NEW YORK, Aug. 7 /CNW/ -- Mercer International Inc. (Nasdaq: MERC, TSX: MRI.U) today reported results for the second quarter of 2007. In 2006, we divested our paper mills and account for this business as discontinued operations and its results are reported separately. As a result, prior year 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 2007 Second Quarter -- Revenues increased by 17% to euro 176.6 million from euro 150.6 million in the comparative quarter of 2006, driven by stronger pulp prices and higher sales volume. Average NBSK list prices in Northern Europe rose to $783 per ADMT in the quarter from $757 in Q1 and $665 per ADMT in the second quarter of 2006. Gains in our pulp price realizations as a result of stronger pulp prices were partially offset by a weakening U.S. dollar, such that our average pulp price realizations increased only marginally to euro 518 per ADMT from euro 512 per ADMT in the prior quarter. The U.S. dollar was weaker in the quarter relative to both the Euro and Canadian dollar, falling in value by 3% and 4% respectively. -- We completed scheduled annual maintenance downtime at two of our three mills and the final strategic capex upgrades at Celgar. This reduced production by approximately 36,000 ADMTs. -- Fiber prices, while materially higher than in the prior year period, fell from Q1 levels and in Europe are continuing to trend downwards. -- Operating EBITDA in the quarter was virtually unchanged from the year prior at euro 25.0 million as improved prices were offset by higher fiber costs, currency changes and lower production as a result of scheduled downtime. For a definition of Operating EBITDA, see page 5 of this press release and for a reconciliation of net income from continuing operations to Operating EBITDA, see page 8 of the financial tables included in this press release. -- Net income from continuing operations was euro 3.3 million, or euro 0.09 per basic and diluted share, in the current quarter which included a net gain on our derivatives and foreign currency denominated long- term debt of euro 19.4 million, compared to net income of euro 18.3 million, or euro 0.55 per basic and euro 0.45 per diluted share, in the same period of 2006 which included a net gain on our derivatives and foreign currency denominated long-term debt of euro 50.8 million.
President's Comments Mr. Jimmy S.H. Lee, President and Chairman, stated:
-- "Pulp markets continued to show strength in the second quarter of 2007. List prices in Europe increased by approximately $40 per ADMT in the quarter and producer and buyer inventories remain at historically low levels. -- We are pleased with the performance of all of our mills in the quarter. The annual scheduled maintenance downtime at our Celgar and Stendal mills reduced production by approximately 36,000 ADMTs in the quarter. Excluding this downtime, production in the quarter was near record productivity records. -- During the scheduled downtime at Celgar, we implemented the final phase of our Blue Goose capital project; consisting of dryer capacity expansion. This upgrade resulted in immediate improved production and the mill had a record production day in June. During the Stendal outage, which was its first scheduled downtime since start up in September 2004, we also optimized several remaining productivity opportunities. These contributed to June being Stendal's second strongest production month since the mill's startup. Additionally, we currently expect that Stendal will be able to conclude a final settlement of all outstanding matters with its contractors under its EPC contract in or about the third quarter of 2007. -- Fiber price reductions in Europe are developing as expected. The storm-felled wood from earlier in the year is being consumed by sawmills and the pricing of resulting residual chips, which comprise a major portion of fiber for our Rosenthal mill, are declining. Prices for residual chips purchased in the second quarter decreased on average by over 30% from first quarter levels. Prices for roundwood, which comprises a major portion of fiber for our Stendal mill, have not declined materially due to continuing strong demand in northern Germany. As a result, we currently expect to increase the amount of residual chips consumed by Stendal in the second half of 2007. We currently anticipate additional declines in the costs of fiber for our German mills for deliveries throughout the balance of the year."
Mr. Lee added: "We are seeing continued strong demand in all our markets. Further, if the recently announced labor action in coastal British Columbia continues, it will reduce NBSK supply from that region. We expect that these factors, along with the weakened U.S. dollar, should result in higher pulp prices in the upcoming months. We expect the NBSK market to remain strong in 2007 as evidenced by the July price increase to approximately $830 per tonne in the United States."
Mr. Lee concluded: "With only a relatively small routine planned shutdown at our Rosenthal mill in Q3 and all our mills running at historically high levels, we are well positioned to take advantage of the NBSK price momentum and falling European fiber prices for the balance of the year."
Summary Selected Highlights
Q2 Q1 Q2
2007 2007 2006
(in millions of Euro, except where otherwise stated)
Revenues euro 176.6 euro 169.5 euro 150.6
Sale of emission allowances - 0.7 7.6
Operating income from
continuing operations 10.9 14.5 10.6
Operating EBITDA(1) 25.0 28.3 25.2
Realized gain (loss) on derivative
instruments - 6.8 (1.7)
Unrealized gain (loss) on
derivative instruments 18.1 (0.2) 46.3
Interest expense 17.6 20.1 22.9
Unrealized foreign exchange gain
on debt 1.3 1.3 6.1
Net income from continuing
operations 3.3 1.1 18.3
Income per share from continuing
operations
Basic euro 0.09 euro 0.03 euro 0.55
Diluted euro 0.09 euro 0.03 euro 0.45
(1) For a definition of Operating EBITDA, see page 5 of this press
release and for a reconciliation of net income (loss) to Operating
EBITDA, see page 8 of the financial tables included in this press
release.
Q2 Q1 Q2
2007 2007 2006
Pulp Production ('000 ADMTs) 326.4 347.3 307.7
Pulp Sales ('000 ADMTs) 337.0 329.1 334.1
NBSK list price in Europe ($/ADMT) 783 757 665 Average pulp price realizations (euro /ADMT) 518 512 453 Average Spot Currency Exchange Rates euro / $(1) 0.7416 0.7630 0.7957 C$ / $(1) 1.0981 1.1716 1.1224 C$ / euro (2) 1.4810 1.5354 1.4104
(1) Average Federal Reserve Bank of New York noon spot rate over the
reporting period.
(2) Average Bank of Canada noon spot rate over the reporting period.
Three Months Ended June 30, 2007 Compared to Three Months Ended June 30, 2006
Revenues for the three months ended June 30, 2007 increased by 17% to euro 176.6 million from euro 150.6 million in the comparative period of 2006, primarily due to stronger pulp prices and higher sales volume, partially offset by a 7% weakening of the U.S. dollar versus the Euro. List prices for NBSK pulp in Europe were approximately euro 579 ($783) per ADMT in the second quarter of 2007, euro 578 ($757) per ADMT in the first quarter of 2007 and approximately euro 529 ($665) per ADMT in the comparative second quarter of last year. Pulp sales volume increased to 337,016 ADMTs in the second quarter of 2007 from 334,136 ADMTs in the comparative period of 2006. Average pulp sales realizations increased to euro 518 per ADMT on average in the second quarter of 2007 from euro 453 per ADMT in the second quarter of 2006, primarily as a result of higher pulp prices.
Cost of sales and general, administrative and other expenses in the second quarter of 2007 increased to euro 165.7 million from euro 140.0 million in the comparative period of 2006, primarily as a result of higher fiber costs which increased by approximately 39% from the year ago quarter.
Fiber costs at our German pulp mills increased in the second quarter of 2007, primarily as a result of continuing increased demand for wood residuals. Fiber costs at our Celgar mill increased, primarily because of a weakening U.S. lumber market that has caused a sharp reduction in sawmill residual production. We expect fiber availability in Europe to increase materially as a result of severe storms in January that felled approximately 60 million cubic meters of timber, primarily in Germany and Scandinavia. This, coupled with the recent strength of the European lumber market, has started to provide some price relief and we expect further downward pressure on European fiber prices for deliveries throughout the balance of the year.
As a result of continued weak markets and prices for the sale of emission allowances, our contribution to income from the sale of such emission allowances in the second quarter of 2007 was euro nil, compared to euro 7.6 million in the second quarter of 2006.
For the second quarter of 2007, operating income increased by approximately 3% to euro 10.9 million from euro 10.6 million in the comparative quarter of 2006, primarily as a result of higher pulp prices and improved operating results at our Celgar mill. Interest expense in the second quarter of 2007 decreased to euro 17.6 million from euro 22.9 million in the 2006 comparative quarter, primarily because of the scheduled repayments of the Stendal facility and the settlement of our cross currency swaps which both occurred in the first quarter of 2007.
Derivative Instruments and Minority Interest
We recorded a net non-cash gain of euro 18.1 million on our outstanding interest rate derivatives at the end of the current quarter, compared to a net gain of euro 44.7 million on our foreign currency and interest rate derivatives in the comparative quarter of 2006.
In the second quarter of 2007, minority interest, representing the minority shareholder's interest in the Stendal mill's income, was euro 1.1 million, compared to its euro 0.4 million share of losses in the comparative quarter of 2006.
Earnings Per Share and Operating EBITDA
We generated "Operating EBITDA" of euro 25.0 million and euro 25.2 million in the three months ended June 30, 2007 and 2006, respectively. Operating EBITDA is defined as operating 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, including financing costs and the effect of derivative instruments. Operating EBITDA is not a measure of financial performance under GAAP, and should not be considered as an alternative to net income or income from operations as a measure of performance, nor as an alternative to net cash from operating activities as a measure of liquidity. Operating EBITDA has significant limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. For a reconciliation of net income to Operating EBITDA, see page 8 of the financial tables included in this press release.
We reported net income from continuing operations for the second quarter of 2007 of euro 3.3 million, or euro 0.09 per basic and diluted share, which included an aggregate of euro 19.4 million of net non-cash gains on our outstanding derivatives and foreign currency denominated long-term debt. In the second quarter of 2006, we reported net income from continuing operations of euro 18.3 million, or euro 0.55 per basic and euro 0.45 per diluted share, which reflected a net gain of euro 50.8 million on our outstanding derivatives and foreign currency denominated long-term debt.
Earnings Release Call
In conjunction with this release, Mercer International Inc. will host a conference call, which will be simultaneously broadcast live over the Internet. Management will host the call, which is scheduled for Wednesday, August 8, 2007 at 10:00 AM EDT. Listeners can access the conference call live and archived through September 8, 2007, over the Internet through a link at the Company's web site at http://www.mercerint.com/en/newsCurrent.cfm, or at http://www.videonewswire.com/event.asp?id=41217. Please allow 15 minutes prior to the call to visit the site and download and install any necessary audio software. A replay of this call will also be available approximately two hours after the live call ends until August 15, 2007 at 11:59 p.m. (Eastern Daylight Time) at (800) 642-1687 for domestic callers or (706) 645- 9291 for international callers, and the passcode is 10286547.
Mercer International Inc. is a global pulp manufacturing company. To obtain further information on the company, please visit its web site at http://www.mercerint.com.
The preceding includes forward looking statements which involve known and unknown risks and uncertainties which may cause 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.
-FINANCIAL TABLES FOLLOW-
MERCER INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
June 30, 2007 and December 31, 2006
(Euros in thousands)
June 30, December 31,
2007 2006
ASSETS
Current Assets
Cash and cash equivalents euro 48,302 euro 69,367
Receivables 104,494 75,022
Note receivable, current portion 5,834 7,798
Inventories 94,891 62,857
Prepaid expenses and other 5,462 4,662
Current assets of discontinued operations 1,104 2,094
Total current assets 260,087 221,800
Long-Term Assets
Cash restricted 45,000 57,000
Property, plant and equipment 968,830 972,143
Investments 88 1
Unrealized foreign exchange rate
derivative gain - 5,933
Deferred note issuance and other costs 6,294 6,984
Deferred income tax 18,670 29,989
Note receivable, less current portion 4,506 8,744
1,043,388 1,080,794 Total assets euro 1,303,475 euro 1,302,594
LIABILITIES
Current Liabilities
Accounts payable and accrued
expenses euro 100,970 euro 84,173
Debt, current portion 33,364 33,903
Current liabilities of discontinued
operations 651 1,926
Total current liabilities 134,985 120,002
Long-Term Liabilities
Debt, less current portion 848,990 873,928
Unrealized interest rate derivative loss 17,570 41,355
Pension and other post-retirement
benefit obligations 18,940 17,954
Capital leases 6,457 6,202
Deferred income tax 24,565 22,911
Other long-term liabilities 3,617 1,441
920,139 963,791
Total liabilities 1,055,124 1,083,793
Minority Interest - -
SHAREHOLDERS' EQUITY Common shares 202,626 195,642 Additional paid-in capital 134 154 Retained earnings 19,485 15,240 Accumulated other comprehensive income 26,106 7,765 Total shareholders' equity 248,351 218,801 Total liabilities and shareholders' equity euro 1,303,475 euro 1,302,594
(1)
MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 2007 and 2006
(Unaudited)
(Euros in thousands, except per share data)
2007 2006
Revenues euro 346,134 euro 292,262
Costs and expenses
Operating costs 277,555 239,292
Operating depreciation and amortization 27,719 28,325
40,860 24,645
General and administrative expenses 16,206 16,314
(Sale) purchase of emission allowances (766) (13,246)
Operating income from continuing operations 25,420 21,577
Other income (expense)
Interest expense (37,709) (45,728)
Investment income 3,195 3,003
Unrealized foreign exchange gain on debt 2,603 12,173
Realized gain (loss) on
derivative instruments 6,820 (5,219)
Unrealized gain on derivative instruments 17,852 90,724
Total other (expense) income (7,239) 54,953
Income before income taxes and minority interest from continuing operations 18,181 76,530 Income tax provision (13,705) (42,920) Income before minority interest from 4,476 33,610 continuing operations Minority interest (43) 898 Net income from continuing operations 4,433 34,508 Net (loss) income from discontinued operations (188) 501 Net income 4,245 35,009
Retained earnings (deficit), beginning of period 15,240 (47,970) Retained earnings (deficit), end of period euro 19,485 euro (12,961)
Net income per share from continuing
operations
Basic euro 0.12 euro 1.04
Diluted euro 0.12 euro 0.85
Income per share
Basic euro 0.12 euro 1.06
Diluted euro 0.12 euro 0.86
(2)
MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 2007 and 2006
(Unaudited)
(Euros in thousands, except per share data)
2007 2006
Revenues euro 176,603 euro 150,594
Costs and expenses
Operating costs 142,808 124,385
Operating depreciation and amortization 13,990 14,637
19,805 11,572
General and administrative expenses 8,901 8,597
(Sale) purchase of emission allowances (39) (7,608)
Operating income from continuing operations 10,943 10,583
Other income (expense)
Interest expense (17,641) (22,914)
Investment income 1,584 1,263
Unrealized foreign exchange gain on debt 1,349 6,060
Realized loss on derivative instruments - (1,657)
Unrealized gain on derivative instruments 18,100 46,347
Total other income 3,392 29,099
Income before income taxes and minority interest from continuing operations 14,335 39,682 Income tax provision (9,904) (21,807) Income before minority interest from continuing operations 4,431 17,875 Minority interest (1,091) 449 Net income from continuing operations 3,340 18,324 Net (loss) income from discontinued operations (181) 97 Net income 3,159 18,421
Retained earnings (deficit), beginning of period 16,326 (31,382) Retained earnings (deficit), end of period euro 19,485 euro (12,961)
Net income per share from continuing
operations
Basic euro 0.09 euro 0.55
Diluted euro 0.09 euro 0.45
Income per share
Basic euro 0.09 euro 0.56
Diluted euro 0.09 euro 0.45
(3)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheet
As at June 30, 2007
(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. ("Mercer Inc.") and our restricted subsidiaries under the indenture, collectively referred to as the "Restricted Group". As at and during the six and three months ended June 30, 2007 and 2006, the Restricted Group was comprised of Mercer International Inc., certain holding subsidiaries and Rosenthal, and the Celgar mill. The Restricted Group excludes the Stendal mill and, up to December 31, 2006, the discontinued paper operations.
June 30, 2007
Restricted Unrestricted Consolidated
Group Subsidiary Eliminations Group
ASSETS Current assets Cash and cash equivalents euro 40,027 euro 8,275 euro - euro 48,302 Receivables 50,159 54,335 - 104,494 Note receivable, current portion 617 5,217 - 5,834 Inventories 57,306 37,585 - 94,891 Prepaid expenses and other 2,445 3,017 - 5,462 Current assets from discontinued operations 1,104 - - 1,104 Total current assets 151,658 108,429 - 260,087 Cash restricted - 45,000 - 45,000 Property, plant and equipment 397,577 571,253 - 968,830 Other 6,382 - - 6,382 Deferred income tax 11,715 6,955 - 18,670 Due from unrestricted group 56,540 - (56,540) - Note receivable, less current 4,506 - - 4,506 portion Total assets euro 628,378 euro 731,637 euro (56,540) euro 1,303,475
LIABILITIES Current Accounts payable and accrued expenses euro 52,366 euro 48,604 euro - euro 100,970 Debt, current portion - 33,364 - 33,364 Current liabilities from discontinued operations 651 - - 651 Total current liabilities 53,017 81,968 - 134,985 Debt, less current portion 291,556 557,434 - 848,990 Due to restricted group - 56,540 (56,540) - Unrealized derivative loss - 17,570 - 17,570 Capital leases 4,520 1,937 - 6,457 Deferred income tax 4,125 20,440 - 24,565 Other long-term liabilities 22,544 13 - 22,557 Total liabilities 375,762 735,902 (56,540) 1,055,124
SHAREHOLDERS' EQUITY Total shareholders' equity (deficit) 252,616 (4,265) - 248,351 Total liabilities and shareholders' equity euro 628,378 euro 731,637 euro (56,540) euro 1,303,475
(4)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheet
As at December 31, 2006
(Euros in thousands)
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 of
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 46,838 euro 37,335 euro - euro 84,173 Debt, current portion - 33,903 - 33,903 Current liabilities of discontinued operations - 1,926 - 1,926 Total current liabilities 46,838 73,164 - 120,002 Debt, less current portion 293,781 580,147 - 873,928 Due to restricted group - 51,265 (51,265) - Unrealized derivative loss - 41,355 - 41,355 Capital leases 2,720 3,482 - 6,202 Deferred income tax 2,832 20,079 - 22,911 Other long-term liabilities 19,395 - - 19,395 Total liabilities 365,566 769,492 (51,265) 1,083,793
SHAREHOLDERS' EQUITY Total shareholders' equity (deficit) 243,949 (25,148) - 218,801 Total liabilities and shareholders' equity euro 609,515 euro 744,344 euro (51,265) euro 1,302,594
(5)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations
For the Six Months Ended June 30, 2007 and 2006
(Unaudited)
(Euros in thousands)
Six Months Ended June 30, 2007
Restricted Unrestricted Consolidated
Group Subsidiary Eliminations Group
Revenues euro 204,240 euro 141,894 euro - euro 346,134
Operating costs 161,829 115,726 - 277,555
Operating
depreciation and
amortization 13,661 14,058 - 27,719
General and
administrative
expenses 10,623 5,583 - 16,206
(Sale) purchase
of emission
allowances (268) (498) - (766)
185,845 134,869 - 320,714
Operating income
from continuing
operations 18,395 7,025 - 25,420
Other income (expense)
Interest expense (14,418) (25,132) 1,841 (37,709)
Investment income 2,440 2,596 (1,841) 3,195
Unrealized foreign
exchange gain
on debt 2,263 340 - 2,603
Derivative financial
instruments, net - 24,672 - 24,672
Total other (expense)
income (9,715) 2,476 - (7,239)
Income before
income taxes and
minority interest
from continuing
operations 8,680 9,501 - 18,181
Income tax provision (4,150) (9,555) - (13,705)
Income (loss) before
minority interest
from continuing
operations 4,530 (54) - 4,476
Minority interest - (43) - (43)
Net income (loss)
from continuing
operations 4,530 (97) - 4,433
Net loss from
discontinued
operations (188) - - (188)
Net income
(loss) euro 4,342 euro (97) euro - euro 4,245
Six Months Ended June 30, 2006
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
Revenues euro 169,752 euro 122,510 euro - euro 292,262
Operating costs 148,388 90,904 - 239,292
Operating
depreciation and
amortization 14,197 14,128 - 28,325
General and
administrative
expenses 10,375 5,939 - 16,314
(Sale) purchase
of emission
allowances (3,651) (9,595) - (13,246)
169,309 101,376 - 270,685
Operating income
from continuing
operations 443 21,134 - 21,577
Other income (expense)
Interest expense (16,442) (31,046) 1,760 (45,728)
Investment income 2,119 2,644 (1,760) 3,003
Unrealized foreign
exchange gain
on debt 12,173 - - 12,173
Derivative financial
instruments, net - 85,505 - 85,505
Total other income
(expense) (2,150) 57,103 - 54,953
Income (loss)
before income
taxes and minority
interest from
continuing
operations (1,707) 78,237 - 76,530
Income tax provision (6,905) (36,015) - (42,920)
Income (loss) before
minority interest
from continuing
operations (8,612) 42,222 - 33,610
Minority interest - 898 - 898
Net income (loss)
from continuing
operations (8,612) 43,120 - 34,508
Net income
from discontinued
operations - 501 - 501
Net income
(loss) euro (8,612) euro 43,621 euro - euro 35,009
(6)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations
For the Three Months Ended June 30, 2007 and 2006
(Unaudited)
(Euros in thousands)
Three Months Ended June 30, 2007
Restricted Unrestricted Consolidated
Group Subsidiary Eliminations Group
Revenues euro 104,307 euro 72,296 euro - euro 176,603
Operating costs 85,271 57,537 - 142,808
Operating depreciation
and amortization 6,975 7,015 - 13,990
General and administrative
expenses 6,264 2,637 - 8,901
(Sale) purchase of emission
allowances (4) (35) - (39)
98,506 67,154 - 165,660
Operating income from
continuing operations 5,801 5,142 - 10,943
Other income (expense)
Interest expense (6,961) (11,606) 926 (17,641)
Investment income 1,136 1,374 (926) 1,584
Unrealized foreign exchange
gain on debt 1,009 340 - 1,349
Derivative financial
instruments, net - 18,100 - 18,100
Total other income
(expense) (4,816) 8,208 - 3,392
Income before income taxes
and minority interest from
continuing operations 985 13,350 - 14,335
Income tax provision (1,612) (8,292) - (9,904)
Income (loss) before
minority interest from
continuing operations (627) 5,058 - 4,431
Minority interest - (1,091) - (1,091)
Net income (loss) from
continuing operations (627) 3,967 - 3,340
Net loss from discontinued
operations (181) - - (181)
Net income (loss) euro (808) euro 3,967 euro - euro 3,159
Three Months Ended June 30, 2006
Restricted Unrestricted Consolidated
Group Subsidiary Eliminations Group
Revenues euro 88,741 euro 61,853 euro - euro 150,594
Operating costs 79,249 45,136 - 124,385
Operating depreciation
and amortization 7,568 7,069 - 14,637
General and administrative
expenses 5,415 3,182 - 8,597
(Sale) purchase of emission
allowances (1,884) (5,724) - (7,608)
90,348 49,663 - 140,011
Operating income from
continuing operations (1,607) 12,190 - 10,583
Other income (expense)
Interest expense (7,979) (15,820) 885 (22,914)
Investment income (loss) (142) 2,290 (885) 1,263
Unrealized foreign exchange
gain on debt 6,060 - - 6,060
Derivative financial
instruments, net 79 44,611 - 44,690
Total other income
(expense) (1,982) 31,081 - 29,099
Income (loss) before
income taxes and minority
interest from continuing
operations (3,589) 43,271 - 39,682
Income tax provision (3,872) (17,935) - (21,807)
Income (loss) before
minority interest from
continuing operations (7,461) 25,336 - 17,875
Minority interest - 449 - 449
Net income (loss) from
continuing operations (7,461) 25,785 - 18,324
Net income from discontinued
operations - 97 - 97
Net income (loss) euro (7,461) euro 25,882 euro - euro 18,421
(7)
MERCER INTERNATIONAL INC.
COMPUTATION OF OPERATING EBITDA
For the Six Months and Three Months Ended June 30, 2007 and 2006
(Unaudited)
(Euros in thousands)
Six Months Ended
June 30,
2007 2006
(in thousands)
Net income from continuing operations euro 4,433 euro 34,508
Minority interest 43 (898)
Income taxes 13,705 42,920
Interest expense 37,709 45,728
Investment income (3,195) (3,003)
Unrealized foreign exchange gain on debt (24,672) (12,173)
Derivative financial instruments, net gain (2,603) (85,505)
Operating income from continuing operations 25,420 21,577
Add: Depreciation and amortization 27,847 28,325
Operating EBITDA(1) euro 53,267 euro 49,902
Three Months Ended
June 30,
2007 2006
(in thousands)
Net income from continuing operations euro 3,340 euro 18,324
Minority interest 1,091 (449)
Income taxes 9,904 21,807
Interest expense 17,641 22,914
Investment income (1,584) (1,263)
Unrealized foreign exchange gain on debt (1,349) (6,060)
Derivative financial instruments, net gain (18,100) (44,690)
Operating income from continuing operations 10,943 10,583
Add: Depreciation and amortization 14,055 14,637
Operating EBITDA(1) euro 24,998 euro 25,220
(1) Operating EBITDA does not reflect the impact of a number of items
that affect our net income, including financing costs and the effect
of derivative instruments. Operating EBITDA is not a measure of
financial performance under accounting principles generally accepted
in the United States, and should not be considered as an alternative
to net income or income from operations as a measure of performance,
nor as an alternative to net cash from operating activities as a
measure of liquidity. Operating EBITDA has significant limitations
as an analytical tool, and should not be considered in isolation, or
as a substitute for analysis of our results as reported under GAAP.
(8)
COMPUTATION OF RESTRICTED GROUP OPERATING EBITDA
For the Six Months and Three Months Ended June 30, 2007 and 2006
(Unaudited)
(Euros in thousands)
Six Months Ended
June 30,
2007 2006
(in thousands)
Restricted Group
Net income (loss) from continuing operations euro 4,530 euro (8,612)
Income taxes 4,150 6,905
Interest expense 14,418 16,442
Investment and other income (2,440) (2,119)
Unrealized foreign exchange gain on debt (2,263) (12,173)
Operating income from continuing operations 18,395 443
Add: Depreciation and amortization 13,661 14,197
Operating EBITDA(1) euro 32,056 euro 14,640
Three Months Ended
June 30,
2007 2006
(in thousands)
Restricted Group
Net loss from continuing operations euro (627) euro (7,461)
Income taxes 1,612 3,872
Interest expense 6,961 7,979
Investment and other (income) expense (1,136) 142
Unrealized foreign exchange gain on debt (1,009) (6,060)
Derivative financial instruments, net loss - (79)
Operating income (loss) from continuing
operations 5,801 (1,607)
Add: Depreciation and amortization 6,975 7,568
Operating EBITDA(1) euro 12,776 euro 5,961
(1) 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.
(9)