8-K

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): May 3, 2010

MERCER INTERNATIONAL INC.

(Exact name of registrant as specified in its charter)

Washington	000-51826	47-0956945
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

Suite 2840, 650 West Georgia Street, Vancouver, British Columbia, Canada	V6B 4N8
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (604) 684-1099

(Former name or former address, if changed since last report.)

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:

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 May 3, 2010, Mercer International Inc. (the “Company”) announced by press release the Company’s results for its first quarter ended March 31, 2010. 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 May 3, 2010

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: May 3, 2010

MERCER INTERNATIONAL INC.

FORM 8-K

EXHIBIT INDEX

Exhibit Number		Description
	99.1	Press release dated May 3, 2010

EX-99.1

Exhibit 99.1

For Immediate Release

MERCER INTERNATIONAL INC. REPORTS SHARPLY HIGHER 2010 FIRST QUARTER REVENUES AND EBITDA

NEW YORK, NY, May 3, 2010 — Mercer International Inc. (Nasdaq: MERC, TSX: MRI.U) today reported stronger results for the first quarter ended March 31, 2010. Operating EBITDA in the quarter increased dramatically to €31.8 million ($44.0 million) from €1.1 million ($1.4 million) in the first quarter of 2009 and from €23.5 million ($32.5 million) in the fourth quarter of 2009. Operating EBITDA is defined on page 4 of this press release and reconciled to net income (loss) attributable to common shareholders on page 6 of the financial tables in this press release.

Summary Financial Highlights

	Q1			Q4			Q1
	2010			2009			2009
	(in millions of Euros, except where otherwise stated)
Pulp revenues	€	171.1		€	154.9		€	129.0
Energy revenues		9.1			10.2			10.5
Operating income (loss)		18.0			9.8			(12.4	)
Operating EBITDA (loss)		31.8			23.5			1.1
Unrealized gain (loss) on derivative instruments		(6.5	)		5.1			(15.0	)
Foreign exchange gain (loss) on debt		(5.2	)		(1.8	)		(4.4	)
Net income (loss) attributable to common shareholders		(7.5	)		2.7			(39.4	)
Net income (loss) per share attributable to common shareholders
Basic	€	(0.21	)	€	0.08		€	(1.08	)
Diluted	€	(0.21	)	€	0.07		€	(1.08	)

Summary Operating Highlights

	Q1		Q4		Q1
	2010		2009		2009
Pulp Production (’000 ADMTs)		329.5		356.9		345.6
Scheduled Production Downtime (’000 ADMTs)		18.2		14.0		—
Pulp Sales (’000 ADMTs)		332.9		351.8		336.7
NBSK pulp list price in Europe ($/ADMT)		860		787		585
NBSK pulp list price in Europe (€/ADMT)		621		533		449
Average pulp sales realizations (€/ADMT)		507		434		377
Energy Production (’000 MWh)		337.7		358.7		356.3
Energy Sales (’000 MWh)		107.1		116.0		112.2
Average Spot Currency Exchange Rates:
€ / $(1)		0.7230		0.6771		0.7676
C$ / $(1)		1.0413		1.0559		1.2448
C$ / €(2)		1.4406		1.5604		1.6217

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

President’s Comments

Mr. Jimmy S.H. Lee, President and Chairman, stated: “In the first quarter, pulp markets continued to strengthen. Continued strong demand from Asia and growing demand in Europe and North America for bleached softwood kraft pulp helped support upward pricing momentum. During the first quarter, European list prices increased by $90 per ADMT to $890 per ADMT. Such price increases were enhanced by the strengthening of the U.S. dollar relative to the Euro in the period.”

Mr. Lee added: “All of our mills performed well in the first quarter. Our Stendal mill had 10 days of scheduled maintenance downtime in the quarter and early in the quarter we curtailed about 17,000 tonnes of production at our German mills because of seasonal low fiber availability due to extreme weather conditions. We have been particularly pleased with the progress at our Celgar mill. While certain initiatives have taken longer to come to fruition than we expected, production is now regularly breaching records and the wood supply systems we have optimized are now deeply entrenched. These initiatives, along with the incremental EBITDA that will be provided by the addition of a new turbine in the fall of 2010, will significantly advance the cash earnings capability of our Celgar mill.”

Mr. Lee continued: “In April, pulp list prices increased by $40 to $930 per ADMT in Europe and in North America and China list prices increased by $50 to $960 per ADMT and $830 per ADMT, respectively. A further $30 per ADMT increase in pulp list prices in Europe and a $40 per ADMT increase in North America and China have also recently been announced for May 2010.”

Mr. Lee concluded: “The global economic revival has continued to date. Looking ahead, we expect the current strong demand and reduced supply to support strong pulp pricing in the near term. We are well positioned to realize upon the strength in pulp markets.”

Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009

Pulp revenues for the three months ended March 31, 2010 increased by approximately 32.6% to €171.1 million from €129.0 million in the comparative period of 2009, due to higher pulp prices. Revenues from the sale of excess energy decreased slightly to €9.1 million in the first quarter from €10.5 million in the same quarter last year, primarily due to the absence of a one-time grid access fee rebate received in 2009.

Pulp production decreased to 329,455 ADMTs in the current quarter from 345,620 ADMTs in the same quarter of 2009, primarily due to 10 days of scheduled maintenance downtime at our Stendal mill and a production curtailment caused by limited fiber supply availability at our German mills during the first quarter of 2010, which did not occur in the first quarter of 2009. We have 12 days (approximately 17,000 tonnes) of scheduled maintenance downtime planned for our Celgar mill in the second quarter of 2010.

Page 2

Pulp sales volume decreased slightly to 332,869 ADMTs in the current quarter from 336,659 ADMTs in the comparative period of 2009. Average pulp sales realizations increased by 34.5% to €507 per ADMT in the first quarter of 2010, compared to €377 per ADMT in the same period last year, primarily due to significantly higher pulp prices and a stronger U.S. dollar relative to the Euro.

Costs and expenses in the first quarter of 2010 increased to €162.2 million from €152.0 million in the comparative period of 2009, primarily due to increased fiber costs and the costs associated with the annual maintenance shutdown at the Stendal mill.

On average, our fiber costs increased by approximately 6.0% in the first quarter of 2010 from the same period in 2009. Our Celgar mill had lower fiber costs because of an increase in the residual supply of fiber and the corresponding decrease in reliance on fiber sourced from third party field chippers. We currently expect fiber costs at our Celgar mill to continue to decrease in the short-term, primarily due to the increased availability of residual woodchips. Fiber costs at our German mills were higher due to the impact of reduced harvesting rates and increased demand from the European board industry. As we move into the second quarter of the year, we expect further upward pressure in pricing for our German mills due to increasing production in the European board industry, but also expect harvesting levels to increase, which should cause pricing to level off thereafter.

For the first quarter of 2010, we recorded operating income of €18.0 million, compared to an operating loss of €12.4 million in the comparative quarter of 2009 primarily due to significantly improved pulp prices.

Interest expense in the first quarter of 2010 marginally decreased to €16.4 million from €16.5 million in the comparative quarter of 2009 due to lower debt levels being partially offset by accretion expense related to the exchange of our convertible notes.

Our Stendal mill recorded an unrealized loss of €6.5 million on its outstanding interest rate derivatives in the current quarter, compared to an unrealized loss of €15.0 million in the same quarter of last year. We recorded a foreign exchange loss on our debt of €5.2 million in the first quarter of 2010 compared to a loss of €4.4 million in the same period last year.

Page 3

In the first quarter of 2010, the noncontrolling shareholder’s interest in the Stendal mill’s loss was €3.7 million, compared to €9.3 million of loss in the same quarter last year.

In the first quarter of 2010, we reported Operating EBITDA of €31.8 million compared to Operating EBITDA of €1.1 million in the first quarter of 2009 and Operating EBITDA of €23.5 million in the fourth quarter of 2009. Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and non-recurring capital asset impairment charges. Management uses Operating EBITDA as a benchmark measurement of its own operating results, and as a benchmark relative to its competitors. Management considers it to be a meaningful supplement to operating income as a performance measure primarily because depreciation expense and non-recurring capital asset impairment charges are not an actual cash cost, and depreciation expense varies widely from company to company in a manner that management considers largely independent of the underlying cost efficiency of their operating facilities. In addition, we believe Operating EBITDA is commonly used by securities analysts, investors and other interested parties to evaluate our financial performance.

Operating EBITDA does not reflect the impact of a number of items that affect our net income, including financing costs and the effect of derivative instruments. Operating EBITDA is not a measure of financial performance under GAAP, and should not be considered as an alternative to net income or income from operations as a measure of performance, nor as an alternative to net cash from operating activities as a measure of liquidity. Operating EBITDA has significant limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. For a reconciliation of net income (loss) attributable to common shareholders to Operating EBITDA, see page 6 of the financial tables included in this press release.

We reported net loss of €7.5 million, or €0.21 per basic and diluted share, for the first quarter of 2010 which included aggregate non-cash, unrealized losses of €11.8 million on the Stendal interest derivatives and foreign exchange loss on our debt. In the first quarter of 2009, we reported a net loss of €39.4 million, or €1.08 per basic and diluted share. As at March 31, 2010 and 2009, respectively, we had 36,483,204 and 36,422,487 common shares outstanding.

Page 4

Liquidity and Capital Resources

The following table is a summary of selected financial information for the periods indicated:

	As at March 31,		As at December 31,
	2010		2009
	(in thousands)
Financial Position
Cash and cash equivalents	€	48,692	€	51,291
Working capital		99,362		99,150

As at March 31, 2010, we had an aggregate amount of €506.3 million outstanding under our Stendal Loan Facility and had drawn approximately C$24.0 million under our Celgar Revolving Facility. As at March 31, 2010, we had not drawn any amount under the €28.5 million in working capital facilities for our Rosenthal mill.

Restricted Group

The following table is a summary of selected financial information for the Restricted Group for the periods indicated.

	As at March 31,		As at December 31,
	2010		2009
	(in thousands)
Restricted Group Financial Position
Cash and cash equivalents	€	26,083	€	20,635
Working capital		76,116		57,015
Property, plant and equipment		375,279		362,311
Total assets		596,293		555,977
Long-term liabilities		320,706		301,173
Total equity		211,742		200,247

As at March 31, 2010, our Restricted Group had cash and cash equivalents of €26.1 million, working capital of €76.1 million and approximately €38.1 million in available undrawn lines of credit.

Earnings Release Call

In conjunction with this release, Mercer International Inc. will host a conference call, which will be simultaneously broadcast live over the Internet. Management will host the call, which is scheduled for Tuesday May 4, 2010 at 10:00 AM (Eastern Daylight Time). Listeners can access the conference call live and archived through June 4, 2010, over the Internet at http://investor.shareholder.com/media/eventdetail.cfm?mediaid=41978&c=MERC&mediakey=D8E8F25804804300 C11FC37D8C9B5C8B&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 May 11, 2010 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 70315308.

Page 5

Mercer International Inc. is a global pulp manufacturing company. To obtain further information on the company, please visit its web site at http://www.mercerint.com.

The preceding includes forward looking statements which involve known and unknown risks and uncertainties which may cause our actual results in future periods to differ materially from forecasted results. Among those factors which could cause actual results to differ materially are the following: the effects of the current 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: Jimmy S.H. Lee Chairman & President (604) 684-1099	FD Investors/Media: Eric Boyriven, Alexandra Tramont (212) 850-5600
David M. Gandossi
Executive Vice-President &
Chief Financial Officer
(604) 684-1099

-FINANCIAL TABLES FOLLOW-

Page 6

MERCER INTERNATIONAL INC.

CONSOLIDATED BALANCE SHEETS
(In thousands of Euros)

	March 31,			December 31,
	2010			2009
ASSETS
Current assets
Cash and cash equivalents	€	48,692		€	51,291
Receivables		90,391			71,143
Inventories		81,730			72,629
Prepaid expenses and other		7,568			5,871
Total current assets		228,381			200,934
Long-term assets
Property, plant and equipment		875,897			868,558
Deferred note issuance and other		7,813			8,186
Deferred income tax		3,698			3,426
Note receivable		2,698			2,727
		890,106			882,897
Total assets	€	1,118,487		€	1,083,831
LIABILITIES
Current liabilities
Accounts payable and accrued expenses	€	105,380		€	85,185
Pension and other post-retirement benefit obligations		619			567
Debt		23,020			16,032
Total current liabilities		129,019			101,784
Long-term liabilities
Debt		810,366			813,142
Unrealized interest rate derivative losses		59,418			52,873
Pension and other post-retirement benefit obligations		19,740			17,902
Capital leases and other		11,087			12,157
		900,611			896,074
Total liabilities		1,029,630			997,858
EQUITY
Shareholders’ equity
Share capital		202,939			202,844
Paid-in capital		(5,625	)		(6,082	)
Retained earnings (deficit)		(104,781	)		(97,235	)
Accumulated other comprehensive income (loss)		30,967			23,695
Total shareholders’ equity		123,500			123,222
Noncontrolling interest (deficit)	€	(34,643	)	€	(37,249	)
Total equity		88,857			85,973
Total liabilities and equity	€	1,118,487		€	1,083,831

(1)

MERCER INTERNATIONAL INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of Euros, except per share data)

	Three Months Ended
	March 31,
	2010			2009
Revenues
Pulp	€	171,121		€	129,033
Energy		9,131			10,539
		180,252			139,572
Costs and expenses
Operating costs		140,409			131,997
Operating depreciation and amortization		13,724			13,401
		26,119			(5,826	)
Selling, general and administrative expenses		8,095			7,145
Sale of emission allowances		—			(558	)
Operating income (loss)		18,024			(12,413	)
Other income (expense)
Interest expense		(16,423	)		(16,549	)
Investment income (loss)		94			(3,202	)
Foreign exchange gain (loss) on debt		(5,231	)		(4,416	)
Gain (loss) on extinguishment of convertible notes		(929	)		—
Gain (loss) on derivative instruments		(6,546	)		(15,013	)
Total other income (expense)		(29,035	)		(39,180	)
Income (loss) before income taxes		(11,011	)		(51,593	)
Income tax benefit (provision) — current		(204	)		(49	)
— deferred		—			3,031
Net income (loss)		(11,215	)		(48,611	)
Less: net loss (income) attributable to noncontrolling interest		3,669			9,261
Net income (loss) attributable to common shareholders		(7,546	)		(39,350	)
Retained earnings (deficit), beginning of period		(97,235	)		(35,046	)
Retained earnings (deficit), end of period	€	(104,781	)	€	(74,396	)
Net income (loss) per share attributable to common shareholders
Basic	€	(0.21	)	€	(1.08	)
Diluted	€	(0.21	)	€	(1.08	)

(2)

MERCER INTERNATIONAL INC.

RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheet
(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 months ended March 31, 2010 and 2009, the Restricted Group was comprised of Mercer International Inc., certain holding subsidiaries and our Rosenthal and Celgar mills. The Restricted Group excludes the Stendal mill.

	March 31, 2010
	Restricted		Unrestricted						Consolidated
	Group		Subsidiaries			Eliminations			Group
ASSETS
Current assets
Cash and cash equivalents	€	26,083	€	22,609		€	—		€	48,692
Receivables		53,074		37,317			—			90,391
Inventories		56,932		24,798			—			81,730
Prepaid expenses and other		3,872		3,696			—			7,568
Total current assets		139,961		88,420			—			228,381
Property, plant and equipment		375,279		500,618			—			875,897
Deferred note issuance and other		3,170		4,643			—			7,813
Deferred income tax		3,698		—			—			3,698
Due from unrestricted group		71,487		—			(71,487	)		—
Note receivable		2,698		—			—			2,698
Total assets	€	596,293	€	593,681		€	(71,487	)	€	1,118,487
LIABILITIES
Current liabilities
Accounts payable and accrued expenses	€	60,456	€	44,924		€	—		€	105,380
Pension and other post-retirement benefit obligations		619		—			—			619
Debt		2,770		20,250			—			23,020
Total current liabilities		63,845		65,174			—			129,019
Debt		294,248		516,118			—			810,366
Due to restricted group		—		71,487			(71,487	)		—
Unrealized interest rate derivative losses		—		59,418			—			59,418
Pension and other post-retirement benefit obligations		19,740		—			—			19,740
Capital leases and other		6,718		4,369			—			11,087
Total liabilities		384,551		716,566			(71,487	)		1,029,630
EQUITY
Total shareholders’ equity (deficit)		211,742		(88,242	)		—			123,500
Noncontrolling interest (deficit)		—		(34,643	)		—			(34,643	)
Total liabilities and equity	€	596,293	€	593,681		€	(71,487	)	€	1,118,487

(3)

MERCER INTERNATIONAL INC.

RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheet
(In thousands of Euros)

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

(4)

MERCER INTERNATIONAL INC.

RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations
(In thousands of Euros)

	Three Months Ended March 31, 2010
	Restricted			Unrestricted						Consolidated
	Group			Subsidiaries			Eliminations			Group
Revenues
Pulp	€	106,417		€	64,704		€	—		€	171,121
Energy		3,375			5,756			—			9,131
		109,792			70,460			—			180,252
Operating costs		78,500			61,909			—			140,409
Operating depreciation and amortization		7,213			6,511			—			13,724
Selling, general and administrative expenses and other		8,006			89			—			8,095
		93,719			68,509			—			162,228
Operating income (loss)		16,073			1,951			—			18,024
Other income (expense)
Interest expense		(7,320	)		(10,264	)		1,161			(16,423	)
Investment income (loss)		1,239			16			(1,161	)		94
Foreign exchange gain (loss) on debt		(5,231	)		—			—			(5,231	)
Gain (loss) on extinguishment of convertible notes		(929	)		—			—			(929	)
Gain (loss) on derivative instruments		—			(6,546	)		—			(6,546	)
Total other income (expense)		(12,241	)		(16,794	)		—			(29,035	)
Income (loss) before income taxes		3,832			(14,843	)		—			(11,011	)
Income tax benefit (provision)		(161	)		(43	)		—			(204	)
Net income (loss)		3,671			(14,886	)		—			(11,215	)
Less: net loss (income) attributable to noncontrolling interest		—			3,669			—			3,669
Net income (loss) attributable to common shareholders	€	3,671		€	(11,217	)	€	—		€	(7,546	)

	Three Months Ended March 31, 2009
	Restricted			Unrestricted						Consolidated
	Group			Subsidiaries			Eliminations			Group
Revenues
Pulp	€	75,016		€	54,017		€	—		€	129,033
Energy		4,016			6,523			—			10,539
		79,032			60,540			—			139,572
Operating costs		73,316			58,681			—			131,997
Operating depreciation and amortization		6,704			6,697			—			13,401
Selling, general and administrative expenses and other		4,422			2,165			—			6,587
		84,442			67,543			—			151,985
Operating income (loss)		(5,410	)		(7,003	)		—			(12,413	)
Other income (expense)
Interest expense		(7,302	)		(10,356	)		1,109			(16,549	)
Investment income (loss)		916			(3,009	)		(1,109	)		(3,202	)
Foreign exchange gain (loss) on debt		(4,416	)		—			—			(4,416	)
Gain (loss) on derivative instruments		—			(15,013	)		—			(15,013	)
Total other income (expense)		(10,802	)		(28,378	)		—			(39,180	)
Income (loss) before income taxes		(16,212	)		(35,381	)		—			(51,593	)
Income tax benefit (provision)		208			2,774			—			2,982
Net income (loss)		(16,004	)		(32,607	)		—			(48,611	)
Less: net loss (income) attributable to noncontrolling interest		—			9,261			—			9,261
Net income (loss) attributable to common shareholders	€	(16,004	)	€	(23,346	)	€	—		€	(39,350	)

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MERCER INTERNATIONAL INC.

COMPUTATION OF OPERATING EBITDA
(Unaudited)
(In thousands of Euros)

	Three Months Ended
	March 31,
	2010			2009
	(in thousands)
Net income (loss) attributable to common shareholders	€	(7,546	)	€	(39,350	)
Net income (loss) attributable to noncontrolling interest		(3,669	)		(9,261	)
Income taxes (benefits)		204			(2,982	)
Interest expense		16,423			16,549
Investment (income) loss		(94	)		3,202
Foreign exchange (gain) loss on debt		5,231			4,416
Loss on extinguishment of convertible notes		929			—
Loss (gain) on derivative instruments		6,546			15,013
Operating income (loss)		18,024			(12,413	)
Add: Depreciation and amortization		13,821			13,467
Operating EBITDA(1)	€	31,845		€	1,054

(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
	March 31,
	2010			2009
	(in thousands)
Restricted Group
Net income (loss) attributable to common shareholders(1)	€	3,671		€	(16,004	)
Income taxes (benefits)		161			(208	)
Interest expense		7,320			7,302
Investment (income) loss		(1,239	)		(916	)
Foreign exchange (gain) loss on debt		5,231			4,416
Loss on extinguishment of convertible notes		929			—
Operating income (loss)		16,073			(5,410	)
Add: Depreciation and amortization		7,310			6,770
Operating EBITDA(2)	€	23,383		€	1,360

(1)

For the Restricted Group, net income (loss) attributable to common shareholders and net income (loss) are the same.

(2)

Operating EBITDA does not reflect the impact of a number of items that affect our net income (loss) attributable to common shareholders, including financing costs and the effect of derivative instruments. Operating EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States, and should not be considered as an alternative to net income (loss) attributable to common shareholders or income (loss) from operations as a measure of performance, nor as an alternative to net cash from operating activities as a measure of liquidity. Operating EBITDA has significant limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP.

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