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 March 31, 2013

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 55,815,704 shares of common stock outstanding as at May 2, 2013.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2013

(Unaudited)

FORM 10-Q

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MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands of Euros)

	March 31,			December 31,
	2013			2012
ASSETS
Current assets
Cash and cash equivalents	€	110,664		€	104,239
Receivables		120,184			110,087
Inventories (Note 2)		112,908			118,300
Prepaid expenses and other		8,295			7,907
Deferred income tax		3,824			4,465
Total current assets		355,875			344,998
Long-term assets
Property, plant and equipment		802,959			808,878
Deferred note issuance and other		11,622			12,162
Deferred income tax		15,104			17,565
		829,685			838,605
Total assets	€	1,185,560		€	1,183,603
LIABILITIES
Current liabilities
Accounts payable and other	€	97,645		€	89,950
Pension and other post-retirement benefit obligations (Note 4)		818			813
Debt (Note 3)		55,081			45,662
Total current liabilities		153,544			136,425
Long-term liabilities
Debt (Note 3)		658,166			665,741
Unrealized interest rate derivative losses (Note 8)		45,513			50,678
Pension and other post-retirement benefit obligations (Note 4)		32,451			32,141
Capital leases and other		13,887			13,936
Deferred income tax		6,175			5,757
		756,192			768,253
Total liabilities		909,736			904,678
EQUITY
Shareholders’ equity
Share capital (Note 5)		248,757			248,371
Paid-in capital		(3,706	)		(3,547	)
Retained earnings		25,375			25,800
Accumulated other comprehensive income		21,570			25,181
Total shareholders’ equity		291,996			295,805
Noncontrolling interest (deficit)		(16,172	)		(16,880	)
Total equity		275,824			278,925
Total liabilities and equity	€	1,185,560		€	1,183,603

Commitments and contingencies (Note 10)

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

FORM 10-Q

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MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands of Euros, except per share data)

	Three Months Ended
	March 31,
	2013			2012
Revenues
Pulp	€	180,120		€	199,439
Energy and chemicals		18,152			18,919
		198,272			218,358
Costs and expenses
Operating costs		165,098			177,770
Operating depreciation and amortization		14,731			14,287
		18,443			26,301
Selling, general and administrative expenses		8,895			10,058
Operating income		9,548			16,243
Other income (expense)
Interest expense		(13,148	)		(14,133	)
Gain on derivative instruments (Note 8)		4,820			876
Other income (expense)		(70	)		(410	)
Total other income (expense)		(8,398	)		(13,667	)
Income before income taxes		1,150			2,576
Income tax benefit (provision)
Current		3,271			(56	)
Deferred		(4,138	)		(676	)
Net income		283			1,844
Less: net income attributable to noncontrolling interest		(708	)		(671	)
Net income (loss) attributable to common shareholders	€	(425	)	€	1,173
Net income (loss) per share attributable to common shareholders (Note 7)
Basic and diluted	€	(0.01	)	€	0.02

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

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MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands of Euros)

	Three Months Ended
	March 31,
	2013			2012
Net income	€	283		€	1,844
Other comprehensive income (loss), net of taxes
Foreign currency translation adjustments, net of tax expense of €574 (2012—benefit of €90)		(3,528	)		2,147
Change in unrecognized losses and prior service costs related to defined benefit plans, net of tax benefit of €nil (2012—€nil)		(93	)		149
Change in unrealized losses on marketable securities, net of tax benefit of €nil (2012—€nil)		10			68
Other comprehensive income (loss), net of taxes		(3,611	)		2,364
Total comprehensive income (loss)		(3,328	)		4,208
Comprehensive income attributable to noncontrolling interest		(708	)		(671	)
Comprehensive income (loss) attributable to common shareholders	€	(4,036	)	€	3,537

INTERIM CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

(Unaudited)

(In thousands of Euros)

	Three Months Ended March 31,
	2013			2012
Net income (loss) attributable to common shareholders	€	(425	)	€	1,173
Retained earnings, beginning of period		25,800			37,985
Retained earnings, end of period	€	25,375		€	39,158

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

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MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands of Euros)

	Three Months Ended
	March 31,
	2013			2012
Cash flows from (used in) operating activities
Net income	€	283		€	1,844
Adjustments to reconcile net income to cash flows from operating activities
Unrealized gain on derivative instruments		(4,695	)		(876	)
Depreciation and amortization		14,794			14,350
Deferred income taxes		4,138			676
Stock compensation expense		267			868
Pension and other post-retirement expense, net of funding		121			(14	)
Other		1,183			793
Changes in working capital
Receivables		(9,704	)		2,685
Inventories		5,746			11,738
Accounts payable and accrued expenses		10,597			2,649
Other		(782	)		1,424
Net cash from (used in) operating activities		21,948			36,137
Cash flows from (used in) investing activities
Purchase of property, plant and equipment		(11,395	)		(8,465	)
Proceeds on sale of property, plant and equipment		13			226
Net cash from (used in) investing activities		(11,382	)		(8,239	)
Cash flows from (used in) financing activities
Repayment of debt		(20,545	)		(10,126	)
Proceeds from borrowings of debt		10,000			—
Repayment of capital lease obligations		(700	)		(611	)
Proceeds from credit facilities, net		5,968			3,759
Payment of note issuance costs		—			(1,621	)
Proceeds from government grants		730			630
Net cash from (used in) financing activities		(4,547	)		(7,969	)
Effect of exchange rate changes on cash and cash equivalents		406			(805	)
Net increase in cash and cash equivalents		6,425			19,124
Cash and cash equivalents, beginning of period		104,239			105,072
Cash and cash equivalents, end of period	€	110,664		€	124,196

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

FORM 10-Q

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MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Unaudited)

(In thousands of Euros)

	Three Months Ended
	March 31,
	2013			2012
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest	€	2,750		€	4,827
Income taxes	€	665		€	2,608
Supplemental schedule of non-cash investing and financing activities
Acquisition of production and other equipment under capital lease obligations	€	170		€	—
Increase (decrease) in accounts payable and accrued purchases for property, plant and equipment	€	(2,899	)	€	463
Increase (decrease) in receivables of government grants for long-term assets	€	—		€	(638	)

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

FORM 10-Q

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MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands of Euros, 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, 2012. In the opinion of the Company, the unaudited interim consolidated financial statements contained herein contain all adjustments necessary to fairly present 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.

Certain prior period amounts in the interim consolidated financial statements have been reclassified to conform to the current period presentation. Beginning in the second quarter of 2012, the Company has presented revenue from the sale of chemicals within energy and chemicals revenue in the Interim Consolidated Statement of Operations. This revenue had previously been presented within operating costs. Chemical revenue for the three month period ended March 31, 2013 was €2,861 (2012 – €2,808).

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

FORM 10-Q

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MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands of Euros, except per share data)

Note 2. Inventories

	March 31, 2013		December 31, 2012
Raw materials	€	37,296	€	46,028
Finished goods		40,092		38,169
Spare parts and other		35,520		34,103
	€	112,908	€	118,300

Note 3. Debt

Debt consists of the following:

	March 31, 2013			December 31, 2012
Note payable to bank, included in a total loan credit facility of €827,950 to finance the construction related to the Stendal mill (a)	€	432,907		€	452,907
Senior notes, interest at 9.50% accrued and payable semi-annually, unsecured (b)		221,429			215,670
Credit agreement with a lender with respect to a revolving credit facility of C$40 million (c)		10,735			4,574
Term bank facility for a project at the Stendal mill of €17,000 (d)		10,000			—
Loans payable to the noncontrolling shareholder of the Stendal mill (e)		37,088			36,620
Investment loan agreement with a lender with respect to a project at the Rosenthal mill of €4,351 (f)		1,088			1,632
Credit agreement with a bank with respect to a revolving credit facility of €25,000 (g)		—			—
Credit agreement with a bank with respect to a revolving credit facility of €3,500 (h)		—			—
		713,247			711,403
Less: current portion		(55,081	)		(45,662	)
Debt, less current portion	€	658,166		€	665,741

The Company made repayments under these facilities of €20,545 during the three month period ended March 31, 2013 (2012 – €10,126). As of March 31, 2013, the maturities of debt are as follows:

Matures	Amount
2013	€	32,908
2014		48,915
2015		44,000
2016		44,000
2017		543,424
Thereafter		—
	€	713,247

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 March 31, 2013, the Company was in compliance with the terms of the indenture.

FORM 10-Q

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MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands of Euros, except per share data)

Note 3. Debt (continued)

(a) Note payable to bank, included in a total loan facility of €827,950 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 March 31, 2013 range from 1.39% to 2.14%), 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 €372,907 of 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 8 – 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 €164,000 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 €15,000 working capital reserve and the Guarantee Amount, as discussed in Note 10(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 March 31, 2013, the DSRA balance was €32,986 and was not Fully Funded.

(b) On November 17, 2010, the Company completed a private offering of $300.0 million 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 June 2012, the Company’s Board of Directors authorized the purchase of up to €50,000 in aggregate principal amount of the Company’s Senior Notes from time to time, over a period ending June 2013. During the three month period ended March 31, 2013, the Company did not purchase any of its outstanding Senior Notes. During the twelve month period ended December 31, 2012, the Company purchased $2.0 million of its outstanding Senior Notes.

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 2013. 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 3.75% or Canadian prime plus 2.00%. U.S. dollar denominated amounts bear interest at LIBOR plus 3.75% or U.S. base plus 2.00%. As at March 31, 2013, this facility was accruing interest at a rate of approximately 5.00%, C$14.0 million of this facility was drawn, C$1.7 million was supporting letters of credit and approximately C$22.3 million was available. The Company is in the process of extending the maturity date of the facility.

FORM 10-Q

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MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands of Euros, except per share data)

Note 3. Debt (continued)

(d) A €17,000 amortizing term facility to partially finance a project, referred to as “Project Blue Mill”, which is expected to increase the Stendal mill’s annual pulp production capacity by 30,000 air-dried metric tonnes and includes the installation of an additional 40 megawatt steam turbine. 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 and is available for disbursement up to August 31, 2013. 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 the Company. As at March 31, 2013, €10,000 had been drawn on this facility and was accruing interest at a rate of approximately 3.83%.

As part of the 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 March 31, 2013, the balance in the investment account was €2,894.

(e) Loans of €26,760 payable by the Stendal mill to its noncontrolling shareholder bear interest at a rate of 7.00% 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 €440, 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 March 31, 2013, accrued interest on these loans was €10,328. As at December 31, 2012, accrued interest on these loans was €9,860.

(f) A four-year amortizing investment loan agreement with a lender relating to the wash press project at the Rosenthal mill with a total facility of €4,351 bearing interest at the rate of Euribor plus 2.75% that matures February 2014. Borrowings under this agreement are secured by the wash press equipment. As at March 31, 2013, the balance outstanding was €1,088 and was accruing interest at a rate of 3.13%.

(g) A €25,000 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 March 31, 2013, approximately €1,000 of this facility was supporting bank guarantees leaving approximately €24,000 available.

(h) A €3,500 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 March 31, 2013, approximately €1,300 of this facility was supporting bank guarantees leaving approximately €2,200 available.

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MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands of Euros, except per share data)

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 month period ended March 31, 2013 totaled €497 (2012 – €501).

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 month period ended March 31, 2013, the Company made contributions of €174 (2012 – €161) to this plan.

Information about the Celgar Plans, in aggregate for the three month periods ended March 31, 2013 and March 31, 2012 is as follows:

	Three Months ended March 31,
	2013					2012
	Pension Benefits			Post- Retirement Benefits		Pension Benefits			Post- Retirement Benefits
Service cost	€	26		€	146	€	27		€	138
Interest cost		355			214		373			214
Expected return on plan assets		(412	)		—		(401	)		—
Recognized net loss		278			23		276			1
Net periodic benefit cost	€	247		€	383	€	275		€	353

The Company participates in a multiemployer plan for hourly-paid employees at the Celgar mill. The contributions to this plan are determined based on an amount per hour worked pursuant to a collective bargaining agreement. The Company has no current or future contribution obligations in excess of the contractual contributions. During the three month period ended March 31, 2013, the Company made contributions of €381 (2012 – €477) to this plan.

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 March 31, 2013 and December 31, 2012, the Company had 55,815,704 common shares issued and outstanding.

Share Repurchase Program

In July 2012, the Company’s Board of Directors authorized a share repurchase program (the “Program”) to repurchase up to approximately $14.4 million of the Company’s outstanding common shares from time to time over a period ending August 2013. During the three month period ended March 31, 2013 and the twelve month period ended December 31, 2012, the Company did not repurchase any of its common shares.

FORM 10-Q

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MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands of Euros, except per share data)

Note 5. Share Capital (continued)

Preferred shares

The Company has authorized 50,000,000 preferred shares with $1 par value issuable in series, of which 2,000,000 shares have been designated as Series A. The preferred shares may be issued in one or more series and with such designations and preferences for each series as shall be stated in the resolutions providing for the designation and issue of each such series adopted by the Board of Directors of the Company. The Board of Directors is authorized by the Company’s articles of incorporation to determine the voting, dividend, redemption and liquidation preferences pertaining to each such series. As at March 31, 2013, no preferred shares had been issued by the Company.

Note 6. Stock-Based Compensation

The Company has 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. As at March 31, 2013, after factoring in all allocated shares, there remain approximately 1.1 million common shares available for grant pursuant to the 2010 Plan.

During the three month period ended March 31, 2013, 40,000 restricted shares vested.

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

	Three Months Ended March 31,
	2013			2012
Net income (loss) attributable to common shareholders:
Basic and diluted	€	(425	)	€	1,173
Net income (loss) per share attributable to common shareholders:
Basic and diluted	€	(0.01	)	€	0.02
Weighted average number of common shares outstanding:
Basic(1)		55,632,982			55,554,830
Effect of dilutive instruments:
PSUs		—			277,676
Stock options		—			28,702
Diluted		55,632,982			55,861,208

(1) The basic weighted average number of shares excludes 156,500 restricted shares which have been issued, but have not vested as at March 31, 2013 (2012 – 198,000 restricted shares).

FORM 10-Q

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MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands of Euros, except per share data)

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

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 March 31,
	2013		2012
PSUs		786,129		—
Restricted shares		156,500		198,000
Stock options		175,000		45,000

Note 8. 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 and a small portion of its pulp sales price risk with the use of derivative instruments. The derivatives are measured at fair value with changes in fair value immediately recognized in gain on derivative instruments in the Interim Consolidated Statement of Operations.

Derivative assets are presented in prepaid expenses and other, and derivative liabilities are presented in unrealized interest rate derivative losses in the Consolidated Balance Sheet.

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 €612,600 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 €357,576 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

During November 2012, the Company entered into two fixed price pulp swap contracts with a bank. Under the terms of the contracts, 3,000 MT of pulp per month is fixed at prices which range from $880 to $890 per MT. The contracts expire in December 2013.

The following table shows our gains and losses by type of derivative recognized in gain on derivative instruments in the Consolidated Statement of Operations:

	Three Months Ended March  31,
	2013			2012
Interest rate derivative contract	€	5,165		€	876
Pulp price derivative contracts		(345	)		—
	€	4,820		€	876

FORM 10-Q

QUARTERLY REPORT - PAGE  14

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands of Euros, except per share data)

Note 9. Financial Instruments

The fair value of financial instruments is summarized as follows:

	March 31, 2013				December 31, 2012
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cash and cash equivalents	€	110,664	€	110,664	€	104,239	€	104,239
Marketable securities		196		196		184		184
Receivables		120,184		120,184		110,087		110,087
Pulp price derivative contracts – asset		280		280		745		745
Accounts payable and other		97,645		97,645		89,950		89,950
Debt		713,247		709,622		711,403		700,001
Interest rate derivative contract – liability		45,513		45,513		50,678		50,678

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. The fair value of debt reflects recent market transactions and discounted cash flow estimates. 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 pulp price derivative contracts and interest rate derivative contract was determined.

Fair Value Measurement and Disclosure

The fair value methodologies and, as a result, the fair value of the Company’s investments 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 and pulp price derivatives are classified within Level 2 of the valuation hierarchy, as they are valued using internal models that use as their basis readily observable market inputs, such as forward interest rates, yield curves observable at specified intervals and commodity price curves. 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 our interest rate and pulp price derivatives are multi-national financial institutions.

FORM 10-Q

QUARTERLY REPORT - PAGE  15

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands of Euros, except per share data)

Note 9. 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 March 31, 2013 using:
Description	Level 1		Level 2		Level 3		Total
Assets
Marketable securities	€	196	€	—	€	—	€	196
Pulp price derivative contracts		—		280		—		280
	€	196	€	280	€	—	€	476
Liabilities
Interest rate derivative contract	€	—	€	45,513	€	—	€	45,513
	Fair value measurements at December 31, 2012  using:
Description	Level 1		Level 2		Level 3		Total
Assets
Marketable securities	€	184	€	—	€	—	€	184
Pulp price derivative contracts		—		745		—		745
	€	184	€	745	€	—	€	929
Liabilities
Interest rate derivative contract	€	—	€	50,678	€	—	€	50,678

Note 10. 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 €10,000 (the “Guarantee Amount”), which is intended to compensate the Company for remediation work that is required at the Stendal mill, but it was less than the amount claimed by the Company under the arbitration. Most of the claims have been settled; however, the arbitration proceeding is ongoing, and there is no certainty that the Company will be successful with its remaining claim.

The €10,000 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 March 31, 2013, the Company had Guarantee Amount proceeds of €1,768 remaining in accounts payable and other.

(b) The Company is involved in a property transfer tax dispute with respect to the Celgar mill and certain other legal actions and claims arising in the ordinary course of business. Celgar had previously paid the property transfer tax assessment. The court proceedings of our appeal commenced during the first quarter of 2013. A final court date for the appeal is scheduled during the second quarter of 2013. The outcome of this appeal process is uncertain. In addition, 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.

FORM 10-Q

QUARTERLY REPORT - PAGE  16

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands of Euros, except per share data)

Note 10. Commitments and Contingencies (continued)

(c) 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.

(d) As at March 31, 2013, the Company had entered into capital commitments of approximately €11,200 at the Stendal mill as part of Project Blue Mill.

FORM 10-Q

QUARTERLY REPORT - PAGE  17

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands of Euros, except per share data)

Note 11. Restricted Group Supplemental Disclosure

The terms of the indenture governing our Senior 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, 2013 and 2012, 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.

Combined Condensed Balance Sheets

	March 31, 2013
	Restricted		Unrestricted						Consolidated
	Group		Subsidiaries			Eliminations			Group
ASSETS
Current assets
Cash and cash equivalents	€	52,032	€	58,632		€	—		€	110,664
Receivables		69,944		50,240			—			120,184
Inventories		72,073		40,835			—			112,908
Prepaid expenses and other		4,834		3,461			—			8,295
Deferred income tax		2,190		1,634			—			3,824
Total current assets		201,073		154,802			—			355,875
Long-term assets
Property, plant and equipment		340,459		462,500			—			802,959
Deferred note issuance and other		6,322		5,300			—			11,622
Deferred income tax		9,222		5,882			—			15,104
Due from unrestricted group		104,581		—			(104,581	)		—
Total assets	€	661,657	€	628,484		€	(104,581	)	€	1,185,560
LIABILITIES
Current liabilities
Accounts payable and other	€	52,688	€	44,957		€	—		€	97,645
Pension and other post-retirement benefit obligations		818		—			—			818
Debt		11,823		43,258			—			55,081
Total current liabilities		65,329		88,215			—			153,544
Long-term liabilities
Debt		221,430		436,736			—			658,166
Due to restricted group		—		104,581			(104,581	)		—
Unrealized interest rate derivative losses		—		45,513			—			45,513
Pension and other post-retirement benefit obligations		32,451		—			—			32,451
Capital leases and other		6,095		7,792			—			13,887
Deferred income tax		6,175		—			—			6,175
Total liabilities		331,480		682,837			(104,581	)		909,736
EQUITY
Total shareholders’ equity (deficit)		330,177		(38,181	)		—			291,996
Noncontrolling interest (deficit)		—		(16,172	)		—			(16,172	)
Total liabilities and equity	€	661,657	€	628,484		€	(104,581	)	€	1,185,560

FORM 10-Q

QUARTERLY REPORT - PAGE  18

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands of Euros, except per share data)

Note 11. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Balance Sheets

	December 31, 2012
	Restricted		Unrestricted						Consolidated
	Group		Subsidiaries			Eliminations			Group
ASSETS
Current assets
Cash and cash equivalents	€	36,714	€	67,525		€	—		€	104,239
Receivables		61,212		48,875			—			110,087
Inventories		74,786		43,514			—			118,300
Prepaid expenses and other		5,811		2,096			—			7,907
Deferred income tax		2,188		2,277			—			4,465
Total current assets		180,711		164,287			—			344,998
Long-term assets
Property, plant and equipment		345,311		463,567			—			808,878
Deferred note issuance and other		6,607		5,555			—			12,162
Deferred income tax		9,179		8,386			—			17,565
Due from unrestricted group		102,311		—			(102,311	)		—
Total assets	€	644,119	€	641,795		€	(102,311	)	€	1,183,603
LIABILITIES
Current liabilities
Accounts payable and other	€	42,106	€	47,844		€	—		€	89,950
Pension and other post-retirement benefit obligations		813		—			—			813
Debt		5,662		40,000			—			45,662
Total current liabilities		48,581		87,844			—			136,425
Long-term liabilities
Debt		216,214		449,527			—			665,741
Due to restricted group		—		102,311			(102,311	)		—
Unrealized interest rate derivative losses		—		50,678			—			50,678
Pension and other post-retirement benefit obligations		32,141		—			—			32,141
Capital leases and other		6,073		7,863			—			13,936
Deferred income tax		5,757		—			—			5,757
Total liabilities		308,766		698,223			(102,311	)		904,678
EQUITY
Total shareholders’ equity (deficit)		335,353		(39,548	)		—			295,805
Noncontrolling interest (deficit)		—		(16,880	)		—			(16,880	)
Total liabilities and equity	€	644,119	€	641,795		€	(102,311	)	€	1,183,603

FORM 10-Q

QUARTERLY REPORT - PAGE  19

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands of Euros, except per share data)

Note 11. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Statements of Operations

	Three months ended March 31, 2013
	Restricted			Unrestricted						Consolidated
	Group			Subsidiaries			Eliminations			Group
Revenues
Pulp	€	100,240		€	79,880		€	—		€	180,120
Energy and chemicals		7,090			11,062			—			18,152
		107,330			90,942			—			198,272
Operating costs		89,523			75,575			—			165,098
Operating depreciation and amortization		8,191			6,540			—			14,731
Selling, general and administrative expenses		5,716			3,179			—			8,895
		103,430			85,294			—			188,724
Operating income		3,900			5,648			—			9,548
Other income (expense)
Interest expense		(5,866	)		(8,930	)		1,648			(13,148	)
Gain (loss) on derivative instruments		(345	)		5,165			—			4,820
Other income (expense)		1,535			43			(1,648	)		(70	)
Total other income (expense)		(4,676	)		(3,722	)		—			(8,398	)
Income (loss) before income taxes		(776	)		1,926			—			1,150
Income tax benefit (provision)		(1,016	)		149			—			(867	)
Net income (loss)		(1,792	)		2,075			—			283
Less: net income attributable to noncontrolling interest		—			(708	)		—			(708	)
Net income (loss) attributable to common shareholders	€	(1,792	)	€	1,367		€	—		€	(425	)

	Three months ended March 31, 2012
	Restricted			Unrestricted						Consolidated
	Group			Subsidiaries			Eliminations			Group
Revenues
Pulp	€	109,889		€	89,550		€	—		€	199,439
Energy and chemicals		7,991			10,928			—			18,919
		117,880			100,478			—			218,358
Operating costs		98,336			79,434			—			177,770
Operating depreciation and amortization		7,640			6,647			—			14,287
Selling, general and administrative expenses		6,521			3,537			—			10,058
		112,497			89,618			—			202,115
Operating income		5,383			10,860			—			16,243
Other income (expense)
Interest expense		(5,810	)		(9,664	)		1,341			(14,133	)
Gain on derivative instruments		—			876			—			876
Other income (expense)		825			106			(1,341	)		(410	)
Total other income (expense)		(4,985	)		(8,682	)		—			(13,667	)
Income before income taxes		398			2,178			—			2,576
Income tax benefit (provision)		(715	)		(17	)		—			(732	)
Net income (loss)		(317	)		2,161			—			1,844
Less: net income attributable to noncontrolling interest		—			(671	)		—			(671	)
Net income (loss) attributable to common shareholders	€	(317	)	€	1,490		€	—		€	1,173

FORM 10-Q

QUARTERLY REPORT - PAGE  20

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands of Euros, except per share data)

Note 11. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Statements of Cash Flows

	Three months ended March 31, 2013
	Restricted			Unrestricted			Consolidated
	Group			Subsidiaries			Group
Cash flows from (used in) operating activities
Net income (loss)	€	(1,792	)	€	2,075		€	283
Adjustments to reconcile net income (loss) to cash flows from operating activities
Unrealized loss (gain) on derivative instruments		470			(5,165	)		(4,695	)
Depreciation and amortization		8,254			6,540			14,794
Deferred income taxes		991			3,147			4,138
Stock compensation expense		267			—			267
Pension and other post-retirement expense, net of funding		121			—			121
Other		413			770			1,183
Changes in working capital
Receivables		(8,339	)		(1,365	)		(9,704	)
Inventories		3,067			2,679			5,746
Accounts payable and accrued expenses		10,505			92			10,597
Other(1)		(1,714	)		932			(782	)
Net cash from (used in) operating activities		12,243			9,705			21,948
Cash flows from (used in) investing activities
Purchase of property, plant and equipment		(2,645	)		(8,750	)		(11,395	)
Proceeds on sale of property, plant and equipment		13			—			13
Net cash from (used in) investing activities		(2,632	)		(8,750	)		(11,382	)
Cash flows from (used in) financing activities
Repayment of debt		(545	)		(20,000	)		(20,545	)
Proceeds from borrowings of debt		—			10,000			10,000
Repayment of capital lease obligations		(122	)		(578	)		(700	)
Proceeds from credit facilities, net		5,968			—			5,968
Proceeds from government grants		—			730			730
Net cash from (used in) financing activities		5,301			(9,848	)		(4,547	)
Effect of exchange rate changes on cash and cash equivalents		406			—			406
Net increase (decrease) in cash and cash equivalents		15,318			(8,893	)		6,425
Cash and cash equivalents, beginning of period		36,714			67,525			104,239
Cash and cash equivalents, end of period	€	52,032		€	58,632		€	110,664

(1) Includes intercompany related transactions.

FORM 10-Q

QUARTERLY REPORT - PAGE  21

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands of Euros, except per share data)

Note 11. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Statements of Cash Flows

	Three months ended March 31, 2012
	Restricted			Unrestricted			Consolidated
	Group			Subsidiaries			Group
Cash flows from (used in) operating activities
Net income (loss)	€	(317	)	€	2,161		€	1,844
Adjustments to reconcile net income (loss) to cash flows from operating activities
Unrealized gain on derivative instruments		—			(876	)		(876	)
Depreciation and amortization		7,703			6,647			14,350
Deferred income taxes		676			—			676
Stock compensation expense		868			—			868
Pension and other post-retirement expense, net of funding		(14	)		—			(14	)
Other		58			735			793
Changes in working capital
Receivables		(2,110	)		4,795			2,685
Inventories		4,018			7,720			11,738
Accounts payable and accrued expenses		5,535			(2,886	)		2,649
Other(1)		(6,474	)		7,898			1,424
Net cash from (used in) operating activities		9,943			26,194			36,137
Cash flows from (used in) investing activities
Purchase of property, plant and equipment		(4,218	)		(4,247	)		(8,465	)
Proceeds on sale of property, plant and equipment		186			40			226
Net cash from (used in) investing activities		(4,032	)		(4,207	)		(8,239	)
Cash flows from (used in) financing activities
Repayment of debt		(543	)		(9,583	)		(10,126	)
Repayment of capital lease obligations		(186	)		(425	)		(611	)
Proceeds from credit facilities, net		3,759			—			3,759
Payment of note issuance costs		—			(1,621	)		(1,621	)
Proceeds from government grants		630			—			630
Net cash from (used in) financing activities		3,660			(11,629	)		(7,969	)
Effect of exchange rate changes on cash and cash equivalents		(805	)		—			(805	)
Net increase in cash and cash equivalents		8,766			10,358			19,124
Cash and cash equivalents, beginning of period		44,829			60,243			105,072
Cash and cash equivalents, end of period	€	53,595		€	70,601		€	124,196

(1) Includes intercompany related transactions.

FORM 10-Q

QUARTERLY REPORT - PAGE  22

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 March 31, 2013, unless otherwise stated; (iv) all references to monetary amounts are to “Euros”, the lawful currency adopted by most members of the European Union, unless otherwise stated; (v) “€” refers to Euros, “$” refers to U.S. dollars and “C$” refers to Canadian dollars; (vi) “ADMTs” refers to air-dried metric tonnes; (vii) “MW” refers to megawatts; and (viii) “MWh” refers to megawatt hours.

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 74.9% owned subsidiary, Stendal, which 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 months ended March 31, 2013 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, 2012 filed with the Securities and Exchange Commission, referred to as the “SEC”.

Current Market Environment

Pulp prices marginally increased in the first quarter of 2013. However, we believe that overall prices are still low given current projected supply and demand levels. At the end of the first quarter of 2013, list prices in Europe were approximately $840 per ADMT and in North America and China were approximately $900 and $700 per ADMT, respectively.

We currently expect strong demand from China as purchasers re-stock inventories which, along with annual maintenance shuts by producers, should cause NBSK pulp prices to continue to gradually increase in the medium term.

Summary Financial Highlights

	Three Months Ended March 31,
	2013			2012
	(in thousands, other than per share amounts)
Pulp revenues	€	180,120		€	199,439
Energy and chemical revenues		18,152			18,919
Operating income		9,548			16,243
Gain on derivative instruments		4,820			876
Income tax benefit (provision)		(867	)		(732	)
Net income (loss)(1)		(425	)		1,173
Net income (loss) per share(1)(2)	€	(0.01	)	€	0.02

(1) Attributable to common shareholders.

(2) Per share amounts are on a basic and diluted basis.

FORM 10-Q

QUARTERLY REPORT - PAGE  23

Selected Production, Sales and Other Data

	Three Months Ended March  31,
	2013		2012
Consolidated
Pulp production (‘000 ADMTs)		361.2		380.3
Scheduled production downtime (‘000 ADMTs)		—		—
Scheduled production downtime (days)		—		—
Pulp sales (‘000 ADMTs)		356.7		384.8
Average NBSK pulp list prices in Europe ($/ADMT)(1)		832		837
Average NBSK pulp list prices in Europe (€/ADMT)		630		638
Average pulp sales realizations (€/ADMT)(2)		499		512
Energy production (‘000 MWh)		424.4		436.2
Energy sales (‘000 MWh)		173.6		182.4
Average energy sales realizations (€/MWh)		88		88
Average Spot Currency Exchange Rates
€ / $(3)		0.7580		0.7623
C$ / $(3)		1.0087		1.0009
C$ / €(4)		1.3319		1.3129

(1) Source: RISI pricing report.

(2) Sales realizations after discounts. Incorporates the effect of pulp price variations occurring between the order and shipment dates.

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

(4) Average Bank of Canada noon spot rates over the reporting period.

Three Months Ended March 31, 2013 Compared to Three Months Ended March 31, 2012

Total revenues for the three months ended March 31, 2013 decreased by approximately 9% to €198.3 million from €218.4 million in the same period in 2012, due to lower pulp revenues and energy and chemical revenues and a weaker U.S. dollar relative to the Euro.

Pulp revenues for the three months ended March 31, 2013 decreased to €180.1 million from €199.4 million in the comparative quarter of 2012, primarily due to the combined effect of lower pulp sales volumes and average pulp sales realizations and a weaker U.S. dollar relative to the Euro. The U.S. dollar was approximately 1% weaker versus the Euro in the current quarter, compared to the same quarter of last year.

Energy and chemical revenues decreased by approximately 4% to €18.2 million in the first quarter from €18.9 million in the same quarter last year, primarily as a result of lower pulp production at our Celgar mill.

Average list prices for NBSK pulp in Europe were approximately $832 (€630) per ADMT in the current quarter, compared to approximately $837 (€638) per ADMT in the same quarter last year. In the first quarter of 2013, average pulp sales realizations decreased by approximately 3% to €499 per ADMT from approximately €512 per ADMT in the same quarter last year, primarily due to lower pulp prices and a weaker U.S. dollar relative to the Euro.

Pulp production decreased by approximately 5% to 361,164 ADMTs in the current quarter from 380,342 ADMTs in the same quarter of 2012, due to decreased pulp production at our Celgar and Stendal mills. We have 11 days (approximately 16,000 ADMTs) of maintenance downtime scheduled for our Celgar mill in the second quarter of 2013 in order to perform annual maintenance.

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Pulp sales volumes decreased by approximately 7% to 356,660 ADMTs in the current quarter from 384,826 ADMTs in the comparative quarter, primarily due to lower sales to China and the United States.

Costs and expenses in the first quarter of 2013 decreased by 7% to €188.7 million from €202.1 million in the comparative period of 2012, primarily due to lower pulp sales volumes and fiber costs, partially offset by higher natural gas costs at our German mills, resulting from higher usage and prices.

In the first quarter of 2013, operating depreciation and amortization marginally increased to €14.7 million from €14.3 million in the same quarter last year. Selling, general and administrative expenses were €8.9 million in the first quarter of 2013, compared to €10.1 million in the first quarter of 2012.

Transportation costs decreased to €16.8 million in the first quarter of 2013 from €18.0 million in the first quarter of 2012, primarily due to lower pulp sales volumes.

On average, our per unit fiber costs in the current quarter decreased by approximately 2% from the same period in 2012, primarily due to overall lower fiber prices. During the first quarter of 2013, fiber costs at our German mills were marginally lower than the comparative period in 2012, when fiber prices were near record highs. Increased demand from the European pellet and board producers, reduced wood supply because of longer than normal winter weather conditions and lower availability of trucking transportation kept fiber prices at relatively high levels in the current quarter. Fiber costs at our Celgar mill decreased as a result of increased sawmill activity in the region. The recent extreme weather conditions are expected to put upward pressure on fiber costs at our German mills in the short term, whereas, we expect fiber costs at our Celgar mill to continue to decrease in the short term.

For the first quarter of 2013, operating income decreased to €9.5 million from €16.2 million in the comparative quarter of 2012, primarily due to the combined effect of lower pulp prices and pulp sales volumes.

Interest expense in the first quarter of 2013 decreased to €13.1 million from €14.1 million in the comparative quarter of 2012, primarily due to lower debt levels associated with the Stendal mill.

We recorded a net derivative gain of €4.8 million, which includes a €0.3 million loss related to fixed price pulp swap contracts entered into in the fourth quarter of 2012 and an unrealized gain of approximately €5.1 million on the mark to market adjustment of our Stendal mill’s interest rate derivative, compared to an unrealized derivative gain of €0.9 million in the same quarter of last year.

During the current quarter, we recorded a net income tax expense of €0.9 million, compared to an expense of €0.7 million in the same quarter of 2012.

Noncontrolling shareholder’s interest in the Stendal mill’s income in each of the first quarters of 2013 and 2012 was €0.7 million.

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We reported a net loss attributable to common shareholders of €0.4 million, or €0.01 per basic and diluted share, for the first quarter of 2013, which included a total net non-cash unrealized gain of €4.7 million on the fixed price pulp swaps and Stendal interest rate derivative, partially offset by a non-cash charge for stock compensation of €0.3 million. In the first quarter of 2012, net income attributable to common shareholders was €1.2 million, or €0.02 per basic and diluted share, which included a non-cash unrealized gain of €0.9 million, or €0.02 per basic share, on the Stendal interest rate derivative, offset by a non-cash charge for stock compensation of €0.9 million.

Operating EBITDA in the first quarter of 2013 was €24.3 million, compared to €30.6 million in the first quarter of 2012. 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 (loss) 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 (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 interests on our Stendal 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 operational 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 interim 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 operational performance and relying primarily on our GAAP financial statements.

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

	Three Months Ended March 31,
	2013			2012
	(in thousands)
Net income (loss) attributable to common shareholders	€	(425	)	€	1,173
Net income attributable to noncontrolling interest		708			671
Income tax provision (benefit)		867			732
Interest expense		13,148			14,133
Gain on derivative instruments		(4,820	)		(876	)
Other expense (income)		70			410
Operating income		9,548			16,243
Add: Depreciation and amortization		14,794			14,350
Operating EBITDA	€	24,342		€	30,593

Liquidity and Capital Resources

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

	As at March 31,		As at December 31,
	2013		2012
	(in thousands)
Financial Position
Cash and cash equivalents	€	110,664	€	104,239
Working capital		202,331		208,573
Total assets		1,185,560		1,183,603
Long-term liabilities		756,192		768,253
Total equity		275,824		278,925

As at March 31, 2013, our cash and cash equivalents increased to €110.7 million from €104.2 million and working capital had decreased to €202.3 million from €208.6 million at the end of 2012.

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 facilities relating to our development of the Stendal mill, referred to as “Stendal Loan Facility”, and for its Project Blue Mill, capital expenditures and interest payments on our outstanding 9.5% Senior Notes, referred to as the “Senior Notes”.

Debt Covenants

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

As at March 31, 2013, we were in compliance with all of the covenants of our indebtedness.

Our Stendal mill has established the Stendal Loan Facility and a project loan facility for Project Blue Mill, collectively referred to as the “Facilities”, which require Stendal to maintain a similar leverage ratio of total debt thereunder to EBITDA, referred to as the “Stendal Ratio”. An aggregate of 80% of the principal amount of the tranches under the Facilities are severally guaranteed by German federal and state governments, and the Facilities are without recourse to the “Restricted Group” which is comprised of Mercer Inc., the Rosenthal and Celgar mills, and certain holding subsidiaries.

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Because of, among other things, volatility in foreign exchange rates and pulp prices, currently we cannot assure that the Stendal mill will be in compliance with the Stendal Ratio as of June 30, 2013. We have entered into discussions with the Stendal mill’s lenders with respect to a satisfactory amendment or waiver, if required. Additionally, we have the right to cure any breach of the Stendal Ratio by providing additional equity to Stendal within 20 business days of being notified of such breach by the lenders. In the event that the Stendal mill is not in compliance with the Stendal Ratio, we are not able to acquire a satisfactory amendment or waiver of such covenant and we do not undertake to cure the breach by providing additional capital to Stendal, it would constitute an Event of Default under the Facilities. If such Event of Default occurs and after careful consideration of the reasonable concerns of Stendal or if the stipulated majority of the lenders have reasonably determined that such default has caused Stendal’s ability to perform its obligations under the Facilities to be materially impaired, the lenders may provide notice cancelling and accelerating the Facilities and demanding full payment of all amounts outstanding thereunder. In the current circumstances, we do not believe Stendal’s lenders would be permitted to accelerate and cancel the Facilities; however, we cannot assure you of the same. If Stendal’s lenders did accelerate and cancel the Facilities, this would have a material adverse effect on the Stendal mill, our business and our consolidated results of operations.

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 decreased to €21.9 million in the three months ended March 31, 2013 from €36.1 million in the comparative period of 2012, primarily due to an increase in receivables, which used cash of €9.7 million in the current quarter, compared to a decrease providing cash of €2.7 million in the same period of 2012. An increase in accounts payable and accrued expenses provided cash of €10.6 million, compared to €2.6 million in the same period of 2012. A decrease in inventories provided cash of €5.7 million in the three months ended March 31, 2013, compared to a decrease in inventories providing cash of €11.7 million in the same period of 2012.

Cash Flows from Investing Activities. Investing activities in the three months ended March 31, 2013 used cash of €11.4 million, compared to using cash of €8.2 million in the same period of 2012. Capital expenditures in the three months ended March 31, 2013 used cash of €11.4 million, compared to €8.5 million in the same period of 2012. Capital expenditures related to Project Blue Mill used cash of €8.7 million in the current quarter.

Cash Flows from Financing Activities. In the three months ended March 31, 2013, financing activities used cash of €4.5 million, compared to using cash of €8.0 million in the same period of 2012. In the current quarter, principal repayments under the Stendal Facility used cash of €20.0 million, compared to €9.6 million in the same period of 2012. During the current quarter, borrowing under the loan facility for Project Blue Mill provided cash of €10.0 million. Net borrowing from our revolving credit facilities provided cash of €6.0 million in the current quarter, compared to €3.8 million in the same period of 2012. In the three months ended March 31, 2013 and 2012, proceeds of government grants provided cash of €0.7 million and €0.6 million respectively.

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Capital Commitments and Future Liquidity

As at March 31, 2013, we had approximately €11.2 million of capital commitments related to our €40.0 million Project Blue Mill at the Stendal mill and deposited €2.9 million in a separate investment account to manage Project Blue Mill’s costs and funding. Project Blue Mill has also received an investment decree, determining that it qualifies for up to €12.0 million in governmental grants, comprised of €9.2 million of investment incentives and €2.8 million of tax grants. The actual receipt of such grants is subject to the Stendal mill satisfying all governmental rules including verification. The investment decree is a condition of our accessing the Project Blue Mill loan facility. As at March 31, 2013, the Stendal mill, based on expenditures to date, had applied for €4.4 million in grants and was awaiting approval and receipt of €3.7 million.

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.

Other than commitments relating to Project Blue Mill, 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.

Contractual Obligations and Commitments

There were no material changes outside the ordinary course to any of our material contractual obligations during the three months ended March 31, 2013.

The collective agreement with our hourly workers at our Rosenthal mill expires on May 31, 2013. We consider the relationships with our employees at our Rosenthal mill to be good and, although no assurance can be provided, we currently expect to enter into a new labor agreement with our Rosenthal mill’s employees without any significant work stoppage.

Foreign Currency

Our reporting currency is the Euro as the majority of our business transactions are denominated in Euros. However, we hold certain assets and liabilities in U.S. dollars and Canadian dollars. Further, the majority of our sales are in products quoted in U.S. dollars, whereas most of our operating costs and expenses are incurred in Euros and, to a lesser extent, Canadian dollars. Accordingly, our consolidated financial results are subject to foreign currency exchange rate fluctuations.

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We translate foreign denominated assets and liabilities into Euros 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 impact shareholders’ equity on the Consolidated Balance Sheet but do not affect our net income.

In the three months ended March 31, 2013, accumulated other comprehensive income decreased by €3.6 million to €21.6 million, primarily due to the foreign currency translation adjustment.

Based upon the exchange rate at March 31, 2013, the U.S. dollar has weakened by approximately 4% in value against the Euro since March 31, 2012. 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 11 of our Interim Consolidated Financial Statements included herein.

Summary Financial Highlights for the Restricted Group

	Three Months Ended March 31,
	2013			2012
	(in thousands)
Pulp revenues	€	100,240		€	109,889
Energy and chemical revenues		7,090			7,991
Operating income		3,900			5,383
Loss on derivative instruments		(345	)		—
Income tax benefit (provision)		(1,016	)		(715	)
Net loss		(1,792	)		(317	)

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Selected Production, Sales and Other Data for the Restricted Group

	Three Months Ended March  31,
	2013		2012
Consolidated
Pulp production (‘000 ADMTs)		205.6		218.6
Scheduled production downtime (‘000 ADMTs)		—		—
Scheduled production downtime (days)		—		—
Pulp sales (‘000 ADMTs)		199.3		213.5
Average NBSK pulp list prices in Europe ($/ADMT)(1)		832		837
Average NBSK pulp list prices in Europe (€/ADMT)		630		638
Average pulp sales realizations (€/ADMT)(2)		503		514
Energy production (‘000 MWh)		230.4		240.2
Energy sales (‘000 MWh)		79.9		88.8
Average energy sales realizations (€/MWh)		89		90
Average Spot Currency Exchange Rates
€ / $(3)		0.7580		0.7623
C$ / $(3)		1.0087		1.0009
C$ / €(4)		1.3319		1.3129

(1) Source: RISI pricing report.

(2) Sales realizations after discounts. Incorporates the effect of pulp price variations occurring between the order and shipment dates.

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

(4) Average Bank of Canada noon spot rates over the reporting period.

Restricted Group Results — Three Months Ended March 31, 2013 Compared to Three Months Ended March 31, 2012

Total revenues for the Restricted Group decreased by approximately 9% to €107.3 million in the first quarter of 2013, compared to €117.9 million in the first quarter of 2012, primarily due to lower pulp and energy and chemical revenues and a weaker U.S. dollar relative to the Euro. The U.S. dollar was approximately 1% weaker versus the Euro in the first quarter of 2013, compared to the first quarter of 2012.

Pulp revenues for the Restricted Group for the three months ended March 31, 2013 decreased to €100.2 million from €109.9 million in the comparative period of 2012, primarily due to the combined effect of lower pulp sales volumes and average pulp sales realizations and a weaker U.S. dollar relative to the Euro. Energy revenues decreased by approximately 11% in the current quarter to €7.1 million from €8.0 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 $832 (€630) per ADMT in the current quarter, compared to $837 (€638) per ADMT in the same quarter last year. In the first quarter of 2013, average pulp sales realizations for the Restricted Group decreased by approximately 2% to €503 per ADMT from €514 per ADMT in the same period last year due to lower pulp prices and a weaker U.S. dollar relative to the Euro.

Pulp production for the Restricted Group decreased by approximately 6% to 205,550 ADMTs in the first quarter of 2013 from 218,620 ADMTs in the same period of 2012, primarily due to decreased pulp production at our Celgar mill. We have 11 days (approximately 16,000 ADMTs) of maintenance downtime scheduled for our Celgar mill in the second quarter of 2013 in order to perform annual maintenance.

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Pulp sales volumes of the Restricted Group decreased by approximately 7% to 199,325 ADMTs in the first quarter of 2013 from 213,472 ADMTs in the comparative period of 2012, primarily due to lower sales to the United States, partially offset by increased sales to Europe.

Costs and expenses for the Restricted Group in the first quarter of 2013 decreased by approximately 8% to €103.4 million from €112.5 million in the comparative period of 2012, primarily due to lower pulp sales volumes and fiber costs at our mills.

In the first quarter of 2013, operating depreciation and amortization for the Restricted Group was €8.2 million, compared to €7.6 million in the same quarter last year. Selling, general and administrative expenses for the Restricted Group were €5.7 million, compared to €6.5 million in the same period of 2012.

Transportation costs for the Restricted Group decreased to €11.6 million in the first quarter of 2013 from €12.9 million in the same quarter last year primarily due to lower pulp sales volumes.

Overall, per unit fiber costs of the Restricted Group in the first quarter of 2013 decreased by approximately 5%, compared to the same period in 2012. During the first quarter of 2013, fiber costs at our Rosenthal mill were marginally lower than the comparative period in 2012, when fiber prices were near record highs. Increased demand from the European pellet and board producers, reduced wood supply because of longer than normal winter weather conditions and lower availability of trucking transportation kept fiber prices at relatively high levels in the current quarter. Fiber costs at our Celgar mill decreased as a result of increased sawmill activity in the region. The recent extreme weather conditions are expected to put upward pressure on fiber costs at our Rosenthal mill in the short term, whereas, we expect fiber costs at our Celgar mill to continue to decrease in the short term.

In the first quarter of 2013, the Restricted Group reported operating income of €3.9 million, compared to €5.4 million in the first quarter of 2012, primarily due to the combined effect of lower pulp prices and pulp sales volumes.

Interest expense for the Restricted Group increased marginally to €5.9 million in the first quarter of 2013 from €5.8 million in the same quarter last year, primarily due to increased borrowings at the Celgar mill.

In the first quarter of 2013, the Restricted Group also recorded a loss on derivative instruments of approximately €0.3 million related to two fixed price pulp swap contracts entered into in the fourth quarter of 2012.

During the first quarter of 2013, the Restricted Group recorded €1.0 million of income tax expense, compared to income tax expense of €0.7 million in the same period last year.

The Restricted Group reported a net loss for the first quarter of 2013 of €1.8 million, compared to a net loss of €0.3 million in the same period last year.

In the first quarter of 2013, the Restricted Group reported Operating EBITDA of €12.2 million, compared to Operating EBITDA of €13.1 million in the comparative quarter of 2012. 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 March 31, 2013 for additional information relating to such limitations of Operating EBITDA.

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

	Three Months Ended March 31,
	2013			2012
	(in thousands)
Restricted Group(1)
Net loss	€	(1,792	)	€	(317	)
Income tax provision (benefit)		1,016			715
Interest expense		5,866			5,810
Loss on derivative instruments		345			—
Other expense (income)		(1,535	)		(825	)
Operating income		3,900			5,383
Add: Depreciation and amortization		8,254			7,703
Operating EBITDA	€	12,154		€	13,086

(1) See Note 11 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 at the dates indicated:

	As at March 31,		As at December 31,
	2013		2012
	(in thousands)
Restricted Group Financial Position(1)
Cash and cash equivalents	€	52,032	€	36,714
Working capital		135,744		132,130
Total assets		661,657		644,119
Long-term liabilities		266,151		260,185
Total equity		330,177		335,353

(1) See Note 11 of the interim consolidated financial statements included elsewhere herein for a reconciliation to our consolidated results.

At March 31, 2013, cash and cash equivalents for the Restricted Group increased to €52.0 million from €36.7 million at the end of 2012.

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.

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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, 2012. 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, environmental conservation and 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, 2012.

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 and results of operations;

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• 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 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;

• Project Blue Mill might not generate the results we expect;

• we are subject to risks related to our employees;

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

• we are dependent on key personnel;

• we may experience material disruptions to our production;

• 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; and

• the price of our common stock may be volatile.

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, 2012. 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.

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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. Demand and pulp prices increased during the first quarter of 2013, and as at March 31, 2013, list prices for NBSK pulp were approximately $840 in Europe, $900 in North America and $700 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 could be materially adversely affected.

FORM 10-Q

QUARTERLY REPORT - PAGE  36

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. 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 Euros. As a result, our revenues 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  37

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 Euro and the U.S. dollar and the Canadian dollar versus the U.S. dollar and the Euro. 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 three months ended March 31, 2013, we recorded an unrealized gain of approximately €5.1 million on our outstanding interest rate derivative, compared to €0.9 million in the same period of 2012.

In November 2012, we entered into two fixed price pulp swap contracts with a bank. Under the terms of these contracts, 3,000 ADMTs of pulp per month is fixed at prices which range from $880 to $890 per ADMT. These contracts expire in December 2013.

We recorded a loss of approximately €0.3 million related to these swap contracts in the three months ended March 31, 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  38

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  39

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, 2012. 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

Other than as listed above, 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, 2012.

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.

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 March 31, 2013, 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  40

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: May 3, 2013

FORM 10-Q

QUARTERLY REPORT - PAGE  41

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 officers 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 with 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: May 3, 2013

/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 officers 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 with 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: May 3, 2013

/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 Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2013 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); 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: May 3, 2013

/s/ Jimmy S.H. Lee

Jimmy S.H. Lee

Chief Executive Officer

A signed original of this written statement required by Section 906 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.

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 Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

(1) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2013 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); 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: May 3, 2013

/s/ David M. Gandossi

David M. Gandossi

Chief Financial Officer

A signed original of this written statement required by Section 906 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.

XML

Financial Instruments (Outstanding Financial Instruments And Estimated Fair Values) (Details) (EUR €) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Marketable securities	€ 196	€ 184
Pulp price derivative contract - asset, carrying value and fair value	280	745
Fair value measurements - Assets	476	929
Interest rate derivative contract - liability, carrying value and fair value	45,513	50,678
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	196	184
Pulp price derivative contract - asset, carrying value and fair value	0	0
Fair value measurements - Assets	196	184
Interest rate derivative contract - liability, carrying value and fair value	0	0
Fair Value, Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Marketable securities	0	0
Pulp price derivative contract - asset, carrying value and fair value	280	745
Fair value measurements - Assets	280	745
Interest rate derivative contract - liability, carrying value and fair value	45,513	50,678
Fair Value, Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Marketable securities	0	0
Pulp price derivative contract - asset, carrying value and fair value	0	0
Fair value measurements - Assets	0	0
Interest rate derivative contract - liability, carrying value and fair value	€ 0	€ 0

XML

Share Capital (Details) (USD $) In Millions, except Share data, unless otherwise specified	1 Months Ended	3 Months Ended	12 Months Ended
	Jul. 31, 2012	Mar. 31, 2013	Dec. 31, 2012
Share Capital [Line Items]
Common shares, authorized		200,000,000
Common shares, par value		$ 1
Common shares, issued		55,815,704	55,815,704
Common shares, outstanding		55,815,704	55,815,704
Share repurchase program, authorized amount	$ 14.4
Stock Repurchased and Retired During Period, Shares		0	0
Preferred shares, authorized		50,000,000
Preferred shares, par value		$ 1
Preferred shares, issued		0
Period of time share repurchase program is in effect	1 year
Series A [Member]
Share Capital [Line Items]
Preferred shares, authorized		2,000,000

XML

Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2013

Financial Instruments [Abstract]

Fair Value Of Financial Instruments

	March 31, 2013				December 31, 2012
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cash and cash equivalents	€	110,664	€	110,664	€	104,239	€	104,239
Marketable securities		196		196		184		184
Receivables		120,184		120,184		110,087		110,087
Pulp price derivative contracts – asset		280		280		745		745
Accounts payable and other		97,645		97,645		89,950		89,950
Debt		713,247		709,622		711,403		700,001
Interest rate derivative contract – liability		45,513		45,513		50,678		50,678

Outstanding Financial Instruments And Estimated Fair Values

	Fair value measurements at March 31, 2013 using:
Description	Level 1		Level 2		Level 3		Total
Assets
Marketable securities	€	196	€	-	€	-	€	196
Pulp price derivative contracts		-		280		-		280
	€	196	€	280	€	-	€	476
Liabilities
Interest rate derivative contract	€	-	€	45,513	€	-	€	45,513
	Fair value measurements at December 31, 2012 using:
Description	Level 1		Level 2		Level 3		Total
Assets
Marketable securities	€	184	€	-	€	-	€	184
Pulp price derivative contracts		-		745		-		745
	€	184	€	745	€	-	€	929
Liabilities
Interest rate derivative contract	€	-	€	50,678	€	-	€	50,678

XML

Restricted Group Supplemental Disclosure (Combined Condensed Statements Of Operations) (Details) (EUR €) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Condensed Financial Statements, Captions [Line Items]
Pulp	€ 180,120	€ 199,439
Energy and chemicals	18,152	18,919
Total revenues	198,272	218,358
Operating costs	165,098	177,770
Operating depreciation and amortization	14,731	14,287
Selling, general and administrative expenses	8,895	10,058
Operating expenses	188,724	202,115
Operating income	9,548	16,243
Interest expense	(13,148)	(14,133)
Gain (loss) on derivative instruments	4,820	876
Other income (expense)	(70)	(410)
Total other income (expense)	(8,398)	(13,667)
Income (loss) before income taxes	1,150	2,576
Income tax benefit (provision)	(867)	(732)
Net income (loss)	283	1,844
Less: net income attributable to noncontrolling interest	(708)	(671)
Net income (loss) attributable to common shareholders	(425)	1,173
Restricted Group [Member]
Condensed Financial Statements, Captions [Line Items]
Pulp	100,240	109,889
Energy and chemicals	7,090	7,991
Total revenues	107,330	117,880
Operating costs	89,523	98,336
Operating depreciation and amortization	8,191	7,640
Selling, general and administrative expenses	5,716	6,521
Operating expenses	103,430	112,497
Operating income	3,900	5,383
Interest expense	(5,866)	(5,810)
Gain (loss) on derivative instruments	(345)	0
Other income (expense)	1,535	825
Total other income (expense)	(4,676)	(4,985)
Income (loss) before income taxes	(776)	398
Income tax benefit (provision)	(1,016)	(715)
Net income (loss)	(1,792)	(317)
Less: net income attributable to noncontrolling interest	0	0
Net income (loss) attributable to common shareholders	(1,792)	(317)
Unrestricted Subsidiaries [Member]
Condensed Financial Statements, Captions [Line Items]
Pulp	79,880	89,550
Energy and chemicals	11,062	10,928
Total revenues	90,942	100,478
Operating costs	75,575	79,434
Operating depreciation and amortization	6,540	6,647
Selling, general and administrative expenses	3,179	3,537
Operating expenses	85,294	89,618
Operating income	5,648	10,860
Interest expense	(8,930)	(9,664)
Gain (loss) on derivative instruments	5,165	876
Other income (expense)	43	106
Total other income (expense)	(3,722)	(8,682)
Income (loss) before income taxes	1,926	2,178
Income tax benefit (provision)	149	(17)
Net income (loss)	2,075	2,161
Less: net income attributable to noncontrolling interest	(708)	(671)
Net income (loss) attributable to common shareholders	1,367	1,490
Eliminations [Member]
Condensed Financial Statements, Captions [Line Items]
Pulp	0	0
Energy and chemicals	0	0
Total revenues	0	0
Operating costs	0	0
Operating depreciation and amortization	0	0
Selling, general and administrative expenses	0	0
Operating expenses	0	0
Operating income	0	0
Interest expense	1,648	1,341
Gain (loss) on derivative instruments	0	0
Other income (expense)	(1,648)	(1,341)
Total other income (expense)	0	0
Income (loss) before income taxes	0	0
Income tax benefit (provision)	0	0
Net income (loss)	0	0
Less: net income attributable to noncontrolling interest	0	0
Net income (loss) attributable to common shareholders	€ 0	€ 0

XML

Derivative Transactions (Details) (EUR €)	3 Months Ended				1 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Mar. 31, 2013 Interest Rate Swap [Member]	Dec. 31, 2004 Interest Rate Swap [Member]	Nov. 30, 2012 Pulp Price Swap Contract [Member]	Nov. 30, 2012 Minimum [Member] Pulp Price Swap Contract [Member]	Nov. 30, 2012 Maximum [Member] Pulp Price Swap Contract [Member]
Derivative [Line Items]
Aggregate maximum principal amount of the Stendal loan facility covered by interest rate swaps				€ 612,600,000
Aggregate notional amount of interest rate swap			357,576,000
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
Gain (loss) on interest rate derivative contract	5,165,000	876,000
Gain (loss) on pulp price derivative contracts	(345,000)	0
Gain (loss) on derivative instruments	€ 4,820,000	€ 876,000

XML

Inventories

3 Months Ended

Mar. 31, 2013

Inventories [Abstract]

Inventories

Note 2. Inventories

	March 31,		December 31,
	2013		2012
Raw materials	€	37,296	€	46,028
Finished goods		40,092		38,169
Spare parts and other		35,520		34,103
	€	112,908	€	118,300

XML

Restricted Group Supplemental Disclosure (Combined Condensed Statements Of Cash Flows) (Details) (EUR €) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013		Mar. 31, 2012
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	€ 283		€ 1,844
Unrealized gain on derivative instruments	(4,695)		(876)
Depreciation and amortization	14,794		14,350
Deferred income taxes	4,138		676
Stock compensation expense	267		868
Pension and other post-retirement expense, net of funding	121		(14)
Other	1,183		793
Receivables	(9,704)		2,685
Inventories	5,746		11,738
Accounts payable and accrued expenses	10,597		2,649
Other	(782)	[1]	1,424	[1]
Net cash from (used in) operating activities	21,948		36,137
Purchase of property, plant and equipment	(11,395)		(8,465)
Proceeds on sale of property, plant and equipment	13		226
Net cash from (used in) investing activities	(11,382)		(8,239)
Repayment of debt	(20,545)		(10,126)
Proceeds from borrowings of debt	10,000		0
Repayment of capital lease obligations	(700)		(611)
Proceeds from credit facilities, net	5,968		3,759
Payment of note issuance costs	0		(1,621)
Proceeds from government grants	730		630
Net cash from (used in) financing activities	(4,547)		(7,969)
Effect of exchange rate changes on cash and cash equivalents	406		(805)
Net increase (decrease) in cash and cash equivalents	6,425		19,124
Cash and cash equivalents, beginning of period	104,239		105,072
Cash and cash equivalents, end of period	110,664		124,196
Restricted Group [Member]
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	(1,792)		(317)
Unrealized gain on derivative instruments	470		0
Depreciation and amortization	8,254		7,703
Deferred income taxes	991		676
Stock compensation expense	267		868
Pension and other post-retirement expense, net of funding	121		(14)
Other	413		58
Receivables	(8,339)		(2,110)
Inventories	3,067		4,018
Accounts payable and accrued expenses	10,505		5,535
Other	(1,714)	[1]	(6,474)	[1]
Net cash from (used in) operating activities	12,243		9,943
Purchase of property, plant and equipment	(2,645)		(4,218)
Proceeds on sale of property, plant and equipment	13		186
Net cash from (used in) investing activities	(2,632)		(4,032)
Repayment of debt	(545)		(543)
Proceeds from borrowings of debt	0
Repayment of capital lease obligations	(122)		(186)
Proceeds from credit facilities, net	5,968		3,759
Payment of note issuance costs			0
Proceeds from government grants	0		630
Net cash from (used in) financing activities	5,301		3,660
Effect of exchange rate changes on cash and cash equivalents	406		(805)
Net increase (decrease) in cash and cash equivalents	15,318		8,766
Cash and cash equivalents, beginning of period	36,714		44,829
Cash and cash equivalents, end of period	52,032		53,595
Unrestricted Subsidiaries [Member]
Condensed Financial Statements, Captions [Line Items]
Net income (loss)	2,075		2,161
Unrealized gain on derivative instruments	(5,165)		(876)
Depreciation and amortization	6,540		6,647
Deferred income taxes	3,147		0
Stock compensation expense	0		0
Pension and other post-retirement expense, net of funding	0		0
Other	770		735
Receivables	(1,365)		4,795
Inventories	2,679		7,720
Accounts payable and accrued expenses	92		(2,886)
Other	932	[1]	7,898	[1]
Net cash from (used in) operating activities	9,705		26,194
Purchase of property, plant and equipment	(8,750)		(4,247)
Proceeds on sale of property, plant and equipment	0		40
Net cash from (used in) investing activities	(8,750)		(4,207)
Repayment of debt	(20,000)		(9,583)
Proceeds from borrowings of debt	10,000
Repayment of capital lease obligations	(578)		(425)
Proceeds from credit facilities, net	0		0
Payment of note issuance costs			(1,621)
Proceeds from government grants	730		0
Net cash from (used in) financing activities	(9,848)		(11,629)
Effect of exchange rate changes on cash and cash equivalents	0		0
Net increase (decrease) in cash and cash equivalents	(8,893)		10,358
Cash and cash equivalents, beginning of period	67,525		60,243
Cash and cash equivalents, end of period	€ 58,632		€ 70,601

[1] Includes intercompany related transactions.

XML

Debt (Narrative) (Details)			3 Months Ended						3 Months Ended								3 Months Ended					3 Months Ended				3 Months Ended				3 Months Ended				3 Months Ended				3 Months Ended				3 Months Ended
	Mar. 31, 2013 EUR (€)	Dec. 31, 2012 EUR (€)	Mar. 31, 2013 Stendal Loan Facility [Member] EUR (€)		Dec. 31, 2012 Stendal Loan Facility [Member] EUR (€)		Mar. 31, 2013 Stendal Loan Facility [Member] Minimum [Member]	Mar. 31, 2013 Stendal Loan Facility [Member] Maximum [Member]	Mar. 31, 2013 Senior Notes [Member]	Mar. 31, 2013 Senior Notes [Member] EUR (€)		Dec. 31, 2012 Senior Notes [Member] USD ($)	Dec. 31, 2012 Senior Notes [Member] EUR (€)		Jun. 30, 2012 Senior Notes [Member] EUR (€)	Nov. 17, 2010 Senior Notes [Member] USD ($)	Mar. 31, 2013 Credit Agreement For Celgar Mill [Member] CAD	Mar. 31, 2013 Credit Agreement For Celgar Mill [Member] EUR (€)		Dec. 31, 2012 Credit Agreement For Celgar Mill [Member] EUR (€)		Mar. 31, 2013 Project Blue Mill [Member] EUR (€)		Dec. 31, 2012 Project Blue Mill [Member] EUR (€)		Mar. 31, 2013 Loans Payable To The Noncontrolling Shareholder[Member] EUR (€)		Dec. 31, 2012 Loans Payable To The Noncontrolling Shareholder[Member] EUR (€)		Mar. 31, 2013 Investment Loan Agreement At Rosenthal Mill [Member] EUR (€)		Dec. 31, 2012 Investment Loan Agreement At Rosenthal Mill [Member] EUR (€)		Mar. 31, 2013 Rosenthal Credit Facility - 25 Million [Member] EUR (€)		Dec. 31, 2012 Rosenthal Credit Facility - 25 Million [Member] EUR (€)		Mar. 31, 2013 Rosenthal Credit Facility - 3.5 Million [Member] EUR (€)		Dec. 31, 2012 Rosenthal Credit Facility - 3.5 Million [Member] EUR (€)		Mar. 31, 2013 Canadian Dollar Borrowings Rate Option 1 [Member] Credit Agreement For Celgar Mill [Member]	Mar. 31, 2013 Canadian Dollar Borrowings Rate Option 2 [Member] Credit Agreement For Celgar Mill [Member]	Mar. 31, 2013 US Dollar Borrowings Rate Option 1 [Member] Credit Agreement For Celgar Mill [Member]	Mar. 31, 2013 US Dollar Borrowings Rate Option 2 [Member] Credit Agreement For Celgar Mill [Member]	Mar. 31, 2013 Twelve Month Period Beginning Dec 1, 2014 [Member] Senior Notes [Member]	Mar. 31, 2013 Twelve Month Period Beginning Dec 1, 2015 [Member] Senior Notes [Member]	Mar. 31, 2013 Beginning Dec 1, 2016 And Thereafter [Member] Senior Notes [Member]	Mar. 31, 2013 Loan Payable To The Noncontrolling Shareholder 3 [Member] Loans Payable To The Noncontrolling Shareholder[Member] EUR (€)
Debt Instrument [Line Items]
Debt, face amount			€ 827,950,000													$ 300,000,000										€ 26,760,000				€ 4,351,000																			€ 440,000
Varying basis spread							0.90%	1.80%														3.50%								2.75%				3.50%				3.50%				3.75%	2.00%	3.75%	2.00%
Description of variable basis spread			Euribor																			Euribor								Euribor				Euribor				three-month Euribor				bankers acceptance	Canadian prime	LIBOR	U.S. base
Interest rate at period							1.39%	2.14%														3.83%								3.13%
Debt instrument interest rate									9.50%	9.50%																7.00%
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%
Maximum Amount Of Principal Debt Guaranteed By the German Government			372,907,000
Debt Instrument, Amount Of Debt Supporting Bank Guarantees																																		1,000,000				1,300,000
Deferred Scheduled Principal Payment To Debt Maturity Date			164,000,000
Debt, maturity date			Sep. 30, 2017						Dec. 01, 2017	Dec. 01, 2017							May 01, 2013	May 01, 2013				Sep. 01, 2017				Oct. 01, 2017				Feb. 01, 2014				Oct. 01, 2016				Dec. 01, 2015
Debt, offering date									Nov. 17, 2010	Nov. 17, 2010
Cash sweep, percent			100.00%
Working capital reserve			15,000,000
DSRA balance			32,986,000
Issued price percentage of principal amount																100.00%
Authorized repurchase principal amount															50,000,000
Repurchased amount										0		2,000,000
Debt repurchase program, period in force															1 year
Senior Note Redemption Notice Minimum Days									30 days	30 days
Senior Note Redemption Notice Maximum Days									60 days	60 days
Redemption prices expressed as percentage of principal amount																																														104.75%	102.38%	100.00%
Maximum borrowing capacity																	40,000,000					17,000,000												25,000,000				3,500,000
Accrued interest																										10,328,000		9,860,000
Line of credit facility interest rate at period end																	5.00%	5.00%
Amount drawn																	14,000,000					10,000,000
Letters of Credit Outstanding, Amount																	1,700,000
Remaining borrowing capacity																	22,300,000																	24,000,000				2,200,000
Balance in investment account used to fund Project Blue Mill																						2,894,000
Debt	€ 713,247,000	€ 711,403,000	€ 432,907,000	[1]	€ 452,907,000	[1]				€ 221,429,000	[2]		€ 215,670,000	[2]				€ 10,735,000	[3]	€ 4,574,000	[3]	€ 10,000,000	[4]	€ 0	[4]	€ 37,088,000	[5]	€ 36,620,000	[5]	€ 1,088,000	[6]	€ 1,632,000	[6]	€ 0	[7]	€ 0	[7]	€ 0	[8]	€ 0	[8]

[1] Note payable to bank, included in a total loan facility of €827,950 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 March 31, 2013 range from 1.39% to 2.14%), 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 €372,907 of 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 8 - 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 €164,000 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 €15,000 working capital reserve and the Guarantee Amount, as discussed in Note 10(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 March 31, 2013, the DSRA balance was €32,986 and was not Fully Funded.

[2] On November 17, 2010, the Company completed a private offering of $300.0 million 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 June 2012, the Company’s Board of Directors authorized the purchase of up to €50,000 in aggregate principal amount of the Company’s Senior Notes from time to time, over a period ending June 2013. During the three month period ended March 31, 2013, the Company did not purchase any of its outstanding Senior Notes. During the twelve month period ended December 31, 2012, the Company purchased $2.0 million of its outstanding Senior Notes. 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 2013. 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 3.75% or Canadian prime plus 2.00%. U.S. dollar denominated amounts bear interest at LIBOR plus 3.75% or U.S. base plus 2.00%. As at March 31, 2013, this facility was accruing interest at a rate of approximately 5.00%, C$14.0 million of this facility was drawn, C$1.7 million was supporting letters of credit and approximately C$22.3 million was available. The Company is in the process of extending the maturity date of the facility.

[4] A €17,000 amortizing term facility to partially finance a project, referred to as "Project Blue Mill", which is expected to increase the Stendal mill’s annual pulp production capacity by 30,000 air-dried metric tonnes and includes the installation of an additional 40 megawatt steam turbine. 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 and is available for disbursement up to August 31, 2013. 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 the Company. As at March 31, 2013, €10,000 had been drawn on this facility and was accruing interest at a rate of approximately 3.83%. As part of the 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 March 31, 2013, the balance in the investment account was €2,894.

[5] Loans of €26,760 payable by the Stendal mill to its noncontrolling shareholder bear interest at a rate of 7.00% 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 €440, 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 March 31, 2013, accrued interest on these loans was €10,328. As at December 31, 2012, accrued interest on these loans was €9,860.

[6] A four-year amortizing investment loan agreement with a lender relating to the wash press project at the Rosenthal mill with a total facility of €4,351 bearing interest at the rate of Euribor plus 2.75% that matures February 2014. Borrowings under this agreement are secured by the wash press equipment. As at March 31, 2013, the balance outstanding was €1,088 and was accruing interest at a rate of 3.13%.

[7] A €25,000 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 March 31, 2013, approximately €1,000 of this facility was supporting bank guarantees leaving approximately €24,000 available.

[8] A €3,500 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 March 31, 2013, approximately €1,300 of this facility was supporting bank guarantees leaving approximately €2,200 available.

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Inventories (Components of Inventory) (Details) (EUR €) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Inventories [Abstract]
Raw materials	€ 37,296	€ 46,028
Finished goods	40,092	38,169
Spare parts and other	35,520	34,103
Inventories	€ 112,908	€ 118,300

XML

Debt (Schedule Of Debt) (Details)	Mar. 31, 2013 EUR (€)	Dec. 31, 2012 EUR (€)	Mar. 31, 2013 Stendal Loan Facility [Member] EUR (€)		Dec. 31, 2012 Stendal Loan Facility [Member] EUR (€)		Mar. 31, 2013 Senior Notes [Member] EUR (€)		Dec. 31, 2012 Senior Notes [Member] EUR (€)		Nov. 17, 2010 Senior Notes [Member] USD ($)	Mar. 31, 2013 Credit Agreement For Celgar Mill [Member] CAD	Mar. 31, 2013 Credit Agreement For Celgar Mill [Member] EUR (€)		Dec. 31, 2012 Credit Agreement For Celgar Mill [Member] EUR (€)		Mar. 31, 2013 Project Blue Mill [Member] EUR (€)		Dec. 31, 2012 Project Blue Mill [Member] EUR (€)		Mar. 31, 2013 Loans Payable To The Noncontrolling Shareholder[Member] EUR (€)		Dec. 31, 2012 Loans Payable To The Noncontrolling Shareholder[Member] EUR (€)		Mar. 31, 2013 Investment Loan Agreement At Rosenthal Mill [Member] EUR (€)		Dec. 31, 2012 Investment Loan Agreement At Rosenthal Mill [Member] EUR (€)		Mar. 31, 2013 Rosenthal Credit Facility - 25 Million [Member] EUR (€)		Dec. 31, 2012 Rosenthal Credit Facility - 25 Million [Member] EUR (€)		Mar. 31, 2013 Rosenthal Credit Facility - 3.5 Million [Member] EUR (€)		Dec. 31, 2012 Rosenthal Credit Facility - 3.5 Million [Member] EUR (€)
Debt Instrument [Line Items]
Total debt	€ 713,247,000	€ 711,403,000	€ 432,907,000	[1]	€ 452,907,000	[1]	€ 221,429,000	[2]	€ 215,670,000	[2]			€ 10,735,000	[3]	€ 4,574,000	[3]	€ 10,000,000	[4]	€ 0	[4]	€ 37,088,000	[5]	€ 36,620,000	[5]	€ 1,088,000	[6]	€ 1,632,000	[6]	€ 0	[7]	€ 0	[7]	€ 0	[8]	€ 0	[8]
Less: current portion	(55,081,000)	(45,662,000)
Debt, less current portion	658,166,000	665,741,000
Debt, face amount			827,950,000								300,000,000										26,760,000				4,351,000
Maximum borrowing capacity												40,000,000					€ 17,000,000												€ 25,000,000				€ 3,500,000
Debt, stated interest rate							9.50%														7.00%

[1] Note payable to bank, included in a total loan facility of €827,950 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 March 31, 2013 range from 1.39% to 2.14%), 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 €372,907 of 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 8 - 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 €164,000 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 €15,000 working capital reserve and the Guarantee Amount, as discussed in Note 10(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 March 31, 2013, the DSRA balance was €32,986 and was not Fully Funded.

[2] On November 17, 2010, the Company completed a private offering of $300.0 million 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 June 2012, the Company’s Board of Directors authorized the purchase of up to €50,000 in aggregate principal amount of the Company’s Senior Notes from time to time, over a period ending June 2013. During the three month period ended March 31, 2013, the Company did not purchase any of its outstanding Senior Notes. During the twelve month period ended December 31, 2012, the Company purchased $2.0 million of its outstanding Senior Notes. 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 2013. 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 3.75% or Canadian prime plus 2.00%. U.S. dollar denominated amounts bear interest at LIBOR plus 3.75% or U.S. base plus 2.00%. As at March 31, 2013, this facility was accruing interest at a rate of approximately 5.00%, C$14.0 million of this facility was drawn, C$1.7 million was supporting letters of credit and approximately C$22.3 million was available. The Company is in the process of extending the maturity date of the facility.

[4] A €17,000 amortizing term facility to partially finance a project, referred to as "Project Blue Mill", which is expected to increase the Stendal mill’s annual pulp production capacity by 30,000 air-dried metric tonnes and includes the installation of an additional 40 megawatt steam turbine. 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 and is available for disbursement up to August 31, 2013. 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 the Company. As at March 31, 2013, €10,000 had been drawn on this facility and was accruing interest at a rate of approximately 3.83%. As part of the 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 March 31, 2013, the balance in the investment account was €2,894.

[5] Loans of €26,760 payable by the Stendal mill to its noncontrolling shareholder bear interest at a rate of 7.00% 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 €440, 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 March 31, 2013, accrued interest on these loans was €10,328. As at December 31, 2012, accrued interest on these loans was €9,860.

[6] A four-year amortizing investment loan agreement with a lender relating to the wash press project at the Rosenthal mill with a total facility of €4,351 bearing interest at the rate of Euribor plus 2.75% that matures February 2014. Borrowings under this agreement are secured by the wash press equipment. As at March 31, 2013, the balance outstanding was €1,088 and was accruing interest at a rate of 3.13%.

[7] A €25,000 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 March 31, 2013, approximately €1,000 of this facility was supporting bank guarantees leaving approximately €24,000 available.

[8] A €3,500 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 March 31, 2013, approximately €1,300 of this facility was supporting bank guarantees leaving approximately €2,200 available.

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Debt (Principal Maturities Of Debt) (Details) (EUR €) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012
Debt [Abstract]
Principal repayments	€ 20,545	€ 10,126
2013	32,908
2014	48,915
2015	44,000
2016	44,000
2017	543,424
Thereafter	0
Total debt	€ 713,247		€ 711,403

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The Company And Summary Of Significant Accounting Policies

3 Months Ended

Mar. 31, 2013

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, 2012. In the opinion of the Company, the unaudited interim consolidated financial statements contained herein contain all adjustments necessary to fairly present 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.

Certain prior period amounts in the interim consolidated financial statements have been reclassified to conform to the current period presentation. Beginning in the second quarter of 2012, the Company has presented revenue from the sale of chemicals within energy and chemicals revenue in the Interim Consolidated Statement of Operations. This revenue had previously been presented within operating costs. Chemical revenue for the three month period ended March 31, 2013 was €2,861 (2012 – €2,808).

In these interim consolidated financial statements, unless otherwise indicated, all amounts are expressed in Euros ("€"). The term "U.S. dollars" and the symbol "$" refer to United States dollars. The symbol "C$" 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, environmental conservation and 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.

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Pension And Other Post-Retirement Benefit Obligations (Details) (EUR €) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Pension Benefits [Member]
Retirement Benefits [Line Items]
Service cost	€ 26	€ 27
Interest cost	355	373
Expected return on plan assets	(412)	(401)
Recognized net loss	278	276
Net periodic benefit cost	247	275
Post-Retirement Benefits [Member]
Retirement Benefits [Line Items]
Service cost	146	138
Interest cost	214	214
Expected return on plan assets	0	0
Recognized net loss	23	1
Net periodic benefit cost	383	353
Celgar Defined Benefit Plans [Member]
Retirement Benefits [Line Items]
Pension and other post-retirement benefit contributions	497	501
Defined Contribution Plan Jan 1, 2009 [Member]
Retirement Benefits [Line Items]
Pension contributions	174	161
Multiemployer Plan [Member]
Retirement Benefits [Line Items]
Multiemployer plan contributions	€ 381	€ 477

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Commitments And Contingencies (Details) (EUR €) In Thousands, unless otherwise specified			3 Months Ended
	Mar. 31, 2013	Jan. 28, 2011	Mar. 31, 2013 Stendal Mill, Project Blue Mill [Member]
Compensation For Remediation Work		€ 10,000
Compensation For Remediation Work In Accounts Payable And Other	1,768	10,000
Unrecorded Unconditional Purchase Obligation, Purchases			€ 11,200

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INTERIM CONSOLIDATED BALANCE SHEETS (Unaudited) (EUR €) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Current assets
Cash and cash equivalents	€ 110,664	€ 104,239
Receivables	120,184	110,087
Inventories (Note 2)	112,908	118,300
Prepaid expenses and other	8,295	7,907
Deferred income tax	3,824	4,465
Total current assets	355,875	344,998
Long-term assets
Property, plant and equipment	802,959	808,878
Deferred note issuance and other	11,622	12,162
Deferred income tax	15,104	17,565
Total noncurrent assets	829,685	838,605
Total assets	1,185,560	1,183,603
Current liabilities
Accounts payable and other	97,645	89,950
Pension and other post-retirement benefit obligations (Note 4)	818	813
Debt (Note 3)	55,081	45,662
Total current liabilities	153,544	136,425
Long-term liabilities
Debt (Note 3)	658,166	665,741
Unrealized interest rate derivative losses (Note 8)	45,513	50,678
Pension and other post-retirement benefit obligations (Note 4)	32,451	32,141
Capital leases and other	13,887	13,936
Deferred income tax	6,175	5,757
Total long-term liabilities	756,192	768,253
Total liabilities	909,736	904,678
Shareholders' equity
Share capital (Note 5)	248,757	248,371
Paid-in capital	(3,706)	(3,547)
Retained earnings	25,375	25,800
Accumulated other comprehensive income	21,570	25,181
Total shareholders' equity	291,996	295,805
Noncontrolling interest (deficit)	(16,172)	(16,880)
Total equity	275,824	278,925
Total liabilities and equity	1,185,560	1,183,603
Commitments and contingencies (Note 10)

XML

INTERIM CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (Unaudited) (EUR €) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Interim Consolidated Statements of Retained Earnings [Abstract]
Net income (loss) attributable to common shareholders	€ (425)	€ 1,173
Retained earnings, beginning of period	25,800	37,985
Retained earnings, end of period	€ 25,375	€ 39,158

XML

Net Income (Loss) Per Share Attributable To Common Shareholders (Details) (EUR €) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013		Mar. 31, 2012
Earnings Per Share Effect Of Dilutive Instruments [Line Items]
Net income (loss) attributable to common shareholders - basic and diluted	€ (425)		€ 1,173
Earnings per share, basic and diluted	€ (0.01)		€ 0.02
Weighted average number of common shares outstanding, Basic	55,632,982	[1]	55,554,830	[1]
Weighted average of number of common shares outstanding, Diluted	55,632,982		55,861,208
Performance Shares And PSUs [Member]
Earnings Per Share Effect Of Dilutive Instruments [Line Items]
Effect of dilutive instruments	0		277,676
Restricted Shares [Member]
Earnings Per Share Effect Of Dilutive Instruments [Line Items]
Contingently issuable shares excluded from the basic weighted average shares outstanding	156,500		198,000
Stock Options [Member]
Earnings Per Share Effect Of Dilutive Instruments [Line Items]
Effect of dilutive instruments	0		28,702

[1] The basic weighted average number of shares excludes 156,500 restricted shares which have been issued, but have not vested as at March 31, 2013 (2012 - 198,000 restricted shares).

XML

Pension And Other Post-Retirement Benefit Obligations (Tables)

3 Months Ended

Mar. 31, 2013

Pension And Other Post-Retirement Benefit Obligations [Abstract]

Components Of Defined Benefit Plan

	Three Months ended March 31,
	2013				2012
	Pension Benefits		Post-Retirement Benefits		Pension Benefits		Post-Retirement Benefits
Service cost	€	26	€	146	€	27	€	138
Interest cost		355		214		373		214
Expected return on plan assets		(412)		-		(401)		-
Recognized net loss		278		23		276		1
Net periodic benefit cost	€	247	€	383	€	275	€	353

XML

Net Income (Loss) Per Share Attributable To Common Shareholders (Anti-Dilutive Instruments) (Details)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Performance Share Units [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from EPS computation	786,129	0
Restricted Shares [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from EPS computation	156,500	198,000
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from EPS computation	175,000	45,000

XML

Derivative Instruments (Tables)

3 Months Ended

Mar. 31, 2013

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
	March 31,
	2013		2012
Interest rate derivative contract	€	5,165	€	876
Pulp price derivative contracts		(345)		-
	€	4,820	€	876

XML

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (EUR €) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Cash flows from (used in) operating activities
Net income (loss)	€ 283	€ 1,844
Adjustments to reconcile net income (loss) to cash flows from operating activities
Unrealized gain on derivative instruments	(4,695)	(876)
Depreciation and amortization	14,794	14,350
Deferred income taxes	4,138	676
Stock compensation expense	267	868
Pension and other post-retirement expense, net of funding	121	(14)
Other	1,183	793
Changes in working capital
Receivables	(9,704)	2,685
Inventories	5,746	11,738
Accounts payable and accrued expenses	10,597	2,649
Other	(782)	1,424
Net cash from (used in) operating activities	21,948	36,137
Cash flows from (used in) investing activities
Purchase of property, plant and equipment	(11,395)	(8,465)
Proceeds on sale of property, plant and equipment	13	226
Net cash from (used in) investing activities	(11,382)	(8,239)
Cash flows from (used in) financing activities
Repayment of debt	(20,545)	(10,126)
Proceeds from borrowings of debt	10,000	0
Repayment of capital lease obligations	(700)	(611)
Proceeds from credit facilities, net	5,968	3,759
Payment of note issuance costs	0	(1,621)
Proceeds from government grants	730	630
Net cash from (used in) financing activities	(4,547)	(7,969)
Effect of exchange rate changes on cash and cash equivalents	406	(805)
Net increase (decrease) in cash and cash equivalents	6,425	19,124
Cash and cash equivalents, beginning of period	104,239	105,072
Cash and cash equivalents, end of period	110,664	124,196
Cash paid during the period for
Interest	2,750	4,827
Income taxes	665	2,608
Supplemental schedule of non-cash investing and financing activities
Acquisition of production and other equipment under capital lease obligations	170	0
Increase (decrease) in accounts payable and accrued purchases for property, plant and equipment	(2,899)	463
Increase (decrease) in receivables of government grants for long-term assets	€ 0	€ (638)

XML

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (EUR €) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Revenues
Pulp	€ 180,120	€ 199,439
Energy and chemicals	18,152	18,919
Total revenues	198,272	218,358
Costs and expenses
Operating costs	165,098	177,770
Operating depreciation and amortization	14,731	14,287
Gross profit	18,443	26,301
Selling, general and administrative expenses	8,895	10,058
Operating income	9,548	16,243
Other income (expense)
Interest expense	(13,148)	(14,133)
Gain on derivative instruments (Note 8)	4,820	876
Other income (expense)	(70)	(410)
Total other income (expense)	(8,398)	(13,667)
Income (loss) before income taxes	1,150	2,576
Income tax benefit (provision) - current	3,271	(56)
Income tax benefit (provision) - deferred	(4,138)	(676)
Net income (loss)	283	1,844
Less: net income attributable to noncontrolling interest	(708)	(671)
Net income (loss) attributable to common shareholders	€ (425)	€ 1,173
Net income (loss) per share attributable to common shareholders (Note 7)
Earnings per share, basic and diluted	€ (0.01)	€ 0.02

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Commitments and Contigencies

3 Months Ended

Mar. 31, 2013

Commitments And Contingencies [Abstract]

Commitments and Contingencies

Note 10. 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 €10,000 (the "Guarantee Amount"), which is intended to compensate the Company for remediation work that is required at the Stendal mill, but it was less than the amount claimed by the Company under the arbitration. Most of the claims have been settled; however, the arbitration proceeding is ongoing, and there is no certainty that the Company will be successful with its remaining claim.

The €10,000 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 March 31, 2013, the Company had Guarantee Amount proceeds of €1,768 remaining in accounts payable and other.

(b) The Company is involved in a property transfer tax dispute with respect to the Celgar mill and certain other legal actions and claims arising in the ordinary course of business. Celgar had previously paid the property transfer tax assessment. The court proceedings of our appeal commenced during the first quarter of 2013. A final court date for the appeal is scheduled during the second quarter of 2013. The outcome of this appeal process is uncertain. In addition, 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.

Note 10. Commitments and Contingencies (continued)

(c) 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. 

(d) As at March 31, 2013, the Company had entered into capital commitments of approximately €11,200 at the Stendal mill as part of Project Blue Mill.

XML

Document and Entity Information	3 Months Ended
	Mar. 31, 2013	May 02, 2013
Document and Entity Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1
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		55,815,704

XML

Restricted Group Supplemental Disclosure

3 Months Ended

Mar. 31, 2013

Restricted Group Supplemental Disclosure [Abstract]

Restricted Group Supplemental Disclosure

Note 11. Restricted Group Supplemental Disclosure

The terms of the indenture governing our Senior 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, 2013 and 2012, 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.

Combined Condensed Balance Sheets

	March 31, 2013
	Restricted		Unrestricted				Consolidated
	Group		Subsidiaries		Eliminations		Group
ASSETS
Current assets
Cash and cash equivalents	€	52,032	€	58,632	€	-	€	110,664
Receivables		69,944		50,240		-		120,184
Inventories		72,073		40,835		-		112,908
Prepaid expenses and other		4,834		3,461		-		8,295
Deferred income tax		2,190		1,634		-		3,824
Total current assets		201,073		154,802		-		355,875
Long-term assets
Property, plant and equipment		340,459		462,500		-		802,959
Deferred note issuance and other		6,322		5,300		-		11,622
Deferred income tax		9,222		5,882		-		15,104
Due from unrestricted group		104,581		-		(104,581)		-
Total assets	€	661,657	€	628,484	€	(104,581)	€	1,185,560
LIABILITIES
Current liabilities
Accounts payable and other	€	52,688	€	44,957	€	-	€	97,645
Pension and other post-retirement benefit obligations		818		-		-		818
Debt		11,823		43,258		-		55,081
Total current liabilities		65,329		88,215		-		153,544
Long-term liabilities
Debt		221,430		436,736		-		658,166
Due to restricted group		-		104,581		(104,581)		-
Unrealized interest rate derivative losses		-		45,513		-		45,513
Pension and other post-retirement benefit obligations		32,451		-		-		32,451
Capital leases and other		6,095		7,792		-		13,887
Deferred income tax		6,175		-		-		6,175
Total liabilities		331,480		682,837		(104,581)		909,736
EQUITY
Total shareholders' equity (deficit)		330,177		(38,181)		-		291,996
Noncontrolling interest (deficit)		-		(16,172)		-		(16,172)
Total liabilities and equity	€	661,657	€	628,484	€	(104,581)	€	1,185,560

Note 11. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Balance Sheets

	December 31, 2012
	Restricted		Unrestricted				Consolidated
	Group		Subsidiaries		Eliminations		Group
ASSETS
Current assets
Cash and cash equivalents	€	36,714	€	67,525	€	-	€	104,239
Receivables		61,212		48,875		-		110,087
Inventories		74,786		43,514		-		118,300
Prepaid expenses and other		5,811		2,096		-		7,907
Deferred income tax		2,188		2,277		-		4,465
Total current assets		180,711		164,287		-		344,998
Long-term assets
Property, plant and equipment		345,311		463,567		-		808,878
Deferred note issuance and other		6,607		5,555		-		12,162
Deferred income tax		9,179		8,386		-		17,565
Due from unrestricted group		102,311		-		(102,311)		-
Total assets	€	644,119	€	641,795	€	(102,311)	€	1,183,603
LIABILITIES
Current liabilities
Accounts payable and other	€	42,106	€	47,844	€	-	€	89,950
Pension and other post-retirement benefit obligations		813		-		-		813
Debt		5,662		40,000		-		45,662
Total current liabilities		48,581		87,844		-		136,425
Long-term liabilities
Debt		216,214		449,527		-		665,741
Due to restricted group		-		102,311		(102,311)		-
Unrealized interest rate derivative losses		-		50,678		-		50,678
Pension and other post-retirement benefit obligations		32,141		-		-		32,141
Capital leases and other		6,073		7,863		-		13,936
Deferred income tax		5,757		-		-		5,757
Total liabilities		308,766		698,223		(102,311)		904,678
EQUITY
Total shareholders' equity (deficit)		335,353		(39,548)		-		295,805
Noncontrolling interest (deficit)		-		(16,880)		-		(16,880)
Total liabilities and equity	€	644,119	€	641,795	€	(102,311)	€	1,183,603

Note 11. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Statements of Operations

	Three months ended March 31, 2013
	Restricted		Unrestricted				Consolidated
	Group		Subsidiaries		Eliminations		Group
Revenues
Pulp	€	100,240	€	79,880	€	-	€	180,120
Energy and chemicals		7,090		11,062		-		18,152
		107,330		90,942		-		198,272
Operating costs		89,523		75,575		-		165,098
Operating depreciation and amortization		8,191		6,540		-		14,731
Selling, general and administrative expenses		5,716		3,179		-		8,895
		103,430		85,294		-		188,724
Operating income		3,900		5,648		-		9,548
Other income (expense)
Interest expense		(5,866)		(8,930)		1,648		(13,148)
Gain (loss) on derivative instruments		(345)		5,165		-		4,820
Other income (expense)		1,535		43		(1,648)		(70)
Total other income (expense)		(4,676)		(3,722)		-		(8,398)
Income (loss) before income taxes		(776)		1,926		-		1,150
Income tax benefit (provision)		(1,016)		149		-		(867)
Net income (loss)		(1,792)		2,075		-		283
Less: net income attributable to noncontrolling interest		-		(708)		-		(708)
Net income (loss) attributable to common shareholders	€	(1,792)	€	1,367	€	-	€	(425)

	Three months ended March 31, 2012
	Restricted		Unrestricted				Consolidated
	Group		Subsidiaries		Eliminations		Group
Revenues
Pulp	€	109,889	€	89,550	€	-	€	199,439
Energy and chemicals		7,991		10,928		-		18,919
		117,880		100,478		-		218,358
Operating costs		98,336		79,434		-		177,770
Operating depreciation and amortization		7,640		6,647		-		14,287
Selling, general and administrative expenses		6,521		3,537		-		10,058
		112,497		89,618		-		202,115
Operating income		5,383		10,860		-		16,243
Other income (expense)
Interest expense		(5,810)		(9,664)		1,341		(14,133)
Gain on derivative instruments		-		876		-		876
Other income (expense)		825		106		(1,341)		(410)
Total other income (expense)		(4,985)		(8,682)		-		(13,667)
Income before income taxes		398		2,178		-		2,576
Income tax benefit (provision)		(715)		(17)		-		(732)
Net income (loss)		(317)		2,161		-		1,844
Less: net income attributable to noncontrolling interest		-		(671)		-		(671)
Net income (loss) attributable to common shareholders	€	(317)	€	1,490	€	-	€	1,173

Note 11. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Statements of Cash Flows

	Three months ended March 31, 2013
	Restricted		Unrestricted		Consolidated
	Group		Subsidiaries		Group
Cash flows from (used in) operating activities
Net income (loss)	€	(1,792)	€	2,075	€	283
Adjustments to reconcile net income (loss) to cash flows
from operating activities
Unrealized loss (gain) on derivative instruments		470		(5,165)		(4,695)
Depreciation and amortization		8,254		6,540		14,794
Deferred income taxes		991		3,147		4,138
Stock compensation expense		267		-		267
Pension and other post-retirement expense, net of
funding		121		-		121
Other		413		770		1,183
Changes in working capital
Receivables		(8,339)		(1,365)		(9,704)
Inventories		3,067		2,679		5,746
Accounts payable and accrued expenses		10,505		92		10,597
Other(1)		(1,714)		932		(782)
Net cash from (used in) operating activities		12,243		9,705		21,948
Cash flows from (used in) investing activities
Purchase of property, plant and equipment		(2,645)		(8,750)		(11,395)
Proceeds on sale of property, plant and equipment		13		-		13
Net cash from (used in) investing activities		(2,632)		(8,750)		(11,382)
Cash flows from (used in) financing activities
Repayment of debt		(545)		(20,000)		(20,545)
Proceeds from borrowings of debt		-		10,000		10,000
Repayment of capital lease obligations		(122)		(578)		(700)
Proceeds from credit facilities, net		5,968		-		5,968
Proceeds from government grants		-		730		730
Net cash from (used in) financing activities		5,301		(9,848)		(4,547)
Effect of exchange rate changes on cash and cash
equivalents		406		-		406
Net increase (decrease) in cash and cash equivalents		15,318		(8,893)		6,425
Cash and cash equivalents, beginning of period		36,714		67,525		104,239
Cash and cash equivalents, end of period	€	52,032	€	58,632	€	110,664

_________________________

(1) Includes intercompany related transactions.

Note 11. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Statements of Cash Flows

	Three months ended March 31, 2012
	Restricted		Unrestricted		Consolidated
	Group		Subsidiaries		Group
Cash flows from (used in) operating activities
Net income (loss)	€	(317)	€	2,161	€	1,844
Adjustments to reconcile net income (loss) to cash flows
from operating activities
Unrealized gain on derivative instruments		-		(876)		(876)
Depreciation and amortization		7,703		6,647		14,350
Deferred income taxes		676		-		676
Stock compensation expense		868		-		868
Pension and other post-retirement expense, net of
funding		(14)		-		(14)
Other		58		735		793
Changes in working capital
Receivables		(2,110)		4,795		2,685
Inventories		4,018		7,720		11,738
Accounts payable and accrued expenses		5,535		(2,886)		2,649
Other(1)		(6,474)		7,898		1,424
Net cash from (used in) operating activities		9,943		26,194		36,137
Cash flows from (used in) investing activities
Purchase of property, plant and equipment		(4,218)		(4,247)		(8,465)
Proceeds on sale of property, plant and equipment		186		40		226
Net cash from (used in) investing activities		(4,032)		(4,207)		(8,239)
Cash flows from (used in) financing activities
Repayment of debt		(543)		(9,583)		(10,126)
Repayment of capital lease obligations		(186)		(425)		(611)
Proceeds from credit facilities, net		3,759		-		3,759
Payment of note issuance costs		-		(1,621)		(1,621)
Proceeds from government grants		630		-		630
Net cash from (used in) financing activities		3,660		(11,629)		(7,969)
Effect of exchange rate changes on cash and cash
equivalents		(805)		-		(805)
Net increase in cash and cash equivalents		8,766		10,358		19,124
Cash and cash equivalents, beginning of period		44,829		60,243		105,072
Cash and cash equivalents, end of period	€	53,595	€	70,601	€	124,196

___________________________

Includes intercompany related transactions.

XML

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (EUR €) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Interim Consolidated Statements Of Comprehensive Income (Loss) [Abstract]
Net income (loss)	€ 283	€ 1,844
Other comprehensive income (loss), net of taxes
Foreign currency translation adjustments, net of tax expense of 574 (2012 - benefit of 90)	(3,528)	2,147
Change in unrecognized losses and prior service costs related to defined benefit plans, net of tax benefit of nil (2012 - nil)	(93)	149
Change in unrealized losses on marketable securities, net of tax benefit of nil (2012 - nil)	10	68
Other comprehensive income (loss), net of taxes	(3,611)	2,364
Total comprehensive income (loss)	(3,328)	4,208
Comprehensive income attributable to noncontrolling interest	(708)	(671)
Comprehensive income (loss) attributable to common shareholders	€ (4,036)	€ 3,537

XML

Share Capital

3 Months Ended

Mar. 31, 2013

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 March 31, 2013 and December 31, 2012, the Company had 55,815,704 common shares issued and outstanding.  

Share Repurchase Program

In July 2012, the Company’s Board of Directors authorized a share repurchase program (the "Program") to repurchase up to approximately $14.4 million of the Company’s outstanding common shares from time to time over a period ending August 2013. During the three month period ended March 31, 2013 and the twelve month period ended December 31, 2012, the Company did not repurchase any of its common shares.

Note 5. Share Capital (continued)

Preferred shares

The Company has authorized 50,000,000 preferred shares with $1 par value issuable in series, of which 2,000,000 shares have been designated as Series A. The preferred shares may be issued in one or more series and with such designations and preferences for each series as shall be stated in the resolutions providing for the designation and issue of each such series adopted by the Board of Directors of the Company. The Board of Directors is authorized by the Company's articles of incorporation to determine the voting, dividend, redemption and liquidation preferences pertaining to each such series. As at March 31, 2013, no preferred shares had been issued by the Company.

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Pension and Other Post-Retirement Benefit Obligations

3 Months Ended

Mar. 31, 2013

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 month period ended March 31, 2013 totaled €497 (2012 – €501).

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 month period ended March 31, 2013, the Company made contributions of €174 (2012 – €161) to this plan.

Information about the Celgar Plans, in aggregate for the three month periods ended March 31, 2013 and March 31, 2012 is as follows:

	Three Months ended March 31,
	2013				2012
	Pension Benefits		Post-Retirement Benefits		Pension Benefits		Post-Retirement Benefits
Service cost	€	26	€	146	€	27	€	138
Interest cost		355		214		373		214
Expected return on plan assets		(412)		-		(401)		-
Recognized net loss		278		23		276		1
Net periodic benefit cost	€	247	€	383	€	275	€	353

The Company participates in a multiemployer plan for hourly-paid employees at the Celgar mill. The contributions to this plan are determined based on an amount per hour worked pursuant to a collective bargaining agreement. The Company has no current or future contribution obligations in excess of the contractual contributions. During the three month period ended March 31, 2013, the Company made contributions of €381 (2012 – €477) to this plan.

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

3 Months Ended

Mar. 31, 2013

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

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

	Three Months Ended
	March 31,
	2013		2012
Net income (loss) attributable to common shareholders:
Basic and diluted	€	(425)	€	1,173
Net income (loss) per share attributable to common shareholders:
Basic and diluted	€	(0.01)	€	0.02
Weighted average number of common shares outstanding:
Basic(1)		55,632,982		55,554,830
Effect of dilutive instruments:
PSUs		-		277,676
Stock options		-		28,702
Diluted		55,632,982		55,861,208

___________________________

(1) The basic weighted average number of shares excludes 156,500 restricted shares which have been issued, but have not vested as at March 31, 2013 (2012 – 198,000 restricted shares).

Schedule Of Antidilutive Instruments Excluded from Computation of Earnings (Loss) Per Share

	Three Months Ended
	March 31,
	2013		2012
PSUs		786,129		-
Restricted shares		156,500		198,000
Stock options		175,000		45,000

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The Company And Summary Of Significant Accounting Policies (Policy)

3 Months Ended

Mar. 31, 2013

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, 2012. In the opinion of the Company, the unaudited interim consolidated financial statements contained herein contain all adjustments necessary to fairly present 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.

Certain prior period amounts in the interim consolidated financial statements have been reclassified to conform to the current period presentation. Beginning in the second quarter of 2012, the Company has presented revenue from the sale of chemicals within energy and chemicals revenue in the Interim Consolidated Statement of Operations. This revenue had previously been presented within operating costs. Chemical revenue for the three month period ended March 31, 2013 was €2,861 (2012 – €2,808).

In these interim consolidated financial statements, unless otherwise indicated, all amounts are expressed in Euros ("€"). The term "U.S. dollars" and the symbol "$" refer to United States dollars. The symbol "C$" 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, environmental conservation and 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.

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Derivative Transactions

3 Months Ended

Mar. 31, 2013

Derivative Transactions [Abstract]

Derivative Transactions

Note 8. 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 and a small portion of its pulp sales price risk with the use of derivative instruments. The derivatives are measured at fair value with changes in fair value immediately recognized in gain on derivative instruments in the Interim Consolidated Statement of Operations.    

Derivative assets are presented in prepaid expenses and other, and derivative liabilities are presented in unrealized interest rate derivative losses in the Consolidated Balance Sheet.

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 €612,600 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 €357,576at 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

During November 2012, the Company entered into two fixed price pulp swap contracts with a bank. Under the terms of the contracts, 3,000 MT of pulp per month is fixed at prices which range from $880 to $890 per MT. The contracts expire in December 2013. 

The following table shows our gains and losses by type of derivative recognized in gain on derivative instruments in the Consolidated Statement of Operations:

	Three Months Ended
	March 31,
	2013		2012
Interest rate derivative contract	€	5,165	€	876
Pulp price derivative contracts		(345)		-
	€	4,820	€	876

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2013

Stock-Based Compensation [Abstract]

Stock-Based Compensation

Note 6. Stock-Based Compensation

The Company has 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. As at March 31, 2013, after factoring in all allocated shares, there remain approximately 1.1 million common shares available for grant pursuant to the 2010 Plan.

During the three month period ended March 31, 2013,40,000 restricted shares vested. 

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Net Income (Loss) Per Share Attributable To Common Shareholders

3 Months Ended

Mar. 31, 2013

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
	March 31,
	2013		2012
Net income (loss) attributable to common shareholders:
Basic and diluted	€	(425)	€	1,173
Net income (loss) per share attributable to common shareholders:
Basic and diluted	€	(0.01)	€	0.02
Weighted average number of common shares outstanding:
Basic(1)		55,632,982		55,554,830
Effect of dilutive instruments:
PSUs		-		277,676
Stock options		-		28,702
Diluted		55,632,982		55,861,208

___________________________

(1) The basic weighted average number of shares excludes 156,500 restricted shares which have been issued, but have not vested as at March 31, 2013 (2012 – 198,000 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
	March 31,
	2013		2012
PSUs		786,129		-
Restricted shares		156,500		198,000
Stock options		175,000		45,000

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Financial Instruments

3 Months Ended

Mar. 31, 2013

Financial Instruments [Abstract]

Financial Instruments

Note 9. Financial Instruments

The fair value of financial instruments is summarized as follows:

	March 31, 2013				December 31, 2012
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cash and cash equivalents	€	110,664	€	110,664	€	104,239	€	104,239
Marketable securities		196		196		184		184
Receivables		120,184		120,184		110,087		110,087
Pulp price derivative contracts – asset		280		280		745		745
Accounts payable and other		97,645		97,645		89,950		89,950
Debt		713,247		709,622		711,403		700,001
Interest rate derivative contract – liability		45,513		45,513		50,678		50,678

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. The fair value of debt reflects recent market transactions and discounted cash flow estimates. 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 pulp price derivative contracts and interest rate derivative contract was determined.

Fair Value Measurement and Disclosure

The fair value methodologies and, as a result, the fair value of the Company's investments 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 and pulp price derivatives are classified within Level 2 of the valuation hierarchy, as they are valued using internal models that use as their basis readily observable market inputs, such as forward interest rates, yield curves observable at specified intervals and commodity price curves. 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 our interest rate and pulp price derivatives are multi-national financial institutions.

Note 9. 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 March 31, 2013 using:
Description	Level 1		Level 2		Level 3		Total
Assets
Marketable securities	€	196	€	-	€	-	€	196
Pulp price derivative contracts		-		280		-		280
	€	196	€	280	€	-	€	476
Liabilities
Interest rate derivative contract	€	-	€	45,513	€	-	€	45,513
	Fair value measurements at December 31, 2012 using:
Description	Level 1		Level 2		Level 3		Total
Assets
Marketable securities	€	184	€	-	€	-	€	184
Pulp price derivative contracts		-		745		-		745
	€	184	€	745	€	-	€	929
Liabilities
Interest rate derivative contract	€	-	€	50,678	€	-	€	50,678

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Stock-Based Compensation (Narrative) (Details)	3 Months Ended
	Mar. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common shares available for grant	1,100,000
Restricted Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vested	40,000

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Debt (Tables)

3 Months Ended

Mar. 31, 2013

Debt [Abstract]

Schedule Of Debt

	March 31,		December 31,
	2013		2012
Note payable to bank, included in a total loan credit facility of €827,950
to finance the construction related to the Stendal mill (a)	€	432,907	€	452,907
Senior notes, interest at 9.50% accrued and payable semi-annually,
unsecured (b)		221,429		215,670
Credit agreement with a lender with respect to a revolving credit facility
of C$40 million (c)		10,735		4,574
Term bank facility for a project at the Stendal mill of €17,000 (d)		10,000		-
Loans payable to the noncontrolling shareholder of the Stendal mill (e)		37,088		36,620
Investment loan agreement with a lender with respect to a project at
the Rosenthal mill of €4,351 (f)		1,088		1,632
Credit agreement with a bank with respect to a revolving credit facility
of €25,000 (g)		-		-
Credit agreement with a bank with respect to a revolving credit facility
of €3,500 (h)		-		-
		713,247		711,403
Less: current portion		(55,081)		(45,662)
Debt, less current portion	€	658,166	€	665,741

Principal Maturities Of Debt

Matures	Amount
2013	€	32,908
2014		48,915
2015		44,000
2016		44,000
2017		543,424
Thereafter		-
	€	713,247

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Restricted Group Supplemental Disclosure (Tables)

3 Months Ended

Mar. 31, 2013

Restricted Group Supplemental Disclosure [Abstract]

Combined Condensed Balance Sheets

Combined Condensed Balance Sheets

	March 31, 2013
	Restricted		Unrestricted				Consolidated
	Group		Subsidiaries		Eliminations		Group
ASSETS
Current assets
Cash and cash equivalents	€	52,032	€	58,632	€	-	€	110,664
Receivables		69,944		50,240		-		120,184
Inventories		72,073		40,835		-		112,908
Prepaid expenses and other		4,834		3,461		-		8,295
Deferred income tax		2,190		1,634		-		3,824
Total current assets		201,073		154,802		-		355,875
Long-term assets
Property, plant and equipment		340,459		462,500		-		802,959
Deferred note issuance and other		6,322		5,300		-		11,622
Deferred income tax		9,222		5,882		-		15,104
Due from unrestricted group		104,581		-		(104,581)		-
Total assets	€	661,657	€	628,484	€	(104,581)	€	1,185,560
LIABILITIES
Current liabilities
Accounts payable and other	€	52,688	€	44,957	€	-	€	97,645
Pension and other post-retirement benefit obligations		818		-		-		818
Debt		11,823		43,258		-		55,081
Total current liabilities		65,329		88,215		-		153,544
Long-term liabilities
Debt		221,430		436,736		-		658,166
Due to restricted group		-		104,581		(104,581)		-
Unrealized interest rate derivative losses		-		45,513		-		45,513
Pension and other post-retirement benefit obligations		32,451		-		-		32,451
Capital leases and other		6,095		7,792		-		13,887
Deferred income tax		6,175		-		-		6,175
Total liabilities		331,480		682,837		(104,581)		909,736
EQUITY
Total shareholders' equity (deficit)		330,177		(38,181)		-		291,996
Noncontrolling interest (deficit)		-		(16,172)		-		(16,172)
Total liabilities and equity	€	661,657	€	628,484	€	(104,581)	€	1,185,560

Note 11. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Balance Sheets

	December 31, 2012
	Restricted		Unrestricted				Consolidated
	Group		Subsidiaries		Eliminations		Group
ASSETS
Current assets
Cash and cash equivalents	€	36,714	€	67,525	€	-	€	104,239
Receivables		61,212		48,875		-		110,087
Inventories		74,786		43,514		-		118,300
Prepaid expenses and other		5,811		2,096		-		7,907
Deferred income tax		2,188		2,277		-		4,465
Total current assets		180,711		164,287		-		344,998
Long-term assets
Property, plant and equipment		345,311		463,567		-		808,878
Deferred note issuance and other		6,607		5,555		-		12,162
Deferred income tax		9,179		8,386		-		17,565
Due from unrestricted group		102,311		-		(102,311)		-
Total assets	€	644,119	€	641,795	€	(102,311)	€	1,183,603
LIABILITIES
Current liabilities
Accounts payable and other	€	42,106	€	47,844	€	-	€	89,950
Pension and other post-retirement benefit obligations		813		-		-		813
Debt		5,662		40,000		-		45,662
Total current liabilities		48,581		87,844		-		136,425
Long-term liabilities
Debt		216,214		449,527		-		665,741
Due to restricted group		-		102,311		(102,311)		-
Unrealized interest rate derivative losses		-		50,678		-		50,678
Pension and other post-retirement benefit obligations		32,141		-		-		32,141
Capital leases and other		6,073		7,863		-		13,936
Deferred income tax		5,757		-		-		5,757
Total liabilities		308,766		698,223		(102,311)		904,678
EQUITY
Total shareholders' equity (deficit)		335,353		(39,548)		-		295,805
Noncontrolling interest (deficit)		-		(16,880)		-		(16,880)
Total liabilities and equity	€	644,119	€	641,795	€	(102,311)	€	1,183,603

Combined Condensed Statements Of Operations

Combined Condensed Statements of Operations

	Three months ended March 31, 2013
	Restricted		Unrestricted				Consolidated
	Group		Subsidiaries		Eliminations		Group
Revenues
Pulp	€	100,240	€	79,880	€	-	€	180,120
Energy and chemicals		7,090		11,062		-		18,152
		107,330		90,942		-		198,272
Operating costs		89,523		75,575		-		165,098
Operating depreciation and amortization		8,191		6,540		-		14,731
Selling, general and administrative expenses		5,716		3,179		-		8,895
		103,430		85,294		-		188,724
Operating income		3,900		5,648		-		9,548
Other income (expense)
Interest expense		(5,866)		(8,930)		1,648		(13,148)
Gain (loss) on derivative instruments		(345)		5,165		-		4,820
Other income (expense)		1,535		43		(1,648)		(70)
Total other income (expense)		(4,676)		(3,722)		-		(8,398)
Income (loss) before income taxes		(776)		1,926		-		1,150
Income tax benefit (provision)		(1,016)		149		-		(867)
Net income (loss)		(1,792)		2,075		-		283
Less: net income attributable to noncontrolling interest		-		(708)		-		(708)
Net income (loss) attributable to common shareholders	€	(1,792)	€	1,367	€	-	€	(425)

	Three months ended March 31, 2012
	Restricted		Unrestricted				Consolidated
	Group		Subsidiaries		Eliminations		Group
Revenues
Pulp	€	109,889	€	89,550	€	-	€	199,439
Energy and chemicals		7,991		10,928		-		18,919
		117,880		100,478		-		218,358
Operating costs		98,336		79,434		-		177,770
Operating depreciation and amortization		7,640		6,647		-		14,287
Selling, general and administrative expenses		6,521		3,537		-		10,058
		112,497		89,618		-		202,115
Operating income		5,383		10,860		-		16,243
Other income (expense)
Interest expense		(5,810)		(9,664)		1,341		(14,133)
Gain on derivative instruments		-		876		-		876
Other income (expense)		825		106		(1,341)		(410)
Total other income (expense)		(4,985)		(8,682)		-		(13,667)
Income before income taxes		398		2,178		-		2,576
Income tax benefit (provision)		(715)		(17)		-		(732)
Net income (loss)		(317)		2,161		-		1,844
Less: net income attributable to noncontrolling interest		-		(671)		-		(671)
Net income (loss) attributable to common shareholders	€	(317)	€	1,490	€	-	€	1,173

Combined Condensed Statements Of Cash Flows

Combined Condensed Statements of Cash Flows

	Three months ended March 31, 2013
	Restricted		Unrestricted		Consolidated
	Group		Subsidiaries		Group
Cash flows from (used in) operating activities
Net income (loss)	€	(1,792)	€	2,075	€	283
Adjustments to reconcile net income (loss) to cash flows
from operating activities
Unrealized loss (gain) on derivative instruments		470		(5,165)		(4,695)
Depreciation and amortization		8,254		6,540		14,794
Deferred income taxes		991		3,147		4,138
Stock compensation expense		267		-		267
Pension and other post-retirement expense, net of
funding		121		-		121
Other		413		770		1,183
Changes in working capital
Receivables		(8,339)		(1,365)		(9,704)
Inventories		3,067		2,679		5,746
Accounts payable and accrued expenses		10,505		92		10,597
Other(1)		(1,714)		932		(782)
Net cash from (used in) operating activities		12,243		9,705		21,948
Cash flows from (used in) investing activities
Purchase of property, plant and equipment		(2,645)		(8,750)		(11,395)
Proceeds on sale of property, plant and equipment		13		-		13
Net cash from (used in) investing activities		(2,632)		(8,750)		(11,382)
Cash flows from (used in) financing activities
Repayment of debt		(545)		(20,000)		(20,545)
Proceeds from borrowings of debt		-		10,000		10,000
Repayment of capital lease obligations		(122)		(578)		(700)
Proceeds from credit facilities, net		5,968		-		5,968
Proceeds from government grants		-		730		730
Net cash from (used in) financing activities		5,301		(9,848)		(4,547)
Effect of exchange rate changes on cash and cash
equivalents		406		-		406
Net increase (decrease) in cash and cash equivalents		15,318		(8,893)		6,425
Cash and cash equivalents, beginning of period		36,714		67,525		104,239
Cash and cash equivalents, end of period	€	52,032	€	58,632	€	110,664

_________________________

(1) Includes intercompany related transactions.

Note 11. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Statements of Cash Flows

	Three months ended March 31, 2012
	Restricted		Unrestricted		Consolidated
	Group		Subsidiaries		Group
Cash flows from (used in) operating activities
Net income (loss)	€	(317)	€	2,161	€	1,844
Adjustments to reconcile net income (loss) to cash flows
from operating activities
Unrealized gain on derivative instruments		-		(876)		(876)
Depreciation and amortization		7,703		6,647		14,350
Deferred income taxes		676		-		676
Stock compensation expense		868		-		868
Pension and other post-retirement expense, net of
funding		(14)		-		(14)
Other		58		735		793
Changes in working capital
Receivables		(2,110)		4,795		2,685
Inventories		4,018		7,720		11,738
Accounts payable and accrued expenses		5,535		(2,886)		2,649
Other(1)		(6,474)		7,898		1,424
Net cash from (used in) operating activities		9,943		26,194		36,137
Cash flows from (used in) investing activities
Purchase of property, plant and equipment		(4,218)		(4,247)		(8,465)
Proceeds on sale of property, plant and equipment		186		40		226
Net cash from (used in) investing activities		(4,032)		(4,207)		(8,239)
Cash flows from (used in) financing activities
Repayment of debt		(543)		(9,583)		(10,126)
Repayment of capital lease obligations		(186)		(425)		(611)
Proceeds from credit facilities, net		3,759		-		3,759
Payment of note issuance costs		-		(1,621)		(1,621)
Proceeds from government grants		630		-		630
Net cash from (used in) financing activities		3,660		(11,629)		(7,969)
Effect of exchange rate changes on cash and cash
equivalents		(805)		-		(805)
Net increase in cash and cash equivalents		8,766		10,358		19,124
Cash and cash equivalents, beginning of period		44,829		60,243		105,072
Cash and cash equivalents, end of period	€	53,595	€	70,601	€	124,196

___________________________

Includes intercompany related transactions.

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Restricted Group Supplemental Disclosure (Combined Condensed Balance Sheets) (Details) (EUR €) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2012	Dec. 31, 2011
Condensed Financial Statements, Captions [Line Items]
Cash and cash equivalents	€ 110,664	€ 104,239	€ 124,196	€ 105,072
Receivables	120,184	110,087
Inventories	112,908	118,300
Prepaid expenses and other	8,295	7,907
Deferred income tax	3,824	4,465
Total current assets	355,875	344,998
Property, plant and equipment	802,959	808,878
Deferred note issuance and other	11,622	12,162
Deferred income tax	15,104	17,565
Due from unrestricted group	0	0
Total assets	1,185,560	1,183,603
Accounts payable and other	97,645	89,950
Pension and other post-retirement benefit obligations	818	813
Debt	55,081	45,662
Total current liabilities	153,544	136,425
Debt, Long Term	658,166	665,741
Due to restricted group	0	0
Unrealized interest rate derivative losses	45,513	50,678
Pension and other post-retirement benefit obligations	32,451	32,141
Capital leases and other	13,887	13,936
Deferred income tax	6,175	5,757
Total liabilities	909,736	904,678
Total shareholders' equity (deficit)	291,996	295,805
Noncontrolling interest (deficit)	(16,172)	(16,880)
Total liabilities and equity	1,185,560	1,183,603
Restricted Group [Member]
Condensed Financial Statements, Captions [Line Items]
Cash and cash equivalents	52,032	36,714	53,595	44,829
Receivables	69,944	61,212
Inventories	72,073	74,786
Prepaid expenses and other	4,834	5,811
Deferred income tax	2,190	2,188
Total current assets	201,073	180,711
Property, plant and equipment	340,459	345,311
Deferred note issuance and other	6,322	6,607
Deferred income tax	9,222	9,179
Due from unrestricted group	104,581	102,311
Total assets	661,657	644,119
Accounts payable and other	52,688	42,106
Pension and other post-retirement benefit obligations	818	813
Debt	11,823	5,662
Total current liabilities	65,329	48,581
Debt, Long Term	221,430	216,214
Due to restricted group	0	0
Unrealized interest rate derivative losses	0	0
Pension and other post-retirement benefit obligations	32,451	32,141
Capital leases and other	6,095	6,073
Deferred income tax	6,175	5,757
Total liabilities	331,480	308,766
Total shareholders' equity (deficit)	330,177	335,353
Noncontrolling interest (deficit)	0	0
Total liabilities and equity	661,657	644,119
Unrestricted Subsidiaries [Member]
Condensed Financial Statements, Captions [Line Items]
Cash and cash equivalents	58,632	67,525	70,601	60,243
Receivables	50,240	48,875
Inventories	40,835	43,514
Prepaid expenses and other	3,461	2,096
Deferred income tax	1,634	2,277
Total current assets	154,802	164,287
Property, plant and equipment	462,500	463,567
Deferred note issuance and other	5,300	5,555
Deferred income tax	5,882	8,386
Due from unrestricted group	0	0
Total assets	628,484	641,795
Accounts payable and other	44,957	47,844
Pension and other post-retirement benefit obligations	0	0
Debt	43,258	40,000
Total current liabilities	88,215	87,844
Debt, Long Term	436,736	449,527
Due to restricted group	104,581	102,311
Unrealized interest rate derivative losses	45,513	50,678
Pension and other post-retirement benefit obligations	0	0
Capital leases and other	7,792	7,863
Deferred income tax	0	0
Total liabilities	682,837	698,223
Total shareholders' equity (deficit)	(38,181)	(39,548)
Noncontrolling interest (deficit)	(16,172)	(16,880)
Total liabilities and equity	628,484	641,795
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 and other	0	0
Deferred income tax	0	0
Due from unrestricted group	(104,581)	(102,311)
Total assets	(104,581)	(102,311)
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	(104,581)	(102,311)
Unrealized interest rate derivative losses	0	0
Pension and other post-retirement benefit obligations	0	0
Capital leases and other	0	0
Deferred income tax	0	0
Total liabilities	(104,581)	(102,311)
Total shareholders' equity (deficit)	0	0
Noncontrolling interest (deficit)	0	0
Total liabilities and equity	€ (104,581)	€ (102,311)

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INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Parenthetical) (EUR €) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Interim Consolidated Statements Of Comprehensive Income (Loss) [Abstract]
Foreign currency translation adjustment, tax expense (benefit)	€ 574	€ (90)
Change in unrecognized losses and prior service cost related to defined benefit plans, tax benefit	0	0
Change in unrealized losses on marketable securities, tax benefit	€ 0	€ 0

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Debt

3 Months Ended

Mar. 31, 2013

Debt [Abstract]

Debt

Note 3. Debt

Debt consists of the following:

	March 31,		December 31,
	2013		2012
Note payable to bank, included in a total loan credit facility of €827,950
to finance the construction related to the Stendal mill (a)	€	432,907	€	452,907
Senior notes, interest at 9.50% accrued and payable semi-annually,
unsecured (b)		221,429		215,670
Credit agreement with a lender with respect to a revolving credit facility
of C$40 million (c)		10,735		4,574
Term bank facility for a project at the Stendal mill of €17,000 (d)		10,000		-
Loans payable to the noncontrolling shareholder of the Stendal mill (e)		37,088		36,620
Investment loan agreement with a lender with respect to a project at
the Rosenthal mill of €4,351 (f)		1,088		1,632
Credit agreement with a bank with respect to a revolving credit facility
of €25,000 (g)		-		-
Credit agreement with a bank with respect to a revolving credit facility
of €3,500 (h)		-		-
		713,247		711,403
Less: current portion		(55,081)		(45,662)
Debt, less current portion	€	658,166	€	665,741

The Company made repayments under these facilities of €20,545 during the three month period ended March 31, 2013 (2012 – €10,126). As of March 31, 2013, the maturities of debt are as follows:

Matures	Amount
2013	€	32,908
2014		48,915
2015		44,000
2016		44,000
2017		543,424
Thereafter		-
	€	713,247

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 March 31, 2013, the Company was in compliance with the terms of the indenture. 

Note 3. Debt (continued)

(a)Note payable to bank, included in a total loan facility of €827,950 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 March 31, 2013 range from 1.39% to2.14%), 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 €372,907 of 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 8 – 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 €164,000 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 €15,000 working capital reserve and the Guarantee Amount, as discussed in Note 10(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 March 31, 2013, the DSRA balance was €32,986 and was not Fully Funded.

(b)On November 17, 2010, the Company completed a private offering of $300.0 million 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 June 2012, the Company’s Board of Directors authorized the purchase of up to €50,000 in aggregate principal amount of the Company’s Senior Notes from time to time, over a period ending June 2013. During the three month period ended March 31, 2013, the Company did not purchase any of its outstanding Senior Notes. During the twelve month period ended December 31, 2012, the Company purchased $2.0 million of its outstanding Senior Notes.

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 2013. 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 3.75% or Canadian prime plus 2.00%. U.S. dollar denominated amounts bear interest at LIBOR plus 3.75% or U.S. base plus 2.00%. As at March 31, 2013, this facility was accruing interest at a rate of approximately 5.00%, C$14.0 million of this facility was drawn, C$1.7 million was supporting letters of credit and approximately C$22.3 million was available. The Company is in the process of extending the maturity date of the facility.

Note 3. Debt (continued)

(d)A €17,000 amortizing term facility to partially finance a project, referred to as "Project Blue Mill", which is expected to increase the Stendal mill’s annual pulp production capacity by 30,000 air-dried metric tonnes and includes the installation of an additional 40 megawatt steam turbine. 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 and is available for disbursement up to August 31, 2013. 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 the Company. As at March 31, 2013, €10,000 had been drawn on this facility and was accruing interest at a rate of approximately 3.83%.

As part of the 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 March 31, 2013, the balance in the investment account was €2,894. 

(e)Loans of €26,760 payable by the Stendal mill to its noncontrolling shareholder bear interest at a rate of 7.00% 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 €440, 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 March 31, 2013, accrued interest on these loans was €10,328. As at December 31, 2012, accrued interest on these loans was €9,860.

(f)A four-year amortizing investment loan agreement with a lender relating to the wash press project at the Rosenthal mill with a total facility of €4,351 bearing interest at the rate of Euribor plus 2.75% that matures February 2014. Borrowings under this agreement are secured by the wash press equipment. As at March 31, 2013, the balance outstanding was €1,088 and was accruing interest at a rate of 3.13%.

(g)A €25,000 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 March 31, 2013, approximately €1,000 of this facility was supporting bank guarantees leaving approximately €24,000 available.

(h)A €3,500 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 March 31, 2013, approximately €1,300 of this facility was supporting bank guarantees leaving approximately €2,200 available.

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The Company And Summary Of Significant Accounting Policies (Details) (EUR €) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
The Company And Summary Of Significant Accounting Policies [Abstract]
Chemical revenue	€ 2,861	€ 2,808

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Financial Instruments (Fair Value Of Financial Instruments) (Details) (EUR €) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2012	Dec. 31, 2011
Financial Instruments [Abstract]
Cash and cash equivalents	€ 110,664	€ 104,239	€ 124,196	€ 105,072
Marketable securities	196	184
Receivables	120,184	110,087
Pulp price derivative contract - asset, carrying value and fair value	280	745
Accounts payable and other	97,645	89,950
Debt	713,247	711,403
Interest rate derivative contract - liability, carrying value and fair value	45,513	50,678
Cash and cash equivalents, Fair Value	110,664	104,239
Marketable securities, Fair Value	196	184
Receivables, Fair Value	120,184	110,087
Accounts payable and other, Fair Value	97,645	89,950
Debt, Fair Value	€ 709,622	€ 700,001

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Inventories (Tables)

3 Months Ended

Mar. 31, 2013

Inventories [Abstract]

Components of Inventory

	March 31,		December 31,
	2013		2012
Raw materials	€	37,296	€	46,028
Finished goods		40,092		38,169
Spare parts and other		35,520		34,103
	€	112,908	€	118,300