferred approximately €164.0 million of scheduled principal payments until the maturity date, September 30, 2017. The amendment also provided for a 100% cash sweep, referred to as the “Cash Sweep”, of any cash, in excess of a €15.0 million working capital reserve and the Guarantee Amount, as discussed in Note 12(a) – Commitments and Contingencies, and other amounts as contemplated in the amendment, held by Stendal which will be used first to fund the DSRA to a level sufficient to service the amounts due and payable under the Stendal Loan Facility during the then following 12 months, which means the DSRA is “Fully Funded”, and second to prepay the deferred principal amounts. As at June 30, 2014, the DSRA balance was €16.0 million and was not Fully Funded.

On March 14, 2014, the Stendal mill received a waiver under the Stendal Loan Facility and Project Blue Mill facility (Note 3(d)) which: postpones the testing date of its senior debt cover ratio to September 30, 2014 from June 30, 2014 and delivery of its report thereon by November 15, 2014; extends the date by which a portion of the net proceeds of the common share offering, as discussed in Note 5 – Share Capital, are contributed to the Stendal mill, to November 17, 2014; and confirms that any such contributed capital shall qualify as an “equity cure” in the event that the Stendal mill is not in compliance with its financial ratio covenants.

In July 2014, the Stendal mill received an amendment to the Stendal Loan Facility and Project Blue Mill facility, as discussed in Note 13 – Subsequent Event.

FORM 10-Q

QUARTERLY REPORT - PAGE 10

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 3. Debt (continued)

(b) On November 17, 2010, the Company completed a private offering of $300,000 in aggregate principal amount of senior notes due 2017 (“Senior Notes”). The Senior Notes were issued at a price of 100% of their principal amount. The Senior Notes will mature on December 1, 2017 and bear interest at 9.50% which is accrued and payable semi-annually.

In July 2013, the Company issued $50,000 in aggregate principal amount of its Senior Notes. The additional notes were priced at 104.50% plus accrued interest from June 1, 2013. The net proceeds from the offering were approximately $50,500, after deducting the underwriter’s discounts, offering expenses and accrued interest.

The Senior Notes are general unsecured senior obligations of the Company. The Senior Notes rank equal in right of payment with all existing and future senior unsecured indebtedness of the Company and senior in right of payment to any current or future subordinated indebtedness of the Company. The Senior Notes are effectively junior in right of payment to all borrowings of the Company’s restricted subsidiaries, including borrowings under the Company’s credit agreements which are secured by certain assets of its restricted subsidiaries.

The Company may redeem all or a part of the Senior Notes, upon not less than 30 days’ or more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) equal to 104.75% for the twelve month period beginning on December 1, 2014, 102.38% for the twelve month period beginning on December 1, 2015, and 100.00% beginning on December 1, 2016 and at any time thereafter, plus accrued and unpaid interest.

(c) Credit agreement with respect to a revolving credit facility of up to C$40.0 million for the Celgar mill. The credit facility matures May 2016. Borrowings under the credit facility are collateralized by the mill’s inventory and receivables and are restricted by a borrowing base calculated on the mill’s inventory and receivables. Canadian dollar denominated amounts bear interest at bankers acceptance plus 1.75% or Canadian prime plus 0.25%. U.S. dollar denominated amounts bear interest at LIBOR plus 1.75% or U.S. base plus 0.25%. As at June 30, 2014, C$1.7 million of this facility was supporting letters of credit and approximately C$38.3 million was available.

(d) A €17.0 million amortizing term facility to partially finance a project, referred to as “Project Blue Mill”. The facility, 80% of which is guaranteed by the State of Saxony-Anhalt, bears interest at a rate of Euribor plus 3.5% per annum. The interest period for the facility, at the choice of the Company, will be of one, three or six months duration and interest is paid on the last day of the interest period selected. The facility, together with accrued interest, is scheduled to mature in September 2017. The facility will be repaid semi-annually, commencing September 30, 2013, is collateralized by the gross assets of the Stendal mill, and will be non-recourse to Mercer Inc. As at June 30, 2014, the facility was accruing interest at a rate of 3.92%.

As part of this term facility, the Company was required to open an investment account with the lender for the purpose of managing project costs and is required to deposit all funding associated with Project Blue Mill in this account. As at June 30, 2014, the balance in the investment account was $3,736.

(e) Loans of €26.8 million payable by the Stendal mill to its noncontrolling shareholder bear interest at a rate of 0.10% per annum and are due in 2017, provided that the Project Blue Mill facility (Note 3(d)) and the Stendal Loan Facility (Note 3(a)) have been fully repaid on such date. The loans are unsecured, subordinated to all liabilities of the Stendal mill, non-recourse to the Company and its restricted subsidiaries. One of the loans, which has a principal amount of €0.4 million, may be repaid prior to October 1, 2017 if the DSRA has been Fully Funded for the first time and this loan is subordinated to all liabilities of the Stendal mill only until such time as the DSRA is Fully Funded for the first time.

As at June 30, 2014 and December 31, 2013, accrued interest on these loans was €11.1 million.

FORM 10-Q

QUARTERLY REPORT - PAGE 11

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 3. Debt (continued)

(f) A €4.4 million investment loan agreement with a lender relating to the wash press project at the Rosenthal mill that matured in February 2014.

(g) A €25.0 million working capital facility at the Rosenthal mill that matures in October 2016. Borrowings under the facility are collateralized by the mill’s inventory and receivables and bear interest at Euribor plus 3.50%. As at June 30, 2014, approximately €0.4 million of this facility was supporting bank guarantees leaving approximately €24.6 million available.

(h) A €5.0 million facility at the Rosenthal mill that matures in December 2015. Borrowings under this facility bear interest at the rate of the three-month Euribor plus 3.50% and are secured by certain land at the Rosenthal mill. As at June 30, 2014 approximately €1.2 million of this facility was supporting bank guarantees leaving approximately €3.8 million available.

Note 4. Pension and Other Post-Retirement Benefit Obligations

Included in pension and other post-retirement benefit obligations are amounts related to the Company’s Celgar and Rosenthal mills. The largest component of this obligation is with respect to the Celgar mill which maintains a defined benefit pension plan and post-retirement benefit plans for certain employees (“Celgar Plans”).

Pension benefits are based on employees’ earnings and years of service. The Celgar Plans are funded by contributions from the Company based on actuarial estimates and statutory requirements. Pension contributions during the three and six month periods ended June 30, 2014 totaled $617 and $1,226, respectively (2013 - $529 and $1,185).

Effective December 31, 2008, the defined benefit plan was closed to new members. In addition, the defined benefit service accrual ceased on December 31, 2008, and members began to receive pension benefits, at a fixed contractual rate, under a new defined contribution plan effective January 1, 2009. During the three and six month periods ended June 30, 2014, the Company made contributions of $184 and $399 respectively (2013 – $152 and $382) to this plan.

	Three Months Ended June 30,
	2014				2013
	Pension Benefits		Post- Retirement Benefits		Pension Benefits		Post- Retirement Benefits
Service cost	$	31	$	184	$	36	$	189
Interest cost		465		315		461		278
Expected return on plan assets		(563)		-		(537)		-
Recognized net loss (income)		199		(3)		362		29
Net periodic benefit cost	$	132	$	496	$	322	$	496
	Six Months Ended June 30,
	2014				2013
	Pension Benefits		Post- Retirement Benefits		Pension Benefits		Post- Retirement Benefits
Service cost	$	61	$	365	$	70	$	382
Interest cost		924		626		930		561
Expected return on plan assets		(1,120)		-		(1,081)		-
Recognized net loss (income)		396		(6)		729		59
Net periodic benefit cost	$	261	$	985	$	648	$	1,002

FORM 10-Q

QUARTERLY REPORT - PAGE 12

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 4. Pension and Other Post-Retirement Benefit Obligations (continued)

Multiemployer Plan

The Company participates in a multiemployer plan for the hourly-paid employees at the Celgar mill. The contributions to the plan are determined based on a percentage of pensionable earnings pursuant to a collective bargaining agreement. The Company has no current or future contribution obligations in excess of the contractual contributions. The contributions during the three and six month periods ended June 30, 2014 totaled $514 and $1,021, respectively (2013 – $497 and $1,000).

Note 5. Share Capital

Common shares

The Company has authorized 200,000,000 common shares with a par value of $1 per share.

As at June 30, 2014, the Company had 64,273,288 common shares issued and outstanding. As at December 31, 2013, the Company had 55,853,704 common shares issued and outstanding. During the six months ended June 30, 2014, the Company issued 38,000 restricted shares to directors of the Company and 331,584 shares were issued to employees of the Company as part of the share based performance plan.

On April 2, 2014, the Company issued an aggregate of 8,050,000 common shares by way of public offering at a price of $7.15 per share for net proceeds of approximately $53,600 after deducting the underwriters’ discounts and offering expenses. The Company intends to use approximately $20,000 of the net proceeds to further capitalize the Stendal mill. The Company intends to use the balance of the net proceeds for capital expenditures, including expansion of our wood procurement and logistics operations in Germany, and for general corporate purposes.

Note 6. Stock-Based Compensation

In June 2010, the Company adopted a stock incentive plan (the “2010 Plan”) which provides for options, restricted stock rights, restricted shares, performance shares, performance share units (“PSUs”) and stock appreciation rights to be awarded to employees, consultants and non-employee directors. During the three and six months ended June 30, 2014, there were no changes to the issued and outstanding options, restricted stock rights, performance shares or stock appreciation rights. During the three months ended June 30, 2014, the Board of Directors of the Company approved an additional 2.0 million common shares be available for grant pursuant to the 2010 Plan. As at June 30, 2014, after factoring in all allocated shares, there remain approximately 2.5 million common shares available for grant.

PSUs

PSUs comprise rights to receive common shares at a future date that are contingent on the Company and the grantee achieving certain performance objectives. The performance objective periods are generally three years or less.

The fair value of PSUs is recorded as compensation expense over the requisite service period. For PSUs which have the same grant and service inception date, the fair value is based upon the targeted number of shares to be awarded and the quoted market price of the Company’s shares at that date. For PSUs where the service inception date precedes the grant date, the fair value is based upon the targeted number of shares awarded and the quoted price of the Company’s shares at each reporting date up to the grant date. The target number of shares is determined using management’s best estimate. The final determination of the number of shares to be granted is made by the Company’s Board of Directors. For the three and six month periods ended June 30, 2014, the Company recognized an expense of $473 and $54, respectively related to PSUs (2013 – expense of $240, and $401).

FORM 10-Q

QUARTERLY REPORT - PAGE 13

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 6. Stock-Based Compensation (continued)

The following table summarizes PSU activity during the period:

	Number of PSUs
Outstanding at January 1, 2013		786,129
Granted		40,499
Forfeited		(35,196)
Outstanding at December 31, 2013		791,432
Granted		657,554
Vested and issued		(331,584)
Expired		(139,240)
Outstanding at June 30, 2014		978,162

Restricted Shares

The fair value of restricted shares is determined based upon the number of shares granted and the quoted price of the Company’s shares on the date of grant. Restricted shares generally vest over one year; however, 200,000 restricted shares granted during the year ended December 31, 2011 vest in equal amounts over a five-year period commencing in 2012. The fair value of the restricted shares is recorded as compensation expense on a straight-line basis over the vesting period.

Expense recognized for the three and six month periods ended June 30, 2014 was $127 and $277, respectively (2013 – $156 and $351). As at June 30, 2014, the total remaining unrecognized compensation cost related to restricted stock amounted to approximately $570 (2013 – $841), which will be amortized over the remaining vesting periods.

The following table summarizes restricted share activity during the period:

	Number of
	Restricted Shares
Outstanding at January 1, 2013		196,500
Granted		38,000
Vested		(76,500)
Outstanding at December 31, 2013		158,000
Granted		38,000
Vested		(78,000)
Outstanding at June 30, 2014		118,000

FORM 10-Q

QUARTERLY REPORT - PAGE 14

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 7. Net Income (Loss) Per Share Attributable to Common Shareholders

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Net income (loss) attributable to common shareholders:
Basic and diluted	$	571	$	(13,015)	$	21,612	$	(13,576)
Net income (loss) per share attributable to common shareholders:
Basic and diluted	$	0.01	$	(0.23)	$	0.36	$	(0.24)
Weighted average number of common shares outstanding:
Basic (1)		63,915,377		55,670,034		59,835,098		55,651,610
Effect of dilutive instruments:
PSUs		353,791		-		448,947		-
Restricted shares		64,588		-		67,391		-
Stock options		8,975		-		10,433		-
Diluted		64,342,731		55,670,034		60,361,869		55,651,610

(1) For the three and six month periods ended June 30, 2014, the basic weighted average number of shares excludes 118,000 restricted shares which have been issued, but have not vested as at June 30, 2014 (2013 – 158,000 restricted shares).

The calculation of diluted net income (loss) per share attributable to common shareholders does not assume the exercise of any instruments that would have an anti-dilutive effect on net income (loss) per share. The following table summarizes the instruments excluded from the calculation of net income (loss) per share attributable to common shareholders because they were anti-dilutive.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
PSUs		-		786,129		-		786,129
Restricted shares		-		158,000		-		158,000
Stock options		-		175,000		-		175,000

Note 8. Restructuring Expenses

In July 2013, the Company announced a workforce reduction at the Celgar mill. In connection with implementing this workforce reduction, during the year ended December 31, 2013, the Company recorded restructuring expenses of $5,029 for severance and other personnel expenses, such as termination benefits. During the six month period ended June 30, 2014, the Company incurred approximately $51 of additional expenses and does not intend to incur any significant additional expenses related to this restructuring. As at June 30, 2014, the Company had a liability for these restructuring expenses of $862 in accounts payable and other.

In November 2013, the Company restructured the management team at the Stendal mill. In connection with this restructuring, during the year ended December 31, 2013, the Company recorded expenses of $1,386 for severance and other personnel expenses, such as termination benefits. As at June 30, 2014, the Company had a liability for these restructuring expenses of $342 in accounts payable and other.

FORM 10-Q

QUARTERLY REPORT - PAGE 15

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 9. Accumulated Other Comprehensive Income

Changes in amounts included in our accumulated other comprehensive income by component are as follows:

	Foreign		Defined Benefit		Unrealized
	Currency		Pension and		Gains on
	Translation		Post-Retirement		Marketable
	Adjustments		Benefit Items		Securities		Total
Balance December 31, 2013	$	47,756	$	(16,414)	$	128	$	31,470
Other comprehensive income (loss) before reclassifications		(2,979)		-		11		(2,968)
Amounts reclassified from accumulated other comprehensive income		-		390		-		390
Net current period other comprehensive income		(2,979)		390		11		(2,578)
Balance June 30, 2014	$	44,777	$	(16,024)	$	139	$	28,892

Note 10. Derivative Transactions

The Company is exposed to certain market risks relating to its ongoing business. The Company seeks to manage these risks through internal risk management policies as well as, from time to time, the use of derivatives. The Company currently manages its interest rate risk with the use of a derivative instrument. The derivatives are measured at fair value with changes in fair value immediately recognized in gain (loss) on derivative instruments in the Consolidated Statement of Operations.

Interest Rate Derivative

During 2004, the Company entered into certain variable-to-fixed interest rate swaps in connection with the Stendal mill with respect to an aggregate maximum amount of approximately €612.6 million of the principal amount of the indebtedness under the Stendal Loan Facility. Under the remaining interest rate swap, the Company pays a fixed rate and receives a floating rate with the interest payments being calculated on a notional amount. Currently, the contract has an aggregate notional amount of €279.8 million at a fixed interest rate of 5.28% and it matures in October 2017 (which for the most part matches the maturity of the Stendal Loan Facility).

The interest rate derivative contract is with a bank that is part of a banking syndicate that holds the Stendal Loan Facility and the Company does not anticipate non-performance by the bank.

Pulp Price Derivatives

In November 2012, the Company entered into two fixed price pulp swap contracts with a bank. Under the terms of the contracts, 3,000 metric tonnes (“MT”) of pulp per month is fixed at prices which range from 880 U.S. dollars to 890 U.S. dollars per MT. The contracts matured in December 2013.

The following table shows the derivative gains and losses by instrument type as they are recognized in gain (loss) on derivative instruments in the Consolidated Statement of Operations:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Interest rate derivative contract	$	2,549	$	7,472	$	5,777	$	14,292
Pulp price derivative contracts		-		(551)		-		(1,007)
	$	2,549	$	6,921	$	5,777	$	13,285

FORM 10-Q

QUARTERLY REPORT - PAGE 16

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 11. Financial Instruments

The fair value of financial instruments is summarized as follows:

	June 30, 2014				December 31, 2013
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cash and cash equivalents	$	241,023	$	241,023	$	147,728	$	147,728
Marketable securities	$	221	$	221	$	217	$	217
Receivables	$	134,749	$	134,749	$	135,893	$	135,893
Accounts payable and other	$	115,643	$	115,643	$	103,814	$	103,814
Debt	$	944,625	$	929,204	$	979,372	$	980,982
Interest rate derivative contract – liability	$	40,447	$	40,447	$	46,517	$	46,517

The carrying value of cash and cash equivalents and accounts payable and other approximates the fair value due to the immediate or short-term maturity of these financial instruments. The carrying value of receivables approximates the fair value due to their short-term nature and historical collectability. Marketable securities are recorded at fair value based on recent transactions. See the Fair Value Measurement and Disclosure section below for details on how the fair value of the interest rate derivative contract and debt was determined.

Fair Value Measurement and Disclosure

The fair value methodologies and, as a result, the fair value of the Company’s marketable securities, debt and derivative instruments are determined based on the fair value hierarchy provided in the Fair Value Measurements and Disclosures topic of the FASB Accounting Standards Codification, and are as follows:

Level 1 – Valuations based on quoted prices in active markets for identical assets and liabilities.

Level 2 – Valuations based on observable inputs in active markets for similar assets and liabilities, other than Level 1 prices, such as quoted commodity prices or interest or currency exchange rates.

Level 3 – Valuations based on significant unobservable inputs that are supported by little or no market activity, such as discounted cash flow methodologies based on internal cash flow forecasts.

The Company classified its marketable securities within Level 1 of the valuation hierarchy because quoted prices are available in an active market for the exchange-traded equities.

The Company’s interest rate derivative is classified within Level 2 of the valuation hierarchy, as it is valued using internal models that use as their basis readily observable market inputs, such as forward interest rates, yield curves observable at specified intervals. The observable inputs reflect market data obtained from independent sources. In addition, the Company considered the risk of non-performance of the obligor, which in some cases reflects the Company’s own credit risk. The counterparty to its interest rate derivative is a multi-national financial institution.

The Company’s debt is recognized at amortized cost. The fair value of debt classified as Level 2 reflects recent market transactions. Discounted cash flow models use observable market inputs taking into consideration variables such as interest rate changes, comparative securities, subordination discount and credit rating changes. The fair value of debt classified as Level 3 is valued using discounted cash flow models or select comparable transactions, which require significant management estimates. These estimates are developed using available market, historical, and forecast data, including taking into account variables such as recent financing activities, the capital structure, and the lack of marketability of such debt.

FORM 10-Q

QUARTERLY REPORT - PAGE 17

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 11. Financial Instruments (continued)

The following table presents a summary of the Company’s outstanding financial instruments and their estimated fair values under the hierarchy defined in Fair Value Measurements and Disclosures Topic of the FASB Accounting Standards Codification:

	Fair value measurements at June 30, 2014 using:
Description	Level 1		Level 2		Level 3		Total
Assets
Marketable securities	$	221	$	-	$	-	$	221
Liabilities
Interest rate derivative contract	$	-	$	40,447	$	-	$	40,447
Debt		-		358,812		570,392		929,204
	$	-	$	399,259	$	570,392	$	969,651
	Fair value measurements at December 31, 2013 using:
Description	Level 1		Level 2		Level 3		Total
Assets
Marketable securities	$	217	$	-	$	-	$	217
Liabilities
Interest rate derivative contract	$	-	$	46,517	$	-	$	46,517
Debt		-		367,405		613,577		980,982
	$	-	$	413,922	$	613,577	$	1,027,499

Note 12. Commitments and Contingencies

(a) Pursuant to an arbitration proceeding with the general construction contractor (the noncontrolling shareholder) of the Stendal mill regarding certain warranty claims, the Company acted upon a bank guarantee for defect liability on civil works that was about to expire as provided in the engineering, procurement, and construction contract. On January 28, 2011, the Company received approximately €10.0 million ($13,606) (the “Guarantee Amount”), which is intended to compensate the Company for remediation work that is required at the Stendal mill.

The €10.0 million ($13,606) was initially recognized as an increase in cash and a corresponding increase in accounts payable and other. As civil works remediation steps are agreed to with the noncontrolling shareholder an agreed to portion of the payable is reversed with the offset recorded in operating costs to offset the remediation expenditures. As at June 30, 2014, the Company had Guarantee Amount proceeds of $2,421 remaining in accounts payable and other.

In July 2014, the Company reached a final settlement for the claims of €1.4 million ($1,906).

(b) The Company was involved in a property transfer tax dispute with respect to the Celgar mill. Celgar had previously paid the property transfer tax assessment. In July 2014, the Company lost its final appeal and accordingly in the period ended June 30, 2014 reclassified $3,617 from prepaid expenses and other to property, plant and equipment in the Consolidated Balance Sheet. The Company will amortize this amount over the remaining useful life of the related assets.

FORM 10-Q

QUARTERLY REPORT - PAGE 18

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 12. Commitments and Contingencies (continued)

The Company is involved in legal actions and claims arising in the ordinary course of business. While the outcome of any legal actions and claims cannot be predicted with certainty, it is the opinion of management that the outcome of any such claim which is pending or threatened, either individually or on a combined basis, will not have a material adverse effect on the consolidated financial condition, results of operations or liquidity of the Company.

(c) In 2012, as a result of a regular tax field audit for the Stendal mill, German public authorities commenced a preliminary investigation into past managers of the mill relating to whether certain settlement amounts received by the Stendal mill in 2007, 2010 and 2011 from the main contractor under the Engineering, Procurement and Construction Contract for the construction of the Stendal mill should have reduced the assessment base for the original investment subsidies granted to the mill by German authorities. The payments were made by the contractor to the Stendal mill to settle certain warranty, performance and remediation claims that the Stendal mill made against the contractor after completion of mill construction in 2004. The amounts currently under review aggregate approximately €8.3 million ($11,400). Investment subsidies received by the Stendal mill were generally based upon a percentage of the assessment base for subsidies of the mill. If the settlement payments received by the Stendal mill result in a reduction of the assessment base for subsidies under applicable German rules there could be a proportionate reduction in the investment subsidies and the difference could be repayable by the Stendal mill. The Stendal mill believes that it has properly recorded the settlement amounts received from the contractor and that the same do not reduce the assessment base for subsidies of the mill. While it is not reasonably possible to predict the outcome of the legal action and claim, it is the opinion of management that the outcome will not have a material adverse effect on the consolidated financial condition, results of operations or liquidity of the Company.

(d) The Company is subject to regulations that require the handling and disposal of asbestos in a prescribed manner if a property undergoes a major renovation or demolition. Otherwise, the Company is not required to remove asbestos from its facilities. Generally asbestos is found on steam and condensate piping systems as well as certain cladding on buildings and in building insulation throughout older facilities. The Company’s obligation for the proper removal and disposal of asbestos products from the Company’s mills is a conditional asset retirement obligation. As a result of the longevity of the Company’s mills, due in part to the maintenance procedures and the fact that the Company does not have plans for major changes that require the removal of asbestos, the timing of the asbestos removal is indeterminate. As a result, the Company is currently unable to reasonably estimate the fair value of its asbestos removal and disposal obligation. The Company will recognize a liability in the period in which sufficient information is available to reasonably estimate its fair value.

Note 13. Subsequent Event

In July 2014, the Stendal mill received lenders’ approval to amend its two term credit facilities to provide greater financial flexibility to Stendal. Such amendments include, among other things, loosening the financial covenant ratios Stendal must meet and reducing the scheduled principal repayments under the Stendal Loan Facility by 50% while retaining its current Cash Sweep. The amendments are subject to customary closing conditions, including, among others, execution and delivery of definitive agreements.

FORM 10-Q

QUARTERLY REPORT - PAGE 19

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 14. Restricted Group Supplemental Disclosure

The terms of the indenture governing the Company’s Senior Notes require that it provides the results of operations and financial condition of Mercer Inc. and the restricted subsidiaries under the indenture, collectively referred to as the “Restricted Group”. As at and during the three and six months ended June 30, 2014 and 2013, the Restricted Group was comprised of Mercer Inc., certain holding subsidiaries and its Rosenthal and Celgar mills. The Restricted Group excludes the Stendal mill.

Combined Condensed Balance Sheets

	June 30, 2014
	Restricted		Unrestricted				Consolidated
	Group		Subsidiaries		Eliminations		Group
ASSETS
Current assets
Cash and cash equivalents	$	157,418	$	83,605	$	-	$	241,023
Receivables		69,808		64,941		-		134,749
Inventories		104,124		60,948		-		165,072
Prepaid expenses and other		7,810		2,290		-		10,100
Deferred income tax		3,606		3,410		-		7,016
Total current assets		342,766		215,194		-		557,960
Long-term assets
Property, plant and equipment		410,110		596,796		-		1,006,906
Deferred note issuance costs and other		11,136		9,464		-		20,600
Deferred income tax		16,522		6,840		-		23,362
Due from unrestricted group		155,467		-		(155,467)		-
Total assets	$	936,001	$	828,294	$	(155,467)	$	1,608,828
LIABILITIES
Current liabilities
Accounts payable and other	$	63,468	$	52,175	$	-	$	115,643
Pension and other post-retirement benefit obligations		1,325		-		-		1,325
Debt		-		62,182		-		62,182
Total current liabilities		64,793		114,357		-		179,150
Long-term liabilities
Debt		336,124		546,319		-		882,443
Due to restricted group		-		155,467		(155,467)		-
Interest rate derivative liability		-		40,447		-		40,447
Pension and other post-retirement benefit obligations		35,370		-		-		35,370
Capital leases and other		8,946		10,630		-		19,576
Deferred income tax		26,229		-		-		26,229
Total liabilities		471,462		867,220		(155,467)		1,183,215
EQUITY
Total shareholders’ equity (deficit)		464,539		(32,495)		-		432,044
Noncontrolling interest (deficit)		-		(6,431)		-		(6,431)
Total liabilities and equity	$	936,001	$	828,294	$	(155,467)	$	1,608,828

FORM 10-Q

QUARTERLY REPORT - PAGE 20

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 14. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Balance Sheets

	December 31, 2013
	Restricted		Unrestricted				Consolidated
	Group		Subsidiaries		Eliminations		Group
ASSETS
Current assets
Cash and cash equivalents	$	82,910	$	64,818	$	-	$	147,728
Receivables		75,987		59,906		-		135,893
Inventories		93,807		77,101		-		170,908
Prepaid expenses and other		7,742		3,176		-		10,918
Deferred income tax		3,273		3,053		-		6,326
Total current assets		263,719		208,054		-		471,773
Long-term assets
Property, plant and equipment		420,373		618,258		-		1,038,631
Deferred note issuance costs and other		10,987		10,011		-		20,998
Deferred income tax		9,894		7,263		-		17,157
Due from unrestricted group		153,851		-		(153,851)		-
Total assets	$	858,824	$	843,586	$	(153,851)	$	1,548,559
LIABILITIES
Current liabilities
Accounts payable and other	$	49,891	$	53,923	$	-	$	103,814
Pension and other post-retirement benefit obligations		1,330		-		-		1,330
Debt		749		59,606		-		60,355
Total current liabilities		51,970		113,529		-		165,499
Long-term liabilities
Debt		336,382		582,635		-		919,017
Due to restricted group		-		153,851		(153,851)		-
Interest rate derivative liability		-		46,517		-		46,517
Pension and other post-retirement benefit obligations		35,466		-		-		35,466
Capital leases and other		8,523		10,770		-		19,293
Deferred income tax		14,450		-		-		14,450
Total liabilities		446,791		907,302		(153,851)		1,200,242
EQUITY
Total shareholders’ equity (deficit)		412,033		(52,955)		-		359,078
Noncontrolling interest (deficit)		-		(10,761)		-		(10,761)
Total liabilities and equity	$	858,824	$	843,586	$	(153,851)	$	1,548,559

FORM 10-Q

QUARTERLY REPORT - PAGE 21

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 14. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Statements of Operations

	Three Months Ended June 30, 2014
	Restricted		Unrestricted				Consolidated
	Group		Subsidiaries		Eliminations		Group
Revenues
Pulp	$	136,632	$	122,850	$	-	$	259,482
Energy and chemicals		7,649		18,061		-		25,710
		144,281		140,911		-		285,192
Operating costs		122,043		108,422		-		230,465
Operating depreciation and amortization		10,631		9,137		-		19,768
Selling, general and administrative expenses		8,647		4,291		-		12,938
		141,321		121,850		-		263,171
Operating income (loss)		2,960		19,061		-		22,021
Other income (expense)
Interest expense		(8,548)		(8,757)		140		(17,165)
Gain (loss) on derivative instruments		-		2,549		-		2,549
Other income (expense)		26		32		(140)		(82)
Total other income (expense)		(8,522)		(6,176)		-		(14,698)
Income (loss) before income taxes		(5,562)		12,885		-		7,323
Income tax benefit (provision)		(4,033)		(525)		-		(4,558)
Net income (loss)		(9,595)		12,360		-		2,765
Less: net income attributable to noncontrolling interest		-		(2,194)		-		(2,194)
Net income (loss) attributable to common shareholders	$	(9,595)	$	10,166	$	-	$	571

	Three Months Ended June 30, 2013
	Restricted		Unrestricted				Consolidated
	Group		Subsidiaries		Eliminations		Group
Revenues
Pulp	$	137,957	$	115,209	$	-	$	253,166
Energy and chemicals		7,886		13,648		-		21,534
		145,843		128,857		-		274,700
Operating costs		135,425		108,938		-		244,363
Operating depreciation and amortization		10,791		8,476		-		19,267
Selling, general and administrative expenses		7,375		4,864		-		12,239
		153,591		122,278		-		275,869
Operating income (loss)		(7,748)		6,579		-		(1,169)
Other income (expense)
Interest expense		(7,685)		(11,639)		2,154		(17,170)
Gain (loss) on derivative instruments		(551)		7,472		-		6,921
Other income (expense)		2,118		44		(2,154)		8
Total other income (expense)		(6,118)		(4,123)		-		(10,241)
Income (loss) before income taxes		(13,866)		2,456		-		(11,410)
Income tax benefit (provision)		(795)		(20)		-		(815)
Net income (loss)		(14,661)		2,436		-		(12,225)
Less: net income attributable to noncontrolling interest		-		(790)		-		(790)
Net income (loss) attributable to common shareholders	$	(14,661)	$	1,646	$	-	$	(13,015)

FORM 10-Q

QUARTERLY REPORT - PAGE 22

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 14. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Statements of Operations

	Six Months Ended June 30, 2014
	Restricted Group		Unrestricted Subsidiaries		Eliminations		Consolidated Group
Revenues
Pulp	$	277,429	$	260,559	$	-	$	537,988
Energy and chemicals		16,530		36,359		-		52,889
		293,959		296,918		-		590,877
Operating costs		233,411		233,358		-		466,769
Operating depreciation and amortization		21,205		18,265		-		39,470
Selling, general and administrative expenses		15,098		8,276		-		23,374
		269,714		259,899		-		529,613
Operating income (loss)		24,245		37,019		-		61,264
Other income (expense)
Interest expense		(17,066)		(17,829)		280		(34,615)
Gain (loss) on derivative instruments		-		5,777		-		5,777
Other income (expense)		138		66		(280)		(76)
Total other income (expense)		(16,928)		(11,986)		-		(28,914)
Income (loss) before income taxes		7,317		25,033		-		32,350
Income tax benefit (provision)		(5,785)		(623)		-		(6,408)
Net income (loss)		1,532		24,410		-		25,942
Less: net income attributable to noncontrolling interest		-		(4,330)		-		(4,330)
Net income (loss) attributable to common shareholders	$	1,532	$	20,080	$	-	$	21,612

	Six Months Ended June 30, 2013
	Restricted Group		Unrestricted Subsidiaries		Eliminations		Consolidated Group
Revenues
Pulp	$	270,307	$	220,677	$	-	$	490,984
Energy and chemicals		17,247		28,254		-		45,501
		287,554		248,931		-		536,485
Operating costs		253,625		208,722		-		462,347
Operating depreciation and amortization		21,606		17,111		-		38,717
Selling, general and administrative expenses		14,922		9,061		-		23,983
		290,153		234,894		-		525,047
Operating income (loss)		(2,599)		14,037		-		11,438
Other income (expense)
Interest expense		(15,430)		(23,430)		4,330		(34,530)
Gain (loss) on derivative instruments		(1,007)		14,292		-		13,285
Other income (expense)		4,145		101		(4,330)		(84)
Total other income (expense)		(12,292)		(9,037)		-		(21,329)
Income (loss) before income taxes		(14,891)		5,000		-		(9,891)
Income tax benefit (provision)		(2,137)		177		-		(1,960)
Net income (loss)		(17,028)		5,177		-		(11,851)
Less: net income attributable to noncontrolling interest		-		(1,725)		-		(1,725)
Net income (loss) attributable to common shareholders	$	(17,028)	$	3,452	$	-	$	(13,576)

FORM 10-Q

QUARTERLY REPORT - PAGE 23

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 14. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Statements of Cash Flows

	Three Months Ended June 30, 2014
	Restricted		Unrestricted		Consolidated
	Group		Subsidiaries		Group
Cash flows from (used in) operating activities
Net income (loss)	$	(9,595)	$	12,360	$	2,765
Adjustments to reconcile net income (loss) to cash flows from operating activities
Unrealized loss (gain) on derivative instruments		-		(2,549)		(2,549)
Depreciation and amortization		10,714		9,137		19,851
Deferred income taxes		3,153		-		3,153
Stock compensation expense		600		-		600
Pension and other post-retirement expense, net of funding		214		-		214
Other		412		440		852
Changes in working capital
Receivables		4,808		9,709		14,517
Inventories		(8,753)		(4,637)		(13,390)
Accounts payable and accrued expenses		(2,397)		(5,665)		(8,062)
Other(1)		1,529		1,809		3,338
Net cash from (used in) operating activities		685		20,604		21,289
Cash flows from (used in) investing activities
Purchase of property, plant and equipment		(5,571)		(580)		(6,151)
Purchase of intangible assets		(229)		(486)		(715)
Proceeds on sale of property, plant and equipment		81		13		94
Net cash from (used in) investing activities		(5,719)		(1,053)		(6,772)
Cash flows from (used in) financing activities
Proceeds from issuance of shares		53,942		-		53,942
Repayment of capital lease obligations		(202)		(330)		(532)
Proceeds from government grants		-		761		761
Net cash from (used in) financing activities		53,740		431		54,171
Effect of exchange rate changes on cash and cash equivalents		666		(440)		226
Net increase (decrease) in cash and cash equivalents		49,372		19,542		68,914
Cash and cash equivalents, beginning of period		108,046		64,063		172,109
Cash and cash equivalents, end of period	$	157,418	$	83,605	$	241,023

(1)   Includes intercompany working capital related transactions.

FORM 10-Q

QUARTERLY REPORT - PAGE 24

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 14. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Statements of Cash Flows

	Three Months Ended June 30, 2013
	Restricted		Unrestricted		Consolidated
	Group		Subsidiaries		Group
Cash flows from (used in) operating activities
Net income (loss)	$	(14,661)	$	2,436	$	(12,225)
Adjustments to reconcile net income (loss) to cash flows from operating activities
Unrealized loss (gain) on derivative instruments		41		(7,472)		(7,431)
Depreciation and amortization		10,878		8,476		19,354
Deferred income taxes		561		(21)		540
Stock compensation expense		396		-		396
Pension and other post-retirement expense, net of funding		277		-		277
Other		378		888		1,266
Changes in working capital
Receivables		24,835		3,800		28,635
Inventories		6,945		(4,164)		2,781
Accounts payable and accrued expenses		(2,540)		406		(2,134)
Other(1)		(9,085)		1,593		(7,492)
Net cash from (used in) operating activities		18,025		5,942		23,967
Cash flows from (used in) investing activities
Purchase of property, plant and equipment		(3,401)		(10,948)		(14,349)
Proceeds on sale of property, plant and equipment		-		3		3
Net cash from (used in) investing activities		(3,401)		(10,945)		(14,346)
Cash flows from (used in) financing activities
Proceeds from borrowings of debt		-		9,090		9,090
Repayment of capital lease obligations		(159)		(363)		(522)
Proceeds from (repayment of) credit facilities, net		9,112		-		9,112
Proceeds from government grants		-		4,441		4,441
Net cash from (used in) financing activities		8,953		13,168		22,121
Effect of exchange rate changes on cash and cash equivalents		(21)		1,061		1,040
Net increase (decrease) in cash and cash equivalents		23,556		9,226		32,782
Cash and cash equivalents, beginning of period		66,820		75,295		142,115
Cash and cash equivalents, end of period	$	90,376	$	84,521	$	174,897

(1)    Includes intercompany working capital related transactions.

FORM 10-Q

QUARTERLY REPORT - PAGE 25

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 14. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Statements of Cash Flows

	Six Months Ended June 30, 2014
	Restricted Group		Unrestricted   Subsidiaries		Consolidated Group
Cash flows from (used in) operating activities
Net income (loss)	$	1,532	$	24,410	$	25,942
Adjustments to reconcile net income (loss) to cash flows from operating activities
Unrealized loss (gain) on derivative instruments		-		(5,777)		(5,777)
Depreciation and amortization		21,373		18,265		39,638
Deferred income taxes		4,881		-		4,881
Stock compensation expense		331		-		331
Pension and other post-retirement expense, net of funding		425		-		425
Other		583		921		1,504
Changes in working capital
Receivables		4,712		(7,527)		(2,815)
Inventories		(10,342)		15,675		5,333
Accounts payable and accrued expenses		12,286		1,894		14,180
Other(1)		(6,563)		3,889		(2,674)
Net cash from (used in) operating activities		29,218		51,750		80,968
Cash flows from (used in) investing activities
Purchase of property, plant and equipment		(8,531)		(4,186)		(12,717)
Purchase of intangible assets		(1,203)		(1,252)		(2,455)
Proceeds on sale of property, plant and equipment		215		58		273
Net cash from (used in) investing activities		(9,519)		(5,380)		(14,899)
Cash flows from (used in) financing activities
Repayment of debt		(744)		(29,797)		(30,541)
Proceeds from issuance of shares		53,942		-		53,942
Repayment of capital lease obligations		(474)		(718)		(1,192)
Proceeds from sale and lease-back transactions		1,047		-		1,047
Proceeds from government grants		832		3,226		4,058
Net cash from (used in) financing activities		54,603		(27,289)		27,314
Effect of exchange rate changes on cash and cash equivalents		206		(294)		(88)
Net increase (decrease) in cash and cash equivalents		74,508		18,787		93,295
Cash and cash equivalents, beginning of year		82,910		64,818		147,728
Cash and cash equivalents, end of year	$	157,418	$	83,605	$	241,023

(1)    Includes intercompany working capital related transactions.

FORM 10-Q

QUARTERLY REPORT - PAGE 26

MERCER INTERNATIONAL INC.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Note 14. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Statements of Cash Flows

	Six Months Ended June 30, 2013
	Restricted		Unrestricted		Consolidated
	Group		Subsidiaries		Group
Cash flows from (used in) operating activities
Net income (loss)	$	(17,028)	$	5,177	$	(11,851)
Adjustments to reconcile net income (loss) to cash flows from operating activities
Unrealized loss (gain) on derivative instruments		662		(14,292)		(13,630)
Depreciation and amortization		21,776		17,111		38,887
Deferred income taxes		1,870		4,134		6,004
Stock compensation expense		752		-		752
Pension and other post-retirement expense, net of funding		437		-		437
Other		923		1,905		2,828
Changes in working capital
Receivables		13,824		1,998		15,822
Inventories		10,995		(627)		10,368
Accounts payable and accrued expenses		11,331		527		11,858
Other(1)		(11,349)		2,824		(8,525)
Net cash from (used in) operating activities		34,193		18,757		52,950
Cash flows from (used in) investing activities
Purchase of property, plant and equipment		(6,893)		(22,501)		(29,394)
Proceeds on sale of property, plant and equipment		17		3		20
Net cash from (used in) investing activities		(6,876)		(22,498)		(29,374)
Cash flows from (used in) financing activities
Repayment of debt		(736)		(25,684)		(26,420)
Proceeds from borrowings of debt		-		22,223		22,223
Repayment of capital lease obligations		(320)		(1,126)		(1,446)
Proceeds from (repayment of) credit facilities, net		17,060		-		17,060
Proceeds from government grants		-		5,413		5,413
Net cash from (used in) financing activities		16,004		826		16,830
Effect of exchange rate changes on cash and cash equivalents		(1,352)		(1,596)		(2,948)
Net increase (decrease) in cash and cash equivalents		41,969		(4,511)		37,458
Cash and cash equivalents, beginning of period		48,407		89,032		137,439
Cash and cash equivalents, end of period	$	90,376	$	84,521	$	174,897

(1)    Includes intercompany working capital related transactions.

FORM 10-Q

QUARTERLY REPORT - PAGE 27

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In this document: (i) unless the context otherwise requires, references to “we”, “our”, “us”, the “Company” or “Mercer” mean Mercer International Inc. and its subsidiaries; (ii) references to “Mercer Inc.” mean the Company excluding its subsidiaries; (iii) information is provided as of June 30, 2014, unless otherwise stated; (iv) all references to “$” shall mean U.S. dollars, which is our reporting currency, unless otherwise stated; (v) “€” refers to Euros and “C$” refers to Canadian dollars; (vi) “ADMTs” refers to air-dried metric tonnes; (vii) “MW” refers to megawatts; and (viii) “MWh” refers to megawatt hours.

Effective October 1, 2013, we changed our reporting currency from Euros to the U.S. dollar. As a result of our change in reporting currency, all comparative financial information has been recast from Euros to U.S. dollars to reflect our financial statements as if they had been historically reported in U.S. dollars, consistent with the method described in significant accounting policies. See “—Critical Accounting Policies—Change in Reporting Currency” and also Note 1 of the consolidated financial statements and related notes included in our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2013 filed with the Securities and Exchange Commission, referred to as the “SEC”, for more information.

Results of Operations

General

We operate three northern bleached softwood kraft, referred to as “NBSK”, pulp mills through our wholly owned subsidiaries, Rosenthal and Celgar, and our 83.0% owned subsidiary, Stendal (we increased our equity ownership from 74.9% as at September 30, 2013). We have a consolidated annual production capacity of approximately 1.5 million ADMTs.

The following discussion and analysis of our results of operations and financial condition for the three and six months ended June 30, 2014 should be read in conjunction with our interim consolidated financial statements and related notes included in this quarterly report, as well as our most recent annual report on Form 10-K for the fiscal year ended December 31, 2013 filed with the SEC.

Current Market Environment

In the second quarter of 2014, pulp list prices remained essentially flat in Europe and North America and decreased marginally in China. At the end of the current quarter, list prices in Europe were approximately $925 per ADMT and in North America and China were approximately $1,030 and $720 per ADMT, respectively.

Currently, the NBSK pulp market is generally under-balanced with world producer inventories at about 25 days’ supply. We currently expect to see continued growth in NBSK demand in emerging markets, particularly in China, driven by increasing strong demand from tissue producers. We currently expect that NBSK pulp prices will remain flat during the summer months in Europe and North America with modest increases beginning in the fourth quarter of 2014.

FORM 10-Q

QUARTERLY REPORT - PAGE 28

During the course of 2014, the global supply of hardwood bleached kraft pulp is now currently being projected to increase by approximately 1.2 million ADMTs, primarily from South America. This increase in hardwood chemical production is largely targeted at the growing demand for pulp by tissue makers, particularly in China. If such additional hardwood bleached pulp supply is not absorbed by such demand growth, as a result of generally lower prices for hardwood bleached pulp, this supply increase could put downward pressure on NBSK pulp prices.

We believe customers’ ability to further substitute NBSK pulp for lower priced hardwood pulp is limited by the strength characteristic provided by NBSK pulp that large modern paper machines need to run lower basis weight paper products efficiently. However, as pulp prices are highly cyclical, there can be no assurance that prices will not decline in the future.

Summary Financial Highlights

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
	(in thousands, other than per share amounts)
Consolidated
Pulp revenues	$	259,482		$	253,166		$	537,988		$	490,984
Energy and chemical revenues	$	25,710		$	21,534		$	52,889		$	45,501
Operating income (loss)	$	22,021		$	(1,169	)	$	61,264		$	11,438
Gain on derivative instruments	$	2,549		$	6,921		$	5,777		$	13,285
Income tax benefit (provision)	$	(4,558	)	$	(815	)	$	(6,408	)	$	(1,960	)
Net income (loss)(1)	$	571		$	(13,015	)	$	21,612		$	(13,576	)
Net income (loss) per share(1)(2)	$	0.01		$	(0.23	)	$	0.36		$	(0.24	)
(1)  Attributable to common shareholders. (2)  Per share amounts are on a basic and diluted basis Selected Production, Sales and Other Data
	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Consolidated
Pulp production (‘000 ADMTs)		353.8			349.5			735.6			710.7
Scheduled production downtime (‘000 ADMTs)		17.7			16.0			17.7			16.0
Scheduled production downtime (days)		12			11			12			11
Pulp sales (‘000 ADMTs)		356.8			368.3			738.1			724.9
Average NBSK pulp list prices in Europe ($/ADMT)(1)		925			857			923			844
Average pulp sales realizations ($/ADMT)(2)		720			679			722			669
Energy production (‘000 MWh)		446.2			405.8			912.5			830.2
Energy sales (‘000 MWh)		197.1			167.5			398.6			341.1
Average energy sales realizations ($/MWh)		113			109			114			113
Average Spot Currency Exchange Rates
$ / €(3)		1.3716			1.3064			1.3711			1.3129
$ / C$(3)		0.9169			0.9777			0.9118			0.9845

(1)   Source: RISI pricing report.

(2)   Average realized pulp price for the periods indicated reflect customer discounts and pulp price movements between the order and shipment date.

(3)   Average Federal Reserve Bank of New York noon spot rate over the reporting period.

FORM 10-Q

QUARTERLY REPORT - PAGE 29

Three Months Ended June 30, 2014 Compared to Three Months Ended June 30, 2013

Total revenues for the three months ended June 30, 2014 increased by approximately 4% to $285.2 million from $274.7 million in the same period in 2013, due to higher pulp prices and higher energy sales volumes.

Pulp revenues for the three months ended June 30, 2014 increased by approximately 2% to $259.5 million from $253.2 million in the comparative quarter of 2013, due to higher price realizations, partially offset by lower sales volumes.

Energy and chemical revenues increased by approximately 20% to $25.7 million in the second quarter of 2014 from $21.5 million in the same quarter last year, primarily because of higher energy sales volume resulting from Project Blue Mill coming online at our Stendal mill at the end of 2013.

Average list prices for NBSK pulp in Europe were approximately $925 per ADMT in the current quarter, compared to approximately $857 per ADMT in the same quarter last year. In the second quarter of 2014, average pulp sales realizations increased by approximately 6% to $720 per ADMT from approximately $679 per ADMT in the same quarter last year primarily due to higher pulp prices.

Pulp production increased by approximately 1% to 353,803 ADMTs in the current quarter from 349,502 ADMTs in the same quarter of 2013. We had an aggregate of 12 days (approximately 17,700 ADMTs) of scheduled maintenance downtime at our Stendal and Celgar mills in the second quarter of 2014. In the current quarter, our Celgar mill took ten days of scheduled maintenance downtime, or approximately 14,000 ADMTs. Our Stendal mill took two days of scheduled maintenance downtime, or approximately 3,700 ADMTs, in the current quarter. We estimate that the scheduled maintenance downtime at our Celgar and Stendal mills adversely impacted our Operating EBITDA by approximately $18.4 million, comprised of approximately $13.0 million in direct out-of-pocket expenses and the balance for reduced production. Many of our competitors that report their financial results using International Financial Reporting Standards capitalize their direct costs of maintenance shutdowns.

Our Rosenthal mill’s 12-day annual maintenance shutdown is scheduled for the third quarter and our Stendal mill is scheduled to have a second two-day maintenance shutdown in the fourth quarter.

Pulp sales volumes decreased by approximately 3% to 356,755 ADMTs in the current quarter from 368,285 ADMTs in the comparative quarter, primarily due to weaker demand from China and lower production at our Celgar mill.

Costs and expenses in the second quarter of 2014 decreased by approximately 5% to $263.2 million from $275.9 million in the comparative period of 2013, primarily due to lower fiber costs and lower sales volumes.

In the second quarter of 2014, operating depreciation and amortization marginally increased to $19.8 million from $19.3 million in the same quarter last year. Selling, general and administrative expenses were $12.9 million in the second quarter of 2014, compared to $12.2 million in the second quarter of 2013.

FORM 10-Q

QUARTERLY REPORT - PAGE 30

Transportation costs marginally decreased to $22.3 million in the second quarter of 2014 from $23.0 million in the second quarter of 2013. The decrease was due to lower sales volume, partially offset by higher costs per tonne at our Celgar mill resulting from limitations on rail car availability.

On average, our overall per unit fiber costs in the current quarter decreased by approximately 5% from the same period in 2013. Timber harvesting was steady through the quarter and sawmills ran at high rates which led to a good supply of pulpwood and residual chips. In addition, less demand pressure on German timber due to the availability of storm damaged wood in Eastern Europe resulted in moderately lower German wood costs in the quarter. For the next quarter of 2014, we currently expect our overall fiber costs to remain stable, with modest increases in Canada being offset by slightly lower prices in Germany.

For the second quarter of 2014, our operating income increased to $22.0 million from an operating loss of $1.2 million in the comparative quarter of 2013, primarily due to higher pulp sales realizations and lower fiber costs, partially offset by a weaker U.S. dollar relative to the Euro.

Interest expense was $17.2 million in the second quarter of 2014 and 2013, respectively.

We recorded a derivative gain of $2.5 million on the mark to market adjustment of our Stendal mill’s interest rate derivative, compared to a net derivative gain of $6.9 million in the same quarter of last year.

During the current quarter, we recorded income tax expense of $4.6 million, compared to income tax expense of $0.8 million in the same quarter of 2013.

The noncontrolling shareholder’s interest in the Stendal mill’s net income in the second quarter of 2014 was $2.2 million, compared to $0.8 million in the same quarter last year.

We reported net income attributable to common shareholders of $0.6 million, or $0.01 per basic and diluted share, for the second quarter of 2014, which included a non-cash unrealized gain on the interest rate derivative of $2.5 million. In the second quarter of 2013, the net loss attributable to common shareholders was $13.0 million, or $0.23 per basic and diluted share, which included a total non-cash net unrealized gain of $7.4 million on the Stendal interest rate derivative and fixed price pulp swaps.

In the second quarter of 2014, Operating EBITDA increased to $41.9 million from $18.2 million in the second quarter of 2013. 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.

FORM 10-Q

QUARTERLY REPORT - PAGE 31

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 the accounting principles generally accepted in the United States of America, referred to as “GAAP”, and should not be considered as an alternative to net income (loss) 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. Some of these limitations are that Operating EBITDA does not reflect: (i) our cash expenditures, or future requirements, for capital expenditures or contractual commitments; (ii) changes in, or cash requirements for, working capital needs; (iii) the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our outstanding debt; (iv) noncontrolling interest on our Stendal NBSK pulp mill operations; (v) the impact of realized or marked to market changes in our derivative positions, which can be substantial; and (vi) the impact of impairment charges against our investments or assets. Because of these limitations, Operating EBITDA should only be considered as a supplemental performance measure and should not be considered as a measure of liquidity or cash available to us to invest in the growth of our business. See the Statement of Cash Flows set out in our consolidated financial statements included herein. Because all companies do not calculate Operating EBITDA in the same manner, Operating EBITDA as calculated by us may differ from Operating EBITDA or EBITDA as calculated by other companies. We compensate for these limitations by using Operating EBITDA as a supplemental measure of our performance and by relying primarily on our GAAP financial statements.

The following table provides a reconciliation of net income (loss) attributable to common shareholders to operating income (loss) and Operating EBITDA for the periods indicated:

	Three Months Ended June 30,
	2014			2013
	(in thousands)
Net income (loss) attributable to common shareholders	$	571		$	(13,015	)
Net income attributable to noncontrolling interest		2,194			790
Income tax provision		4,558			815
Interest expense		17,165			17,170
(Gain) loss on derivative instruments		(2,549	)		(6,921	)
Other (income) expense		82			(8	)
Operating income (loss)		22,021			(1,169	)
Add: Depreciation and amortization		19,851			19,354
Operating EBITDA	$	41,872		$	18,185

Six Months Ended June 30, 2014 Compared to Six Months Ended June 30, 2013

Total revenues for the six months ended June 30, 2014 increased by approximately 10% to $590.9 million from $536.5 million in the same period in 2013, due to higher pulp and energy revenues.

Pulp revenues for the six months ended June 30, 2014 increased by approximately 10% to $538.0 million from $491.0 million in the comparative period of 2013, due to higher pulp price realizations.

FORM 10-Q

QUARTERLY REPORT - PAGE 32

Energy and chemical revenues increased by approximately 16% to $52.9 million in the first half of 2014 from $45.5 million in the same period last year, primarily because of higher energy sales volumes resulting from Project Blue Mill coming online at our Stendal mill at the end of 2013.

Average list prices for NBSK pulp in Europe were approximately $923 per ADMT in the first half of 2014, compared to approximately $844 per ADMT in the same period last year. In the first half of 2014, average pulp sales realizations increased by approximately 8% to $722 per ADMT from approximately $669 per ADMT in the same period last year, primarily due to higher pulp prices.

Pulp production increased by approximately 4% to 735,588 ADMTs in the first half of 2014 from 710,666 ADMTs in the same period of 2013. We had an aggregate of 12 days (approximately 17,700 ADMTs) of scheduled maintenance downtime at our Stendal and Celgar mills in the first half of 2014. In the first half of 2014, our Celgar mill took ten days of scheduled maintenance downtime, or approximately 14,000 ADMTs. Our Stendal mill took two days of scheduled maintenance downtime, or approximately 3,700 ADMTs, in the first half of 2014.

Pulp sales volumes increased by approximately 2% to 738,110 ADMTs in the first half of 2014 from 724,945 ADMTs in the comparative period of 2013, primarily due to higher sales in North America.

Costs and expenses in the first half of 2014 increased by approximately 1% to $529.6 million from $525.0 million in the comparative period of 2013, primarily due to the impact of a weaker U.S. dollar relative to the Euro, partially offset by lower fiber costs.

In the first half of 2014, operating depreciation and amortization marginally increased to $39.5 million from $38.7 million in the same period last year.

Selling, general and administrative expenses decreased to $23.4 million in the first half of 2014, compared to $24.0 million in the same period of 2013.

Transportation costs marginally decreased to $44.2 million in the first half of 2014 from $45.2 million in the comparative period of 2013. The decrease is due to lower per tonne freight costs for the German mills, partially offset by higher per tonne freight costs at our Celgar mill resulting from limitations on rail car availability.

On average, our overall per unit fiber costs in the first half of 2014 decreased by approximately 1% from the same period in 2013. Timber harvesting was steady through the first half of 2014 and sawmills ran at high rates which led to a good supply of pulpwood and residual chips. In addition, less demand pressure on German timber due to the availability of storm damaged wood in Eastern Europe resulted in moderately lower German wood costs in the period. For the next quarter of 2014, we currently expect our overall fiber costs to remain stable, with modest increases in Canada being offset by slightly lower prices in Germany.

In the first half of 2014, our operating income increased to $61.3 million from $11.4 million in the comparative period of 2013, primarily due to higher sales realizations and sales volumes and lower fiber costs.

Interest expense in the first half of 2014 marginally increased to $34.6 million from $34.5 million in the comparative period of 2013.

FORM 10-Q

QUARTERLY REPORT - PAGE 33

We recorded a derivative gain of $5.8 million on the mark to market adjustment of our Stendal mill’s interest rate derivative, compared to a net derivative gain of $13.3 million in the same period of last year.

During the six months ended June 30, 3014, we recorded income tax expense of $6.4 million, compared to net income tax expense of $2.0 million in the same period of 2013.

The noncontrolling shareholder’s interest in the Stendal mill’s net income in the first half of 2014 was $4.3 million, compared to $1.7 million in the same period last year.

We reported net income attributable to common shareholders of $21.6 million, or $0.36 per basic and diluted share, for the first half of 2014, which included a non-cash unrealized gain on the interest rate derivative of $5.8 million. In the first half of 2013, the net loss attributable to common shareholders was $13.6 million, or $0.24 per basic and diluted share, which included a total non-cash net unrealized gain of $13.6 million on the Stendal interest rate derivative and fixed price pulp swaps.

In the six months ended June 30, 2014, Operating EBITDA increased to $100.9 million from $50.3 million in the same period of 2013. Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and non-recurring capital asset impairment charges. 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. See the discussion of our results for the three months ended June 30, 2014 for additional information relating to such limitations of Operating EBITDA.

The following table provides a reconciliation of net income (loss) attributable to common shareholders to operating income and Operating EBITDA for the periods indicated:

	Six Months Ended June 30,
	2014			2013
	(in thousands)
Net income (loss) attributable to common shareholders	$	21,612		$	(13,576	)
Net income attributable to noncontrolling interest		4,330			1,725
Income tax provision		6,408			1,960
Interest expense		34,615			34,530
(Gain) loss on derivative instruments		(5,777	)		(13,285	)
Other expense		76			84
Operating income		61,264			11,438
Add: Depreciation and amortization		39,638			38,887
Operating EBITDA	$	100,902		$	50,325

FORM 10-Q

QUARTERLY REPORT - PAGE 34

Liquidity and Capital Resources

The following table is a summary of selected financial information as at the dates indicated:

	As at June 30, 2014		As at December 31, 2013
	(in thousands)
Financial Position
Cash and cash equivalents	$	241,023	$	147,728
Working capital	$	378,810	$	306,274
Total assets	$	1,608,828	$	1,548,559
Long-term liabilities	$	1,004,065	$	1,034,743
Total equity	$	425,613	$	348,317

As at June 30, 2014, our cash and cash equivalents had increased to $241.0 million from $147.7 million at the end of 2013 and working capital had increased to $378.8 million from $306.3 million at the end of 2013. On April 2, 2014, we completed our registered public offering (the “2014 Equity Offering”) of 8,050,000 shares of our common stock at a price to the public of $7.15 per share for net proceeds of approximately $53.6 million.

As at June 30, 2014, we had approximately €28.4 million and C$38.3 million available under our Rosenthal and Celgar revolving facilities, respectively.

Sources and Uses of Funds

Our principal sources of funds are cash flows from operations, cash and cash equivalents on hand and the revolving working capital loan facilities for our Celgar and Rosenthal mills. Our principal uses of funds consist of operating expenditures, payments of principal and interest on the project loan facility relating to our development of the Stendal mill (the “Stendal Loan Facility”) and for its Project Blue Mill (collectively, the “Stendal Facilities”), capital expenditures and interest payments on our outstanding Senior Notes.

Debt Covenants

Our long-term obligations contain various financial tests and covenants customary to these types of arrangements.

As at June 30, 2014, the Stendal Facilities had approximately $556.7 million in principal outstanding, compared to approximately $590.1 million at December 31, 2013. The Stendal Facilities are without recourse to the Restricted Group (comprised of Mercer Inc., the Rosenthal and Celgar mills and certain holding subsidiaries) and 80% of the principal amount thereunder is severally guaranteed by German federal and state governments.

In March 2014, our Stendal mill received a waiver to the Stendal Facilities to: postpone the testing date of its Senior Debt/EBITDA cover ratio to September 30, 2014 from June 30, 2014 and report thereon by November 15, 2014; extend the date by which a portion of the net proceeds of the 2014 Equity Offering must be contributed to Stendal to November 17, 2014; and confirm that any such contributed capital shall qualify as an “equity cure” in the event that the Stendal mill is not in compliance with prescribed financial ratio covenants.

FORM 10-Q

QUARTERLY REPORT - PAGE 35

In July 2014, our Stendal mill received lenders’ approval to amend the Stendal Facilities to provide greater financial flexibility to Stendal. Such amendments include, among other things, loosening the financial covenant ratios Stendal must meet and reducing the scheduled principal repayments under the Stendal Loan Facility by 50% while retaining its current “cash sweep”. In connection with such amendments, we will provide Stendal with additional capital of $20.0 million. The amendments are subject to customary closing conditions, including, among others, execution and delivery of definitive agreements.

Cash Flow Analysis

Cash Flows from Operating Activities. We operate in a cyclical industry and our operating cash flows vary accordingly. Our principal operating cash expenditures are for labor, fiber and chemicals.

Working capital levels fluctuate throughout the year and are affected by maintenance downtime, changing sales patterns, seasonality and the timing of receivables and the payment of payables and expenses.

Cash provided by operating activities increased to $81.0 million in the six months ended June 30, 2014 from $53.0 million in the comparative period of 2013, primarily due to higher operating income. An increase in accounts payable and accrued expenses provided cash of $14.2 million, compared to $11.9 million in the same period of 2013. A decrease in inventories provided cash of $5.3 million in the six months ended June 30, 2014, compared to $10.4 million in the same period of 2013. An increase in receivables used cash of $2.8 million in the six months ended June 30, 2014, compared to a decrease providing cash of $15.8 million in the same period of 2013.

Cash Flows from Investing Activities. Investing activities in the six months ended June 30, 2014 used cash of $14.9 million, compared to $29.4 million in the same period of 2013. In the first half of 2014, capital expenditures and costs associated with the implementation of the enterprise resource planning system used cash of $15.2 million, compared to $29.4 million of capital expenditures in the same period of 2013.

Cash Flows from Financing Activities. In the six months ended June 30, 2014, financing activities provided cash of $27.3 million, compared to $16.8 million in the same period of 2013. In the six months ended June 30, 2014, proceeds from the 2014 Equity Offering provided cash of $53.9 million and principal repayments under the Stendal Facilities used cash of $29.8 million, compared to using cash of $25.7 million in the same period of 2013.

During the six months ended June 30, 2013, borrowing under the loan facility for Project Blue Mill provided cash of $22.2 million. Net borrowing from our revolving credit facilities provided cash of $17.1 million in the six months ended June 30, 2013. In the six months ended June 30, 2014 and 2013, proceeds of government grants provided cash of $4.1 million and $5.4 million, respectively.

Capital Commitments and Future Liquidity

Based upon the current level of operations and our current expectations for future periods in light of the current economic environment, and in particular, current and expected pulp pricing and foreign exchange rates, we believe that cash flow from operations and available cash, together with available borrowings will be adequate to meet our liquidity needs in the next 12 months.

FORM 10-Q

QUARTERLY REPORT - PAGE 36

We currently have no material commitments to acquire assets or operating businesses. We anticipate that there may be acquisitions or commitments to capital projects in the future. To achieve the long-term goals of expanding our assets and earnings, additional capital resources may be required. Depending on the size of a transaction or project, the capital resources that will be required can be substantial. The necessary resources will be generated from cash flow from operations, cash on hand, borrowing against our assets or the issuance of securities.

Off-Balance Sheet Arrangements

At June 30, 2014, we did not have any off-balance sheet arrangements (as defined in Item 303(a)(4)(ii) of Regulation S-K).

Contractual Obligations and Commitments

There were no material changes outside the ordinary course to any of our material contractual obligations during the six months ended June 30, 2014.

Foreign Currency

Effective October 1, 2013, our reporting currency is the U.S. dollar. However, we hold certain assets and liabilities in Euros and Canadian dollars and the majority of our expenditures are denominated in Euros or Canadian dollars. Accordingly, our consolidated financial results are subject to foreign currency exchange rate fluctuations.

We translate foreign denominated assets and liabilities into U.S. dollars at the rate of exchange on the balance sheet date. Equity accounts are translated using historical exchange rates. Unrealized gains or losses from these translations are recorded in our consolidated statement of comprehensive income (loss) and do not affect our net earnings.

In the six months ended June 30, 2014, accumulated other comprehensive income decreased by $2.6 million to $28.9 million, primarily due to the foreign currency translation adjustment.

Based upon the exchange rate at June 30, 2014, the U.S. dollar has weakened by approximately 5% in value against the Euro since June 30, 2013. See “Quantitative and Qualitative Disclosures about Market Risk”.

Results of Operations of the Restricted Group under our Senior Note Indenture

General

The indenture governing our Senior Notes requires that we also provide a discussion in annual and quarterly reports we file with the SEC under Management’s Discussion and Analysis of Financial Condition and Results of Operations of the results of operations and financial condition of Mercer Inc. and our restricted subsidiaries under the indenture, referred to as the “Restricted Group”. The Restricted Group is comprised of Mercer Inc., our Rosenthal and Celgar mills and certain holding subsidiaries. The Restricted Group excludes our Stendal mill.

The following is a discussion of the results of operations and financial condition of the Restricted Group. For further information regarding the Restricted Group including, without limitation, a reconciliation to our consolidated results of operations, see Note 14 of our interim consolidated financial statements included herein.

FORM 10-Q

QUARTERLY REPORT - PAGE 37

Summary Financial Highlights for the Restricted Group

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Restricted Group(1)		(in thousands)
Pulp revenues	$	136,632		$	137,957		$	277,429		$	270,307
Energy and chemical revenues	$	7,649		$	7,886		$	16,530		$	17,247
Operating income (loss)	$	2,960		$	(7,748	)	$	24,245		$	(2,599	)
Gain (loss) on derivative instruments	$	-		$	(551	)	$	-		$	(1,007	)
Income tax benefit (provision)	$	(4,033	)	$	(795	)	$	(5,785	)	$	(2,137	)
Net income (loss)	$	(9,595	)	$	(14,661	)	$	1,532		$	(17,028	)
(1)  See Note 14 of the interim financial statements included elsewhere herein for a reconciliation to our consolidated results. Selected Production, Sales and Other Data for the Restricted Group
	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Pulp production (‘000 ADMTs)		185.2			192.1			396.0			397.7
Scheduled production downtime (‘000 ADMTs)		14.0			16.0			14.0			16.0
Scheduled production downtime (days)		10			11			10			11
Pulp sales (‘000 ADMTs)		189.3			202.4			382.3			401.8
Average NBSK pulp list prices in Europe ($/ADMT)(1)		925			857			923			844
Average pulp sales realizations ($/ADMT)(2)		722			681			726			673
Energy production (‘000 MWh)		204.4			216.3			430.4			446.6
Energy sales (‘000 MWh)		70.1			78.8			144.9			158.7
Average energy sales realizations ($/MWh)		109			100			114			109
Average Spot Currency Exchange Rates
$ / €(3)		1.3716			1.3064			1.3711			1.3129
$ / C$(3)		0.9169			0.9777			0.9118			0.9845

(1)   Source: RISI pricing report.

(2)   Average realized pulp price for the periods indicated reflect customer discounts and pulp price movements between the order and shipment date.

(3)   Average Federal Reserve Bank of New York noon spot rate over the reporting period.

Restricted Group Results — Three Months Ended June 30, 2014 Compared to Three Months Ended June 30, 2013

Total revenues for the Restricted Group decreased by approximately 1% to $144.3 million in the second quarter of 2014, compared to $145.8 million in the second quarter of 2013, primarily due to lower pulp and energy revenues at our Celgar mill.

Pulp revenues for the Restricted Group for the three months ended June 30, 2014 decreased to $136.6 million from $138.0 million in the comparative period of 2013, primarily due to lower pulp sales volumes, partially offset by higher price realizations.

Energy and chemical revenues decreased by approximately 4% in the current quarter to $7.6 million from $7.9 million in the same period last year, primarily as a result of lower pulp production at our Celgar mill.

FORM 10-Q

QUARTERLY REPORT - PAGE 38

Average list prices for NBSK pulp in Europe were approximately $925 per ADMT in the current quarter, compared to $857 per ADMT in the same quarter last year. In the second quarter of 2014, average pulp sales realizations for the Restricted Group increased by approximately 6% to $722 per ADMT from $681 per ADMT in the same period last year, primarily due to higher pulp prices.

Pulp production for the Restricted Group decreased by approximately 4% to 185,159 ADMTs in the second quarter of 2014 from 192,142 ADMTs in the same period of 2013. We had ten days (approximately 14,000 ADMTs) of scheduled maintenance downtime at our Celgar mill in the second quarter of 2014, which we estimate adversely impacted our Operating EBITDA by approximately $16.4 million, comprised of approximately $11.6 million in direct out-of-pocket expenses and the balance for reduced production. Our Rosenthal mill’s 12-day annual maintenance shutdown is scheduled for the third quarter of 2014.

Pulp sales volumes of the Restricted Group decreased by approximately 7% to 189,278 ADMTs in the second quarter of 2014 from 202,446 ADMTs in the comparative period of 2013, primarily due to weaker demand from China and lower production at our Celgar mill.

Costs and expenses for the Restricted Group in the second quarter of 2014 decreased by approximately 8% to $141.3 million from $153.6 million in the comparative period of 2013, primarily due to lower sales volumes and lower fiber costs.

In the second quarter of 2014, operating depreciation and amortization for the Restricted Group was $10.6 million, compared to $10.8 million in the same quarter last year. Selling, general and administrative expenses for the Restricted Group were $8.6 million, compared to $7.4 million in the same period of 2013.

Transportation costs for the Restricted Group decreased to $15.1 million in the second quarter of 2014 from $16.1 million in the same quarter last year. The decrease was due to lower sales volumes, partially offset by higher costs per tonne at our Celgar mill resulting from limitations on rail car availability.

Overall, per unit fiber costs of the Restricted Group in the second quarter of 2014 decreased by approximately 10% compared to the same period in 2013. During the second quarter of 2014, fiber costs at both our Rosenthal and Celgar mills were lower than the comparative period in 2013. Fiber costs at our Celgar mill decreased as a result of strong sawmill activity in the region. For the third quarter, we currently expect fiber costs at our Celgar mill to increase slightly and our fiber costs at our Rosenthal mill to be slightly lower.

In the second quarter of 2014, the Restricted Group reported operating income of $3.0 million, compared to an operating loss of $7.7 million in the second quarter of 2013, primarily due to higher pulp sales realizations and lower fiber costs, partially offset by lower sales volumes.

Interest expense for the Restricted Group increased to $8.5 million in the second quarter of 2014 from $7.7 million in the same quarter of last year. The increase is due to the additional Senior Notes issued in July 2013.

In the second quarter of 2013, the Restricted Group also recorded a loss on derivative instruments of approximately $0.6 million related to two fixed price pulp swap contracts entered into in the fourth quarter of 2012. Such contracts matured in December 2013.

FORM 10-Q

QUARTERLY REPORT - PAGE 39

During the second quarter of 2014, the Restricted Group recorded $4.0 million of income tax expense, compared to income tax expense of $0.8 million in the same period last year.

The net loss reported by the Restricted Group for the second quarter of 2014 was $9.6 million, compared to a net loss of $14.7 million in the same period last year.

In the second quarter of 2014, the Restricted Group’s Operating EBITDA increased to $13.7 million from $3.1 million in the same quarter of 2013. Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and non-recurring capital asset impairment charges. 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. See the discussion of our consolidated results for the three months ended June 30, 2014 for additional information relating to such limitations of Operating EBITDA.

The following table provides a reconciliation of net income (loss) to operating income (loss) and Operating EBITDA for the Restricted Group for the periods indicated:

	Three Months Ended June 30,
	2014			2013
	(in thousands)
Restricted Group(1)
Net income (loss)	$	(9,595	)	$	(14,661	)
Income tax provision		4,033			795
Interest expense		8,548			7,685
(Gain) loss on derivative instruments		-			551
Other (income) expense		(26	)		(2,118	)
Operating income (loss)		2,960			(7,748	)
Add: Depreciation and amortization		10,714			10,878
Operating EBITDA	$	13,674		$	3,130

(1)   See Note 14 of the interim consolidated financial statements included elsewhere herein for a reconciliation to our consolidated results.

Restricted Group Results — Six Months Ended June 30, 2014 Compared to Six Months Ended June 30, 2013

Total revenues for the Restricted Group increased by approximately 2% to $294.0 million in the first half of 2014, compared to $287.6 million in the same period of 2013, primarily due to higher pulp revenues.

Pulp revenues for the Restricted Group for the six months ended June 30, 2014 increased to $277.4 million from $270.3 million in the comparative period of 2013, primarily due to higher pulp sales realizations, partially offset by lower sales volumes.

Energy and chemical revenues decreased by approximately 4% in the first half of 2014 to $16.5 million from $17.2 million in the same period last year, primarily as a result of lower pulp production at our Celgar mill.

Average list prices for NBSK pulp in Europe were approximately $923 per ADMT in the six months ended June 30, 2014, compared to $844 per ADMT in the same period last year. In the first half of 2014, average pulp sales realizations for the Restricted Group increased by approximately 8% to $726 per ADMT from $673 per ADMT in the same period last year, primarily due to higher pulp prices.

FORM 10-Q

QUARTERLY REPORT - PAGE 40

Pulp production for the Restricted Group decreased marginally to 395,975 ADMTs in the first half of 2014 from 397,692 ADMTs in the same period of 2013. We had ten days (approximately 14,000 ADMTs) of scheduled maintenance downtime at our Celgar mill in the first half of 2014. Our Rosenthal mill’s annual maintenance shutdown is scheduled for September 2014.

Pulp sales volumes of the Restricted Group decreased by approximately 5% to 382,292 ADMTs in the first half of 2014 from 401,771 ADMTs in the comparative period of 2013.

Costs and expenses for the Restricted Group in the first half of 2014 decreased by approximately 7% to $269.7 million from $290.2 million in the comparative period of 2013, primarily due to the impact of lower sales volumes and lower fiber costs.

In the first half of 2014, operating depreciation and amortization for the Restricted Group was $21.2 million, compared to $21.6 million in the same period last year. Selling, general and administrative expenses for the Restricted Group were $15.1 million, compared to $14.9 million in the same period of 2013.

Transportation costs for the Restricted Group decreased to $28.8 million in the first half of 2014 from $31.4 million in the same period last year. The decrease was due to lower sales volumes and the impact of a stronger U.S. dollar relative to the Canadian dollar, partially offset by higher costs per tonne at our Celgar mill resulting from limitations on rail car availability.

Overall, per unit fiber costs of the Restricted Group in the first half of 2014 decreased by approximately 5% compared to the same period in 2013. During the first half of 2014, fiber costs at our Rosenthal mill were higher than the comparative period in 2013 due to the impact of a weaker U.S. dollar relative to the Euro. Fiber costs at our Celgar mill decreased as a result of strong sawmill activity in the region. For the third quarter, we currently expect fiber costs at our Celgar mill to increase slightly and our fiber costs at our Rosenthal mill to be slightly lower.

In the first half of 2014, the Restricted Group reported operating income of $24.2 million, compared to an operating loss of $2.6 million in the same period of 2013, primarily due to higher pulp revenues and lower fiber costs at our Celgar mill.

Interest expense for the Restricted Group increased to $17.1 million in the first half of 2014 from $15.4 million in the same period of last year. The increase is due to the additional Senior Notes issued in July 2013.

In the first half of 2013, the Restricted Group also recorded a loss on derivative instruments of approximately $1.0 million related to two fixed price pulp swap contracts entered into in the fourth quarter of 2012. Such contracts matured in December 2013.

During the first half of 2014, the Restricted Group recorded $5.8 million of income tax expense, compared to income tax expense of $2.1 million in the same period last year.

Net income reported by the Restricted Group for the first half of 2014 was $1.5 million, compared to a net loss of $17.0 million in the same period last year.

FORM 10-Q

QUARTERLY REPORT - PAGE 41

In the first half of 2014, the Restricted Group’s Operating EBITDA increased to $45.6 million from $19.2 million in the same period of 2013. Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and non-recurring capital asset impairment charges. 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. See the discussion of our consolidated results for the three months ended June 30, 2014 for additional information relating to such limitations of Operating EBITDA.

The following table provides a reconciliation of net income (loss) to operating income (loss) and Operating EBITDA for the Restricted Group for the periods indicated:

	Six Months Ended June 30,
	2014			2013
	(in thousands)
Restricted Group(1)
Net income (loss)	$	1,532		$	(17,028	)
Income tax provision		5,785			2,137
Interest expense		17,066			15,430
(Gain) loss on derivative instruments		-			1,007
Other (income) expense		(138	)		(4,145	)
Operating income (loss)		24,245			(2,599	)
Add: Depreciation and amortization		21,373			21,776
Operating EBITDA	$	45,618		$	19,177
(1)  See Note 14 of the interim consolidated financial statements included elsewhere herein for a reconciliation to our consolidated results. Liquidity and Capital Resources of the Restricted Group The following table is a summary of selected financial information for the Restricted Group as at the dates indicated:
	As at June 30,         2014			As at December 31, 2013
	(in thousands)
Restricted Group Financial Position(1)
Cash and cash equivalents	$	157,418		$	82,910
Working capital	$	277,973		$	211,749
Total assets	$	936,001		$	858,824
Long-term liabilities	$	406,669		$	394,821
Total equity	$	464,539		$	412,033

(1)   See Note 14 of the interim consolidated financial statements included elsewhere herein for a reconciliation to our consolidated results.

At June 30, 2014, cash and cash equivalents for the Restricted Group increased to $157.4 million from $82.9 million at the end of 2013. On April 2, 2014, we completed the 2014 Equity Offering for net proceeds of approximately $53.6 million. We currently expect to use approximately $20.0 million of the net proceeds from this offering to further capitalize our Stendal mill to provide it with greater operational and financial flexibility.

As at June 30, 2014, we had approximately €28.4 million and C$38.3 million available under our Rosenthal and Celgar revolving credit facilities, respectively.

FORM 10-Q

QUARTERLY REPORT - PAGE 42

We currently expect the Restricted Group to meet its interest and debt service obligations and meet the working and maintenance capital requirements for its operations for the next 12 months with cash flow from operations, cash on hand and available borrowings.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect both the amount and the timing of the recording of assets, liabilities, revenues, and expenses in the consolidated financial statements and accompanying note disclosures. Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. As the number of variables and assumptions affecting the probable future resolution of the uncertainties increase, these judgments become even more subjective and complex.

Our significant accounting policies are disclosed in Note 1 to our annual report on Form 10-K for the fiscal year ended December 31, 2013. While all of the significant accounting policies are important to the consolidated financial statements, some of these policies may be viewed as having a high degree of judgment. On an ongoing basis, using currently available information, management reviews its estimates, including those related to the accounting for, among other things, doubtful accounts and reserves, depreciation and amortization, future cash flows associated with impairment testing for long-lived assets, derivative financial instruments, legal liabilities, asset retirement obligations, pensions and post-retirement benefit obligations, income taxes, contingencies, and inventory obsolescence and provisions. Actual results could differ materially from these estimates, and changes in these estimates are recorded when known.

We have identified certain accounting policies that are the most important to the portrayal of our current financial condition and results of operations.

For information about both our significant and critical accounting policies, see our annual report on Form 10-K for the fiscal year ended December 31, 2013.

Cautionary Statement Regarding Forward-Looking Information

The statements in this report that are not reported financial results or other historical information are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended.

Generally, forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, or words of similar meaning, or future or conditional verbs, such as “will”, “should”, “could”, or “may”, although not all forward-looking statements contain these identifying words. Forward-looking statements are based on expectations, forecasts and assumptions by our management and involve a number of risks, uncertainties and other factors, many of which are beyond our control, that could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. These factors include, but are not limited to, the following:

• the highly cyclical nature of our business;

• our level of indebtedness could negatively impact our financial condition, results of operations and liquidity;

FORM 10-Q

QUARTERLY REPORT - PAGE 43

• a weakening of the global economy could adversely affect our business and financial results and have a material adverse effect on our liquidity and capital resources;

• cyclical fluctuations in the price and supply of our raw materials could adversely affect our business;

• we operate in highly competitive markets;

• we are exposed to currency exchange rate and interest rate fluctuations;

• we use derivatives to manage certain risks which has caused significant fluctuations in our operating results;

• we are subject to extensive environmental regulation and we could have environmental liabilities at our facilities;

• our business is subject to risks associated with climate change and social government responses thereto;

• our new enterprise resource planning system may cost more than expected, be delayed, fail to perform as planned and interrupt operational transactions during and following the implementation, which could adversely affect our operations and results of operations;

• our operations require substantial capital and we may be unable to maintain adequate capital resources to provide for such requirements;

• future acquisitions may result in additional risks and uncertainties in our business;

• changes in credit ratings issued by nationally recognized statistical rating organizations could adversely affect our cost of financing and have an adverse effect on the market price of our securities;

• the actual benefits of the Celgar workforce reduction may differ from those currently expected;

• we are subject to risks related to our employees;

• we rely on German federal and state government grants and guarantees and participate in German and European statutory energy programs;

• we are dependent on key personnel;

• we may experience material disruptions to our production (including as a result of, among other things, planned and unplanned maintenance shutdowns);

• if our long-lived assets become impaired, we may be required to record non-cash impairment that could have a material impact on our results of operations;

• we may incur losses as a result of unforeseen or catastrophic events, including the emergence of a pandemic, terrorist attacks or natural disasters;

• our insurance coverage may not be adequate;

• we rely on third parties for transportation services;

• the price of our common stock may be volatile; and

• a small number of our stockholders could significantly influence our business.

FORM 10-Q

QUARTERLY REPORT - PAGE 44

Given these uncertainties, you should not place undue reliance on our forward-looking statements. The forgoing review of important factors is not exhaustive or necessarily in order of importance and should be read in conjunction with the risks and assumptions including those set forth in reports and other documents we have filed with or furnished to the SEC, including in our annual report on Form 10-K for the fiscal year ended December 31, 2013. We advise you that these cautionary remarks expressly qualify in their entirety all forward-looking statements attributable to us or persons acting on our behalf. Unless required by law, we do not assume any obligation to update forward-looking statements based on unanticipated events or changed expectations. However, you should carefully review the reports and other documents we file from time to time with the SEC.

Cyclical Nature of Business

Revenues

The pulp business is highly cyclical in nature and markets are characterized by periods of supply and demand imbalance, which in turn affects prices. Pulp markets are highly competitive and are sensitive to cyclical changes in the global economy, industry capacity and foreign exchange rates, all of which can have a significant influence on selling prices and our operating results. The length and magnitude of industry cycles have varied over time but generally reflect changes in macro-economic conditions and levels of industry capacity. Pulp is a commodity that is generally available from other producers. Because commodity products have few distinguishing qualities from producer to producer, competition is generally based upon price, which is generally determined by supply relative to demand.

Industry capacity can fluctuate as changing industry conditions can influence producers to idle production capacity or permanently close mills. In addition, to avoid substantial cash costs in idling or closing a mill, some producers will choose to operate at a loss, sometimes even a cash loss, which can prolong weak pricing environments due to oversupply. Oversupply of our products can also result from producers introducing new capacity in response to favorable pricing trends.

Demand for pulp has historically been determined primarily by general global macro-economic conditions and has been closely tied to overall business activity. From 2006 to mid-2008, pulp prices steadily improved. However, the global economic crisis in the latter half of 2008 resulted in a sharp decline of pulp prices from a high of $900 per ADMT to $635 per ADMT at the end of 2008. Pulp prices began to increase in the second half of 2009 and continued to increase to record levels through June of 2010, before declining slightly in the fourth quarter of 2010. Pulp prices again rebounded to record levels in the first half of 2011 but declined sharply in the latter part of the year, primarily due to economic uncertainty in Europe and credit tightening in China. Economic uncertainty in Europe and China, respectively, impacted both demand and prices. In 2012, list prices were on average approximately 15% lower than 2011. In 2013, list prices were approximately 6% higher than 2012. During the six months ended June 30, 2014, pulp prices marginally increased in Europe and North America and marginally decreased in China. As at June 30, 2014, list prices for NBSK pulp were approximately $925 per ADMT in Europe, $1,030 per ADMT in North America and $720 per ADMT in China.

Accordingly, prices for pulp are driven by many factors outside our control, and we have little influence over the timing and extent of price changes, which are often volatile. Because market conditions beyond our control determine the price for pulp, prices may fall below our cash production costs, requiring us to either incur short-term losses on product sales or cease production at one or more of our mills. Therefore, our profitability depends on managing our cost structure, particularly raw materials which represent a significant component of our operating costs and can fluctuate based upon factors beyond our control. If the prices of our products decline, or if prices for our raw materials increase, or both, our results of operations and cash flows could be materially adversely affected.

FORM 10-Q

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Costs

Our production costs are influenced by the availability and cost of raw materials, energy and labor, and our plant efficiencies and productivity. Our main raw material is fiber in the form of wood chips and pulp logs. Wood chip and pulp log costs are primarily affected by the supply of, and demand for, lumber and pulp, which are both cyclical and, to a lesser extent, by increasing demand from renewable energy producers. Higher fiber costs could affect producer profit margins if they are unable to pass along price increases to pulp customers or purchasers of surplus energy. The state of lumber markets affects both the amount of sawmill residuals, such as chips, produced as a by-product of lumber and the level of timber harvesting, which provides us with pulp logs. Production costs also depend on the total volume of production. Lower operating rates during periods of cyclically low demand result in higher average production costs and lower margins.

Currency

The majority of our sales are in products quoted in U.S. dollars while most of our operating costs and expenses, other than those of the Celgar mill, are incurred in Euros. In addition, all of the products sold by the Celgar mill are quoted in U.S. dollars and the Celgar mill costs are primarily incurred in Canadian dollars. Our results of operations and financial condition are reported in U.S. dollars. As a result, our expenses are adversely affected by a decrease in the value of the U.S. dollar relative to the Euro and to the Canadian dollar. Such shifts in currencies relative to the Euro and the Canadian dollar reduce our operating margins and the cash flow available to fund our operations and to service our debt. This could have a material adverse effect on our business, financial condition, results of operations and cash flows.

FORM 10-Q

QUARTERLY REPORT - PAGE 46

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks from changes in interest rates and foreign currency exchange rates, particularly the exchange rates between the U.S. dollar versus each of the Euro and the Canadian dollar. Changes in these rates may affect our results of operations and financial condition and, consequently, our fair value. We seek to manage these risks through internal risk management policies as well as the use of derivatives. We use derivatives to reduce or limit our exposure to interest rate and currency risks. We also use derivatives to reduce or limit our exposure to fluctuations in pulp prices. We use derivatives to reduce our potential losses or to augment our potential gains, depending on our management’s perception of future economic events and developments. These types of derivatives are generally highly speculative in nature. They are also very volatile as they are highly leveraged given that margin requirements are relatively low in proportion to notional amounts.

Many of our strategies, including the use of derivatives, and the types of derivatives selected by us, are based on historical trading patterns and correlations and our management’s expectations of future events. However, these strategies may not be effective in all market environments or against all types of risks. Unexpected market developments may affect our risk management strategies during this time, and unanticipated developments could impact our risk management strategies in the future. If any of the variety of instruments and strategies we utilize is not effective, we may incur significant losses.

All of our derivatives are marked to market at the end of each reporting period, and all unrealized gains and losses are recognized in earnings for a reporting period. We determine market valuations based primarily upon observable inputs including applicable yield curves.

During the six months ended June 30, 2014, we recorded an unrealized gain of approximately $5.8 million on our outstanding interest rate derivative, compared to an unrealized gain of $14.3 million in the same period of 2013.

In November 2012, we entered into two fixed price pulp swap contracts with a bank. Under the terms of these contracts, 3,000 metric tonnes of pulp per month were fixed at prices with a range from $880 to $890 per metric tonne. We recorded a loss of approximately $1.0 million related to these swap contracts in the six months ended June 30, 2013. These contracts matured in December 2013.

We are also subject to some energy price risk, primarily for the natural gas and the electricity that our operations purchase.

FORM 10-Q

QUARTERLY REPORT - PAGE 47

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, referred to as the “Exchange Act”), as of the end of the period covered by this report. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act.

It should be noted that any system of controls is based in part upon certain assumptions designed to obtain reasonable (and not absolute) assurance as to its effectiveness, and there can be no assurance that any design will succeed in achieving its stated goals.

Changes in Internal Controls

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

FORM 10-Q

QUARTERLY REPORT - PAGE 48

PART II.         OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are subject to routine litigation incidental to our business, including those described in our latest annual report on Form 10-K for the fiscal year ended December 31, 2013. We do not believe that the outcome of such litigation will have a material adverse effect on our business or financial condition.

ITEM 1A. RISK FACTORS

As of June 30, 2014, there have been no material changes to the factors disclosed in Item 1A. Risk Factors in our latest annual report on Form 10-K for the fiscal year ended December 31, 2013.

ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

FORM 10-Q

QUARTERLY REPORT - PAGE 49

ITEM 6.         EXHIBITS

Exhibit No.	Description
31.1	Section 302 Certification of Chief Executive Officer
31.2	Section 302 Certification of Chief Financial Officer
32.1*	Section 906 Certification of Chief Executive Officer
32.2*	Section 906 Certification of Chief Financial Officer
101	The following financial statements from the Company’s Form 10-Q for the fiscal quarter ended June 30, 2014, formatted in XBRL: (i) Interim Consolidated Balance Sheets; (ii) Interim Consolidated Statements of Operations; (iii) Interim Consolidated Statements of Retained Earnings; (iv) Interim Consolidated Statements of Comprehensive Income; (v) Interim Consolidated Statements of Cash Flows; and (vi) Notes to Interim Consolidated Financial Statements.
* In accordance with Release 33-8212 of the Commission, these Certifications: (i) are “furnished” to the Commission and are not “filed” for the purposes of liability under the Securities Exchange Act of 1934, as amended; and (ii) are not to be subject to automatic incorporation by reference into any of the Company’s registration statements filed under the Securities Act of 1933, as amended, for the purposes of liability thereunder or any offering memorandum, unless the Company specifically incorporates them by reference therein.

FORM 10-Q

QUARTERLY REPORT - PAGE 50

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MERCER INTERNATIONAL INC.
By:	/s/ David M. Gandossi
	David M. Gandossi
	Secretary and Chief Financial Officer

Date: August 1, 2014

FORM 10-Q

QUARTERLY REPORT - PAGE 51

EX-31.1

Exhibit 31.1

CERTIFICATION OF PERIODIC REPORT

I, Jimmy S.H. Lee, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Mercer International Inc. (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: August 1, 2014

/s/ Jimmy S.H. Lee                

Jimmy S.H. Lee

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF PERIODIC REPORT

I, David M. Gandossi, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Mercer International Inc. (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: August 1, 2014

/s/ David M. Gandossi                        

David M. Gandossi

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF PERIODIC REPORT

I, Jimmy S.H. Lee, Chief Executive Officer of Mercer International Inc. (the “Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 2014 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 1, 2014

/s/ Jimmy S.H. Lee                

Jimmy S.H. Lee

Chief Executive Officer

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Mercer International Inc. and will be retained by Mercer International Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

EX-32.2

Exhibit 32.2

CERTIFICATION OF PERIODIC REPORT

I, David M. Gandossi, Chief Financial Officer of Mercer International Inc. (the “Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 2014 (the “Report”) fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 1, 2014

/s/ David M. Gandossi

David M. Gandossi

Chief Financial Officer

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Mercer International Inc. and will be retained by Mercer International Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

XML

Stock-Based Compensation (Narrative) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended			6 Months Ended		12 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Jun. 30, 2014 Performance Share Units [Member]	Jun. 30, 2013 Performance Share Units [Member]	Jun. 30, 2014 Performance Share Units [Member]	Jun. 30, 2013 Performance Share Units [Member]	Dec. 31, 2013 Performance Share Units [Member]	Jun. 30, 2014 Restricted Stock [Member]	Jun. 30, 2013 Restricted Stock [Member]	Jun. 30, 2014 Restricted Stock [Member]	Jun. 30, 2013 Restricted Stock [Member]	Dec. 31, 2013 Restricted Stock [Member]	Jun. 30, 2014 Restricted Shares, 2011 Grant To Chief Executive Officer	Dec. 31, 2011 Restricted Shares, 2011 Grant To Chief Executive Officer
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common shares available for grant	2,500,000
Expense recognized		$ 473	$ 240	$ 54	$ 401		$ 127	$ 156	$ 277	$ 351
Shares granted				657,554		40,499			38,000		38,000		200,000
Vesting period				3 years						1 year		5 years
Unrecognized compensation cost							$ 570	$ 841	$ 570	$ 841
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized	2,000,000

XML

Restricted Group Supplemental Disclosure (Combined Condensed Statements Of Cash Flows) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	$ 2,765		$ (12,225)		$ 25,942		$ (11,851)
Unrealized loss (gain) on derivative instruments	(2,549)		(7,431)		(5,777)		(13,630)
Depreciation and amortization	19,851		19,354		39,638		38,887
Deferred income taxes	3,153		540		4,881		6,004
Stock compensation expense	600		396		331		752
Pension and other post-retirement expense, net of funding	214		277		425		437
Other	852		1,266		1,504		2,828
Receivables	14,517		28,635		(2,815)		15,822
Inventories	(13,390)		2,781		5,333		10,368
Accounts payable and accrued expenses	(8,062)		(2,134)		14,180		11,858
Other	3,338	[1]	(7,492)	[1]	(2,674)	[1]	(8,525)	[1]
Net cash from (used in) operating activities	21,289		23,967		80,968		52,950
Purchase of property, plant and equipment	(6,151)		(14,349)		(12,717)		(29,394)
Purchase of intangible assets	(715)		0		(2,455)		0
Proceeds on sale of property, plant and equipment	94		3		273		20
Net cash from (used in) investing activities	(6,772)		(14,346)		(14,899)		(29,374)
Repayment of debt	0		0		(30,541)		(26,420)
Proceeds from borrowings of debt	0		9,090		0		22,223
Proceeds from issuance of shares	53,942		0		53,942		0
Repayment of capital lease obligations	(532)		(522)		(1,192)		(1,446)
Proceeds from sale and lease-back transactions	0		0		1,047		0
Proceeds from (repayment of) credit facilities, net	0		9,112		0		17,060
Proceeds from government grants	761		4,441		4,058		5,413
Net cash from (used in) financing activities	54,171		22,121		27,314		16,830
Effect of exchange rate changes on cash and cash equivalents	226		1,040		(88)		(2,948)
Net increase (decrease) in cash and cash equivalents	68,914		32,782		93,295		37,458
Cash and cash equivalents, beginning of period	172,109		142,115		147,728		137,439
Cash and cash equivalents, end of period	241,023		174,897		241,023		174,897
Restricted Group [Member]
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	(9,595)		(14,661)		1,532		(17,028)
Unrealized loss (gain) on derivative instruments	0		41		0		662
Depreciation and amortization	10,714		10,878		21,373		21,776
Deferred income taxes	3,153		561		4,881		1,870
Stock compensation expense	600		396		331		752
Pension and other post-retirement expense, net of funding	214		277		425		437
Other	412		378		583		923
Receivables	4,808		24,835		4,712		13,824
Inventories	(8,753)		6,945		(10,342)		10,995
Accounts payable and accrued expenses	(2,397)		(2,540)		12,286		11,331
Other	1,529	[1]	(9,085)	[1]	(6,563)	[1]	(11,349)	[1]
Net cash from (used in) operating activities	685		18,025		29,218		34,193
Purchase of property, plant and equipment	(5,571)		(3,401)		(8,531)		(6,893)
Purchase of intangible assets	(229)				(1,203)
Proceeds on sale of property, plant and equipment	81		0		215		17
Net cash from (used in) investing activities	(5,719)		(3,401)		(9,519)		(6,876)
Repayment of debt					(744)		(736)
Proceeds from borrowings of debt			0				0
Proceeds from issuance of shares	53,942				53,942
Repayment of capital lease obligations	(202)		(159)		(474)		(320)
Proceeds from sale and lease-back transactions					1,047
Proceeds from (repayment of) credit facilities, net			9,112				17,060
Proceeds from government grants	0		0		832		0
Net cash from (used in) financing activities	53,740		8,953		54,603		16,004
Effect of exchange rate changes on cash and cash equivalents	666		(21)		206		(1,352)
Net increase (decrease) in cash and cash equivalents	49,372		23,556		74,508		41,969
Cash and cash equivalents, beginning of period	108,046		66,820		82,910		48,407
Cash and cash equivalents, end of period	157,418		90,376		157,418		90,376
Unrestricted Subsidiaries [Member]
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	12,360		2,436		24,410		5,177
Unrealized loss (gain) on derivative instruments	(2,549)		(7,472)		(5,777)		(14,292)
Depreciation and amortization	9,137		8,476		18,265		17,111
Deferred income taxes	0		(21)		0		4,134
Stock compensation expense	0		0		0		0
Pension and other post-retirement expense, net of funding	0		0		0		0
Other	440		888		921		1,905
Receivables	9,709		3,800		(7,527)		1,998
Inventories	(4,637)		(4,164)		15,675		(627)
Accounts payable and accrued expenses	(5,665)		406		1,894		527
Other	1,809	[1]	1,593	[1]	3,889	[1]	2,824	[1]
Net cash from (used in) operating activities	20,604		5,942		51,750		18,757
Purchase of property, plant and equipment	(580)		(10,948)		(4,186)		(22,501)
Purchase of intangible assets	(486)				(1,252)
Proceeds on sale of property, plant and equipment	13		3		58		3
Net cash from (used in) investing activities	(1,053)		(10,945)		(5,380)		(22,498)
Repayment of debt					(29,797)		(25,684)
Proceeds from borrowings of debt			9,090				22,223
Proceeds from issuance of shares	0				0
Repayment of capital lease obligations	(330)		(363)		(718)		(1,126)
Proceeds from sale and lease-back transactions					0
Proceeds from (repayment of) credit facilities, net			0				0
Proceeds from government grants	761		4,441		3,226		5,413
Net cash from (used in) financing activities	431		13,168		(27,289)		826
Effect of exchange rate changes on cash and cash equivalents	(440)		1,061		(294)		(1,596)
Net increase (decrease) in cash and cash equivalents	19,542		9,226		18,787		(4,511)
Cash and cash equivalents, beginning of period	64,063		75,295		64,818		89,032
Cash and cash equivalents, end of period	$ 83,605		$ 84,521		$ 83,605		$ 84,521

[1] Includes intercompany working capital related transactions.

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Financial Instruments (Fair Value Of Financial Instruments) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Cash and cash equivalents	$ 241,023	$ 172,109	$ 147,728	$ 174,897	$ 142,115	$ 137,439
Marketable securities	221		217
Receivables	134,749		135,893
Accounts payable and other	115,643		103,814
Debt	944,625		979,372
Interest rate derivative contract - liability, carrying value and fair value	40,447		46,517
Cash and cash equivalents, Fair Value	241,023		147,728
Marketable securities, Fair Value	221		217
Receivables, Fair Value	134,749		135,893
Accounts payable and other, Fair Value	115,643		103,814
Debt, Fair Value	929,204		980,982
Fair Value, Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Marketable securities			217
Interest rate derivative contract - liability, carrying value and fair value	0		0
Marketable securities, Fair Value	221
Debt, Fair Value	0		0
Fair Value, Significant Other Observable Inputs (Level 2) [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Marketable securities			0
Interest rate derivative contract - liability, carrying value and fair value	40,447		46,517
Marketable securities, Fair Value	0
Debt, Fair Value	358,812		367,405
Fair Value, Significant unobservable inputs (Level 3) [Member]
Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques [Line Items]
Marketable securities			0
Interest rate derivative contract - liability, carrying value and fair value	0		0
Marketable securities, Fair Value	0
Debt, Fair Value	$ 570,392		$ 613,577

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Derivative Transactions (Narrative) (Details) In Millions, unless otherwise specified	6 Months Ended		1 Months Ended
	Jun. 30, 2014 Interest Rate Swap [Member] EUR (€)	Dec. 31, 2004 Interest Rate Swap [Member] EUR (€)	Nov. 30, 2012 Pulp Price Swap Contract [Member] t item	Nov. 30, 2012 Pulp Price Swap Contract [Member] Minimum [Member]	Nov. 30, 2012 Pulp Price Swap Contract [Member] Maximum [Member]
Derivative [Line Items]
Number of price pulp swap contracts			2
Aggregate maximum principal amount of the Stendal loan facility covered by interest rate swaps		€ 612.6
Aggregate notional amount of interest rate swap	€ 279.8
Derivative fixed interest rate	5.28%
Derivative maturity date	Oct. 01, 2017		Dec. 01, 2013
Metric tonnes of pulp hedged per month			3,000
Swap contract fixed price of pulp per metric tonne				880	890

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Inventories (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Inventories [Abstract]
Raw materials	$ 62,151	$ 66,356
Finished goods	52,185	54,982
Spare parts and other	50,736	49,570
Inventories	$ 165,072	$ 170,908

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Pension And Other Post-Retirement Benefit Obligations (Tables)

6 Months Ended

Jun. 30, 2014

Pension And Other Post-Retirement Benefit Obligations [Abstract]

Components Of Defined Benefit Plan

	Three Months Ended June 30,
	2014				2013
	Pension Benefits		Post-Retirement Benefits		Pension Benefits		Post-Retirement Benefits
Service cost	$	31	$	184	$	36	$	189
Interest cost		465		315		461		278
Expected return on plan assets		(563)		-		(537)		-
Recognized net loss (income)		199		(3)		362		29
Net periodic benefit cost	$	132	$	496	$	322	$	496
	Six Months Ended June 30,
	2014				2013
	Pension Benefits		Post-Retirement Benefits		Pension Benefits		Post-Retirement Benefits
Service cost	$	61	$	365	$	70	$	382
Interest cost		924		626		930		561
Expected return on plan assets		(1,120)		-		(1,081)		-
Recognized net loss (income)		396		(6)		729		59
Net periodic benefit cost	$	261	$	985	$	648	$	1,002

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Commitments And Contingencies (Details) In Thousands, unless otherwise specified	1 Months Ended		3 Months Ended
	Jul. 31, 2014 USD ($)	Jul. 31, 2014 EUR (€)	Jun. 30, 2014 USD ($)	Jun. 30, 2014 EUR (€)	Jan. 28, 2011 USD ($)	Jan. 28, 2011 EUR (€)
Commitments And Contingencies [Abstract]
Compensation For Remediation Work					$ 13,606	€ 10,000
Compensation For Remediation Work In Accounts Payable And Other			2,421		13,606	10,000
Settlement for civil claim	1,906	1,400
Property Taxes Reclassified To Property, Plant And Equipment			3,617
German government grants under review			$ 11,400	€ 8,300

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Net Income (Loss) Per Share Attributable To Common Shareholders (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2014		Jun. 30, 2013		Jun. 30, 2014		Jun. 30, 2013
Earnings Per Share Effect Of Dilutive Instruments [Line Items]
Net income (loss) attributable to common shareholders - basic and diluted	$ 571		$ (13,015)		$ 21,612		$ (13,576)
Net income (loss) per share attributable to common shareholders, Basic and Diluted	$ 0.01		$ (0.23)		$ 0.36		$ (0.24)
Weighted average number of common shares outstanding, Basic (1)	63,915,377	[1]	55,670,034	[1]	59,835,098	[1]	55,651,610	[1]
Weighted average number of common shares outstanding, Diluted	64,342,731		55,670,034		60,361,869		55,651,610
Performance Share Units [Member]
Earnings Per Share Effect Of Dilutive Instruments [Line Items]
Effect of dilutive instruments	353,791		0		448,947		0
Restricted Stock [Member]
Earnings Per Share Effect Of Dilutive Instruments [Line Items]
Effect of dilutive instruments	64,588		0		67,391		0
Contingently issuable shares excluded from the basic weighted average shares outstanding	118,000		158,000		118,000		158,000
Stock Options [Member]
Earnings Per Share Effect Of Dilutive Instruments [Line Items]
Effect of dilutive instruments	8,975		0		10,433		0

[1] For the three and six month periods ended June 30, 2014, the basic weighted average number of shares excludes 118,000 restricted shares which have been issued, but have not vested as at June 30, 2014 (2013 - 158,000 restricted shares).

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Pension and Other Post-Retirement Benefit Obligations (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Pension Benefits [Member]
Retirement Benefits [Line Items]
Service cost	$ 31	$ 36	$ 61	$ 70
Interest cost	465	461	924	930
Expected return on plan assets	(563)	(537)	(1,120)	(1,081)
Recognized net loss (income)	199	362	396	729
Net periodic benefit cost	132	322	261	648
Post-Retirement Benefits [Member]
Retirement Benefits [Line Items]
Service cost	184	189	365	382
Interest cost	315	278	626	561
Expected return on plan assets	0	0	0	0
Recognized net loss (income)	(3)	29	(6)	59
Net periodic benefit cost	496	496	985	1,002
Celgar Defined Benefit Plans [Member]
Retirement Benefits [Line Items]
Pension and other postretirement benefit contributions	617	529	1,226	1,185
Multiemployer Plans, Pension [Member]
Retirement Benefits [Line Items]
Company contributions	514	497	1,021	1,000
Defined Contribution Pension [Member]
Retirement Benefits [Line Items]
Pension contributions	$ 184	$ 152	$ 399	$ 382

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Restricted Group Supplemental Disclosure (Combined Condensed Balance Sheets) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012
Condensed Financial Statements, Captions [Line Items]
Cash and cash equivalents	$ 241,023	$ 172,109	$ 147,728	$ 174,897	$ 142,115	$ 137,439
Receivables	134,749		135,893
Inventories	165,072		170,908
Prepaid expenses and other	10,100		10,918
Deferred income tax	7,016		6,326
Total current assets	557,960		471,773
Property, plant and equipment	1,006,906		1,038,631
Deferred note issuance costs and other	20,600		20,998
Deferred income tax	23,362		17,157
Due from unrestricted group	0		0
Total assets	1,608,828		1,548,559
Accounts payable and other	115,643		103,814
Pension and other post-retirement benefit obligations	1,325		1,330
Debt	62,182		60,355
Total current liabilities	179,150		165,499
Debt, Long Term	882,443		919,017
Due to restricted group	0		0
Interest rate derivative liability	40,447		46,517
Pension and other post-retirement benefit obligations	35,370		35,466
Capital leases and other	19,576		19,293
Deferred income tax	26,229		14,450
Total liabilities	1,183,215		1,200,242
Total shareholders' equity (deficit)	432,044		359,078
Noncontrolling interest (deficit)	(6,431)		(10,761)
Total liabilities and equity	1,608,828		1,548,559
Restricted Group [Member]
Condensed Financial Statements, Captions [Line Items]
Cash and cash equivalents	157,418	108,046	82,910	90,376	66,820	48,407
Receivables	69,808		75,987
Inventories	104,124		93,807
Prepaid expenses and other	7,810		7,742
Deferred income tax	3,606		3,273
Total current assets	342,766		263,719
Property, plant and equipment	410,110		420,373
Deferred note issuance costs and other	11,136		10,987
Deferred income tax	16,522		9,894
Due from unrestricted group	155,467		153,851
Total assets	936,001		858,824
Accounts payable and other	63,468		49,891
Pension and other post-retirement benefit obligations	1,325		1,330
Debt	0		749
Total current liabilities	64,793		51,970
Debt, Long Term	336,124		336,382
Due to restricted group	0		0
Interest rate derivative liability	0		0
Pension and other post-retirement benefit obligations	35,370		35,466
Capital leases and other	8,946		8,523
Deferred income tax	26,229		14,450
Total liabilities	471,462		446,791
Total shareholders' equity (deficit)	464,539		412,033
Noncontrolling interest (deficit)	0		0
Total liabilities and equity	936,001		858,824
Unrestricted Subsidiaries [Member]
Condensed Financial Statements, Captions [Line Items]
Cash and cash equivalents	83,605	64,063	64,818	84,521	75,295	89,032
Receivables	64,941		59,906
Inventories	60,948		77,101
Prepaid expenses and other	2,290		3,176
Deferred income tax	3,410		3,053
Total current assets	215,194		208,054
Property, plant and equipment	596,796		618,258
Deferred note issuance costs and other	9,464		10,011
Deferred income tax	6,840		7,263
Due from unrestricted group	0		0
Total assets	828,294		843,586
Accounts payable and other	52,175		53,923
Pension and other post-retirement benefit obligations	0		0
Debt	62,182		59,606
Total current liabilities	114,357		113,529
Debt, Long Term	546,319		582,635
Due to restricted group	155,467		153,851
Interest rate derivative liability	40,447		46,517
Pension and other post-retirement benefit obligations	0		0
Capital leases and other	10,630		10,770
Deferred income tax	0		0
Total liabilities	867,220		907,302
Total shareholders' equity (deficit)	(32,495)		(52,955)
Noncontrolling interest (deficit)	(6,431)		(10,761)
Total liabilities and equity	828,294		843,586
Eliminations [Member]
Condensed Financial Statements, Captions [Line Items]
Cash and cash equivalents	0		0
Receivables	0		0
Inventories	0		0
Prepaid expenses and other	0		0
Deferred income tax	0		0
Total current assets	0		0
Property, plant and equipment	0		0
Deferred note issuance costs and other	0		0
Deferred income tax	0		0
Due from unrestricted group	(155,467)		(153,851)
Total assets	(155,467)		(153,851)
Accounts payable and other	0		0
Pension and other post-retirement benefit obligations	0		0
Debt	0		0
Total current liabilities	0		0
Debt, Long Term	0		0
Due to restricted group	(155,467)		(153,851)
Interest rate derivative liability	0		0
Pension and other post-retirement benefit obligations	0		0
Capital leases and other	0		0
Deferred income tax	0		0
Total liabilities	(155,467)		(153,851)
Total shareholders' equity (deficit)	0		0
Noncontrolling interest (deficit)	0		0
Total liabilities and equity	$ (155,467)		$ (153,851)

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Derivative Transactions (Schedule of Derivatives) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Derivative Transactions [Abstract]
Gain (loss) on interest rate derivative contract	$ 2,549	$ 7,472	$ 5,777	$ 14,292
Gain (loss) on pulp price derivative contracts	0	(551)	0	(1,007)
Gain (loss) on derivative instruments total	$ 2,549	$ 6,921	$ 5,777	$ 13,285

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Inventories

6 Months Ended

Jun. 30, 2014

Inventories [Abstract]

Inventories

Note 2. Inventories

	June 30,		December 31,
	2014		2013
Raw materials	$	62,151	$	66,356
Finished goods		52,185		54,982
Spare parts and other		50,736		49,570
	$	165,072	$	170,908

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Net Income (Loss) Per Share Attributable To Common Shareholders (Anti-dilutive Instruments) (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Performance Share Units [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from EPS computation	0	786,129	0	786,129
Restricted Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from EPS computation	0	158,000	0	158,000
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from EPS computation	0	175,000	0	175,000

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Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2014

Derivative Transactions [Abstract]

Schedule of gains and losses by type of derivative recognized in gain (loss) on derivative instruments in the Consolidated Statement of Operations

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Interest rate derivative contract	$	2,549	$	7,472	$	5,777	$	14,292
Pulp price derivative contracts		-		(551)		-		(1,007)
	$	2,549	$	6,921	$	5,777	$	13,285

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Accumulated Other Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2014

Accumulated Other Comprehensive Income, Net of Tax [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

	Foreign		Defined Benefit		Unrealized
	Currency		Pension and		Gains on
	Translation		Post-Retirement		Marketable
	Adjustments		Benefit Items		Securities		Total
Balance December 31, 2013	$	47,756	$	(16,414)	$	128	$	31,470
Other comprehensive income (loss) before
reclassifications		(2,979)		-		11		(2,968)
Amounts reclassified from accumulated other
comprehensive income		-		390		-		390
Net current period other comprehensive income		(2,979)		390		11		(2,578)
Balance June 30, 2014	$	44,777	$	(16,024)	$	139	$	28,892

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Restructuring Expenses (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Stendal Pulp Mill [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring expenses		$ 1,386
Restructuring reserve current	342
Celgar Pulp Mill [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring expenses	51	5,029
Restructuring reserve current	$ 862

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Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2014

Financial Instruments [Abstract]

Fair Value Of Financial Instruments

	June 30, 2014				December 31, 2013
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cash and cash equivalents	$	241,023	$	241,023	$	147,728	$	147,728
Marketable securities	$	221	$	221	$	217	$	217
Receivables	$	134,749	$	134,749	$	135,893	$	135,893
Accounts payable and other	$	115,643	$	115,643	$	103,814	$	103,814
Debt	$	944,625	$	929,204	$	979,372	$	980,982
Interest rate derivative contract – liability	$	40,447	$	40,447	$	46,517	$	46,517

Outstanding Financial Instruments And Estimated Fair Values

	Fair value measurements at June 30, 2014 using:
Description	Level 1		Level 2		Level 3		Total
Assets
Marketable securities	$	221	$	-	$	-	$	221
Liabilities
Interest rate derivative contract	$	-	$	40,447	$	-	$	40,447
Debt		-		358,812		570,392		929,204
	$	-	$	399,259	$	570,392	$	969,651
	Fair value measurements at December 31, 2013 using:
Description	Level 1		Level 2		Level 3		Total
Assets
Marketable securities	$	217	$	-	$	-	$	217
Liabilities
Interest rate derivative contract	$	-	$	46,517	$	-	$	46,517
Debt		-		367,405		613,577		980,982
	$	-	$	413,922	$	613,577	$	1,027,499

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Restricted Group Supplemental Disclosure (Tables)

6 Months Ended

Jun. 30, 2014

Restricted Group Supplemental Disclosure [Abstract]

Combined Condensed Balance Sheets

Combined Condensed Balance Sheets

	June 30, 2014
	Restricted		Unrestricted				Consolidated
	Group		Subsidiaries		Eliminations		Group
ASSETS
Current assets
Cash and cash equivalents	$	157,418	$	83,605	$	-	$	241,023
Receivables		69,808		64,941		-		134,749
Inventories		104,124		60,948		-		165,072
Prepaid expenses and other		7,810		2,290		-		10,100
Deferred income tax		3,606		3,410		-		7,016
Total current assets		342,766		215,194		-		557,960
Long-term assets
Property, plant and equipment		410,110		596,796		-		1,006,906
Deferred note issuance costs and other		11,136		9,464		-		20,600
Deferred income tax		16,522		6,840		-		23,362
Due from unrestricted group		155,467		-		(155,467)		-
Total assets	$	936,001	$	828,294	$	(155,467)	$	1,608,828
LIABILITIES
Current liabilities
Accounts payable and other	$	63,468	$	52,175	$	-	$	115,643
Pension and other post-retirement benefit
obligations		1,325		-		-		1,325
Debt		-		62,182		-		62,182
Total current liabilities		64,793		114,357		-		179,150
Long-term liabilities
Debt		336,124		546,319		-		882,443
Due to restricted group		-		155,467		(155,467)		-
Interest rate derivative liability		-		40,447		-		40,447
Pension and other post-retirement benefit
obligations		35,370		-		-		35,370
Capital leases and other		8,946		10,630		-		19,576
Deferred income tax		26,229		-		-		26,229
Total liabilities		471,462		867,220		(155,467)		1,183,215
EQUITY
Total shareholders' equity (deficit)		464,539		(32,495)		-		432,044
Noncontrolling interest (deficit)		-		(6,431)		-		(6,431)
Total liabilities and equity	$	936,001	$	828,294	$	(155,467)	$	1,608,828

Note 14. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Balance Sheets

	December 31, 2013
	Restricted		Unrestricted				Consolidated
	Group		Subsidiaries		Eliminations		Group
ASSETS
Current assets
Cash and cash equivalents	$	82,910	$	64,818	$	-	$	147,728
Receivables		75,987		59,906		-		135,893
Inventories		93,807		77,101		-		170,908
Prepaid expenses and other		7,742		3,176		-		10,918
Deferred income tax		3,273		3,053		-		6,326
Total current assets		263,719		208,054		-		471,773
Long-term assets
Property, plant and equipment		420,373		618,258		-		1,038,631
Deferred note issuance costs and other		10,987		10,011		-		20,998
Deferred income tax		9,894		7,263		-		17,157
Due from unrestricted group		153,851		-		(153,851)		-
Total assets	$	858,824	$	843,586	$	(153,851)	$	1,548,559
LIABILITIES
Current liabilities
Accounts payable and other	$	49,891	$	53,923	$	-	$	103,814
Pension and other post-retirement benefit
obligations		1,330		-		-		1,330
Debt		749		59,606		-		60,355
Total current liabilities		51,970		113,529		-		165,499
Long-term liabilities
Debt		336,382		582,635		-		919,017
Due to restricted group		-		153,851		(153,851)		-
Interest rate derivative liability		-		46,517		-		46,517
Pension and other post-retirement benefit
obligations		35,466		-		-		35,466
Capital leases and other		8,523		10,770		-		19,293
Deferred income tax		14,450		-		-		14,450
Total liabilities		446,791		907,302		(153,851)		1,200,242
EQUITY
Total shareholders' equity (deficit)		412,033		(52,955)		-		359,078
Noncontrolling interest (deficit)		-		(10,761)		-		(10,761)
Total liabilities and equity	$	858,824	$	843,586	$	(153,851)	$	1,548,559

Combined Condensed Statements Of Operations

	Three Months Ended June 30, 2014
	Restricted		Unrestricted				Consolidated
	Group		Subsidiaries		Eliminations		Group
Revenues
Pulp	$	136,632	$	122,850	$	-	$	259,482
Energy and chemicals		7,649		18,061		-		25,710
		144,281		140,911		-		285,192
Operating costs		122,043		108,422		-		230,465
Operating depreciation and amortization		10,631		9,137		-		19,768
Selling, general and administrative expenses		8,647		4,291		-		12,938
		141,321		121,850		-		263,171
Operating income (loss)		2,960		19,061		-		22,021
Other income (expense)
Interest expense		(8,548)		(8,757)		140		(17,165)
Gain (loss) on derivative instruments		-		2,549		-		2,549
Other income (expense)		26		32		(140)		(82)
Total other income (expense)		(8,522)		(6,176)		-		(14,698)
Income (loss) before income taxes		(5,562)		12,885		-		7,323
Income tax benefit (provision)		(4,033)		(525)		-		(4,558)
Net income (loss)		(9,595)		12,360		-		2,765
Less: net income attributable to noncontrolling interest		-		(2,194)		-		(2,194)
Net income (loss) attributable to common shareholders	$	(9,595)	$	10,166	$	-	$	571

	Three Months Ended June 30, 2013
	Restricted		Unrestricted				Consolidated
	Group		Subsidiaries		Eliminations		Group
Revenues
Pulp	$	137,957	$	115,209	$	-	$	253,166
Energy and chemicals		7,886		13,648		-		21,534
		145,843		128,857		-		274,700
Operating costs		135,425		108,938		-		244,363
Operating depreciation and amortization		10,791		8,476		-		19,267
Selling, general and administrative expenses		7,375		4,864		-		12,239
		153,591		122,278		-		275,869
Operating income (loss)		(7,748)		6,579		-		(1,169)
Other income (expense)
Interest expense		(7,685)		(11,639)		2,154		(17,170)
Gain (loss) on derivative instruments		(551)		7,472		-		6,921
Other income (expense)		2,118		44		(2,154)		8
Total other income (expense)		(6,118)		(4,123)		-		(10,241)
Income (loss) before income taxes		(13,866)		2,456		-		(11,410)
Income tax benefit (provision)		(795)		(20)		-		(815)
Net income (loss)		(14,661)		2,436		-		(12,225)
Less: net income attributable to noncontrolling interest		-		(790)		-		(790)
Net income (loss) attributable to common shareholders	$	(14,661)	$	1,646	$	-	$	(13,015)

Note 14. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Statements of Operations

	Six Months Ended June 30, 2014
	Restricted Group		Unrestricted Subsidiaries		Eliminations		Consolidated Group
Revenues
Pulp	$	277,429	$	260,559	$	-	$	537,988
Energy and chemicals		16,530		36,359		-		52,889
		293,959		296,918		-		590,877
Operating costs		233,411		233,358		-		466,769
Operating depreciation and amortization		21,205		18,265		-		39,470
Selling, general and administrative expenses		15,098		8,276		-		23,374
		269,714		259,899		-		529,613
Operating income (loss)		24,245		37,019		-		61,264
Other income (expense)
Interest expense		(17,066)		(17,829)		280		(34,615)
Gain (loss) on derivative instruments		-		5,777		-		5,777
Other income (expense)		138		66		(280)		(76)
Total other income (expense)		(16,928)		(11,986)		-		(28,914)
Income (loss) before income taxes		7,317		25,033		-		32,350
Income tax benefit (provision)		(5,785)		(623)		-		(6,408)
Net income (loss)		1,532		24,410		-		25,942
Less: net income attributable to noncontrolling interest		-		(4,330)		-		(4,330)
Net income (loss) attributable to common shareholders	$	1,532	$	20,080	$	-	$	21,612

	Six Months Ended June 30, 2013
	Restricted		Unrestricted				Consolidated
	Group		Subsidiaries		Eliminations		Group
Revenues
Pulp	$	270,307	$	220,677	$	-	$	490,984
Energy and chemicals		17,247		28,254		-		45,501
		287,554		248,931		-		536,485
Operating costs		253,625		208,722		-		462,347
Operating depreciation and amortization		21,606		17,111		-		38,717
Selling, general and administrative expenses		14,922		9,061		-		23,983
		290,153		234,894		-		525,047
Operating income (loss)		(2,599)		14,037		-		11,438
Other income (expense)
Interest expense		(15,430)		(23,430)		4,330		(34,530)
Gain (loss) on derivative instruments		(1,007)		14,292		-		13,285
Other income (expense)		4,145		101		(4,330)		(84)
Total other income (expense)		(12,292)		(9,037)		-		(21,329)
Income (loss) before income taxes		(14,891)		5,000		-		(9,891)
Income tax benefit (provision)		(2,137)		177		-		(1,960)
Net income (loss)		(17,028)		5,177		-		(11,851)
Less: net income attributable to noncontrolling interest		-		(1,725)		-		(1,725)
Net income (loss) attributable to common shareholders	$	(17,028)	$	3,452	$	-	$	(13,576)

Combined Condensed Statements Of Cash Flows

Combined Condensed Statements of Cash Flows

	Three Months Ended June 30, 2014
	Restricted		Unrestricted		Consolidated
	Group		Subsidiaries		Group
Cash flows from (used in) operating activities
Net income (loss)	$	(9,595)	$	12,360	$	2,765
Adjustments to reconcile net income (loss) to cash flows
from operating activities
Unrealized loss (gain) on derivative instruments		-		(2,549)		(2,549)
Depreciation and amortization		10,714		9,137		19,851
Deferred income taxes		3,153		-		3,153
Stock compensation expense		600		-		600
Pension and other post-retirement expense, net of
funding		214		-		214
Other		412		440		852
Changes in working capital
Receivables		4,808		9,709		14,517
Inventories		(8,753)		(4,637)		(13,390)
Accounts payable and accrued expenses		(2,397)		(5,665)		(8,062)
Other(1)		1,529		1,809		3,338
Net cash from (used in) operating activities		685		20,604		21,289
Cash flows from (used in) investing activities
Purchase of property, plant and equipment		(5,571)		(580)		(6,151)
Purchase of intangible assets		(229)		(486)		(715)
Proceeds on sale of property, plant and equipment		81		13		94
Net cash from (used in) investing activities		(5,719)		(1,053)		(6,772)
Cash flows from (used in) financing activities
Proceeds from issuance of shares		53,942		-		53,942
Repayment of capital lease obligations		(202)		(330)		(532)
Proceeds from government grants		-		761		761
Net cash from (used in) financing activities		53,740		431		54,171
Effect of exchange rate changes on cash and cash
equivalents		666		(440)		226
Net increase (decrease) in cash and cash equivalents		49,372		19,542		68,914
Cash and cash equivalents, beginning of period		108,046		64,063		172,109
Cash and cash equivalents, end of period	$	157,418	$	83,605	$	241,023

_________________________

(1) Includes intercompany working capital related transactions.  

Note 14. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Statements of Cash Flows

	Three Months Ended June 30, 2013
	Restricted		Unrestricted		Consolidated
	Group		Subsidiaries		Group
Cash flows from (used in) operating activities
Net income (loss)	$	(14,661)	$	2,436	$	(12,225)
Adjustments to reconcile net income (loss) to cash flows
from operating activities
Unrealized loss (gain) on derivative instruments		41		(7,472)		(7,431)
Depreciation and amortization		10,878		8,476		19,354
Deferred income taxes		561		(21)		540
Stock compensation expense		396		-		396
Pension and other post-retirement expense, net of
funding		277		-		277
Other		378		888		1,266
Changes in working capital
Receivables		24,835		3,800		28,635
Inventories		6,945		(4,164)		2,781
Accounts payable and accrued expenses		(2,540)		406		(2,134)
Other(1)		(9,085)		1,593		(7,492)
Net cash from (used in) operating activities		18,025		5,942		23,967
Cash flows from (used in) investing activities
Purchase of property, plant and equipment		(3,401)		(10,948)		(14,349)
Proceeds on sale of property, plant and equipment		-		3		3
Net cash from (used in) investing activities		(3,401)		(10,945)		(14,346)
Cash flows from (used in) financing activities
Proceeds from borrowings of debt		-		9,090		9,090
Repayment of capital lease obligations		(159)		(363)		(522)
Proceeds from (repayment of) credit facilities, net		9,112		-		9,112
Proceeds from government grants		-		4,441		4,441
Net cash from (used in) financing activities		8,953		13,168		22,121
Effect of exchange rate changes on cash and cash
equivalents		(21)		1,061		1,040
Net increase (decrease) in cash and cash equivalents		23,556		9,226		32,782
Cash and cash equivalents, beginning of period		66,820		75,295		142,115
Cash and cash equivalents, end of period	$	90,376	$	84,521	$	174,897

___________________________

(1) Includes intercompany working capital related transactions.

Note 14. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Statements of Cash Flows

	Six Months Ended June 30, 2014
	Restricted Group		Unrestricted Subsidiaries		Consolidated Group
Cash flows from (used in) operating activities
Net income (loss)	$	1,532	$	24,410	$	25,942
Adjustments to reconcile net income (loss) to cash flows
from operating activities
Unrealized loss (gain) on derivative instruments		-		(5,777)		(5,777)
Depreciation and amortization		21,373		18,265		39,638
Deferred income taxes		4,881		-		4,881
Stock compensation expense		331		-		331
Pension and other post-retirement expense, net of
funding		425		-		425
Other		583		921		1,504
Changes in working capital
Receivables		4,712		(7,527)		(2,815)
Inventories		(10,342)		15,675		5,333
Accounts payable and accrued expenses		12,286		1,894		14,180
Other(1)		(6,563)		3,889		(2,674)
Net cash from (used in) operating activities		29,218		51,750		80,968
Cash flows from (used in) investing activities
Purchase of property, plant and equipment		(8,531)		(4,186)		(12,717)
Purchase of intangible assets		(1,203)		(1,252)		(2,455)
Proceeds on sale of property, plant and equipment		215		58		273
Net cash from (used in) investing activities		(9,519)		(5,380)		(14,899)
Cash flows from (used in) financing activities
Repayment of debt		(744)		(29,797)		(30,541)
Proceeds from issuance of shares		53,942		-		53,942
Repayment of capital lease obligations		(474)		(718)		(1,192)
Proceeds from sale and lease-back transactions		1,047		-		1,047
Proceeds from government grants		832		3,226		4,058
Net cash from (used in) financing activities		54,603		(27,289)		27,314
Effect of exchange rate changes on cash and cash
equivalents		206		(294)		(88)
Net increase (decrease) in cash and cash equivalents		74,508		18,787		93,295
Cash and cash equivalents, beginning of year		82,910		64,818		147,728
Cash and cash equivalents, end of year	$	157,418	$	83,605	$	241,023

___________________________

(1) Includes intercompany working capital related transactions.

Note 14. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Statements of Cash Flows

	Six Months Ended June 30, 2013
	Restricted		Unrestricted		Consolidated
	Group		Subsidiaries		Group
Cash flows from (used in) operating activities
Net income (loss)	$	(17,028)	$	5,177	$	(11,851)
Adjustments to reconcile net income (loss) to cash flows
from operating activities
Unrealized loss (gain) on derivative instruments		662		(14,292)		(13,630)
Depreciation and amortization		21,776		17,111		38,887
Deferred income taxes		1,870		4,134		6,004
Stock compensation expense		752		-		752
Pension and other post-retirement expense, net of
funding		437		-		437
Other		923		1,905		2,828
Changes in working capital
Receivables		13,824		1,998		15,822
Inventories		10,995		(627)		10,368
Accounts payable and accrued expenses		11,331		527		11,858
Other(1)		(11,349)		2,824		(8,525)
Net cash from (used in) operating activities		34,193		18,757		52,950
Cash flows from (used in) investing activities
Purchase of property, plant and equipment		(6,893)		(22,501)		(29,394)
Proceeds on sale of property, plant and equipment		17		3		20
Net cash from (used in) investing activities		(6,876)		(22,498)		(29,374)
Cash flows from (used in) financing activities
Repayment of debt		(736)		(25,684)		(26,420)
Proceeds from borrowings of debt		-		22,223		22,223
Repayment of capital lease obligations		(320)		(1,126)		(1,446)
Proceeds from (repayment of) credit facilities, net		17,060		-		17,060
Proceeds from government grants		-		5,413		5,413
Net cash from (used in) financing activities		16,004		826		16,830
Effect of exchange rate changes on cash and cash
equivalents		(1,352)		(1,596)		(2,948)
Net increase (decrease) in cash and cash equivalents		41,969		(4,511)		37,458
Cash and cash equivalents, beginning of period		48,407		89,032		137,439
Cash and cash equivalents, end of period	$	90,376	$	84,521	$	174,897

___________________________

XML

The Company And Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2014

The Company And Summary Of Significant Accounting Policies [Abstract]

The Company And Summary Of Significant Accounting Policies

Note 1. The Company and Summary of Significant Accounting Policies

Basis of Presentation

The interim consolidated financial statements contained herein include the accounts of Mercer International Inc. ("Mercer Inc.") and its wholly-owned and majority-owned subsidiaries (collectively the "Company"). The Company's shares of common stock are quoted and listed for trading on both the NASDAQ Global Market and the Toronto Stock Exchange.

The interim consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"). The year-end Consolidated Balance Sheet data was derived from audited financial statements. The footnote disclosure included herein has been prepared in accordance with accounting principles generally accepted for interim financial statements in the United States ("GAAP"). The interim consolidated financial statements should be read together with the audited consolidated financial statements and accompanying notes included in the Company's latest annual report on Form 10‑K for the fiscal year ended December 31, 2013. In the opinion of the Company, the unaudited interim consolidated financial statements contained herein contain all adjustments necessary for a fair statement of the results of the interim periods included. The results for the periods included herein may not be indicative of the results for the entire year.

The Company has three pulp mills that are aggregated into one reportable business segment, market pulp. Accordingly, the results presented are those of the reportable business segment.

In these interim consolidated financial statements, unless otherwise indicated, all amounts are expressed in United States dollars ("U.S. dollars" or "$"). The symbol “€” refers to Euros and the symbol "C$" refers to Canadian dollars.

Use of Estimates

Preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant management judgment is required in determining the accounting for, among other things, doubtful accounts and reserves, depreciation and amortization, future cash flows associated with impairment testing for long-lived assets, derivative financial instruments, legal liabilities, asset retirement obligations, pensions and post-retirement benefit obligations, income taxes, contingencies, and inventory obsolescence and provisions. Actual results could differ materially from these estimates, and changes in these estimates are recorded when known.

New Accounting Standards

In March 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2013-05, an update to Foreign Currency Matters, which indicates that a cumulative translation adjustment is attached to the parent's investment in a foreign entity and should be released in a manner consistent with the derecognition guidance on investments in entities. Thus, the entire amount of the cumulative translation adjustment associated with the foreign entity would be released when there has been (i) a sale of a subsidiary or group of net assets within a foreign entity and the sale represents the substantially complete liquidation of the investment in the foreign entity; (ii) a loss of a controlling financial interest in an investment in a foreign entity; or (iii) a step acquisition for a foreign entity. The update does not change the requirement to release a pro-rata portion of the cumulative translation adjustment of the foreign entity into earnings for a partial sale of an equity method investment in a foreign entity. The amendments are effective for interim and annual periods beginning after December 15, 2013 and did not have an impact on the Company's interim consolidated financial statements.

Note 1. The Company and Summary of Significant Accounting Policies (continued)

In July 2013, the FASB issued ASU 2013-11, which provides guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss ("NOL") carryforward, a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 requires entities to present an unrecognized tax benefit as a reduction of a deferred tax asset for a NOL or tax credit carryforward whenever the NOL or tax credit carryforward would be available to reduce the additional taxable income or tax due if the tax position is disallowed. This accounting standard update requires entities to assess whether to net the unrecognized tax benefit with a deferred tax asset as of the reporting date. The amendments are effective for interim and annual periods beginning after December 15, 2013. The Company has determined these changes did not have an impact on the interim consolidated financial statements.

In May 2014 the FASB issued ASU 2014-09, "Revenue Recognition - Revenue from Contracts with Customers" (ASU 2014-09) that requires companies to recognize revenue when a customer obtains control rather than when companies have transferred substantially all risks and rewards of a good or service. This update is effective for annual reporting periods beginning on or after December 15, 2016 and interim periods therein and requires expanded disclosures. The Company is currently assessing the impact the adoption of ASU 2014-09 will have on its consolidated financial statements.

XML

The Company and Summary of Significant Accounting Policies (Details)	6 Months Ended
	Jun. 30, 2014 segment
The Company And Summary Of Significant Accounting Policies [Abstract]
Number of reportable segments	1
Number of pulp mills	3

XML

Stock-Based Compensation (Summary Of Share Activity - PSU's) (Details) (Performance Share Units [Member])	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Performance Share Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding - Beginning	791,432	786,129
Granted	657,554	40,499
Vested and issued	(331,584)
Expired	(139,240)
Forfeited		(35,196)
Outstanding - Ending	978,162	791,432

XML

Restricted Group Supplemental Disclosure (Combined Condensed Statements Of Operations) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Condensed Financial Statements, Captions [Line Items]
Pulp	$ 259,482	$ 253,166	$ 537,988	$ 490,984
Energy and chemicals	25,710	21,534	52,889	45,501
Total revenues	285,192	274,700	590,877	536,485
Operating costs	230,465	244,363	466,769	462,347
Operating depreciation and amortization	19,768	19,267	39,470	38,717
Selling, general and administrative expenses	12,938	12,239	23,374	23,983
Operating expenses	263,171	275,869	529,613	525,047
Operating income (loss)	22,021	(1,169)	61,264	11,438
Interest expense	(17,165)	(17,170)	(34,615)	(34,530)
Gain (loss) on derivative instruments	2,549	6,921	5,777	13,285
Other income (expense)	(82)	8	(76)	(84)
Total other income (expense)	(14,698)	(10,241)	(28,914)	(21,329)
Income (loss) before income taxes	7,323	(11,410)	32,350	(9,891)
Income tax benefit (provision)	(4,558)	(815)	(6,408)	(1,960)
Net income (loss)	2,765	(12,225)	25,942	(11,851)
Less: net income attributable to noncontrolling interest	(2,194)	(790)	(4,330)	(1,725)
Net income (loss) attributable to common shareholders	571	(13,015)	21,612	(13,576)
Restricted Group [Member]
Condensed Financial Statements, Captions [Line Items]
Pulp	136,632	137,957	277,429	270,307
Energy and chemicals	7,649	7,886	16,530	17,247
Total revenues	144,281	145,843	293,959	287,554
Operating costs	122,043	135,425	233,411	253,625
Operating depreciation and amortization	10,631	10,791	21,205	21,606
Selling, general and administrative expenses	8,647	7,375	15,098	14,922
Operating expenses	141,321	153,591	269,714	290,153
Operating income (loss)	2,960	(7,748)	24,245	(2,599)
Interest expense	(8,548)	(7,685)	(17,066)	(15,430)
Gain (loss) on derivative instruments	0	(551)	0	(1,007)
Other income (expense)	26	2,118	138	4,145
Total other income (expense)	(8,522)	(6,118)	(16,928)	(12,292)
Income (loss) before income taxes	(5,562)	(13,866)	7,317	(14,891)
Income tax benefit (provision)	(4,033)	(795)	(5,785)	(2,137)
Net income (loss)	(9,595)	(14,661)	1,532	(17,028)
Less: net income attributable to noncontrolling interest	0	0	0	0
Net income (loss) attributable to common shareholders	(9,595)	(14,661)	1,532	(17,028)
Unrestricted Subsidiaries [Member]
Condensed Financial Statements, Captions [Line Items]
Pulp	122,850	115,209	260,559	220,677
Energy and chemicals	18,061	13,648	36,359	28,254
Total revenues	140,911	128,857	296,918	248,931
Operating costs	108,422	108,938	233,358	208,722
Operating depreciation and amortization	9,137	8,476	18,265	17,111
Selling, general and administrative expenses	4,291	4,864	8,276	9,061
Operating expenses	121,850	122,278	259,899	234,894
Operating income (loss)	19,061	6,579	37,019	14,037
Interest expense	(8,757)	(11,639)	(17,829)	(23,430)
Gain (loss) on derivative instruments	2,549	7,472	5,777	14,292
Other income (expense)	32	44	66	101
Total other income (expense)	(6,176)	(4,123)	(11,986)	(9,037)
Income (loss) before income taxes	12,885	2,456	25,033	5,000
Income tax benefit (provision)	(525)	(20)	(623)	177
Net income (loss)	12,360	2,436	24,410	5,177
Less: net income attributable to noncontrolling interest	(2,194)	(790)	(4,330)	(1,725)
Net income (loss) attributable to common shareholders	10,166	1,646	20,080	3,452
Eliminations [Member]
Condensed Financial Statements, Captions [Line Items]
Pulp	0	0	0	0
Energy and chemicals	0	0	0	0
Total revenues	0	0	0	0
Operating costs	0	0	0	0
Operating depreciation and amortization	0	0	0	0
Selling, general and administrative expenses	0	0	0	0
Operating expenses	0	0	0	0
Operating income (loss)	0	0	0	0
Interest expense	140	2,154	280	4,330
Gain (loss) on derivative instruments	0	0	0	0
Other income (expense)	(140)	(2,154)	(280)	(4,330)
Total other income (expense)	0	0	0	0
Income (loss) before income taxes	0	0	0	0
Income tax benefit (provision)	0	0	0	0
Net income (loss)	0	0	0	0
Less: net income attributable to noncontrolling interest	0	0	0	0
Net income (loss) attributable to common shareholders	$ 0	$ 0	$ 0	$ 0

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INTERIM CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Current assets
Cash and cash equivalents	$ 241,023	$ 147,728
Receivables	134,749	135,893
Inventories (Note 2)	165,072	170,908
Prepaid expenses and other	10,100	10,918
Deferred income tax	7,016	6,326
Total current assets	557,960	471,773
Long-term assets
Property, plant and equipment	1,006,906	1,038,631
Deferred note issuance costs and other	20,600	20,998
Deferred income tax	23,362	17,157
Total noncurrent assets	1,050,868	1,076,786
Total assets	1,608,828	1,548,559
Current liabilities
Accounts payable and other	115,643	103,814
Pension and other post-retirement benefit obligations (Note 4)	1,325	1,330
Debt (Note 3)	62,182	60,355
Total current liabilities	179,150	165,499
Long-term liabilities
Debt (Note 3)	882,443	919,017
Interest rate derivative liability (Note 10)	40,447	46,517
Pension and other post-retirement benefit obligations (Note 4)	35,370	35,466
Capital leases and other	19,576	19,293
Deferred income tax	26,229	14,450
Total long-term liabilities	1,004,065	1,034,743
Total liabilities	1,183,215	1,200,242
Shareholders' equity
Share capital (Note 5)	386,081	328,549
Paid-in capital	(15,356)	(11,756)
Retained earnings	32,427	10,815
Accumulated other comprehensive income (Note 9)	28,892	31,470
Total shareholders' equity	432,044	359,078
Noncontrolling interest (deficit)	(6,431)	(10,761)
Total equity	425,613	348,317
Total liabilities and equity	1,608,828	1,548,559
Commitments and contingencies (Note 12)

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Accumulated Other Comprehensive Income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Accumulated Other Comprehensive Income (Loss), Net of Tax, Beginning Balance			$ 31,470
Other comprehensive income (loss) before reclassifications			(2,968)
Amounts reclassified from other accumulated comprehensive income			390
Net current period other comprehensive income	6,507	(4,336)	(2,578)	(18,615)
Accumulated Other Comprehensive Income (Loss), Net of Tax, Ending Balance	28,892		28,892
Foreign Currency Translation Adjustments [Member]
Accumulated Other Comprehensive Income (Loss), Net of Tax, Beginning Balance			47,756
Other comprehensive income (loss) before reclassifications			(2,979)
Amounts reclassified from other accumulated comprehensive income			0
Net current period other comprehensive income			(2,979)
Accumulated Other Comprehensive Income (Loss), Net of Tax, Ending Balance	44,777		44,777
Defined Benefit Pension Plans [Member]
Accumulated Other Comprehensive Income (Loss), Net of Tax, Beginning Balance			(16,414)
Other comprehensive income (loss) before reclassifications			0
Amounts reclassified from other accumulated comprehensive income			390
Net current period other comprehensive income			390
Accumulated Other Comprehensive Income (Loss), Net of Tax, Ending Balance	(16,024)		(16,024)
Unrealized Gains (Losses) on Securities [Member]
Accumulated Other Comprehensive Income (Loss), Net of Tax, Beginning Balance			128
Other comprehensive income (loss) before reclassifications			11
Amounts reclassified from other accumulated comprehensive income			0
Net current period other comprehensive income			11
Accumulated Other Comprehensive Income (Loss), Net of Tax, Ending Balance	$ 139		$ 139

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INTERIM CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
INTERIM CONSOLIDATED STATEMENTS OF RETAINED EARNINGS [Abstract]
Net income (loss) attributable to common shareholders	$ 571	$ (13,015)	$ 21,612	$ (13,576)
Retained earnings, beginning of period	31,856	36,629	10,815	37,190
Retained earnings, end of period	$ 32,427	$ 23,614	$ 32,427	$ 23,614

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Debt (Schedule Of Debt) (Details)	Jun. 30, 2014 USD ($)	Dec. 31, 2013 USD ($)	Jun. 30, 2014 Stendal Loan Facility [Member] USD ($)		Jun. 30, 2014 Stendal Loan Facility [Member] EUR (€)	Dec. 31, 2013 Stendal Loan Facility [Member] USD ($)		Jun. 30, 2014 Senior Notes [Member] USD ($)		Dec. 31, 2013 Senior Notes [Member] USD ($)		Jul. 31, 2013 Senior Notes [Member] USD ($)	Nov. 17, 2010 Senior Notes [Member] USD ($)	Jun. 30, 2014 Credit Agreement For Celgar Mill [Member] USD ($)		Jun. 30, 2014 Credit Agreement For Celgar Mill [Member] CAD	Dec. 31, 2013 Credit Agreement For Celgar Mill [Member] USD ($)		Jun. 30, 2014 Project Blue Mill [Member] USD ($)		Jun. 30, 2014 Project Blue Mill [Member] EUR (€)	Dec. 31, 2013 Project Blue Mill [Member] USD ($)		Jun. 30, 2014 Loans Payable To The Noncontrolling Shareholder[Member] USD ($)		Jun. 30, 2014 Loans Payable To The Noncontrolling Shareholder[Member] EUR (€)	Dec. 31, 2013 Loans Payable To The Noncontrolling Shareholder[Member] USD ($)		Jun. 30, 2014 Loan Agreement At The Rosenthal Mill [Member] USD ($)		Jun. 30, 2014 Loan Agreement At The Rosenthal Mill [Member] EUR (€)	Dec. 31, 2013 Loan Agreement At The Rosenthal Mill [Member] USD ($)		Jun. 30, 2014 Rosenthal Credit Facility - 25 Million [Member] USD ($)		Jun. 30, 2014 Rosenthal Credit Facility - 25 Million [Member] EUR (€)	Dec. 31, 2013 Rosenthal Credit Facility - 25 Million [Member] USD ($)		Jun. 30, 2014 Rosenthal Credit Facility - 5.0 Million [Member] USD ($)		Jun. 30, 2014 Rosenthal Credit Facility - 5.0 Million [Member] EUR (€)	Dec. 31, 2013 Rosenthal Credit Facility - 5.0 Million [Member] USD ($)
Debt Instrument [Line Items]
Total debt	$ 944,625,000	$ 979,372,000	$ 537,890,000	[1]		$ 568,945,000	[1]	$ 336,124,000	[2]	$ 336,382,000	[2]			$ 0	[3]		$ 0	[3]	$ 18,812,000	[4]		$ 21,179,000	[4]	$ 51,799,000	[5]		$ 52,117,000	[5]	$ 0	[6]		$ 749,000	[6]	$ 0	[7]		$ 0	[7]	$ 0	[8]		$ 0	[8]
Less: current portion	(62,182,000)	(60,355,000)
Debt, less current portion	882,443,000	919,017,000
Debt, face amount					828,000,000							50,000,000	300,000,000								17,000,000					26,800,000					4,400,000
Maximum borrowing capacity																40,000,000																				€ 25,000,000					€ 5,000,000
Debt, stated interest rate								9.50%

[1] Note payable to bank, included in a total loan facility of €828.0 million to finance the construction related to the Stendal mill ("Stendal Loan Facility"), interest at rates varying from Euribor plus 0.90% to Euribor plus 1.80% (rates on amounts of borrowing at June 30, 2014 range from 1.47% to 2.22%), principal due in required installments beginning September 30, 2006 until September 30, 2017, collateralized by the gross assets of the Stendal mill, with 48% and 32% guaranteed by the Federal Republic of Germany and the State of Saxony-Anhalt, respectively, of up to €332.9 million of the outstanding principal, subject to a debt service reserve account ("DSRA") for purposes of paying amounts due in the following 12 months under the terms of the Stendal Loan Facility; payment of dividends is only permitted if certain cash flow requirements are met. See Note 10 - Derivative Transactions for a discussion of the Company's variable-to-fixed interest rate swap that was put in place to effectively fix the interest rate on the Stendal Loan Facility.On March 13, 2009, the Company finalized an agreement with its lenders to amend its Stendal Loan Facility. The amendment deferred approximately €164.0 million of scheduled principal payments until the maturity date, September 30, 2017. The amendment also provided for a 100% cash sweep, referred to as the "Cash Sweep", of any cash, in excess of a €15.0 million working capital reserve and the Guarantee Amount, as discussed in Note 12(a) - Commitments and Contingencies, and other amounts as contemplated in the amendment, held by Stendal which will be used first to fund the DSRA to a level sufficient to service the amounts due and payable under the Stendal Loan Facility during the then following 12 months, which means the DSRA is "Fully Funded", and second to prepay the deferred principal amounts. As at June 30, 2014, the DSRA balance was €16.0 million and was not Fully Funded. On March 14, 2014, the Stendal mill received a waiver under the Stendal Loan Facility and Project Blue Mill facility (Note 3(d)) which: postpones the testing date of its senior debt cover ratio to September 30, 2014 from June 30, 2014 and delivery of its report thereon by November 15, 2014; extends the date by which a portion of the net proceeds of the common share offering, as discussed in Note 5 - Share Capital, are contributed to the Stendal mill, to November 17, 2014; and confirms that any such contributed capital shall qualify as an “equity cure” in the event that the Stendal mill is not in compliance with its financial ratio covenants. In July 2014, the Stendal mill received an amendment to the Stendal Loan Facility and Project Blue Mill facility, as discussed in Note 13 - Subsequent Event.

[2] On November 17, 2010, the Company completed a private offering of $300,000 in aggregate principal amount of senior notes due 2017 ("Senior Notes"). The Senior Notes were issued at a price of 100% of their principal amount. The Senior Notes will mature on December 1, 2017 and bear interest at 9.50% which is accrued and payable semi-annually. In July 2013, the Company issued $50,000 in aggregate principal amount of its Senior Notes. The additional notes were priced at 104.50% plus accrued interest from June 1, 2013. The net proceeds from the offering were approximately $50,500, after deducting the underwriter's discounts, offering expenses and accrued interest. The Senior Notes are general unsecured senior obligations of the Company. The Senior Notes rank equal in right of payment with all existing and future senior unsecured indebtedness of the Company and senior in right of payment to any current or future subordinated indebtedness of the Company. The Senior Notes are effectively junior in right of payment to all borrowings of the Company's restricted subsidiaries, including borrowings under the Company's credit agreements which are secured by certain assets of its restricted subsidiaries.The Company may redeem all or a part of the Senior Notes, upon not less than 30 days' or more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) equal to 104.75% for the twelve month period beginning on December 1, 2014, 102.38% for the twelve month period beginning on December 1, 2015, and 100.00% beginning on December 1, 2016 and at any time thereafter, plus accrued and unpaid interest.

[3] Credit agreement with respect to a revolving credit facility of up to C$40.0 million for the Celgar mill. The credit facility matures May 2016. Borrowings under the credit facility are collateralized by the mill's inventory and receivables and are restricted by a borrowing base calculated on the mill's inventory and receivables. Canadian dollar denominated amounts bear interest at bankers acceptance plus 1.75% or Canadian prime plus 0.25%. U.S. dollar denominated amounts bear interest at LIBOR plus 1.75% or U.S. base plus 0.25%. As at June 30, 2014, C$1.7 million of this facility was supporting letters of credit and approximately C$38.3 million was available.

[4] A €17.0 million amortizing term facility to partially finance a project, referred to as "Project Blue Mill". The facility, 80% of which is guaranteed by the State of Saxony-Anhalt, bears interest at a rate of Euribor plus 3.5% per annum. The interest period for the facility, at the choice of the Company, will be of one, three or six months duration and interest is paid on the last day of the interest period selected. The facility, together with accrued interest, is scheduled to mature in September 2017. The facility will be repaid semi-annually, commencing September 30, 2013, is collateralized by the gross assets of the Stendal mill, and will be non-recourse to Mercer Inc. As at June 30, 2014, the facility was accruing interest at a rate of 3.92%. As part of this term facility, the Company was required to open an investment account with the lender for the purpose of managing project costs and is required to deposit all funding associated with Project Blue Mill in this account. As at June 30, 2014, the balance in the investment account was $3,736

[5] Loans of €26.8 million payable by the Stendal mill to its noncontrolling shareholder bear interest at a rate of 0.10% per annum and are due in 2017, provided that the Project Blue Mill facility (Note 3(d)) and the Stendal Loan Facility (Note 3(a)) have been fully repaid on such date. The loans are unsecured, subordinated to all liabilities of the Stendal mill, non-recourse to the Company and its restricted subsidiaries. One of the loans, which has a principal amount of €0.4 million, may be repaid prior to October 1, 2017 if the DSRA has been Fully Funded for the first time and this loan is subordinated to all liabilities of the Stendal mill only until such time as the DSRA is Fully Funded for the first time.As at June 30, 2014 and December 31, 2013, accrued interest on these loans was €11.1 million.

[6] A €4.4 million investment loan agreement with a lender relating to the wash press project at the Rosenthal mill that matured in February 2014.

[7] A €25.0 million working capital facility at the Rosenthal mill that matures in October 2016. Borrowings under the facility are collateralized by the mill's inventory and receivables and bear interest at Euribor plus 3.50%. As at June 30, 2014, approximately €0.4 million of this facility was supporting bank guarantees leaving approximately €24.6 million available.

[8] A €5.0 million facility at the Rosenthal mill that matures in December 2015. Borrowings under this facility bear interest at the rate of the three-month Euribor plus 3.50% and are secured by certain land at the Rosenthal mill. As at June 30, 2014 approximately €1.2 million of this facility was supporting bank guarantees leaving approximately €3.8 million available.

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The Company and Summary of Significant Accounting Policies (Policy)

6 Months Ended

Jun. 30, 2014

The Company And Summary Of Significant Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The interim consolidated financial statements contained herein include the accounts of Mercer International Inc. ("Mercer Inc.") and its wholly-owned and majority-owned subsidiaries (collectively the "Company"). The Company's shares of common stock are quoted and listed for trading on both the NASDAQ Global Market and the Toronto Stock Exchange.

The interim consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"). The year-end Consolidated Balance Sheet data was derived from audited financial statements. The footnote disclosure included herein has been prepared in accordance with accounting principles generally accepted for interim financial statements in the United States ("GAAP"). The interim consolidated financial statements should be read together with the audited consolidated financial statements and accompanying notes included in the Company's latest annual report on Form 10‑K for the fiscal year ended December 31, 2013. In the opinion of the Company, the unaudited interim consolidated financial statements contained herein contain all adjustments necessary for a fair statement of the results of the interim periods included. The results for the periods included herein may not be indicative of the results for the entire year.

The Company has three pulp mills that are aggregated into one reportable business segment, market pulp. Accordingly, the results presented are those of the reportable business segment.

In these interim consolidated financial statements, unless otherwise indicated, all amounts are expressed in United States dollars ("U.S. dollars" or "$"). The symbol “€” refers to Euros and the symbol "C$" refers to Canadian dollars.

Use of Estimates

Use of Estimates

Preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant management judgment is required in determining the accounting for, among other things, doubtful accounts and reserves, depreciation and amortization, future cash flows associated with impairment testing for long-lived assets, derivative financial instruments, legal liabilities, asset retirement obligations, pensions and post-retirement benefit obligations, income taxes, contingencies, and inventory obsolescence and provisions. Actual results could differ materially from these estimates, and changes in these estimates are recorded when known.

New Accounting Standards

New Accounting Standards

In March 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2013-05, an update to Foreign Currency Matters, which indicates that a cumulative translation adjustment is attached to the parent's investment in a foreign entity and should be released in a manner consistent with the derecognition guidance on investments in entities. Thus, the entire amount of the cumulative translation adjustment associated with the foreign entity would be released when there has been (i) a sale of a subsidiary or group of net assets within a foreign entity and the sale represents the substantially complete liquidation of the investment in the foreign entity; (ii) a loss of a controlling financial interest in an investment in a foreign entity; or (iii) a step acquisition for a foreign entity. The update does not change the requirement to release a pro-rata portion of the cumulative translation adjustment of the foreign entity into earnings for a partial sale of an equity method investment in a foreign entity. The amendments are effective for interim and annual periods beginning after December 15, 2013 and did not have an impact on the Company's interim consolidated financial statements.

Note 1. The Company and Summary of Significant Accounting Policies (continued)

In July 2013, the FASB issued ASU 2013-11, which provides guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss ("NOL") carryforward, a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 requires entities to present an unrecognized tax benefit as a reduction of a deferred tax asset for a NOL or tax credit carryforward whenever the NOL or tax credit carryforward would be available to reduce the additional taxable income or tax due if the tax position is disallowed. This accounting standard update requires entities to assess whether to net the unrecognized tax benefit with a deferred tax asset as of the reporting date. The amendments are effective for interim and annual periods beginning after December 15, 2013. The Company has determined these changes did not have an impact on the interim consolidated financial statements.

In May 2014 the FASB issued ASU 2014-09, "Revenue Recognition - Revenue from Contracts with Customers" (ASU 2014-09) that requires companies to recognize revenue when a customer obtains control rather than when companies have transferred substantially all risks and rewards of a good or service. This update is effective for annual reporting periods beginning on or after December 15, 2016 and interim periods therein and requires expanded disclosures. The Company is currently assessing the impact the adoption of ASU 2014-09 will have on its consolidated financial statements.

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Debt (Principal Maturities Of Debt) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Debt [Abstract]
2014	$ 29,610
2015	65,143
2016	65,143
2017	784,729
2018	0
Thereafter	0
Total debt	$ 944,625	$ 979,372

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Debt (Tables)

6 Months Ended

Jun. 30, 2014

Debt [Abstract]

Schedule Of Debt

	June 30,		December 31,
	2014		2013
Note payable to bank, included in a total loan credit facility of €828.0
million to finance the construction related to the Stendal mill (a)	$	537,890	$	568,945
Senior notes, interest at 9.50% accrued and payable semi-annually,
unsecured (b)		336,124		336,382
Credit agreement with a lender with respect to a revolving credit facility
of C$40.0 million (c)		-		-
Term bank facility for a project at the Stendal mill of €17.0 million (d)		18,812		21,179
Loans payable to the noncontrolling shareholder of the Stendal mill (e)		51,799		52,117
Investment loan agreement with a lender with respect to a project at
the Rosenthal mill of €4.4 million (f)		-		749
Credit agreement with a bank with respect to a revolving credit facility
of €25.0 million (g)		-		-
Credit agreement with a bank with respect to a revolving credit facility
of €5.0 million (h)		-		-
		944,625		979,372
Less:  current portion		(62,182)		(60,355)
Debt, less current portion	$	882,443	$	919,017

Principal Maturities Of Debt

Matures	Amount
2014	$	29,610
2015		65,143
2016		65,143
2017		784,729
2018		-
Thereafter		-
	$	944,625

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INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Cash flows from (used in) operating activities
Net income (loss)	$ 2,765	$ (12,225)	$ 25,942	$ (11,851)
Adjustments to reconcile net income (loss) to cash flows from operating activities
Unrealized loss (gain) on derivative instruments	(2,549)	(7,431)	(5,777)	(13,630)
Depreciation and amortization	19,851	19,354	39,638	38,887
Deferred income taxes	3,153	540	4,881	6,004
Stock compensation expense	600	396	331	752
Pension and other post-retirement expense, net of funding	214	277	425	437
Other	852	1,266	1,504	2,828
Changes in working capital
Receivables	14,517	28,635	(2,815)	15,822
Inventories	(13,390)	2,781	5,333	10,368
Accounts payable and accrued expenses	(8,062)	(2,134)	14,180	11,858
Other	3,338	(7,492)	(2,674)	(8,525)
Net cash from (used in) operating activities	21,289	23,967	80,968	52,950
Cash flows from (used in) investing activities
Purchase of property, plant and equipment	(6,151)	(14,349)	(12,717)	(29,394)
Purchase of intangible assets	(715)	0	(2,455)	0
Proceeds on sale of property, plant and equipment	94	3	273	20
Net cash from (used in) investing activities	(6,772)	(14,346)	(14,899)	(29,374)
Cash flows from (used in) financing activities
Repayment of debt	0	0	(30,541)	(26,420)
Proceeds from borrowings of debt	0	9,090	0	22,223
Proceeds from issuance of shares	53,942	0	53,942	0
Repayment of capital lease obligations	(532)	(522)	(1,192)	(1,446)
Proceeds from sale and lease-back transactions	0	0	1,047	0
Proceeds from (repayment of) credit facilities, net	0	9,112	0	17,060
Proceeds from government grants	761	4,441	4,058	5,413
Net cash from (used in) financing activities	54,171	22,121	27,314	16,830
Effect of exchange rate changes on cash and cash equivalents	226	1,040	(88)	(2,948)
Net increase (decrease) in cash and cash equivalents	68,914	32,782	93,295	37,458
Cash and cash equivalents, beginning of period	172,109	142,115	147,728	137,439
Cash and cash equivalents, end of period	241,023	174,897	241,023	174,897
Cash paid during the period for
Interest	29,653	28,504	32,889	32,135
Income taxes	1,020	1,129	1,818	2,007
Supplemental schedule of non-cash investing and financing activities
Acquisition of production and other equipment under capital lease obligations	0	321	618	545
Increase (decrease) in accounts payable and accrued purchases for property, plant and equipment	1,904	620	(2,294)	(3,208)
Increase (decrease) in receivables of government grants for long-term assets	$ (148)	$ 0	$ (2,962)	$ 0

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INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Revenues
Pulp	$ 259,482	$ 253,166	$ 537,988	$ 490,984
Energy and chemicals	25,710	21,534	52,889	45,501
Total revenues	285,192	274,700	590,877	536,485
Costs and expenses
Operating costs	230,465	244,363	466,769	462,347
Operating depreciation and amortization	19,768	19,267	39,470	38,717
Gross profit	34,959	11,070	84,638	35,421
Selling, general and administrative expenses	12,938	12,239	23,374	23,983
Operating income (loss)	22,021	(1,169)	61,264	11,438
Other income (expense)
Interest expense	(17,165)	(17,170)	(34,615)	(34,530)
Gain (loss) on derivative instruments (Note 10)	2,549	6,921	5,777	13,285
Other income (expense)	(82)	8	(76)	(84)
Total other income (expense)	(14,698)	(10,241)	(28,914)	(21,329)
Income (loss) before income taxes	7,323	(11,410)	32,350	(9,891)
Income tax benefit (provision) - current	(1,405)	(275)	(1,527)	4,044
Income tax benefit (provision) - deferred	(3,153)	(540)	(4,881)	(6,004)
Net income (loss)	2,765	(12,225)	25,942	(11,851)
Less: net income attributable to noncontrolling interest	(2,194)	(790)	(4,330)	(1,725)
Net income (loss) attributable to common shareholders	$ 571	$ (13,015)	$ 21,612	$ (13,576)
Net income (loss) per share attributable to common shareholders (Note 7)
Earnings Per Share, Basic and Diluted	$ 0.01	$ (0.23)	$ 0.36	$ (0.24)

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Derivative Transactions

6 Months Ended

Jun. 30, 2014

Derivative Transactions [Abstract]

Derivative Transactions

Note 10. Derivative Transactions

The Company is exposed to certain market risks relating to its ongoing business. The Company seeks to manage these risks through internal risk management policies as well as, from time to time, the use of derivatives.  The Company currently manages its interest rate risk with the use of a derivative instrument. The derivatives are measured at fair value with changes in fair value immediately recognized in gain (loss) on derivative instruments in the Consolidated Statement of Operations.

Interest Rate Derivative

During 2004, the Company entered into certain variable-to-fixed interest rate swaps in connection with the Stendal mill with respect to an aggregate maximum amount of approximately €612.6 million of the principal amount of the indebtedness under the Stendal Loan Facility. Under the remaining interest rate swap, the Company pays a fixed rate and receives a floating rate with the interest payments being calculated on a notional amount. Currently, the contract has an aggregate notional amount of €279.8million at a fixed interest rate of 5.28% and it matures in October 2017 (which for the most part matches the maturity of the Stendal Loan Facility).

The interest rate derivative contract is with a bank that is part of a banking syndicate that holds the Stendal Loan Facility and the Company does not anticipate non-performance by the bank.

Pulp Price Derivatives

In November 2012, the Company entered into two fixed price pulp swap contracts with a bank. Under the terms of the contracts, 3,000 metric tonnes ("MT") of pulp per month is fixed at prices which range from 880 U.S. dollars to 890 U.S. dollars per MT. The contracts matured in December 2013.  

The following table shows the derivative gains and losses by instrument type as they are recognized in gain (loss) on derivative instruments in the Consolidated Statement of Operations:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Interest rate derivative contract	$	2,549	$	7,472	$	5,777	$	14,292
Pulp price derivative contracts		-		(551)		-		(1,007)
	$	2,549	$	6,921	$	5,777	$	13,285

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Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Jul. 31, 2014
Document and Entity Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2
Trading Symbol	merc
Entity Registrant Name	MERCER INTERNATIONAL INC.
Entity Central Index Key	0001333274
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		64,273,288

XML

Financial Instruments

6 Months Ended

Jun. 30, 2014

Financial Instruments [Abstract]

Financial Instruments

Note 11. Financial Instruments

The fair value of financial instruments is summarized as follows:

	June 30, 2014				December 31, 2013
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cash and cash equivalents	$	241,023	$	241,023	$	147,728	$	147,728
Marketable securities	$	221	$	221	$	217	$	217
Receivables	$	134,749	$	134,749	$	135,893	$	135,893
Accounts payable and other	$	115,643	$	115,643	$	103,814	$	103,814
Debt	$	944,625	$	929,204	$	979,372	$	980,982
Interest rate derivative contract – liability	$	40,447	$	40,447	$	46,517	$	46,517

The carrying value of cash and cash equivalents and accounts payable and other approximates the fair value due to the immediate or short-term maturity of these financial instruments. The carrying value of receivables approximates the fair value due to their short-term nature and historical collectability. Marketable securities are recorded at fair value based on recent transactions. See the Fair Value Measurement and Disclosure section below for details on how the fair value of the interest rate derivative contract and debt was determined.

Fair Value Measurement and Disclosure

The fair value methodologies and, as a result, the fair value of the Company's marketable securities, debt and derivative instruments are determined based on the fair value hierarchy provided in the Fair Value Measurements and Disclosures topic of the FASB Accounting Standards Codification, and are as follows:

Level 1 – Valuations based on quoted prices in active markets for identical assets and liabilities.

Level 2 – Valuations based on observable inputs in active markets for similar assets and liabilities, other than Level 1 prices, such as quoted commodity prices or interest or currency exchange rates.

Level 3 – Valuations based on significant unobservable inputs that are supported by little or no market activity, such as discounted cash flow methodologies based on internal cash flow forecasts.

The Company classified its marketable securities within Level 1 of the valuation hierarchy because quoted prices are available in an active market for the exchange-traded equities.

The Company's interest rate derivative is classified within Level 2 of the valuation hierarchy, as it is valued using internal models that use as their basis readily observable market inputs, such as forward interest rates, yield curves observable at specified intervals. The observable inputs reflect market data obtained from independent sources.  In addition, the Company considered the risk of non-performance of the obligor, which in some cases reflects the Company's own credit risk.  The counterparty to its interest rate derivative is a multi-national financial institution.

The Company's debt is recognized at amortized cost. The fair value of debt classified as Level 2 reflects recent market transactions.  Discounted cash flow models use observable market inputs taking into consideration variables such as interest rate changes, comparative securities, subordination discount and credit rating changes. The fair value of debt classified as Level 3 is valued using discounted cash flow models or select comparable transactions, which require significant management estimates. These estimates are developed using available market, historical, and forecast data, including taking into account variables such as recent financing activities, the capital structure, and the lack of marketability of such debt.

Note 11. Financial Instruments (continued)

The following table presents a summary of the Company's outstanding financial instruments and their estimated fair values under the hierarchy defined in Fair Value Measurements and Disclosures Topic of the FASB Accounting Standards Codification: 

	Fair value measurements at June 30, 2014 using:
Description	Level 1		Level 2		Level 3		Total
Assets
Marketable securities	$	221	$	-	$	-	$	221
Liabilities
Interest rate derivative contract	$	-	$	40,447	$	-	$	40,447
Debt		-		358,812		570,392		929,204
	$	-	$	399,259	$	570,392	$	969,651
	Fair value measurements at December 31, 2013 using:
Description	Level 1		Level 2		Level 3		Total
Assets
Marketable securities	$	217	$	-	$	-	$	217
Liabilities
Interest rate derivative contract	$	-	$	46,517	$	-	$	46,517
Debt		-		367,405		613,577		980,982
	$	-	$	413,922	$	613,577	$	1,027,499

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INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) [Abstract]
Net income (loss)	$ 2,765	$ (12,225)	$ 25,942	$ (11,851)
Other comprehensive income (loss), net of taxes
Foreign currency translation adjustment (net of tax effect of $45, ($378), $48, $380)	6,153	(5,280)	(2,979)	(19,449)
Change in unrecognized losses and prior service costs related to defined benefit plans (net of tax effect of $nil in all periods)	390	979	390	856
Change in unrealized gains (losses) on marketable securities (net of tax effect of $nil in all periods)	(36)	(35)	11	(22)
Net current period other comprehensive income	6,507	(4,336)	(2,578)	(18,615)
Total comprehensive income (loss)	9,272	(16,561)	23,364	(30,466)
Comprehensive income attributable to noncontrolling interest	(2,194)	(790)	(4,330)	(1,725)
Comprehensive income (loss) attributable to common shareholders	$ 7,078	$ (17,351)	$ 19,034	$ (32,191)

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Share Capital

6 Months Ended

Jun. 30, 2014

Share Capital [Abstract]

Share Capital

Note 5. Share Capital

Common shares

The Company has authorized 200,000,000 common shares with a par value of $1 per share.

As at June 30, 2014, the Company had 64,273,288 common shares issued and outstanding. As at December 31, 2013, the Company had 55,853,704 common shares issued and outstanding. During the six months ended June 30, 2014, the Company issued 38,000 restricted shares to directors of the Company and 331,584 shares were issued to employees of the Company as part of the share based performance plan.

On April 2, 2014, the Company issued an aggregate of 8,050,000 common shares by way of public offering at a price of $7.15 per share for net proceeds of approximately $53,600 after deducting the underwriters’ discounts and offering expenses. The Company intends to use approximately $20,000 of the net proceeds to further capitalize the Stendal mill. The Company intends to use the balance of the net proceeds for capital expenditures, including expansion of our wood procurement and logistics operations in Germany, and for general corporate purposes.

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Pension and Other Post-Retirement Benefit Obligations

6 Months Ended

Jun. 30, 2014

Pension And Other Post-Retirement Benefit Obligations [Abstract]

Pension and Other Post-Retirement Benefit Obligations

Note 4. Pension and Other Post-Retirement Benefit Obligations

Included in pension and other post-retirement benefit obligations are amounts related to the Company's Celgar and Rosenthal mills. The largest component of this obligation is with respect to the Celgar mill which maintains a defined benefit pension plan and post-retirement benefit plans for certain employees ("Celgar Plans").

Pension benefits are based on employees' earnings and years of service. The Celgar Plans are funded by contributions from the Company based on actuarial estimates and statutory requirements. Pension contributions during the three and six month periods ended June 30, 2014 totaled $617 and $1,226, respectively (2013 – $529 and $1,185).

Effective December 31, 2008, the defined benefit plan was closed to new members.  In addition, the defined benefit service accrual ceased on December 31, 2008, and members began to receive pension benefits, at a fixed contractual rate, under a new defined contribution plan effective January 1, 2009. During the three and six month periods ended June 30, 2014, the Company made contributions of $184 and $399 respectively (2013 – $152 and $382) to this plan.

	Three Months Ended June 30,
	2014				2013
	Pension Benefits		Post-Retirement Benefits		Pension Benefits		Post-Retirement Benefits
Service cost	$	31	$	184	$	36	$	189
Interest cost		465		315		461		278
Expected return on plan assets		(563)		-		(537)		-
Recognized net loss (income)		199		(3)		362		29
Net periodic benefit cost	$	132	$	496	$	322	$	496
	Six Months Ended June 30,
	2014				2013
	Pension Benefits		Post-Retirement Benefits		Pension Benefits		Post-Retirement Benefits
Service cost	$	61	$	365	$	70	$	382
Interest cost		924		626		930		561
Expected return on plan assets		(1,120)		-		(1,081)		-
Recognized net loss (income)		396		(6)		729		59
Net periodic benefit cost	$	261	$	985	$	648	$	1,002

Note 4. Pension and Other Post-Retirement Benefit Obligations (continued)

Multiemployer Plan

The Company participates in a multiemployer plan for the hourly-paid employees at the Celgar mill. The contributions to the plan are determined based on a percentage of pensionable earnings pursuant to a collective bargaining agreement. The Company has no current or future contribution obligations in excess of the contractual contributions. The contributions during the three and six month periods ended June 30, 2014 totaled $514 and $1,021, respectively (2013 – $497 and $1,000). 

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Inventories (Tables)

6 Months Ended

Jun. 30, 2014

Inventories [Abstract]

Components of Inventory

	June 30,		December 31,
	2014		2013
Raw materials	$	62,151	$	66,356
Finished goods		52,185		54,982
Spare parts and other		50,736		49,570
	$	165,072	$	170,908

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2014

Commitments And Contingencies [Abstract]

Commitments and Contingencies

Note 12. Commitments and Contingencies

(a) Pursuant to an arbitration proceeding with the general construction contractor (the noncontrolling shareholder) of the Stendal mill regarding certain warranty claims, the Company acted upon a bank guarantee for defect liability on civil works that was about to expire as provided in the engineering, procurement, and construction contract. On January 28, 2011, the Company received approximately €10.0 million ($13,606) (the "Guarantee Amount"), which is intended to compensate the Company for remediation work that is required at the Stendal mill.

The €10.0 million ($13,606) was initially recognized as an increase in cash and a corresponding increase in accounts payable and other. As civil works remediation steps are agreed to with the noncontrolling shareholder an agreed to portion of the payable is reversed with the offset recorded in operating costs to offset the remediation expenditures. As at June 30, 2014, the Company had Guarantee Amount proceeds of $2,421 remaining in accounts payable and other.

In July 2014, the Company reached a final settlement for the claims of €1.4 million ($1,906).

(b) The Company was involved in a property transfer tax dispute with respect to the Celgar mill. Celgar had previously paid the property transfer tax assessment. In July 2014, the Company lost its final appeal and accordingly in the period ended June 30, 2014 reclassified $3,617 from prepaid expenses and other to property, plant and equipment in the Consolidated Balance Sheet. The Company will amortize this amount over the remaining useful life of the related assets.

Note 12. Commitments and Contingencies (continued)

The Company is involved in legal actions and claims arising in the ordinary course of business. While the outcome of any legal actions and claims cannot be predicted with certainty, it is the opinion of management that the outcome of any such claim which is pending or threatened, either individually or on a combined basis, will not have a material adverse effect on the consolidated financial condition, results of operations or liquidity of the Company.

(c) In 2012, as a result of a regular tax field audit for the Stendal mill, German public authorities commenced a preliminary investigation into past managers of the mill relating to whether certain settlement amounts received by the Stendal mill in 2007, 2010 and 2011 from the main contractor under the Engineering, Procurement and Construction Contract for the construction of the Stendal mill should have reduced the assessment base for the original investment subsidies granted to the mill by German authorities. The payments were made by the contractor to the Stendal mill to settle certain warranty, performance and remediation claims that the Stendal mill made against the contractor after completion of mill construction in 2004. The amounts currently under review aggregate approximately €8.3 million ($11,400). Investment subsidies received by the Stendal mill were generally based upon a percentage of the assessment base for subsidies of the mill. If the settlement payments received by the Stendal mill result in a reduction of the assessment base for subsidies under applicable German rules there could be a proportionate reduction in the investment subsidies and the difference could be repayable by the Stendal mill. The Stendal mill believes that it has properly recorded the settlement amounts received from the contractor and that the same do not reduce the assessment base for subsidies of the mill. While it is not reasonably possible to predict the outcome of the legal action and claim, it is the opinion of management that the outcome will not have a material adverse effect on the consolidated financial condition, results of operations or liquidity of the Company.

(d) The Company is subject to regulations that require the handling and disposal of asbestos in a prescribed manner if a property undergoes a major renovation or demolition. Otherwise, the Company is not required to remove asbestos from its facilities. Generally asbestos is found on steam and condensate piping systems as well as certain cladding on buildings and in building insulation throughout older facilities. The Company's obligation for the proper removal and disposal of asbestos products from the Company's mills is a conditional asset retirement obligation. As a result of the longevity of the Company's mills, due in part to the maintenance procedures and the fact that the Company does not have plans for major changes that require the removal of asbestos, the timing of the asbestos removal is indeterminate. As a result, the Company is currently unable to reasonably estimate the fair value of its asbestos removal and disposal obligation. The Company will recognize a liability in the period in which sufficient information is available to reasonably estimate its fair value. 

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Restructuring Expenses

6 Months Ended

Jun. 30, 2014

Restructuring Charges [Abstract]

Restructuring charges

Note 8. Restructuring Expenses

In July 2013, the Company announced a workforce reduction at the Celgar mill. In connection with implementing this workforce reduction, during the year ended December 31, 2013, the Company recorded restructuring expenses of $5,029 for severance and other personnel expenses, such as termination benefits. During the six month period ended June 30, 2014, the Company incurred approximately $51 of additional expenses and does not intend to incur any significant additional expenses related to this restructuring. As at June 30, 2014, the Company had a liability for these restructuring expenses of $862 in accounts payable and other.

In November 2013, the Company restructured the management team at the Stendal mill.  In connection with this restructuring, during the year ended December 31, 2013, the Company recorded expenses of $1,386 for severance and other personnel expenses, such as termination benefits. As at June 30, 2014, the Company had a liability for these restructuring expenses of $342in accounts payable and other.   

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2014

Stock-Based Compensation [Abstract]

Stock-Based Compensation

Note 6. Stock-Based Compensation

In June 2010, the Company adopted a stock incentive plan (the "2010 Plan") which provides for options, restricted stock rights, restricted shares, performance shares, performance share units ("PSUs") and stock appreciation rights to be awarded to employees, consultants and non-employee directors.  During the three and six months ended June 30, 2014, there were no changes to the issued and outstanding options, restricted stock rights, performance shares or stock appreciation rights. During the three months ended June 30, 2014, the Board of Directors of the Company approved an additional 2.0 million common shares be available for grant pursuant to the 2010 Plan. As at June 30, 2014, after factoring in all allocated shares, there remain approximately 2.5 million common shares available for grant.

PSUs

PSUs comprise rights to receive common shares at a future date that are contingent on the Company and the grantee achieving certain performance objectives. The performance objective periods are generally three years or less.

The fair value of PSUs is recorded as compensation expense over the requisite service period. For PSUs which have the same grant and service inception date, the fair value is based upon the targeted number of shares to be awarded and the quoted market price of the Company’s shares at that date. For PSUs where the service inception date precedes the grant date, the fair value is based upon the targeted number of shares awarded and the quoted price of the Company's shares at each reporting date up to the grant date. The target number of shares is determined using management's best estimate. The final determination of the number of shares to be granted is made by the Company's Board of Directors.For the three and six month periods ended June 30, 2014, the Company recognized an expense of $473 and $54, respectively related to PSUs (2013 – expense of $240, and $401).

Note 6. Stock-Based Compensation (continued)

The following table summarizes PSU activity during the period:

	Number of PSUs
Outstanding at January 1, 2013	786,129
Granted	40,499
Forfeited	(35,196)
Outstanding at December 31, 2013	791,432
Granted	657,554
Vested and issued	(331,584)
Expired	(139,240)
Outstanding at June 30, 2014	978,162

Restricted Shares

The fair value of restricted shares is determined based upon the number of shares granted and the quoted price of the Company's shares on the date of grant. Restricted shares generally vest over one year; however, 200,000 restricted shares granted during the year ended December 31, 2011 vest in equal amounts over a five-year period commencing in 2012. The fair value of the restricted shares is recorded as compensation expense on a straight-line basis over the vesting period.

Expense recognized for the three and six month periods ended June 30, 2014 was $127 and $277, respectively (2013 – $156 and $351). As at June 30, 2014, the total remaining unrecognized compensation cost related to restricted stock amounted to approximately $570 (2013 – $841), which will be amortized over the remaining vesting periods.

The following table summarizes restricted share activity during the period:

	Number of
	Restricted Shares
Outstanding at January 1, 2013	196,500
Granted	38,000
Vested	(76,500)
Outstanding at December 31, 2013	158,000
Granted	38,000
Vested	(78,000)
Outstanding at June 30, 2014	118,000

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Net Income (Loss) Per Share Attributable To Common Shareholders

6 Months Ended

Jun. 30, 2014

Net Income (Loss) Per Share Attributable To Common Shareholders [Abstract]

Net Income (Loss) Per Share Attributable To Common Shareholders

Note 7. Net Income (Loss) Per Share Attributable to Common Shareholders

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Net income (loss) attributable to common shareholders:
Basic and diluted	$	571	$	(13,015)	$	21,612	$	(13,576)
Net income (loss) per share attributable to common shareholders:
Basic and diluted	$	0.01	$	(0.23)	$	0.36	$	(0.24)
Weighted average number of common shares outstanding:
Basic (1)		63,915,377		55,670,034		59,835,098		55,651,610
Effect of dilutive instruments:
PSUs		353,791		-		448,947		-
Restricted shares		64,588		-		67,391		-
Stock options		8,975		-		10,433		-
Diluted		64,342,731		55,670,034		60,361,869		55,651,610

________

(1) For the three and six month periods ended June 30, 2014, the basic weighted average number of shares excludes 118,000 restricted shares which have been issued, but have not vested as at June 30, 2014 (2013 – 158,000 restricted shares).

The calculation of diluted net income (loss) per share attributable to common shareholders does not assume the exercise of any instruments that would have an anti-dilutive effect on net income (loss) per share.  The following table summarizes the instruments excluded from the calculation of net income (loss) per share attributable to common shareholders because they were anti-dilutive.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
PSUs		-		786,129		-		786,129
Restricted shares		-		158,000		-		158,000
Stock options		-		175,000		-		175,000

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Accumulated Other Comprehensive Income

6 Months Ended

Jun. 30, 2014

Accumulated Other Comprehensive Income, Net of Tax [Abstract]

Comprehensive Income (Loss) Note [Text Block]

Note 9. Accumulated Other Comprehensive Income

Changes in amounts included in our accumulated other comprehensive income by component are as follows:

	Foreign		Defined Benefit		Unrealized
	Currency		Pension and		Gains on
	Translation		Post-Retirement		Marketable
	Adjustments		Benefit Items		Securities		Total
Balance December 31, 2013	$	47,756	$	(16,414)	$	128	$	31,470
Other comprehensive income (loss) before
reclassifications		(2,979)		-		11		(2,968)
Amounts reclassified from accumulated other
comprehensive income		-		390		-		390
Net current period other comprehensive income		(2,979)		390		11		(2,578)
Balance June 30, 2014	$	44,777	$	(16,024)	$	139	$	28,892

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Debt (Narrative) (Details)	6 Months Ended			1 Months Ended	6 Months Ended		6 Months Ended					6 Months Ended
	Jun. 30, 2014 Stendal Loan Facility [Member] EUR (€)	Jun. 30, 2014 Stendal Loan Facility [Member] Minimum [Member]	Jun. 30, 2014 Stendal Loan Facility [Member] Maximum [Member]	Jul. 31, 2013 Senior Notes [Member] USD ($)	Jun. 30, 2014 Senior Notes [Member]	Nov. 17, 2010 Senior Notes [Member] USD ($)	Jun. 30, 2014 Credit Agreement For Celgar Mill [Member] CAD	Jun. 30, 2014 Project Blue Mill [Member] USD ($)	Jun. 30, 2014 Project Blue Mill [Member] EUR (€)	Jun. 30, 2014 Loans Payable To The Noncontrolling Shareholder[Member] EUR (€)	Jun. 30, 2014 Loan Payable To The Noncontrolling Shareholder 2 [Member] EUR (€)	Jun. 30, 2014 Loan Agreement At The Rosenthal Mill [Member] EUR (€)	Jun. 30, 2014 Rosenthal Credit Facility - 25 Million [Member] EUR (€)	Jun. 30, 2014 Rosenthal Credit Facility - 5.0 Million [Member] EUR (€)	Jun. 30, 2014 Canadian Dollar Borrowings Rate Option 1 [Member] Credit Agreement For Celgar Mill [Member]	Jun. 30, 2014 Canadian Dollar Borrowings Rate Option 2 [Member] Credit Agreement For Celgar Mill [Member]	Jun. 30, 2014 US Dollar Borrowings Rate Option 1 [Member] Credit Agreement For Celgar Mill [Member]	Jun. 30, 2014 US Dollar Borrowings Rate Option 2 [Member] Credit Agreement For Celgar Mill [Member]	Jun. 30, 2014 Twelve Month Period Beginning Dec 1, 2014 [Member] Senior Notes [Member]	Jun. 30, 2014 Twelve Month Period Beginning Dec 1, 2015 [Member] Senior Notes [Member]	Jun. 30, 2014 Beginning Dec 1, 2016 And Thereafter [Member] Senior Notes [Member]
Debt Instrument [Line Items]
Debt, face amount	€ 828,000,000			$ 50,000,000		$ 300,000,000			€ 17,000,000	€ 26,800,000	€ 400,000	€ 4,400,000
Varying basis spread		0.90%	1.80%					3.50%	3.50%				3.50%	3.50%	1.75%	0.25%	1.75%	0.25%
Description of variable basis spread	Euribor							Euribor	Euribor				Euribor	three-month Euribor	bankers acceptance	Canadian prime	LIBOR	U.S. base
Interest rate at period		1.47%	2.22%							0.10%
Debt instrument interest rate					9.50%
Percentage Of Debt Guaranteed By The Federal Republic Of Germany	48.00%
Percentage Of Debt Guaranteed By The State Of Saxony-Anhalt	32.00%							80.00%	80.00%
Maximum Amount Of Principal Debt Guaranteed By the German Government	332,900,000
Debt Instrument, Amount Of Debt Supporting Bank Guarantees													400,000	1,200,000
Deferred Scheduled Principal Payment To Debt Maturity Date	164,000,000
Debt, maturity date	Sep. 30, 2017				Dec. 01, 2017		May 01, 2016	Sep. 01, 2017	Sep. 01, 2017			Feb. 01, 2014	Oct. 01, 2016	Dec. 01, 2015
Debt, offering date					Nov. 17, 2010
Cash sweep, percent	100.00%
Working capital reserve	15,000,000
DSRA balance	16,000,000
Issued price percentage of principal amount				104.50%		100.00%
Senior Note Redemption Notice Minimum Days					30 days
Senior Note Redemption Notice Maximum Days					60 days
Redemption prices expressed as percentage of principal amount																			104.75%	102.38%	100.00%
Maximum borrowing capacity							40,000,000						25,000,000	5,000,000
Interest Payable										11,100,000
Line of credit facility interest rate at period end								3.92%	3.92%
Letters of Credit Outstanding, Amount							1,700,000
Remaining borrowing capacity							38,300,000						24,600,000	3,800,000
Proceeds from issuance of debt				50,500,000
Balance in investment account used to fund Project Blue Mill								$ 3,736,000

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Subsequent Events (Details)	Jul. 31, 2014
Subsequent Event [Abstract]
Percentage Reduction Of Principal Repayments	50.00%

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Restricted Group Supplemental Disclosure

6 Months Ended

Jun. 30, 2014

Restricted Group Supplemental Disclosure [Abstract]

Restricted Group Supplemental Disclosure

Note 14. Restricted Group Supplemental Disclosure

The terms of the indenture governing the Company's Senior Notes require that it provides the results of operations and financial condition of Mercer Inc. and the restricted subsidiaries under the indenture, collectively referred to as the "Restricted Group".  As at and during the three and six months ended June 30, 2014 and 2013, the Restricted Group was comprised of Mercer Inc., certain holding subsidiaries and its Rosenthal and Celgar mills. The Restricted Group excludes the Stendal mill.

Combined Condensed Balance Sheets

	June 30, 2014
	Restricted		Unrestricted				Consolidated
	Group		Subsidiaries		Eliminations		Group
ASSETS
Current assets
Cash and cash equivalents	$	157,418	$	83,605	$	-	$	241,023
Receivables		69,808		64,941		-		134,749
Inventories		104,124		60,948		-		165,072
Prepaid expenses and other		7,810		2,290		-		10,100
Deferred income tax		3,606		3,410		-		7,016
Total current assets		342,766		215,194		-		557,960
Long-term assets
Property, plant and equipment		410,110		596,796		-		1,006,906
Deferred note issuance costs and other		11,136		9,464		-		20,600
Deferred income tax		16,522		6,840		-		23,362
Due from unrestricted group		155,467		-		(155,467)		-
Total assets	$	936,001	$	828,294	$	(155,467)	$	1,608,828
LIABILITIES
Current liabilities
Accounts payable and other	$	63,468	$	52,175	$	-	$	115,643
Pension and other post-retirement benefit
obligations		1,325		-		-		1,325
Debt		-		62,182		-		62,182
Total current liabilities		64,793		114,357		-		179,150
Long-term liabilities
Debt		336,124		546,319		-		882,443
Due to restricted group		-		155,467		(155,467)		-
Interest rate derivative liability		-		40,447		-		40,447
Pension and other post-retirement benefit
obligations		35,370		-		-		35,370
Capital leases and other		8,946		10,630		-		19,576
Deferred income tax		26,229		-		-		26,229
Total liabilities		471,462		867,220		(155,467)		1,183,215
EQUITY
Total shareholders' equity (deficit)		464,539		(32,495)		-		432,044
Noncontrolling interest (deficit)		-		(6,431)		-		(6,431)
Total liabilities and equity	$	936,001	$	828,294	$	(155,467)	$	1,608,828

Note 14. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Balance Sheets

	December 31, 2013
	Restricted		Unrestricted				Consolidated
	Group		Subsidiaries		Eliminations		Group
ASSETS
Current assets
Cash and cash equivalents	$	82,910	$	64,818	$	-	$	147,728
Receivables		75,987		59,906		-		135,893
Inventories		93,807		77,101		-		170,908
Prepaid expenses and other		7,742		3,176		-		10,918
Deferred income tax		3,273		3,053		-		6,326
Total current assets		263,719		208,054		-		471,773
Long-term assets
Property, plant and equipment		420,373		618,258		-		1,038,631
Deferred note issuance costs and other		10,987		10,011		-		20,998
Deferred income tax		9,894		7,263		-		17,157
Due from unrestricted group		153,851		-		(153,851)		-
Total assets	$	858,824	$	843,586	$	(153,851)	$	1,548,559
LIABILITIES
Current liabilities
Accounts payable and other	$	49,891	$	53,923	$	-	$	103,814
Pension and other post-retirement benefit
obligations		1,330		-		-		1,330
Debt		749		59,606		-		60,355
Total current liabilities		51,970		113,529		-		165,499
Long-term liabilities
Debt		336,382		582,635		-		919,017
Due to restricted group		-		153,851		(153,851)		-
Interest rate derivative liability		-		46,517		-		46,517
Pension and other post-retirement benefit
obligations		35,466		-		-		35,466
Capital leases and other		8,523		10,770		-		19,293
Deferred income tax		14,450		-		-		14,450
Total liabilities		446,791		907,302		(153,851)		1,200,242
EQUITY
Total shareholders' equity (deficit)		412,033		(52,955)		-		359,078
Noncontrolling interest (deficit)		-		(10,761)		-		(10,761)
Total liabilities and equity	$	858,824	$	843,586	$	(153,851)	$	1,548,559

Note 14. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Statements of Operations

	Three Months Ended June 30, 2014
	Restricted		Unrestricted				Consolidated
	Group		Subsidiaries		Eliminations		Group
Revenues
Pulp	$	136,632	$	122,850	$	-	$	259,482
Energy and chemicals		7,649		18,061		-		25,710
		144,281		140,911		-		285,192
Operating costs		122,043		108,422		-		230,465
Operating depreciation and amortization		10,631		9,137		-		19,768
Selling, general and administrative expenses		8,647		4,291		-		12,938
		141,321		121,850		-		263,171
Operating income (loss)		2,960		19,061		-		22,021
Other income (expense)
Interest expense		(8,548)		(8,757)		140		(17,165)
Gain (loss) on derivative instruments		-		2,549		-		2,549
Other income (expense)		26		32		(140)		(82)
Total other income (expense)		(8,522)		(6,176)		-		(14,698)
Income (loss) before income taxes		(5,562)		12,885		-		7,323
Income tax benefit (provision)		(4,033)		(525)		-		(4,558)
Net income (loss)		(9,595)		12,360		-		2,765
Less: net income attributable to noncontrolling interest		-		(2,194)		-		(2,194)
Net income (loss) attributable to common shareholders	$	(9,595)	$	10,166	$	-	$	571

	Three Months Ended June 30, 2013
	Restricted		Unrestricted				Consolidated
	Group		Subsidiaries		Eliminations		Group
Revenues
Pulp	$	137,957	$	115,209	$	-	$	253,166
Energy and chemicals		7,886		13,648		-		21,534
		145,843		128,857		-		274,700
Operating costs		135,425		108,938		-		244,363
Operating depreciation and amortization		10,791		8,476		-		19,267
Selling, general and administrative expenses		7,375		4,864		-		12,239
		153,591		122,278		-		275,869
Operating income (loss)		(7,748)		6,579		-		(1,169)
Other income (expense)
Interest expense		(7,685)		(11,639)		2,154		(17,170)
Gain (loss) on derivative instruments		(551)		7,472		-		6,921
Other income (expense)		2,118		44		(2,154)		8
Total other income (expense)		(6,118)		(4,123)		-		(10,241)
Income (loss) before income taxes		(13,866)		2,456		-		(11,410)
Income tax benefit (provision)		(795)		(20)		-		(815)
Net income (loss)		(14,661)		2,436		-		(12,225)
Less: net income attributable to noncontrolling interest		-		(790)		-		(790)
Net income (loss) attributable to common shareholders	$	(14,661)	$	1,646	$	-	$	(13,015)

Note 14. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Statements of Operations

	Six Months Ended June 30, 2014
	Restricted Group		Unrestricted Subsidiaries		Eliminations		Consolidated Group
Revenues
Pulp	$	277,429	$	260,559	$	-	$	537,988
Energy and chemicals		16,530		36,359		-		52,889
		293,959		296,918		-		590,877
Operating costs		233,411		233,358		-		466,769
Operating depreciation and amortization		21,205		18,265		-		39,470
Selling, general and administrative expenses		15,098		8,276		-		23,374
		269,714		259,899		-		529,613
Operating income (loss)		24,245		37,019		-		61,264
Other income (expense)
Interest expense		(17,066)		(17,829)		280		(34,615)
Gain (loss) on derivative instruments		-		5,777		-		5,777
Other income (expense)		138		66		(280)		(76)
Total other income (expense)		(16,928)		(11,986)		-		(28,914)
Income (loss) before income taxes		7,317		25,033		-		32,350
Income tax benefit (provision)		(5,785)		(623)		-		(6,408)
Net income (loss)		1,532		24,410		-		25,942
Less: net income attributable to noncontrolling interest		-		(4,330)		-		(4,330)
Net income (loss) attributable to common shareholders	$	1,532	$	20,080	$	-	$	21,612

	Six Months Ended June 30, 2013
	Restricted		Unrestricted				Consolidated
	Group		Subsidiaries		Eliminations		Group
Revenues
Pulp	$	270,307	$	220,677	$	-	$	490,984
Energy and chemicals		17,247		28,254		-		45,501
		287,554		248,931		-		536,485
Operating costs		253,625		208,722		-		462,347
Operating depreciation and amortization		21,606		17,111		-		38,717
Selling, general and administrative expenses		14,922		9,061		-		23,983
		290,153		234,894		-		525,047
Operating income (loss)		(2,599)		14,037		-		11,438
Other income (expense)
Interest expense		(15,430)		(23,430)		4,330		(34,530)
Gain (loss) on derivative instruments		(1,007)		14,292		-		13,285
Other income (expense)		4,145		101		(4,330)		(84)
Total other income (expense)		(12,292)		(9,037)		-		(21,329)
Income (loss) before income taxes		(14,891)		5,000		-		(9,891)
Income tax benefit (provision)		(2,137)		177		-		(1,960)
Net income (loss)		(17,028)		5,177		-		(11,851)
Less: net income attributable to noncontrolling interest		-		(1,725)		-		(1,725)
Net income (loss) attributable to common shareholders	$	(17,028)	$	3,452	$	-	$	(13,576)

Note 14. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Statements of Cash Flows

	Three Months Ended June 30, 2014
	Restricted		Unrestricted		Consolidated
	Group		Subsidiaries		Group
Cash flows from (used in) operating activities
Net income (loss)	$	(9,595)	$	12,360	$	2,765
Adjustments to reconcile net income (loss) to cash flows
from operating activities
Unrealized loss (gain) on derivative instruments		-		(2,549)		(2,549)
Depreciation and amortization		10,714		9,137		19,851
Deferred income taxes		3,153		-		3,153
Stock compensation expense		600		-		600
Pension and other post-retirement expense, net of
funding		214		-		214
Other		412		440		852
Changes in working capital
Receivables		4,808		9,709		14,517
Inventories		(8,753)		(4,637)		(13,390)
Accounts payable and accrued expenses		(2,397)		(5,665)		(8,062)
Other(1)		1,529		1,809		3,338
Net cash from (used in) operating activities		685		20,604		21,289
Cash flows from (used in) investing activities
Purchase of property, plant and equipment		(5,571)		(580)		(6,151)
Purchase of intangible assets		(229)		(486)		(715)
Proceeds on sale of property, plant and equipment		81		13		94
Net cash from (used in) investing activities		(5,719)		(1,053)		(6,772)
Cash flows from (used in) financing activities
Proceeds from issuance of shares		53,942		-		53,942
Repayment of capital lease obligations		(202)		(330)		(532)
Proceeds from government grants		-		761		761
Net cash from (used in) financing activities		53,740		431		54,171
Effect of exchange rate changes on cash and cash
equivalents		666		(440)		226
Net increase (decrease) in cash and cash equivalents		49,372		19,542		68,914
Cash and cash equivalents, beginning of period		108,046		64,063		172,109
Cash and cash equivalents, end of period	$	157,418	$	83,605	$	241,023

_________________________

(1) Includes intercompany working capital related transactions.  

Note 14. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Statements of Cash Flows

	Three Months Ended June 30, 2013
	Restricted		Unrestricted		Consolidated
	Group		Subsidiaries		Group
Cash flows from (used in) operating activities
Net income (loss)	$	(14,661)	$	2,436	$	(12,225)
Adjustments to reconcile net income (loss) to cash flows
from operating activities
Unrealized loss (gain) on derivative instruments		41		(7,472)		(7,431)
Depreciation and amortization		10,878		8,476		19,354
Deferred income taxes		561		(21)		540
Stock compensation expense		396		-		396
Pension and other post-retirement expense, net of
funding		277		-		277
Other		378		888		1,266
Changes in working capital
Receivables		24,835		3,800		28,635
Inventories		6,945		(4,164)		2,781
Accounts payable and accrued expenses		(2,540)		406		(2,134)
Other(1)		(9,085)		1,593		(7,492)
Net cash from (used in) operating activities		18,025		5,942		23,967
Cash flows from (used in) investing activities
Purchase of property, plant and equipment		(3,401)		(10,948)		(14,349)
Proceeds on sale of property, plant and equipment		-		3		3
Net cash from (used in) investing activities		(3,401)		(10,945)		(14,346)
Cash flows from (used in) financing activities
Proceeds from borrowings of debt		-		9,090		9,090
Repayment of capital lease obligations		(159)		(363)		(522)
Proceeds from (repayment of) credit facilities, net		9,112		-		9,112
Proceeds from government grants		-		4,441		4,441
Net cash from (used in) financing activities		8,953		13,168		22,121
Effect of exchange rate changes on cash and cash
equivalents		(21)		1,061		1,040
Net increase (decrease) in cash and cash equivalents		23,556		9,226		32,782
Cash and cash equivalents, beginning of period		66,820		75,295		142,115
Cash and cash equivalents, end of period	$	90,376	$	84,521	$	174,897

___________________________

(1) Includes intercompany working capital related transactions.

Note 14. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Statements of Cash Flows

	Six Months Ended June 30, 2014
	Restricted Group		Unrestricted Subsidiaries		Consolidated Group
Cash flows from (used in) operating activities
Net income (loss)	$	1,532	$	24,410	$	25,942
Adjustments to reconcile net income (loss) to cash flows
from operating activities
Unrealized loss (gain) on derivative instruments		-		(5,777)		(5,777)
Depreciation and amortization		21,373		18,265		39,638
Deferred income taxes		4,881		-		4,881
Stock compensation expense		331		-		331
Pension and other post-retirement expense, net of
funding		425		-		425
Other		583		921		1,504
Changes in working capital
Receivables		4,712		(7,527)		(2,815)
Inventories		(10,342)		15,675		5,333
Accounts payable and accrued expenses		12,286		1,894		14,180
Other(1)		(6,563)		3,889		(2,674)
Net cash from (used in) operating activities		29,218		51,750		80,968
Cash flows from (used in) investing activities
Purchase of property, plant and equipment		(8,531)		(4,186)		(12,717)
Purchase of intangible assets		(1,203)		(1,252)		(2,455)
Proceeds on sale of property, plant and equipment		215		58		273
Net cash from (used in) investing activities		(9,519)		(5,380)		(14,899)
Cash flows from (used in) financing activities
Repayment of debt		(744)		(29,797)		(30,541)
Proceeds from issuance of shares		53,942		-		53,942
Repayment of capital lease obligations		(474)		(718)		(1,192)
Proceeds from sale and lease-back transactions		1,047		-		1,047
Proceeds from government grants		832		3,226		4,058
Net cash from (used in) financing activities		54,603		(27,289)		27,314
Effect of exchange rate changes on cash and cash
equivalents		206		(294)		(88)
Net increase (decrease) in cash and cash equivalents		74,508		18,787		93,295
Cash and cash equivalents, beginning of year		82,910		64,818		147,728
Cash and cash equivalents, end of year	$	157,418	$	83,605	$	241,023

___________________________

(1) Includes intercompany working capital related transactions.

Note 14. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Statements of Cash Flows

	Six Months Ended June 30, 2013
	Restricted		Unrestricted		Consolidated
	Group		Subsidiaries		Group
Cash flows from (used in) operating activities
Net income (loss)	$	(17,028)	$	5,177	$	(11,851)
Adjustments to reconcile net income (loss) to cash flows
from operating activities
Unrealized loss (gain) on derivative instruments		662		(14,292)		(13,630)
Depreciation and amortization		21,776		17,111		38,887
Deferred income taxes		1,870		4,134		6,004
Stock compensation expense		752		-		752
Pension and other post-retirement expense, net of
funding		437		-		437
Other		923		1,905		2,828
Changes in working capital
Receivables		13,824		1,998		15,822
Inventories		10,995		(627)		10,368
Accounts payable and accrued expenses		11,331		527		11,858
Other(1)		(11,349)		2,824		(8,525)
Net cash from (used in) operating activities		34,193		18,757		52,950
Cash flows from (used in) investing activities
Purchase of property, plant and equipment		(6,893)		(22,501)		(29,394)
Proceeds on sale of property, plant and equipment		17		3		20
Net cash from (used in) investing activities		(6,876)		(22,498)		(29,374)
Cash flows from (used in) financing activities
Repayment of debt		(736)		(25,684)		(26,420)
Proceeds from borrowings of debt		-		22,223		22,223
Repayment of capital lease obligations		(320)		(1,126)		(1,446)
Proceeds from (repayment of) credit facilities, net		17,060		-		17,060
Proceeds from government grants		-		5,413		5,413
Net cash from (used in) financing activities		16,004		826		16,830
Effect of exchange rate changes on cash and cash
equivalents		(1,352)		(1,596)		(2,948)
Net increase (decrease) in cash and cash equivalents		41,969		(4,511)		37,458
Cash and cash equivalents, beginning of period		48,407		89,032		137,439
Cash and cash equivalents, end of period	$	90,376	$	84,521	$	174,897

___________________________

(1) Includes intercompany working capital related transactions.

XML

Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2014

Performance Share Units [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Summary Of Share Based Compensation Arrangement Activity

	Number of PSUs
Outstanding at January 1, 2013	786,129
Granted	40,499
Forfeited	(35,196)
Outstanding at December 31, 2013	791,432
Granted	657,554
Vested and issued	(331,584)
Expired	(139,240)
Outstanding at June 30, 2014	978,162

Restricted Stock [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Summary Of Share Based Compensation Arrangement Activity

	Number of
	Restricted Shares
Outstanding at January 1, 2013	196,500
Granted	38,000
Vested	(76,500)
Outstanding at December 31, 2013	158,000
Granted	38,000
Vested	(78,000)
Outstanding at June 30, 2014	118,000

XML

Financial Instruments (Outstanding Financial Instruments And Estimated Fair Values) (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Marketable securities, Fair Value	$ 221	$ 217
Interest rate derivative contract	40,447	46,517
Debt, Fair Value	929,204	980,982
Fair value measurements - Liabilities	969,651	1,027,499
Fair Value, Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Marketable securities, Fair Value	221
Interest rate derivative contract	0	0
Debt, Fair Value	0	0
Fair value measurements - Liabilities	0	0
Fair Value, Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Marketable securities, Fair Value	0
Interest rate derivative contract	40,447	46,517
Debt, Fair Value	358,812	367,405
Fair value measurements - Liabilities	399,259	413,922
Fair Value, Significant unobservable inputs (Level 3) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Marketable securities, Fair Value	0
Interest rate derivative contract	0	0
Debt, Fair Value	570,392	613,577
Fair value measurements - Liabilities	$ 570,392	$ 613,577

XML

Stock-Based Compensation (Summary Of Share Activity - Restricted Shares) (Details) (Restricted Stock [Member])	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Outstanding - Beginning	158,000	196,500
Granted	38,000	38,000
Vested	(78,000)	(76,500)
Outstanding - Ending	118,000	158,000

XML

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) [Abstract]
Foreign currency translation adjustment, tax effect	$ 45	$ (378)	$ 48	$ 380
Change in unrecognized losses and prior service costs related to defined benefit plans, tax effect	0	0	0	0
Change in unrealized gains (losses) on marketable securities, tax effect	$ 0	$ 0	$ 0	$ 0

XML

Debt

6 Months Ended

Jun. 30, 2014

Debt [Abstract]

Debt

Note 3. Debt

Debt consists of the following:

	June 30,		December 31,
	2014		2013
Note payable to bank, included in a total loan credit facility of €828.0
million to finance the construction related to the Stendal mill (a)	$	537,890	$	568,945
Senior notes, interest at 9.50% accrued and payable semi-annually,
unsecured (b)		336,124		336,382
Credit agreement with a lender with respect to a revolving credit facility
of C$40.0 million (c)		-		-
Term bank facility for a project at the Stendal mill of €17.0 million (d)		18,812		21,179
Loans payable to the noncontrolling shareholder of the Stendal mill (e)		51,799		52,117
Investment loan agreement with a lender with respect to a project at
the Rosenthal mill of €4.4 million (f)		-		749
Credit agreement with a bank with respect to a revolving credit facility
of €25.0 million (g)		-		-
Credit agreement with a bank with respect to a revolving credit facility
of €5.0 million (h)		-		-
		944,625		979,372
Less:  current portion		(62,182)		(60,355)
Debt, less current portion	$	882,443	$	919,017

Note 3. Debt (continued)

As of June 30, 2014, the maturities of debt are as follows:

Matures	Amount
2014	$	29,610
2015		65,143
2016		65,143
2017		784,729
2018		-
Thereafter		-
	$	944,625

Certain of the Company's debt instruments were issued under an indenture which, among other things, restricts its ability and the ability of its restricted subsidiaries to make certain payments. These limitations are subject to specific exceptions. As at June 30, 2014, the Company was in compliance with the terms of the indenture. 

(a)Note payable to bank, included in a total loan facility of €828.0 million to finance the construction related to the Stendal mill ("Stendal Loan Facility"), interest at rates varying from Euribor plus 0.90% to Euribor plus 1.80%(rates on amounts of borrowing at June 30, 2014 range from 1.47% to2.22%), principal due in required installments beginning September 30, 2006 until September 30, 2017, collateralized by the gross assets of the Stendal mill, with 48% and 32% guaranteed by the Federal Republic of Germany and the State of Saxony-Anhalt, respectively, of up to €332.9 million of the outstanding principal, subject to a debt service reserve account ("DSRA") for purposes of paying amounts due in the following 12 months under the terms of the Stendal Loan Facility; payment of dividends is only permitted if certain cash flow requirements are met. See Note 10 – Derivative Transactions for a discussion of the Company's variable-to-fixed interest rate swap that was put in place to effectively fix the interest rate on the Stendal Loan Facility.

On March 13, 2009, the Company finalized an agreement with its lenders to amend its Stendal Loan Facility. The amendment deferred approximately €164.0 million of scheduled principal payments until the maturity date, September 30, 2017.  The amendment also provided for a 100% cash sweep, referred to as the "Cash Sweep", of any cash, in excess of a €15.0 million working capital reserve and the Guarantee Amount, as discussed in Note 12(a) – Commitments and Contingencies, and other amounts as contemplated in the amendment, held by Stendal which will be used first to fund the DSRA to a level sufficient to service the amounts due and payable under the Stendal Loan Facility during the then following 12 months, which means the DSRA is "Fully Funded", and second to prepay the deferred principal amounts. As at June 30, 2014, the DSRA balance was €16.0 million and was not Fully Funded.

On March 14, 2014, the Stendal mill received a waiver under the Stendal Loan Facility and Project Blue Mill facility (Note 3(d)) which: postpones the testing date of its senior debt cover ratio to September 30, 2014 from June 30, 2014 and delivery of its report thereon by November 15, 2014; extends the date by which a portion of the net proceeds of the common share offering, as discussed in Note 5 – Share Capital, are contributed to the Stendal mill, to November 17, 2014; and confirms that any such contributed capital shall qualify as an “equity cure” in the event that the Stendal mill is not in compliance with its financial ratio covenants.

In July 2014, the Stendal mill received an amendment to the Stendal Loan Facility and Project Blue Mill facility, as discussed in Note 13 – Subsequent Event.

Note 3. Debt (continued)

(b)On November 17, 2010, the Company completed a private offering of $300,000 in aggregate principal amount of senior notes due 2017 ("Senior Notes"). The Senior Notes were issued at a price of 100% of their principal amount. The Senior Notes will mature on December 1, 2017 and bear interest at 9.50% which is accrued and payable semi-annually.

In July 2013, the Company issued $50,000 in aggregate principal amount of its Senior Notes. The additional notes were priced at 104.50% plus accrued interest from June 1, 2013. The net proceeds from the offering were approximately $50,500, after deducting the underwriter's discounts, offering expenses and accrued interest.

The Senior Notes are general unsecured senior obligations of the Company. The Senior Notes rank equal in right of payment with all existing and future senior unsecured indebtedness of the Company and senior in right of payment to any current or future subordinated indebtedness of the Company. The Senior Notes are effectively junior in right of payment to all borrowings of the Company's restricted subsidiaries, including borrowings under the Company's credit agreements which are secured by certain assets of its restricted subsidiaries.

The Company may redeem all or a part of the Senior Notes, upon not less than 30 days' or more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) equal to 104.75% for the twelve month period beginning on December 1, 2014, 102.38% for the twelve month period beginning on December 1, 2015, and 100.00% beginning on December 1, 2016 and at any time thereafter, plus accrued and unpaid interest.

(c)Credit agreement with respect to a revolving credit facility of up to C$40.0 million for the Celgar mill. The credit facility matures May 2016. Borrowings under the credit facility are collateralized by the mill's inventory and receivables and are restricted by a borrowing base calculated on the mill's inventory and receivables. Canadian dollar denominated amounts bear interest at bankers acceptance plus 1.75% or Canadian prime plus 0.25%. U.S. dollar denominated amounts bear interest at LIBOR plus 1.75% or U.S. base plus 0.25%. As at June 30, 2014, C$1.7 million of this facility was supporting letters of credit and approximately C$38.3 million was available.

(d)A €17.0 million amortizing term facility to partially finance a project, referred to as "Project Blue Mill". The facility, 80% of which is guaranteed by the State of Saxony-Anhalt, bears interest at a rate of Euribor plus 3.5% per annum. The interest period for the facility, at the choice of the Company, will be of one, three or six months duration and interest is paid on the last day of the interest period selected. The facility, together with accrued interest, is scheduled to mature in September 2017. The facility will be repaid semi-annually, commencing September 30, 2013, is collateralized by the gross assets of the Stendal mill, and will be non-recourse to Mercer Inc. As at June 30, 2014, the facility was accruing interest at a rate of 3.92%.  

As part of this term facility, the Company was required to open an investment account with the lender for the purpose of managing project costs and is required to deposit all funding associated with Project Blue Mill in this account. As at June 30, 2014, the balance in the investment account was $3,736.

(e)Loans of €26.8 million payable by the Stendal mill to its noncontrolling shareholder bear interest at a rate of 0.10% per annum and are due in 2017, provided that the Project Blue Mill facility (Note 3(d)) and the Stendal Loan Facility (Note 3(a)) have been fully repaid on such date. The loans are unsecured, subordinated to all liabilities of the Stendal mill, non-recourse to the Company and its restricted subsidiaries. One of the loans, which has a principal amount of €0.4 million, may be repaid prior to October 1, 2017 if the DSRA has been Fully Funded for the first time and this loan is subordinated to all liabilities of the Stendal mill only until such time as the DSRA is Fully Funded for the first time.

As at June 30, 2014 and December 31, 2013, accrued interest on these loans was €11.1 million.

Note 3. Debt (continued)

(f)A €4.4 million investment loan agreement with a lender relating to the wash press project at the Rosenthal mill that matured in February 2014.  

(g)A €25.0 million working capital facility at the Rosenthal mill that matures in October 2016. Borrowings under the facility are collateralized by the mill's inventory and receivables and bear interest at Euribor plus 3.50%. As at June 30, 2014, approximately €0.4 million of this facility was supporting bank guarantees leaving approximately €24.6 million available.

(h) A €5.0 million facility at the Rosenthal mill that matures in December 2015. Borrowings under this facility bear interest at the rate of the three-month Euribor plus 3.50% and are secured by certain land at the Rosenthal mill. As at June 30, 2014 approximately €1.2 million of this facility was supporting bank guarantees leaving approximately €3.8 million available.

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Net Income (Loss) Per Share Attributable To Common Shareholders (Tables)

6 Months Ended

Jun. 30, 2014

Net Income (Loss) Per Share Attributable To Common Shareholders [Abstract]

Schedule Of Net Income (Loss) Per Share Attributable To Common Shareholders

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Net income (loss) attributable to common shareholders:
Basic and diluted	$	571	$	(13,015)	$	21,612	$	(13,576)
Net income (loss) per share attributable to common shareholders:
Basic and diluted	$	0.01	$	(0.23)	$	0.36	$	(0.24)
Weighted average number of common shares outstanding:
Basic (1)		63,915,377		55,670,034		59,835,098		55,651,610
Effect of dilutive instruments:
PSUs		353,791		-		448,947		-
Restricted shares		64,588		-		67,391		-
Stock options		8,975		-		10,433		-
Diluted		64,342,731		55,670,034		60,361,869		55,651,610

________

(1) For the three and six month periods ended June 30, 2014, the basic weighted average number of shares excludes 118,000 restricted shares which have been issued, but have not vested as at June 30, 2014 (2013 – 158,000 restricted shares).

Schedule of Antidilutive Instruments Excluded from Computation of Net Income (Loss) Per Share

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
PSUs		-		786,129		-		786,129
Restricted shares		-		158,000		-		158,000
Stock options		-		175,000		-		175,000

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Share Capital (Details) (USD $) In Thousands, except Share data, unless otherwise specified	1 Months Ended	3 Months Ended			6 Months Ended
	Apr. 30, 2014	Sep. 30, 2014	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Share Capital [Line Items]
Common shares, authorized			200,000,000		200,000,000
Common shares, par value			$ 1		$ 1
Common shares, issued			64,273,288		64,273,288		55,853,704
Common shares, outstanding			64,273,288		64,273,288		55,853,704
Common shares issued during the period	8,050,000
Shares Issued, Price Per Share	$ 7.15
Proceeds from Issuance of Common Stock	$ 53,600		$ 53,942	$ 0	$ 53,942	$ 0
Planned Investment In Related Entity		$ 20,000
Restricted Stock [Member]
Share Capital [Line Items]
Common shares issued during the period					38,000
Performance Shares [Member]
Share Capital [Line Items]
Common shares issued during the period					331,584

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Subsequent Events

6 Months Ended

Jun. 30, 2014

Subsequent Event [Abstract]

Subsequent Events [Text Block]

Note 13.Subsequent Event

In July 2014, the Stendal mill received lenders' approval to amend its two term credit facilities to provide greater financial flexibility to Stendal. Such amendments include, among other things, loosening the financial covenant ratios Stendal must meet and reducing the scheduled principal repayments under the Stendal Loan Facility by 50% while retaining its current Cash Sweep. The amendments are subject to customary closing conditions, including, among others, execution and delivery of definitive agreements.