NEW YORK, Feb. 26 /CNW/ -- Mercer International Inc. (Nasdaq: MERC; TSX: MRI.U) today reported results for the fourth quarter and year ended December 31, 2006. In 2006, we divested our paper mills and, pursuant to SFAS 144, account for this business as discontinued operations and its results are reported separately as discontinued operations. As a result, previously reported amounts have been reclassified to conform to the current presentation. Except as otherwise noted, the following discussion relates to our continuing operations.
Highlights of the 2006 Fourth Quarter
-- Revenues increased by 30.5% to euro 160.5 million from euro 123.0 million in the comparative quarter of 2005, primarily due to higher pulp prices and sales volumes from our Stendal and Celgar pulp mills. -- Operating EBITDA increased to euro 50.2 million in the fourth quarter from euro 13.1 million in the comparative quarter of 2005. For a definition of Operating EBITDA, see page 5 of this press release and for a reconciliation of net income (loss) to Operating EBITDA, see page 8 of the financial tables included in this press release. -- Pulp markets continued to strengthen. Average list prices for NBSK pulp in Europe were $730 per ADMT in the fourth quarter of 2006, $710 per ADMT in the third quarter of 2006 and $600 per ADMT in the fourth quarter of 2005. -- In December 2006, we curtailed production of approximately 20,000 ADMTs of pulp at our German pulp mills because of fiber supply imbalances. -- We recorded a net gain on our outstanding derivatives of euro 34.8 million and a loss of euro 1.5 million in the fourth quarter of 2006 and 2005, respectively. -- We had net income of euro 28.6 million, or euro 0.85 per basic and euro 0.66 per diluted share, in the current quarter, compared to a net loss of euro 27.2 million, or euro 0.82 per basic and diluted share, in the same period of 2005. Highlights of 2006 -- Revenues in 2006 increased by approximately 38% to euro 624.0 million from euro 452.4 million in 2005, primarily as a result of higher pulp prices and increased sales volumes at our Stendal and Celgar mills. -- Operating EBITDA increased by 112% to euro 148.3 million in 2006 from euro 69.8 million in 2005 reflecting higher pulp sales. For a definition of Operating EBITDA, see page 5 of this press release and for a reconciliation of net income (loss) to Operating EBITDA, see page 8 of the financial tables included in this press release. -- Pulp markets strengthened throughout 2006. Average list prices for NBSK pulp in Europe were $680 per ADMT in 2006, compared to $610 per ADMT in 2005. -- Net realized and unrealized non-cash holding gains were euro 105.8 million on our outstanding foreign currency derivatives at the end of 2006, compared to a net realized and unrealized non-cash holding loss of euro 71.8 million in 2005. -- Net income increased to euro 69.2 million, or euro 2.08 per basic and euro 1.72 per diluted share, in 2006, compared to a net loss of euro 112.1 million, or euro 3.59 per basic and diluted share, in 2005. President's Comments
Mr. Jimmy S.H. Lee, President and Chairman, stated: "During the fourth quarter of 2006:
-- Our strong results reflect strengthening pulp markets. Currently, list NBSK prices per tonne are approximately $760 to $770 in Europe, $790 in the United States and $730 to $760 in Asia, depending upon the country of delivery. These price improvements are being partially offset by upward pressure on fiber prices. -- Our results were impacted by production curtailments of 20,000 ADMTs at our German mills."
Mr. Lee continued: "The recent storms in central Europe in January 2007 have reportedly caused the downfall of over 40 million cubic meters of wood. This wood will have to be harvested and processed in a timely manner. We expect this to markedly increase the fiber availability to our German mills and temper or lower fiber prices in central Europe during the second half of 2007."
Mr. Lee added: "Further to our objective of building a focused and profitable pulp company, in 2006 we increased our exposure to NBSK pulp by acquiring a further approximate 7% interest in the Stendal mill and disposing of all of our paper operations."
Mr. Lee concluded: "Looking forward to 2007, we expect the current strength in pulp markets to continue. All of our mills are running well and, in the second quarter, we will complete and tie in the C$28.0 million capital project at the Celgar mill. Further, we are now currently expecting a better fiber outlook in Germany. As a result, with our large, modern and efficient pulp mills, we are well positioned to continue providing solid results for our stakeholders."
Summary Selected Highlights
Q4 Q3 YTD Q4 YTD
2006 2006 2006 2005 2005
(in millions of Euro, except where otherwise stated)
Revenues euro 160.5 euro 171.2 euro 624.0 euro 123.0 euro 452.4
Sales of
emission
allowances 2.4 - 15.6 4.9 17.3
Income from
operations 36.2 34.7 92.5 0.3 18.7
Operating
EBITDA(1) 50.2 48.2 148.3 13.1 69.8
Realized gain
(loss) on
derivative
instruments 1.7 - (3.5) - (2.5)
Interest expense 23.2 23.1 91.9 23.4 86.3
Unrealized gain
(loss) on
derivative
instruments 33.1 (14.5) 109.4 (1.5) (69.3)
Unrealized foreign
exchange gain
(loss) on debt 3.8 (1.6) 15.2 (2.6) (4.2)
Net income (loss)
from continuing
operations 28.6 6.1 69.2 (27.2) (112.1)
Income (loss)
per share from
continuing
operations
Basic euro 0.85 euro 0.19 euro 2.08 euro (0.82) euro (3.59)
Diluted euro 0.66 euro 0.14 euro 1.72 euro (0.82) euro (3.59)
(1) For a definition of Operating EBITDA, see page 5 of this press release
and for a reconciliation of net income (loss) to Operating EBITDA, see
page 8 of the financial tables included in this press release.
Q4 Q3 YTD Q4 YTD
2006 2006 2006 2005 2005
Production
('000 tonnes)
Total pulp
production 328.9 347.2 1,302.3 296.3 1,184.6
Sales
('000 tonnes)
Total pulp
sales volume(1) 344.4 338.2 1,326.4 291.0 1,101.3
NBSK list price in
Europe (US$/ADMT) 730 710 680 600 610
Mill net pulp
price realizations
(euro/ADMT)(2) 480 482 465 458 407
(1) Excluding intercompany pulp sales volumes of 603 ADMTs in Q4 2006,
2,774 ADMTs in Q3 2006, 13,234 ADMTs in YTD 2006, 3,638 ADMTs in Q4
2005 and 14,289 ADMTs in YTD 2005, respectively.
(2) Excluding revenues from third party transportation activities.
Results of Operations - 2006 Fourth Quarter
Revenues for the three months ended December 31, 2006 increased to euro 160.5 million from euro 123.0 million in the comparative period of 2005, primarily due to higher pulp prices and sales volumes.
List prices for NBSK pulp in Europe were approximately euro 553 ($730) per ADMT in the fourth quarter of 2006, compared to approximately euro 506 ($600) per ADMT in the comparative period of last year. Mill net pulp sales realizations increased to euro 480 per ADMT on average in the fourth quarter of 2006 from euro 458 per ADMT in the fourth quarter of 2005, primarily as a result of higher prices.
Cost of sales and general, administrative and other operating expenses decreased to euro 126.7 million in the fourth quarter of 2006 from euro 127.7 million in the comparative period of 2005, primarily as a result of a reversal of accruals for wastewater fees of euro 13.0 million. In 2006, German authorities confirmed that certain initiatives and capital expenditures undertaken by us qualified to offset such fees.
Fiber costs at our German pulp mills increased significantly in the fourth quarter of 2006 versus the same quarter of 2005 as a result of supply imbalances and increased demand for wood residuals from alternative or renewable energy producers. These factors contributed to upward pressure on fiber prices in the quarter and for fiber deliveries into the start of 2007. Severe winter storms in central Europe in January 2007, which caused significant damage to the forests, are expected to increase fiber supply and to temper and moderate fiber prices in the second half of 2007. In the fourth quarter of 2006, fiber costs at our Celgar mill increased significantly compared to the same quarter of 2005, primarily because of fluctuations in regional woodchip availability caused by slumping North American lumber markets.
For the fourth quarter of 2006, income from operations increased to euro 36.2 million from euro 0.3 million in the comparative quarter of 2005, primarily as a result of overall higher pulp prices and sales volumes and improved productivity at our Stendal and Celgar mills.
Derivative Instruments
In the fourth quarter of 2006, we recorded a net realized gain before minority interest of euro 1.7 million on the settlement of certain of Stendal's currency swaps and an unrealized non-cash holding gain of euro 33.1 million before minority interest upon the marked to market valuation of Stendal's outstanding derivatives. In the comparative quarter of 2005, we recorded a net realized and unrealized non-cash holding loss of euro 1.5 million before minority interests upon the marked to market valuation of our outstanding derivatives.
Earnings Per Share and Operating EBITDA
We generated "Operating EBITDA" of euro 50.2 million and euro 13.1 million in the three months ended December 31, 2006 and 2005, respectively. Operating EBITDA is defined as income (loss) from continuing operations plus depreciation and amortization and non-recurring capital asset impairment charges. Management uses Operating EBITDA as a benchmark measurement of its own operating results, and as a benchmark relative to its competitors. Management considers it to be a meaningful supplement to operating income as a performance measure primarily because depreciation expense and non-recurring capital asset impairment charges are not an actual cash cost, and depreciation expense varies widely from company to company in a manner that management considers largely independent of the underlying cost efficiency of their operating facilities. In addition, we believe Operating EBITDA is commonly used by securities analysts, investors and other interested parties to evaluate our financial performance.
Operating EBITDA does not reflect the impact of a number of items that affect our net income (loss), including financing costs and the effect of derivative instruments. Operating EBITDA is not a measure of financial performance under GAAP, and should not be considered as an alternative to net income (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. For a reconciliation of net income (loss) to Operating EBITDA, see page 8 of the financial tables included in this press release.
We reported net income from continuing operations for the fourth quarter of 2006 of euro 28.6 million, or euro 0.85 per basic and euro 0.66 per diluted share, which included an aggregate of euro 36.9 million of unrealized gains on our outstanding derivatives, a foreign exchange loss on our long-term debt and a contribution to income of euro 13.0 million from reversing accruals for wastewater fees. In the fourth quarter of 2005, we reported a net loss of euro 27.2 million, or euro 0.82 per basic and diluted share, which reflected the inclusion of interest expense of euro 16.1 million related to our Stendal mill and the net realized and unrealized loss of euro 1.5 million on our interest rate and currency derivatives and the unrealized non-cash foreign exchange loss of euro 2.6 million on our long-term debt.
During the fourth quarter of 2006, net income including discontinued operations was euro 21.5 million, or euro 0.63 per basic and euro 0.50 per diluted share. In 2005, the net loss in the fourth quarter including discontinued operations was euro 29.8 million, or euro 0.90 per basic and diluted share.
Discontinued Operations
Revenues from our discontinued operations in the current quarter decreased to euro 9.0 million from euro 14.5 million in the same period of 2005. For the fourth quarter of 2006, our discontinued operations generated an operating gain of euro 0.2 million, compared to an operating loss of euro 0.1 million in the fourth quarter of 2005.
Results of Operations - 2006
Revenues for the year ended December 31, 2006 increased by approximately 38% to euro 624.0 million from euro 452.4 million in 2005, primarily as a result of higher pulp prices and sales volumes at our Stendal and Celgar mills. List prices for NBSK pulp in Europe were approximately euro 542 ($680) per ADMT in 2006, compared to approximately euro 490 ($610) per ADMT in 2005. Mill net pulp sales realizations increased to euro 465 per ADMT on average in the year ended December 31, 2006 from euro 407 per ADMT in 2005, primarily as a result of higher pulp prices.
Cost of sales and general, administrative and other expenses for the pulp operations increased to euro 531.5 million in 2006 from euro 433.8 million in 2005, primarily as a result of higher sales volumes, partially offset by a reversal of accruals for wastewater fees of euro 13.0 million.
Beginning in 2005, our German operations became subject to the European Union Emissions Trading Scheme, pursuant to which our German pulp mills were granted emission allowances. In 2006 and 2005, we recorded a contribution to income from operations of euro 15.6 million and euro 17.3 million, respectively, resulting from the sale of emission allowances.
Fiber costs at our German pulp mills increased by approximately 12% in 2006 versus 2005 as a result of both a supply imbalance from low harvest levels during the severe conditions in the prior winter harvesting seasons and increased demand for wood residuals from alternative or renewable energy producers. In 2006, fiber costs at our Celgar mill increased by approximately 10% versus 2005, primarily because of fluctuations in regional woodchip availability caused by slumping North American lumber markets.
In 2006, our operating income increased almost fourfold to euro 92.5 million from euro 18.7 million in 2005, primarily as a result of overall higher pulp prices and sales volumes and improved productivity at our Stendal and Celgar mills.
Interest expense in 2006 increased to euro 91.9 million from euro 86.3 million in the year ago period because of the inclusion of a full year's interest on our senior notes issued in February 2005 and euro 2.1 million of interest expense recorded on the purchase of $15.2 million principal amount of our convertible notes.
Derivative Instruments and Minority Interest
We recorded a net realized and unrealized non-cash holding gain of euro 105.8 million before minority interests upon the marked to market valuation of our outstanding foreign currency derivatives at the end of 2006, compared to a net realized and unrealized non-cash holding loss of euro 71.8 million before minority interests upon the marked to market valuation of our outstanding derivatives in 2005.
In 2006, minority interest, representing the minority shareholder's proportionate interest in the Stendal mill, was euro 1.1 million of the current year earnings, compared to euro 17.7 million of the loss in 2005.
Earnings Per Share and Operating EBITDA
We generated "Operating EBITDA" of euro 148.3 million and euro 69.8 million in the year ended December 31, 2006 and 2005, respectively. For a definition of Operating EBITDA, see page 5 of this press release and for a reconciliation of net income (loss) to Operating EBITDA, see page 8 of the financial tables included in this press release.
We reported net income for the year ended December 31, 2006 of euro 69.2 million, or euro 2.08 per basic and euro 1.72 per diluted share, which reflected higher pulp prices, generally stronger pulp markets and the net gains on our currency and interest rate derivatives of euro 68.5 million and euro 37.3 million. In 2005, we reported a net loss of euro 112.1 million, or euro 3.59 per basic and diluted share, which reflected generally weak pulp markets, the realized and unrealized net losses on our currency and interest rate derivatives of euro 71.8 million, interest expense relating to our Stendal mill of euro 56.8 million, the unrealized non-cash foreign exchange loss on our long-term debt of euro 4.2 million and the non-cash impairment charge of euro 1.7 million relating to investments, partially offset by a non- cash benefit for income taxes of euro 13.1 million.
In 2006, net income including discontinued operations was euro 63.2 million, or euro 1.90 per basic and euro 1.58 per diluted share. In 2005, the net loss including discontinued operations was euro 117.1 million, or euro 3.75 per basic and diluted share.
Discontinued Operations
Revenues from our discontinued operations were euro 46.4 million in 2006, compared to euro 61.5 million in 2005. For 2006, there was an operating gain from our discontinued operations of euro 0.3 million, compared to an operating loss of euro 2.3 million in 2005.
Earnings Release Call
In conjunction with this press release, Mercer International Inc. will host a conference call, which will be simultaneously broadcast live over the Internet. Management will host the call, which is scheduled for Tuesday, February 27, 2007 at 10:00 a.m. (Eastern Standard Time). Listeners can access the conference call live and archived over the Internet through a link at the Company's website at http://www.mercerint.com/en/newsCurrent.cfm, or at http://www.videonewswire.com/event.asp?id=37956. Please allow 15 minutes prior to the call to visit the website and download and install any necessary audio software. A replay of this call will be available approximately two hours after the live call ends until March 6, 2007 at 11:59 p.m. (Eastern Standard Time). The replay number is (800) 642-1687 for domestic callers or (706) 645-9291 for international callers. The passcode is 8836168.
Mercer International Inc. is a global pulp manufacturing company. To obtain further information on the company, please visit its website at http://www.mercerint.com.
The preceding includes forward looking statements which involve known and unknown risks and uncertainties which may cause the Company's actual results in future periods to differ materially from forecasted results. Among those factors which could cause actual results to differ materially are the following: market conditions, competition and other risk factors listed from time to time in the Company's SEC reports.
MERCER INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2006 and 2005
(Euros in thousands)
December 31, December 31,
2006 2005
ASSETS
Current Assets
Cash and cash equivalents euro 69,367 euro 82,775
Cash restricted - 7,039
Receivables 75,022 69,988
Note receivable, current portion 7,798 -
Inventories 62,857 73,742
Prepaid expenses and other 4,662 5,369
Current assets of discontinued operations 2,094 12,609
Total current assets 221,800 251,522
Long-Term Assets
Cash restricted 57,000 24,573
Property, plant and equipment 972,143 1,015,363
Investments 1 6,314
Unrealized foreign exchange rate derivative gain 5,933 -
Deferred note issuance and other costs 6,984 8,364
Deferred income tax 29,989 78,381
Note receivable, less current portion 8,744 -
Long-term assets of discontinued operations - 9,299
1,080,794 1,142,294
Total assets euro 1,302,594 euro 1,393,816
LIABILITIES
Current Liabilities
Accounts payable and accrued expenses euro 83,810 euro 100,285
Pension and other post-retirement benefit
obligations, current portion 363 -
Debt, current portion 33,903 25,550
Current liabilities of discontinued operations 1,926 14,492
Total current liabilities 120,002 140,327
Long-Term Liabilities
Debt, less current portion 873,928 919,423
Unrealized foreign exchange rate derivative loss - 61,979
Unrealized interest rate derivative losses 41,355 78,646
Pension and other post-retirement benefit
obligations 17,954 17,113
Capital leases and other 7,643 9,945
Deferred income tax 22,911 14,444
Long-term liabilities of discontinued operations - 3,196
963,791 1,104,746
Total liabilities 1,083,793 1,245,073
Minority Interest - -
SHAREHOLDERS' EQUITY
Common shares 195,642 181,586
Additional paid-in capital, stock options 154 14
Retained earnings (deficit) 15,240 (47,970)
Accumulated other comprehensive income 7,765 15,113
Total shareholders' equity 218,801 148,743
Total liabilities and shareholders'
equity euro 1,302,594 euro 1,393,816
MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended December 31, 2006 and 2005
(Euros in thousands, except per share data)
2006 2005
Revenues euro 160,467 euro 123,002
Costs and expenses:
Operating costs 105,428 108,964
Operating depreciation and amortization 14,044 12,890
40,995 1,148
General and administrative expenses 7,189 5,832
(Sale) purchase of emission allowances (2,363) (4,939)
Operating income from continuing operations 36,169 255
Other income (expense)
Interest expense (23,162) (23,365)
Investment income 2,007 863
Unrealized foreign exchange gain (loss) on debt 3,776 (2,565)
Realized loss on derivative instruments 1,709 -
Unrealized gain (loss) on derivative instruments 33,107 (1,504)
Total other income (expense) 17,437 (26,571)
Income (loss) before income taxes and minority
interest from continuing operations 53,606 (26,316)
Income tax (provision) benefit (17,055) (1,487)
Income (loss) before minority interest from
continuing operations 36,551 (27,803)
Minority interest (7,945) 598
Net income (loss) from continuing operations 28,606 (27,205)
Net income (loss) from discontinued operations (7,133) (2,568)
Net income (loss) 21,473 (29,773)
Deficit, beginning of period (6,233) (18,197)
Retained earnings (deficit), end of
period euro 15,240 euro (47,970)
Net income (loss) per share
Basic euro 0.63 euro (0.90)
Diluted euro 0.50 euro (0.90)
Income (loss) per share from continuing
operations
Basic euro 0.85 euro (0.82)
Diluted euro 0.66 euro (0.82)
MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2006 and 2005
(Unaudited)
(Euros in thousands, except per share data)
2006 2005
Revenues euro 623,977 euro 452,437
Costs and expenses:
Operating costs 462,543 375,408
Operating depreciation and amortization 55,834 51,160
105,600 25,869
General and administrative expenses 28,705 24,511
(Sale) purchase of emission allowances (15,609) (17,292)
Operating income from continuing operations 92,504 18,650
Other income (expense)
Interest expense (91,931) (86,326)
Investment income 6,090 2,422
Unrealized foreign exchange gain (loss)
on debt 15,245 (4,156)
Realized loss on derivative instruments (3,510) (2,455)
Unrealized gain (loss) on derivative
instruments 109,358 (69,308)
Impairment of investments - (1,699)
Total other income (expense) 35,252 (161,522)
Income (loss) before income taxes and minority
interest from continuing operations 127,756 (142,872)
Income tax (provision) benefit (57,443) 13,140
Income (loss) before minority interest from
continuing operations 70,313 (129,732)
Minority interest (1,071) 17,674
Net income (loss) from continuing operations 69,242 (112,058)
Net loss from discontinued operations (6,032) (5,088)
Net income (loss) euro 63,210 euro (117,146)
Net income (loss) per share from continuing
operations
Basic euro 2.08 euro (3.59)
Diluted euro 1.72 euro (3.59)
Net income (loss) per share
Basic euro 1.90 euro (3.75)
Diluted euro 1.58 euro (3.75)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheet
As at December 31, 2006
(Euros in thousands)
The terms of the indenture governing our 9.25% senior unsecured notes requires 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 years ended December 31, 2006 and 2005, the Restricted Group was comprised of Mercer International Inc., certain holding subsidiaries and Rosenthal, and the Celgar mill from the date of its acquisition on February 14, 2005. During the year ended December 31, 2004, the Restricted Group was comprised of Mercer International Inc., certain holding subsidiaries and Rosenthal, which was the only member of the Restricted Group with material operations during this period. The Restricted Group excludes the Stendal mill and our discontinued operations.
December 31, 2006
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
ASSETS
Current
Cash and cash
equivalents euro 39,078 euro 30,289 euro - euro 69,367
Receivables 38,662 36,360 - 75,022
Note receivable,
current portion 620 7,178 - 7,798
Inventories 41,087 21,770 - 62,857
Prepaid expenses
and other 2,352 2,310 - 4,662
Current assets
from discontinued
operations - 2,094 - 2,094
Total current
assets 121,799 100,001 - 221,800
Cash restricted - 57,000 - 57,000
Property, plant and
equipment 408,957 563,186 - 972,143
Other 8,155 4,763 - 12,918
Deferred income tax 14,316 15,673 - 29,989
Due from unrestricted
group 51,265 - (51,265) -
Note receivable,
less current
portion 5,023 3,721 - 8,744
Total assets euro 609,515 euro 744,344 euro (51,265) euro 1,302,594
LIABILITIES
Current
Accounts payable
and accrued
expenses euro 46,475 euro 37,335 euro - euro 83,810
Pension and other
post-retirement
benefit obligations,
current portion 363 - - 363
Debt, current portion - 33,903 - 33,903
Current liabilities
from discontinued
operations - 1,926 - 1,926
Total current
liabilities 46,838 73,164 - 120,002
Debt, less current
portion 293,781 571,840 - 865,621
Due to restricted
group - 51,265 (51,265) -
Unrealized derivative
loss - 41,355 - 41,355
Capital leases and
other 22,115 11,789 - 33,904
Deferred income tax 2,832 20,079 - 22,911
Total liabilities 365,566 769,492 (51,265) 1,083,793
SHAREHOLDERS' EQUITY
Total shareholders'
equity (deficit) 243,949 (25,148)(1) - 218,801
Total liabilities
and shareholders'
equity euro 609,515 euro 744,344 euro (51,265) euro 1,302,594
(1) Shareholders' equity does not include government grants received or
receivable related to the Stendal mill. Shareholders' equity is
impacted by the unrealized non-cash marked to market valuation losses
on derivative financial instruments.
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheet
As at December 31, 2005
(Euros in thousands)
December 31, 2005
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
ASSETS
Current
Cash and cash
equivalents euro 48,790 euro 33,985 euro - euro 82,775
Cash restricted - 7,039 - 7,039
Receivables 41,349 28,655 - 70,004
Inventories 47,100 26,642 - 73,742
Prepaid expenses
and other 2,940 2,429 - 5,369
Current assets
from discontinued
operations - 12,593 - 12,593
Total current assets 140,179 111,343 - 251,522
Cash restricted - 24,573 - 24,573
Property, plant and
equipment 404,151 611,212 - 1,015,363
Other 10,533 4,145 - 14,678
Deferred income tax 24,303 54,078 - 78,381
Due from unrestricted
group 46,412 - (46,412) -
Long-term assets
from discontinued
operations - 9,299 - 9,299
Total assets euro 625,578 euro 814,650 euro (46,412) euro 1,393,816
LIABILITIES
Current
Accounts payable
and accrued
expenses euro 46,867 euro 53,418 euro - euro 100,285
Debt, current
portion - 25,550 - 25,550
Current liabilities
from discontinued
operations - 14,492 - 14,492
Total current
liabilities 46,867 93,460 - 140,327
Debt, less current
portion 342,023 577,400 - 919,423
Due to restricted
group - 46,412 (46,412) -
Unrealized derivatives
loss - 140,625 - 140,625
Other 20,722 6,336 - 27,058
Deferred income tax 1,851 12,593 - 14,444
Long-term liabilities
from discontinued
operations - 3,196 - 3,196
Total liabilities 411,463 880,022 (46,412) 1,245,073
SHAREHOLDERS' EQUITY
Total shareholders'
equity 214,115 (65,372)(1) - 148,743
Total liabilities and
shareholders'
equity euro 625,578 euro 814,650 euro (46,412) euro 1,393,816
(1) Shareholders' equity does not include government grants received or
receivable related to the Stendal mill. Shareholders' equity is
impacted by the unrealized non-cash marked to market valuation losses
on derivative financial instruments.
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations
For the Three Months Ended December 31, 2006 and 2005
(Unaudited)
(Euros in thousands)
Three Months Ended December 31, 2006
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
Revenues euro 95,456 euro 65,151 euro (140) euro 160,467
Operating costs 71,994 33,432 - 105,426
Operating
depreciation and
amortization 7,239 6,807 - 14,046
General and
administrative
expenses 3,947 3,242 - 7,189
(Sale) purchase of
emission allowances (1,282) (1,081) - (2,363)
Operating income
from continuing
operations 13,558 22,751 (140) 36,169
Other income
(expense)
Interest expense (9,752) (14,315) 905 (23,162)
Investment income 2,056 856 (905) 2,007
Unrealized foreign
exchange gain on
debt 3,776 - - 3,776
Derivative financial
instruments, net - 34,816 - 34,816
Total other (expense)
income (3,920) 21,357 - 17,437
Income (loss) before
income taxes and
minority interest
from continuing
operations 9,638 44,108 (140) 53,606
Income tax
provision (2,972) (14,083) - (17,055)
Income (loss) before
minority interest from
continuing
operations 6,666 30,025 (140) 36,551
Minority interest - (7,945) - (7,945)
Net income (loss)
from continuing
operations euro 6,666 euro 22,080 euro (140) euro 28,606
Net income (loss)
from discontinued
operations euro - euro (7,133) euro - euro (7,133)
Net income
(loss) euro 6,666 euro 14,947 euro (140) euro 21,743
Three Months Ended December 31, 2005
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
Revenues euro 75,890 euro 47,112 euro - euro 123,002
Operating costs 71,655 38,914 (1,605) 108,964
Operating
depreciation
and amortization 6,467 7,083 (660) 12,890
General and
administrative
expenses 3,466 2,366 - 5,832
(Sale) purchase of
emission
allowances (2,869) (2,070) - (4,939)
Operating income
(loss) from
continuing
operations (2,829) 819 2,265 255
Other income
(expense)
Interest expense (8,434) (15,762) 831 (23,365)
Investment income 1,429 265 (831) 863
Derivative financial
instruments, net 199 (1,703) - (1,504)
Unrealized foreign
exchange loss on
debt (2,565) - - (2,565)
Total other
expense (9,371) (17,200) - (26,571)
Income (loss) before
income taxes and
minority interest
from continuing
operations (12,200) (16,381) 2,265 (26,316)
Income tax
(provision)
benefit 6,706 (8,193) - (1,487)
Income (loss) before
minority interest
from continuing
operations (5,494) (24,574) 2,265 (27,803)
Minority interest - 598 - 598
Net income (loss)
from continuing
operations euro (5,494) euro (23,976) euro 2,265 euro (27,205)
Net income (loss)
from discontinued
operations euro - euro (2,568) euro - euro (2,568)
Net income
(loss) euro (5,494) euro (26,544) euro 2,265 euro (29,773)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations
For the Years Ended December 31, 2006 and 2005
(Euros in thousands)
Year Ended December 31, 2006
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
Revenues euro 360,986 euro 262,991 euro - euro 623,977
Operating costs 286,087 176,456 - 462,543
Operating
depreciation
and amortization 27,819 28,015 - 55,834
General and
administrative
expenses 17,611 11,094 - 28,705
(Sale) purchase of
emission
allowances (4,933) (10,676) - (15,609)
Operating income
from continuing
operations 34,402 58,102 - 92,504
Other income (expense)
Interest expense (34,354) (61,137) 3,560 (91,931)
Investment income 5,316 4,334 (3,560) 6,090
Derivative financial
instruments, net - 105,848 - 105,848
Unrealized foreign
exchange gain on
debt 15,245 - - 15,245
Total other
(expense)
income (13,793) 49,045 - 35,252
Income (loss)
before income
taxes and
minority interest
from continuing
operations 20,609 107,147 - 127,756
Income tax
provision (11,258) (46,185) - (57,443)
Income (loss)
before minority
interest from
continuing
operations 9,351 60,962 - 70,313
Minority interest - (1,071) - (1,071)
Net income from
continuing
operations euro 9,351 euro 59,891 euro - euro 69,242
Net loss from
discontinued
operations euro - euro (6,032) euro - euro (6,032)
Net income euro 9,351 euro 53,859 euro - euro 63,210
Year Ended December 31, 2005
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
Revenues euro 276,406 euro 176,031 euro - euro 452,437
Operating costs 230,039 146,974 (1,605) 375,408
Operating
depreciation
and amortization 23,898 27,262 - 51,160
General and
administrative
expenses 19,025 5,486 - 24,511
(Sale) purchase of
emission
allowances (7,271) (10,021) - (17,292)
Operating income
from continuing
operations 10,715 6,330 1,605 18,650
Other income
(expense)
Interest expense (32,352) (56,789) 2,815 (86,326)
Investment income 3,742 1,495 (2,815) 2,422
Derivative
financial
instruments, net (295) (71,468) - (71,763)
Unrealized foreign
exchange loss
on debt (4,156) - - (4,156)
Impairment of
investments (1,699) - - (1,699)
Total other
expense (34,760) (126,762) - (161,522)
Income (loss)
before income
taxes and
minority interest
from continuing
operations (24,045) (120,432) 1,605 (142,872)
Income tax (provision)
benefit (1,161) 14,301 - 13,140
Loss before minority
interest from
continuing
operations (25,206) (106,131) 1,605 (129,732)
Minority interest - 17,674 - 17,674
Net loss from
continuing
operations euro (25,206) euro (88,457) euro 1,605 euro (112,058)
Net loss from
discontinued
operations euro - euro (5,088) euro - euro (5,088)
Net loss euro (25,206) euro (93,545) euro 1,605 euro (117,146)
MERCER INTERNATIONAL INC.
COMPUTATION OF OPERATING EBITDA
For the Three Months and Years Ended December 31, 2006 and 2005
(Unaudited)
(Euros in thousands)
Three Months Ended
December 31,
2006 2005(1)
(in thousands)
Net income (loss) euro 21,473 euro (29,773)
Net loss from discontinued operations 7,133 2,568
Net income (loss) from continuing operations 28,606 (27,205)
Minority interest 7,945 (598)
Income taxes (benefit) 17,055 1,487
Interest expense 23,162 23,365
Investment income (2,007) (863)
Foreign exchange (gain) loss on debt (3,776) 2,565
Derivative financial instruments,
net (gain) loss (34,816) 1,504
Income from continuing operations 36,169 255
Add: Depreciation and amortization 14,044 12,890
Operating EBITDA(2) euro 50,213 euro 13,145
Year Ended
December 31,
2006 2005(1)
(in thousands)
Net income (loss) euro 63,210 euro (117,146)
Net loss from discontinued operations 6,032 5,088
Net income (loss) from continuing operations 69,242 (112,058)
Minority interest 1,071 (17,674)
Income taxes (benefit) 57,443 (13,140)
Interest expense 91,931 86,326
Investment income (6,090) (2,422)
Foreign exchange (gain ) loss on debt (15,245) 4,156
Derivative financial instruments,
net (gain) loss (105,848) 71,763
Impairment of investments - 1,699
Income from continuing operations 92,504 18,650
Add: Depreciation and amortization 55,834 51,160
Operating EBITDA(2) euro 148,338 euro 69,810
(1) The results of the Celgar pulp mill are included from the date of its
acquisition on February 14, 2005.
(2) Operating EBITDA does not reflect the impact of a number of items that
affect our net income (loss), including financing costs and the effect
of derivative instruments. Operating EBITDA is not a measure of
financial performance under accounting principles generally accepted
in the United States, and should not be considered as an alternative
to net income (loss) 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.
MERCER INTERNATIONAL INC.
COMPUTATION OF RESTRICTED GROUP OPERATING EBITDA
For the Three Months and Years Ended December 31, 2006 and 2005
(Unaudited)
(Euros in thousands)
Three Months Ended
December 31,
2006 2005
(in thousands)
Restricted Group(2)
Net income (loss) euro 6,666 euro (5,494)
Income taxes (benefit) 2,972 (6,706)
Interest expense 9,752 8,434
Investment and other income (2,056) (1,429)
Derivative financial instruments, net - (199)
Foreign exchange (gain) loss on debt (3,776) 2,565
Income from operations 13,558 (2,829)
Add: Depreciation and amortization 7,239 6,467
Operating EBITDA(2) euro 20,797 euro 3,638
Year Ended
December 31,
2006 2005
(in thousands)
Restricted Group(1)
Net income (loss) euro 9,351 euro (25,206)
Income taxes 11,258 1,161
Interest expense 34,354 32,352
Investment and other expense (income) (5,316) (3,742)
Derivative financial instruments, net - 295
Foreign exchange (gain) loss on debt (15,245) 4,156
Impairment of investments - 1,699
Income from operations 34,402 10,715
Add: Depreciation and amortization 27,819 23,898
Operating EBITDA(2) euro 62,221 euro 34,613
(1) The results of the Celgar pulp mill are included from the date of its
acquisition on February 14, 2005.
(2) Operating EBITDA does not reflect the impact of a number of items that
affect net income (loss), including financing costs and the effect of
derivative instruments. Operating EBITDA is not a measure of
financial performance under accounting principles generally accepted
in the United States, and should not be considered as an alternative
to net income (loss) 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.