-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WaJAx6CfkLl4OfuAFLid+3ZO0c4I7d99UG1vdUINGV8jG4IqASQZ+mC97UOYO7/L e/rTHpu20ZNDgQTzk8EEEA== 0000950123-09-054239.txt : 20091028 0000950123-09-054239.hdr.sgml : 20091028 20091028170726 ACCESSION NUMBER: 0000950123-09-054239 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20091028 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20091028 DATE AS OF CHANGE: 20091028 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERCER INTERNATIONAL INC. CENTRAL INDEX KEY: 0001333274 STANDARD INDUSTRIAL CLASSIFICATION: PULP MILLS [2611] IRS NUMBER: 470956945 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-51826 FILM NUMBER: 091142354 BUSINESS ADDRESS: STREET 1: 14900 INTERURBAN AVENUE SOUTH STREET 2: SUITE 282 CITY: SEATTLE STATE: WA ZIP: 98168 BUSINESS PHONE: (206) 674-4639 MAIL ADDRESS: STREET 1: 14900 INTERURBAN AVENUE SOUTH STREET 2: SUITE 282 CITY: SEATTLE STATE: WA ZIP: 98168 FORMER COMPANY: FORMER CONFORMED NAME: MERCER INTERNATIONAL REGCO INC. DATE OF NAME CHANGE: 20050715 8-K 1 o57636e8vk.htm FORM 8-K e8vk
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 28, 2009
MERCER INTERNATIONAL INC.
(Exact name of Registrant as specified in its charter)
Washington
(State or other jurisdiction of incorporation or organization)
     
000-51826   47-0956945
(Commission File Number)   (I.R.S. Employer Identification No.)
Suite 2840, 650 West Georgia Street, Vancouver, British Columbia, Canada V6B 4N8
(Address of Office)
(604) 684-1099
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 

 

ITEM 2.02   RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
The information contained in this Current Report shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into a filing under the Securities Act of 1933, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
On October 28, 2009 Mercer International Inc. (the “Company”) announced by press release the Company’s results for its third quarter ended September 30, 2009. A copy of the Company’s press release is attached hereto as Exhibit 99.1.
ITEM 9.01   FINANCIAL STATEMENTS AND EXHIBITS.
         
Exhibit No.   Description
     
  99.1    
Press Release dated October 28, 2009

 

 

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 hereunto duly authorized.
         
 
   MERCER INTERNATIONAL INC.

 		  
     /s/ David M. Gandossi  
    David M. Gandossi   
    Chief Financial Officer   
 
Date:  October  28, 2009

 

 

MERCER INTERNATIONAL INC.
FORM 8-K
EXHIBIT INDEX
         
Exhibit Number   Description
     
  99.1    
Press release dated October 28, 2009

 

EX-99.1 2 o57636exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
(MERCER LOGO)
For Immediate Release
MERCER INTERNATIONAL INC. REPORTS IMPROVED PULP PRICES LEADING TO
STRONGER 2009 THIRD QUARTER RESULTS
     NEW YORK, NY, October 28, 2009 — Mercer International Inc. (Nasdaq: MERC, TSX: MRI.U) today reported results for the third quarter ended September 30, 2009. Operating EBITDA increased by over 200% in the current quarter to €13.0 million (U.S.$18.6 million) from €3.9 million (U.S.$5.3 million) in the prior quarter and compares to €24.0 million (U.S.$36.0 million) in the third quarter of 2008. Operating EBITDA is defined on page 4 of this press release and reconciled to net income (loss) attributable to common shareholders on page 7 of the financial tables in this press release.
Summary Financial Highlights
                         
    Q3     Q2     Q3  
    2009     2009     2008  
    (in millions of Euros, except where otherwise stated)  
Pulp revenues
   € 145.9     € 147.5     € 178.6  
Energy revenues
     10.4       11.4       6.2  
Operating income (loss)
     (0.5 )     (9.7 )     9.9  
Operating EBITDA
     13.0       3.9       24.0  
Unrealized gain (loss) on derivative instruments
     (3.3 )     7.5       (8.2 )
Foreign exchange gain (loss) on debt
     3.8       5.2       (9.6 )
Net income (loss) attributable to common shareholders
     (14.1 )     (11.5 )     (17.2 )
Net income (loss) per share attributable to common shareholders:
                        
Basic
   € (0.39 )   € (0.32 )   € (0.47 )
Diluted
   € (0.39 )   € (0.32 )   € (0.47 )
Summary Operating Highlights
                         
    Q3     Q2     Q3  
    2009     2009     2008  
Pulp Production (‘000 ADMTs)
     345.8       349.1       368.4  
Scheduled Production Downtime (‘000 ADMTs)
     35.4       0.6       9.0  
Pulp Sales (‘000 ADMTs)
     361.6       395.4       363.8  
NBSK pulp list price in Europe (US$/ADMT)
      693       602       878  
NBSK pulp list price in Europe (€/ADMT)
      485       442       585  
Average pulp sales realizations (€/ADMT)(1)
      397       367       484  
Energy Production (‘000 MWh)
     354.4       376.0       377.3  
Energy Sales (‘000 MWh)
     121.8       128.5       119.5  
Average Spot Currency Exchange Rates(2):
                        
€ / $
     0.6990       0.7338       0.6658  
C$ / $
     1.0974       1.1671       1.0416  
C$ / €
     1.5694       1.5890       1.5620  
 
(1)   List price, less discounts and commissions.
 
(2)   Average Bank of Canada noon spot rates over the reporting period.

 

 

Page 2
President’s Comments
     Mr. Jimmy S.H. Lee, President and Chairman, stated: “In the third quarter, pulp markets continued to strengthen. Strong demand from China and historically low global inventories for bleached softwood kraft pulp, which are reported to have currently fallen to approximately 22 days of supply, helped support upward pricing momentum. During the current quarter, three price increases raised European list prices by a total of U.S.$100 per ADMT to U.S.$730 per ADMT by quarter end. Subsequently, in October, producers implemented a further U.S.$30 per ADMT price increase and, effective November 1, 2009, have announced a further U.S.$40 per ADMT price increase. Such price increases were partially offset by the continued weakening of the U.S. dollar versus the Euro and Canadian dollar in the period. While prices are substantially improved from the prior quarter, they are still well below prices in the same period of last year.”
     Mr. Lee continued: “Our results were impacted by 30 days of scheduled production downtime at our German mills, including 21 days at our Rosenthal mill in September. Operationally the quarter was a positive one as we benefitted from lower production costs due to improved productivity, lower fiber costs and cost-saving initiatives at all of our mills.”
     Mr. Lee added: “We are also pleased with the approximately Cdn.$57.7 million in credits we have been allocated under the Canadian government’s Pulp and Paper Green Transformation Program. We intend to complete construction of the Celgar green energy project with funding from such credits.”
     Mr. Lee concluded: “We are beginning to see signs of a global economic revival including gains in key Asian economies and improved outlooks in developed economies. In the pulp markets, pricing improvements have been driven by strong demand from China and production curtailments taken by many producers. We currently expect recent pulp price improvements combined with only seven days of scheduled downtime to result in improved operating results in the fourth quarter. Possible headwinds to a robust recovery in our industry include the potential of recently shut capacity coming back online more quickly than anticipated and a second wave of government subsidies for U.S. producers. In general, we are optimistic on the short-term outlook for pulp prices and believe that the sustainability of restarts and other high cost producers is possible only in a sustained higher pulp price environment.”
Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008
     Pulp revenues for the three months ended September 30, 2009 decreased by approximately 18.3% to €145.9 million from €178.6 million in the comparative period of 2008, primarily due to lower pulp list prices. Revenues from the sale of excess energy increased by approximately 67.7% in the third quarter to €10.4 million from €6.2 million in the same quarter last year as a result of the higher tariffs in effect under Germany’s Renewable Energy Resources Act.

 

 

Page 3
     Pulp production decreased to 345,833 ADMTs in the current quarter from 368,378 ADMTs in the same quarter of 2008 primarily as a result of 30 days of scheduled maintenance shutdowns at our German mills. In the comparative quarter of 2008, we had only ten days of scheduled maintenance downtime.
     Pulp sales volume decreased slightly to 361,627 ADMTs in the current quarter from 363,775 ADMTs in the comparative period of 2008. Average pulp sales realizations decreased by approximately 18.0% to €397 per ADMT in the third quarter of 2009, compared to €484 per ADMT in the same period last year, primarily due to lower pulp prices.
     Costs and expenses in the third quarter of 2009 decreased to €156.7 million from €175.0 million in the comparative period of 2008 primarily due to lower pulp production and operating costs.
     Overall, our fiber costs decreased by approximately 17.9% in the third quarter of 2009 from the same period in 2008. Fiber costs at our German mills were lower as demand from the European board industry remains limited. At our Celgar mill, fiber costs continue to benefit from improved woodroom performance and decreased reliance on fiber sourced from third party field chippers. As we move into the final quarter of the year, we expect some upward pressure in pricing for our German mills due to restocking by pulp and paper producers and seasonal demand for firewood.
     During the third quarter of 2009, our pulp inventories decreased by approximately 22.2% to €20.3 million from €26.1 million at the end of the prior quarter, primarily due to lower production as a result of the scheduled maintenance shutdowns at our German mills. Our raw material inventories increased to €25.2 million in the current quarter from €21.0 million at the end of the second quarter of 2009 as a result of lower production and commencement of our regular seasonal build-up.
     For the third quarter of 2009, we recorded an operating loss of €0.5 million compared to operating income of €9.9 million in the comparative quarter of 2008, primarily due to lower price realizations.
     Interest expense in the third quarter of 2009 decreased marginally to €16.1 million from €16.4 million in the comparative quarter of 2008.

 

 

Page 4
     Our Stendal mill recorded an unrealized loss of €3.3 million on its interest rate derivatives in the current quarter, compared to an unrealized loss of €8.2 million in the same period last year. In the three months ended September 30, 2009, we recorded a foreign exchange gain on our debt of €3.8 million compared to a loss of €9.6 million in the same three months of 2008.
     In the third quarter of 2009, the noncontrolling shareholder’s interest in the Stendal mill’s loss was €1.9 million, compared to €3.3 million in the same quarter last year.
     In the third quarter of 2009, we reported Operating EBITDA of €13.0 million compared to Operating EBITDA of €3.9 million in the prior quarter and Operating EBITDA of €24.0 million in the third quarter of 2008. Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and non-recurring capital asset impairment charges. Management uses Operating EBITDA as a benchmark measurement of its own operating results, and as a benchmark relative to its competitors. Management considers it to be a meaningful supplement to operating income as a performance measure primarily because depreciation expense and non-recurring capital asset impairment charges are not an actual cash cost, and depreciation expense varies widely from company to company in a manner that management considers largely independent of the underlying cost efficiency of their operating facilities. In addition, we believe Operating EBITDA is commonly used by securities analysts, investors and other interested parties to evaluate our financial performance.
     Operating EBITDA does not reflect the impact of a number of items that affect our net income, including financing costs and the effect of derivative instruments. Operating EBITDA is not a measure of financial performance under GAAP, and should not be considered as an alternative to net income attributable to common shareholders or income from operations as a measure of performance, nor as an alternative to net cash from operating activities as a measure of liquidity. Operating EBITDA has significant limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. For a reconciliation of Operating EBITDA to net income (loss) attributable to common shareholders, see page 7 of the financial tables included in this press release.
     We reported a net loss attributable to common shareholders of €14.1 million, or €0.39 per basic and diluted share, in the current quarter and a net loss attributable to common shareholders of €17.2 million, or €0.47 per basic and diluted share, in the comparative quarter of 2008. As at September 30, 2009 and 2008, respectively, we had 36,443,487 and 36,422,487 common shares outstanding.

 

 

Page 5
Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008
     Pulp revenues for the nine months ended September 30, 2009 decreased to €422.4 million from €528.3 million in the comparative period of 2008, primarily due to lower pulp list prices. Revenues from the sale of excess energy increased to €32.3 million from €20.0 million in the same period last year as a result of the higher tariffs in effect under Germany’s Renewable Energy Resources Act.
     In the first nine months of 2009 we reported Operating EBITDA of €17.9 million compared to Operating EBITDA of €76.6 million in the nine months ended September 30, 2008. 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 third quarter of 2009 for additional information relating to Operating EBITDA and page 7 of the financial tables for a reconciliation to net income (loss) attributable to common shareholders.
     We reported a net loss attributable to common shareholders for the first nine months of 2009 of €64.9 million, or €1.79 per basic and diluted share. In the first nine months of 2008, we reported a net loss attributable to common shareholders of €13.4 million, or €0.37 per basic and diluted share.
Liquidity and Capital Resources
     The following table is a summary of selected financial information for the periods indicated:
                 
    As at     As at  
    September 30,     December 31,  
    2009     2008  
    (in thousands)  
Financial Position
                
Cash and cash equivalents
   € 51,275     € 42,452  
Cash, restricted
     —       13,000  
Working capital
     70,163       154,374  
Property, plant and equipment
     874,830       881,704  
Total assets
     1,085,649       1,151,600  
Long-term liabilities
     876,916       914,970  
Total equity
     80,417       132,103  
     As at September 30, 2009, our cash and cash equivalents were €51.3 million and working capital was €70.2 million. The decrease in working capital includes €14.0 million of higher current indebtedness resulting from the reclassification of the revolving credit facility for our Celgar mill, which matures in May 2010, to a current liability. The lower working capital also reflects improvements in fiber supply chain management and a rebalancing of finished goods inventories from the very high levels we experienced at the end of 2008 amid plummeting world pulp markets. We currently expect to complete an extension of the maturity of the revolving credit facility for Celgar in the fourth quarter of 2009.

 

 

Page 6
Restricted Group
     The following table is a summary of selected financial information for the Restricted Group for the periods indicated:
                 
    As at     As at  
    September 30,     December 31,  
    2009     2008  
    (in thousands)  
Restricted Group Financial Position
                
Cash and cash equivalents
   € 25,294     € 26,176  
Working capital
     38,346       101,490  
Property, plant and equipment
     362,748       351,009  
Total assets
     552,960       564,374  
Long-term liabilities
     279,648       309,235  
Total equity
     199,210       210,179  
     As at September 30, 2009, our Restricted Group had cash and cash equivalents of €25.3 million and working capital of €38.3 million. The decrease in working capital includes €14.0 million of higher current indebtedness resulting from the reclassification of the Celgar working capital facility to a current liability. The lower working capital amount also reflects improvements in fiber supply chain management and a rebalancing of finished goods inventories from the very high levels the Restricted Group experienced at the end of 2008.
Earnings Release Call
     In conjunction with this release, Mercer International Inc. will host a conference call, which will be simultaneously broadcast live over the Internet. Management will host the call, which is scheduled for Thursday, October 29, 2009 at 10:00 AM (Eastern Daylight Time).
Listeners can access the conference call live and archived through November 29, 2009, over the Internet at http://investor.shareholder.com/media/eventdetail.cfm?mediaid=39172&c=MERC&mediakey=248B7FC2C4F13124 2A1E99AB95341C57&e=0 or through a link on the Company’s News/Financial page at http://www.mercerint.com/s/NewsReleases.asp. Please allow 15 minutes prior to the call to visit the site and download and install any necessary audio software. A replay of this call will be available approximately two hours after the live call ends until November 5, 2009 at 11:59 PM (Eastern Daylight Time). The replay number is (800) 642-1687 for domestic callers or (706) 645-9291 for international callers, and the passcode is 36160303.
     Mercer International Inc. is a global pulp manufacturing company. To obtain further information on the company, please visit its web site at http://www.mercerint.com.

 

 

Page 7
     The preceding includes forward looking statements which involve known and unknown risks and uncertainties which may cause our actual results in future periods to differ materially from forecasted results. Among those factors which could cause actual results to differ materially are the following: the continuing effects of the ongoing economic and financial turmoil, the highly cyclical nature of our business, raw material costs, our level of indebtedness, competition, foreign exchange and interest rate fluctuations, our use of derivatives, expenditures for capital projects, environmental regulation and compliance, disruptions to our production, market conditions and other risk factors listed from time to time in our SEC reports.
 
     
APPROVED BY:
   FD
 
   Investors: Eric Boyriven, Alexandra Tramont
Jimmy S.H. Lee
   Media: Jordana Miller
Chairman & President
   (212) 850-5600
(604) 684-1099
    
 
    
David M. Gandossi
    
Executive Vice-President &
    
Chief Financial Officer
    
(604) 684-1099
    
-FINANCIAL TABLES FOLLOW-

 

 

MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands of Euros)
                 
    September 30,     December 31,  
    2009     2008  
ASSETS
                
Current assets
                
Cash and cash equivalents
   € 51,275     € 42,452  
Cash, restricted
     —       13,000  
Receivables
     73,133       100,158  
Inventories
     68,459       98,457  
Prepaid expenses and other
     5,612       4,834  
 
            
Total current assets
     198,479       258,901  
 
            
Long-term assets
                
Property, plant and equipment
     874,830       881,704  
Investments
     133       419  
Deferred note issuance and other costs
     7,659       4,011  
Deferred income tax
     2,232       3,036  
Note receivable, less current portion
     2,316       3,529  
 
            
 
     887,170       892,699  
 
            
Total assets
   € 1,085,649     € 1,151,600  
 
            
 
                
LIABILITIES
                
Current liabilities
                
Accounts payable and accrued expenses
   € 99,292     € 87,517  
Pension and other post-retirement benefit obligations
     554       510  
Debt, current portion
     28,470       16,500  
 
            
Total current liabilities
     128,316       104,527  
 
            
Long-term liabilities
                
Debt, less current portion
     795,303       837,918  
Unrealized interest rate derivative losses
     58,001       47,112  
Pension and other post-retirement benefit obligations
     14,245       12,846  
Capital leases and other
     9,367       11,267  
Deferred income tax
     —       5,827  
 
            
 
     876,916       914,970  
 
            
Total liabilities
     1,005,232       1,019,497  
 
            
 
                
EQUITY
                
Shareholders’ equity
                
Share capital
     202,844       202,844  
Paid-in capital
     (5,477 )     299  
Retained earnings (deficit)
     (99,984 )     (35,046 )
Accumulated other comprehensive income (loss)
     22,190       (1,872 )
 
            
Total shareholders’ equity
     119,573       166,225  
 
            
 
                
Noncontrolling interest (deficit)
     (39,156 )     (34,122 )
 
            
Total equity
     80,417       132,103  
 
            
Total liabilities and equity
   € 1,085,649     € 1,151,600  
 
            

(1)

 

MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands of Euros, except per share data)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009     2008     2009     2008  
Revenues
                                
Pulp
   € 145,857     € 178,603     € 422,412     € 528,289  
Energy
     10,374       6,225       32,275       20,006  
 
                        
 
     156,231       184,828       454,687       548,295  
Costs and expenses
                                
Operating costs
     136,566       150,987       417,596       447,111  
Operating depreciation and amortization
     13,385       14,033       40,325       41,668  
 
                        
 
     6,280       19,808       (3,234 )     59,516  
Selling, general and administrative expenses
     6,620       9,954       19,797       24,803  
Purchase (sale) of emission allowances
     153       —       (389 )     —  
 
                        
Operating income (loss)
     (493 )     9,854       (22,642 )     34,713  
 
                        
 
                                
Other income (expense)
                                
Interest expense
     (16,085 )     (16,424 )     (48,953 )     (49,057 )
Investment income (loss)
     20       (2,031 )     (3,044 )     (300 )
Foreign exchange gain (loss) on debt
     3,779       (9,560 )     4,533       (3,291 )
Unrealized gain (loss) on derivative instruments
     (3,327 )     (8,215 )     (10,889 )     4,515  
 
                        
Total other income (expense)
     (15,613 )     (36,230 )     (58,353 )     (48,133 )
 
                        
Income (loss) before income taxes
     (16,106 )     (26,376 )     (80,995 )     (13,420 )
Income tax benefit (provision) — current
     (13 )     (231 )     (127 )     (68 )
— deferred
     70       6,144       4,989       (2,982 )
 
                        
Net income (loss)
     (16,049 )     (20,463 )     (76,133 )     (16,470 )
Less: net loss (income) attributable to noncontrolling interest
     1,937       3,290       11,195       3,037  
 
                        
Net income (loss) attributable to common shareholders
     (14,112 )     (17,173 )     (64,938 )     (13,433 )
 
                                
Retained earnings (deficit), beginning of period
     (85,872 )     41,159       (35,046 )     37,419  
 
                        
Retained earnings (deficit), end of period
   € (99,984 )   € 23,986     € (99,984 )   € 23,986  
 
                        
 
                                
Net income (loss) per share attributable to common shareholders:
                                
Basic and diluted
   € (0.39 )   € (0.47 )   € (1.79 )   € (0.37 )
 
                        

(2)

 

MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheet
(Unaudited)
(In thousands of Euros)
The terms of the indenture governing our 9.25% senior unsecured notes require that we provide the results of operations and financial condition of Mercer International Inc. and our restricted subsidiaries under the indenture, collectively referred to as the “Restricted Group”. As at and during the three and nine months ended September 30, 2009 and 2008, the Restricted Group was comprised of Mercer International Inc., our Rosenthal and Celgar mills and certain holding subsidiaries. The Restricted Group excludes the Stendal mill.
                                 
    September 30, 2009  
    Restricted     Unrestricted             Consolidated  
    Group     Subsidiaries     Eliminations     Group  
ASSETS
                                
Current assets
                                
Cash and cash equivalents
   € 25,294     € 25,981     € —     € 51,275  
Cash, restricted
     —       —       —       —  
Receivables
     32,382       40,751       —       73,133  
Inventories
     51,395       17,064       —       68,459  
Prepaid expenses and other
     3,377       2,235       —       5,612  
 
                        
Total current assets
     112,448       86,031       —       198,479  
 
                                
Property, plant and equipment
     362,748       512,082       —       874,830  
Other
     2,840       4,952       —       7,792  
Deferred income tax
     2,232       —       —       2,232  
Due from unrestricted group
     70,376       —       (70,376 )     —  
Note receivable, less current portion
     2,316       —       —       2,316  
 
                        
Total assets
   € 552,960     € 603,065     € (70,376 )   € 1,085,649  
 
                        
 
                                
LIABILITIES
                                
Current liabilities
                                
Accounts payable and accrued expenses
   € 58,995     € 40,297     € —     € 99,292  
Pension and other post-retirement benefit obligations
     554       —       —       554  
Debt, current portion
     14,553       13,917       —       28,470  
 
                        
Total current liabilities
     74,102       54,214       —       128,316  
 
                                
Debt, less current portion
     259,205       536,098       —       795,303  
Due to restricted group
     —       70,376       (70,376 )     —  
Unrealized interest rate derivative losses
     —       58,001       —       58,001  
Pension and other post-retirement benefit obligations
     14,245       —       —       14,245  
Capital leases and other
     6,198       3,169       —       9,367  
 
                        
Total liabilities
     353,750       721,858       (70,376 )     1,005,232  
 
                        
 
                                
EQUITY
                                
Total shareholders’ equity (deficit)
     199,210       (79,637 )     —       119,573  
Noncontrolling interest (deficit)
     —       (39,156 )     —       (39,156 )
 
                        
Total liabilities and equity
   € 552,960     € 603,065     € (70,376 )   € 1,085,649  
 
                        

(3)

 

MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheet
(Unaudited)
(In thousands of Euros)
                                 
    December 31, 2008  
    Restricted     Unrestricted             Consolidated  
    Group     Subsidiaries     Eliminations     Group  
ASSETS
                                
Current assets
                                
Cash and cash equivalents
   € 26,176     € 16,276     € —     € 42,452  
Cash, restricted
     —       13,000       —       13,000  
Receivables
     57,258       42,900       —       100,158  
Inventories
     59,801       38,656       —       98,457  
Prepaid expenses and other
     3,215       1,619       —       4,834  
 
                        
Total current assets
     146,450       112,451       —       258,901  
 
                                
Property, plant and equipment
     351,009       530,695       —       881,704  
Other
     4,425       5       —       4,430  
Deferred income tax
     3,036       —       —       3,036  
Due from unrestricted group
     55,925       —       (55,925 )     —  
Note receivable, less current portion
     3,529       —       —       3,529  
 
                        
Total assets
   € 564,374     € 643,151     € (55,925 )   € 1,151,600  
 
                        
 
                                
LIABILITIES
                                
Current liabilities
                                
Accounts payable and accrued expenses
   € 44,450     € 43,067     € —     € 87,517  
Pension and other post-retirement benefit obligations
     510       —       —       510  
Debt, current portion
     —       16,500       —       16,500  
 
                        
Total current liabilities
     44,960       59,567       —       104,527  
 
                                
Debt, less current portion
     289,222       548,696       —       837,918  
Due to restricted group
     —       55,925       (55,925 )     —  
Unrealized interest rate derivative losses
     —       47,112       —       47,112  
Pension and other post-retirement benefit obligations
     12,846       —       —       12,846  
Capital leases and other
     7,167       4,100       —       11,267  
Deferred income tax
     —       5,827       —       5,827  
 
                        
Total liabilities
     354,195       721,227       (55,925 )     1,019,497  
 
                        
 
                                
EQUITY
                                
Total shareholders’ equity (deficit)
     210,179       (43,954 )     —       166,225  
Noncontrolling interest (deficit)
     —       (34,122 )     —       (34,122 )
 
                        
Total liabilities and equity
   € 564,374     € 643,151     € (55,925 )   € 1,151,600  
 
                        

(4)

 

MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations
(Unaudited)
(In thousands of Euros)
                                 
    Three Months Ended September 30, 2009  
    Restricted     Unrestricted             Consolidated  
    Group     Subsidiaries     Eliminations     Group  
Revenues
                                
Pulp
   € 79,213     € 66,644     € —     € 145,857  
Energy
     3,201       7,173       —       10,374  
 
                        
 
     82,414       73,817       —       156,231  
 
                        
 
                                
Operating costs
     78,360       58,206       —       136,566  
Operating depreciation and amortization
     6,816       6,569       —       13,385  
Selling, general and administrative expenses and other
     3,824       2,949       —       6,773  
 
                        
 
     89,000       67,724       —       156,724  
 
                        
Operating income (loss)
     (6,586 )     6,093       —       (493 )
 
                        
 
                                
Other income (expense)
                                
Interest expense
     (6,546 )     (10,674 )     1,135       (16,085 )
Investment income (loss)
     1,112       43       (1,135 )     20  
Foreign exchange gain (loss) on debt
     3,779       —       —       3,779  
Unrealized gain (loss) on derivative instruments
     —       (3,327 )     —       (3,327 )
 
                        
Total other income (expense)
     (1,655 )     (13,958 )     —       (15,613 )
 
                        
Income (loss) before income taxes
     (8,241 )     (7,865 )     —       (16,106 )
Income tax benefit (provision)
     108       (51 )     —       57  
 
                        
Net income (loss)
     (8,133 )     (7,916 )     —       (16,049 )
Less: net (income) loss attributable to noncontrolling interest
     —       1,937       —       1,937  
 
                        
Net income (loss) attributable to common shareholders
   € (8,133 )   € (5,979 )   € —     € (14,112 )
 
                        
                                 
    Three Months Ended September 30, 2008  
    Restricted     Unrestricted             Consolidated  
    Group     Subsidiaries     Eliminations     Group  
Revenues
                                
Pulp
   € 102,604     € 75,999     € —     € 178,603  
Energy
     2,316       3,909       —       6,225  
 
                        
 
     104,920       79,908       —       184,828  
 
                        
 
                                
Operating costs
     91,034       59,953       —       150,987  
Operating depreciation and amortization
     7,333       6,700       —       14,033  
Selling, general and administrative expenses
     6,585       3,369       —       9,954  
 
                        
 
     104,952       70,022       —       174,974  
 
                        
Operating income (loss)
     (32 )     9,886       —       9,854  
 
                        
 
                                
Other income (expense)
                                
Interest expense
     (6,687 )     (10,719 )     982       (16,424 )
Investment income (loss)
     1,679       (2,728 )     (982 )     (2,031 )
Foreign exchange gain (loss) on debt
     (9,560 )     —       —       (9,560 )
Unrealized gain (loss) on derivative instruments
     —       (8,215 )     —       (8,215 )
 
                        
Total other income (expense)
     (14,568 )     (21,662 )     —       (36,230 )
 
                        
Income (loss) before income taxes
     (14,600 )     (11,776 )     —       (26,376 )
Income tax benefit (provision)
     5,173       740       —       5,913  
 
                        
Net income (loss)
     (9,427 )     (11,036 )     —       (20,463 )
Less: net (income) loss attributable to noncontrolling interest
     —       3,290       —       3,290  
 
                        
Net income (loss) attributable to common shareholders
   € (9,427 )   € (7,746 )   € —     € (17,173 )
 
                        

(5)

 

MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations
(Unaudited)
(In thousands of Euros)
                                 
    Nine Months Ended September 30, 2009  
    Restricted     Unrestricted             Consolidated  
    Group     Subsidiaries     Eliminations     Group  
Revenues
                                
Pulp
   € 230,672     € 191,740     € —     € 422,412  
Energy
     11,162       21,113       —       32,275  
 
                        
 
     241,834       212,853       —       454,687  
 
                        
 
                                
Operating costs
     230,489       187,107       —       417,596  
Operating depreciation and amortization
     20,408       19,917       —       40,325  
Selling, general and administrative expenses and other
     12,540       6,868       —       19,408  
 
                        
 
     263,437       213,892       —       477,329  
 
                        
Operating income (loss)
     (21,603 )     (1,039 )     —       (22,642 )
 
                        
 
                                
Other income (expense)
                                
Interest expense
     (20,775 )     (31,543 )     3,365       (48,953 )
Investment income (loss)
     3,262       (2,941 )     (3,365 )     (3,044 )
Foreign exchange gain (loss) on debt
     4,533       —       —       4,533  
Unrealized gain (loss) on derivative instruments
     —       (10,889 )     —       (10,889 )
 
                        
Total other income (expense)
     (12,980 )     (45,373 )     —       (58,353 )
 
                        
Income (loss) before income taxes
     (34,583 )     (46,412 )     —       (80,995 )
Income tax benefit (provision)
     (833 )     5,695       —       4,862  
 
                        
Net income (loss)
     (35,416 )     (40,717 )     —       (76,133 )
Less: net (income) loss attributable to noncontrolling interest
     —       11,195       —       11,195  
 
                        
Net income (loss) attributable to common shareholders
   € (35,416 )   € (29,522 )   € —     € (64,938 )
 
                        
                                 
    Nine Months Ended September 30, 2008  
    Restricted     Unrestricted             Consolidated  
    Group     Subsidiaries     Eliminations     Group  
Revenues
                                
Pulp
   € 301,400     € 226,889     € —     € 528,289  
Energy
     7,996       12,010       —       20,006  
 
                        
 
     309,396       238,899       —       548,295  
 
                        
 
                                
Operating costs
     262,308       184,803       —       447,111  
Operating depreciation and amortization
     21,528       20,140       —       41,668  
Selling, general and administrative expenses and other
     15,194       9,609       —       24,803  
 
                        
 
     299,030       214,552       —       513,582  
 
                        
Operating income (loss)
     10,366       24,347       —       34,713  
 
                        
 
                                
Other income (expense)
                                
Interest expense
     (19,769 )     (32,200 )     2,912       (49,057 )
Investment income (loss)
     4,972       (2,360 )     (2,912 )     (300 )
Foreign exchange gain (loss) on debt
     (3,181 )     (110 )     —       (3,291 )
Unrealized gain (loss) on derivative instruments
     —       4,515       —       4,515  
 
                        
Total other income (expense)
     (17,978 )     (30,155 )     —       (48,133 )
 
                        
Income (loss) before income taxes
     (7,612 )     (5,808 )     —       (13,420 )
Income tax benefit (provision)
     1,716       (4,766 )     —       (3,050 )
 
                        
Net income (loss)
     (5,896 )     (10,574 )     —       (16,470 )
Less: net (income) loss attributable to noncontrolling interest
     —       3,037       —       3,037  
 
                        
Net income (loss) attributable to common shareholders
   € (5,896 )   € (7,537 )   € —     € (13,433 )
 
                        

(6)

 

MERCER INTERNATIONAL INC.
COMPUTATION OF OPERATING EBITDA
(Unaudited)
(In thousands of Euros)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009     2008     2009     2008  
Net income (loss) attributable to common shareholders
   € (14,112 )   € (17,173 )   € (64,938 )   € (13,433 )
Net income (loss) attributable to noncontrolling interest
     (1,937 )     (3,290 )     (11,195 )     (3,037 )
Income taxes (benefits)
     (57 )     (5,913 )     (4,862 )     3,050  
Interest expense
     16,085       16,424       48,953       49,057  
Investment (income) loss
     (20 )     2,031       3,044       300  
Foreign exchange (gain) loss on debt
     (3,779 )     9,560       (4,533 )     3,291  
Unrealized (gain) loss on derivative instruments
     3,327       8,215       10,889       (4,515 )
 
                        
Operating income (loss)
     (493 )     9,854       (22,642 )     34,713  
Add: Depreciation and amortization.
     13,447       14,103       40,518       41,879  
 
                        
Operating EBITDA(1)
   € 12,954     € 23,957     € 17,876     € 76,592  
 
                        
 
(1)   Operating EBITDA does not reflect the impact of a number of items that affect our net income (loss) attributable to common shareholders, including financing costs and the effect of derivative instruments. Operating EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States, and should not be considered as an alternative to net income (loss) attributable to common shareholders or income (loss) from operations as a measure of performance, nor as an alternative to net cash from operating activities as a measure of liquidity. Operating EBITDA has significant limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP.
COMPUTATION OF RESTRICTED GROUP OPERATING EBITDA
(Unaudited)
(In thousands of Euros)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009     2008     2009     2008  
Restricted Group
                                
Net income (loss) attributable to common shareholders
   € (8,133 )   € (9,427 )   € (35,416 )   € (5,896 )
Income taxes (benefits)
     (108 )     (5,173 )     833       (1,716 )
Interest expense
     6,546       6,687       20,775       19,769  
Investment (income) loss
     (1,112 )     (1,679 )     (3,262 )     (4,972 )
Foreign exchange (gain) loss on debt
     (3,779 )     9,560       (4,533 )     3,181  
 
                        
Operating income (loss)
     (6,586 )     (32 )     (21,603 )     10,366  
Add: Depreciation and amortization.
     6,878       7,403       20,601       21,739  
 
                        
Operating EBITDA(1)
   € 292     € 7,371     € (1,002 )   € 32,105  
 
                        
 
(1)   Operating EBITDA does not reflect the impact of a number of items that affect our net income (loss) attributable to common shareholders, including financing costs and the effect of derivative instruments. Operating EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States, and should not be considered as an alternative to net income (loss) attributable to common shareholders or income (loss) from operations as a measure of performance, nor as an alternative to net cash from operating activities as a measure of liquidity. Operating EBITDA has significant limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP.

(7)

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