NEW YORK, Nov. 5 /CNW/ -- Mercer International Inc. (Nasdaq: MERC, TSX: MRI.U) today reported results for the third 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.
The quarter ended September 30, 2007 was operationally one of our best ever with record pulp production and shipments. In addition, our financial results were solid despite the continued weakening of the U.S. dollar against the Euro and higher fiber costs in the current quarter. High mill efficiencies and only nine days of annual maintenance downtime were the primary drivers of the operational results. Demand for NBSK remained strong throughout the quarter which enabled us to secure price increases in both the European and Asian markets which were partially offset by the impact of the weak U.S. dollar.
Highlights of the 2007 Third Quarter
-- Revenues increased by 12% to euro 191.1 million from euro 171.2 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 $810 per ADMT in the quarter from $783 per ADMT in the prior quarter and $708 per ADMT in the third quarter of 2006. -- Our average pulp price realizations increased to euro 520 per ADMT from euro 482 in the same quarter of 2006 but were only marginally higher than euro 518 per ADMT in the prior quarter of 2007 as higher prices were largely offset by a weakening U.S. dollar. During the third quarter, the U.S. dollar was weaker relative to both the Euro and Canadian dollar, falling in value by 2% and 5% respectively compared to the second quarter of 2007 and 7% against each such currency in the comparative period of 2006. -- On average, fiber prices were approximately 33% higher than in the prior year period but decreased marginally from prior quarter levels. -- Operating EBITDA in the current quarter of euro 35.8 million was down compared to the comparative quarter in 2006 of euro 48.2 million as higher sales and productivity along with improved prices were more than offset by higher fiber costs and currency changes. 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 7 of the financial tables included in this press release. -- Net income from continuing operations was euro 10.7 million, or euro 0.30 per basic and euro 0.26 per diluted share, in the current quarter which included a net loss on our derivatives and foreign currency denominated long-term debt of euro 1.1 million, compared to net income from continuing operations of euro 6.1 million, or euro 0.18 per basic and diluted share, in the same period of 2006 which included a net loss on our derivatives and foreign currency denominated long-term debt of euro 15.2 million.
President's Comments
Mr. Jimmy S.H. Lee, President and Chairman, stated:
-- "We had strong operating performances in the quarter, setting production and sales records. Scheduled maintenance downtime at our Rosenthal mill reduced production by approximately 8,400 ADMTs in the quarter. We have now completed all of our 2007 annual maintenance downtime. -- Pulp markets continued to show strength in the third quarter of 2007. List prices in the quarter increased by approximately $27 per ADMT in Europe. Demand in the upcoming quarter is currently expected to remain strong as both producer and buyer inventories remain at historically low levels. -- During the quarter, Stendal concluded a final settlement of substantially all outstanding matters with its contractors under its EPC contract while still maintaining existing warranties as provided by the equipment suppliers. We are happy to conclude this settlement with our contractors which addresses all significant outstanding matters. -- Prices for residual chips in Germany and British Columbia purchased in the third quarter decreased marginally from second quarter levels. Prices for roundwood, which comprises a major portion of fiber for our Stendal mill, have not declined due to continuing strong demand in northern Germany. As a result, we expect to continue to displace roundwood with residual chips at Stendal in the final quarter of 2007. Overall, we currently expect fiber prices in the fourth quarter to be generally level with third quarter prices but continuing weakness in North American and European lumber markets may put upward pressure on prices in early 2008. -- We are seeing continued strong demand in all our markets. We expect that this, along with the weakened U.S. dollar, will result in higher pulp prices in the upcoming months."
Mr. Lee concluded: "With our mills running at historically high levels, we are well positioned to take advantage of the NBSK price momentum and stabilizing fiber prices for the balance of the year, although further weakness in the U.S. dollar will adversely impact our price realizations and margins."
Summary Selected Highlights
Q3 Q2 Q3
2007 2007 2006
(in millions of Euro, except where otherwise stated)
Revenues euro 191.1 euro 176.6 euro 171.2 Operating income from continuing operations 21.5 10.9 34.8 Operating EBITDA(1) 35.8 25.0 48.2 Unrealized (loss) gain on derivative instruments (5.7) 18.1 (14.5) Interest expense 18.6 17.6 23.0 Unrealized foreign exchange gain (loss) on debt 4.6 1.3 (0.7) Net income from continuing operations 10.7 3.3 6.1 Income per share from continuing operations Basic euro 0.30 euro 0.09 euro 0.18 Diluted euro 0.26 euro 0.09 euro 0.18
(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 7 of the financial tables included in this press release.
Q3 Q2 Q3
2007 2007 2006
Pulp Production ('000 ADMTs) 361.0 326.4 347.2
Pulp Sales ('000 ADMTs) 363.5 337.0 338.2
NBSK list price in Europe ($/ADMT) 810 783 708
Average pulp price realizations (euro/ADMT) 520 518 482
Average Spot Currency Exchange Rates
euro / $(1) 0.7268 0.7416 0.7851
C$ / $(1) 1.0446 1.0981 1.1212
C$ / euro(2) 1.4367 1.4810 1.4279
(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 September 30, 2007 Compared to Three Months Ended September 30, 2006
Revenues for the three months ended September 30, 2007 increased by 12% to euro 191.1 million from euro 171.2 million in the comparative period of 2006, primarily due to higher sales volume and stronger pulp prices, partially offset by a 7% weakening of the U.S. dollar versus the Euro and the Canadian dollar. List prices for NBSK pulp in Europe were approximately euro 589 ($810) per ADMT in the third quarter of 2007, euro 579 ($783) per ADMT in the second quarter of 2007 and approximately euro 556 ($708) per ADMT in the same period last year. Pulp sales volume increased to 363,523 ADMTs in the third quarter of 2007 from 338,201 ADMTs in the comparative period of 2006. Average pulp sales realizations increased to euro 520 per ADMT on average in the third quarter of 2007 from euro 482 per ADMT in the third quarter of 2006, primarily as a result of higher pulp prices.
Cost of sales, general administrative and other expenses in the third quarter of 2007 increased to euro 169.7 million from euro 136.5 million in the comparative period of 2006, primarily as a result of higher sales volumes and fiber costs.
On average, in the current quarter, fiber costs increased by approximately 33% from the comparative period of 2006 and decreased marginally from the second quarter of 2007. Fiber costs at our German pulp mills fell moderately in the current quarter from the second quarter of 2007, primarily as a result of increased availability of storm-felled wood and relatively high levels of sawmill activity. While fiber availability is generally good, the recent deterioration in European lumber prices is expected to keep fiber prices relatively level in the fourth quarter. Fiber costs at our Celgar mill were stable, due to our supply optimization efforts along with the currency impact on the mill's U.S. sourced fiber. Incremental whole log chipping has been required to offset the lower availability of chips resulting from weak North American lumber markets and resulting lower sawmilling activity.
For the third quarter of 2007, operating income decreased by approximately 38% to euro 21.5 million from euro 34.8 million in the comparative quarter of 2006, as higher pulp prices and improved operating results were more than offset by exchange rates and higher fiber costs.
Interest expense in the third quarter of 2007 decreased to euro 18.6 million from euro 23.0 million in the comparative quarter of 2006, primarily due to a lower level of borrowing by Stendal and the settlement of our cross- currency swaps in the first quarter of 2007.
During the quarter, Stendal concluded a final settlement of substantially all outstanding matters with its contractors under its EPC contract while still maintaining existing warranties as provided by the equipment suppliers. Pursuant to the settlement, Stendal received approximately euro 11 million from its contractors, of which euro 9.1 million was applied to reduce our costs of assets and did not affect our revenues or income.
Derivative Instruments, Long-Term Debt and Minority Interest
We recorded a net unrealized loss of euro 5.7 million on our outstanding interest rate derivatives at the end of the current quarter as a result of a decline in long-term interest rates, compared to a net loss of euro 14.5 million on our foreign currency and interest rate derivatives in the same quarter of last year.
In the current quarter, we recorded an unrealized gain on our foreign currency denominated debt of euro 4.6 million, compared to losses of euro 0.7 million in the third quarter of 2006.
In the third quarter of 2007, minority interest, representing the minority shareholder's interest in the Stendal mill's income, was euro 0.7 million, compared to its euro 6.0 million share of losses in the same quarter of last year.
Earnings Per Share and Operating EBITDA
We generated "Operating EBITDA" of euro 35.8 million and euro 48.2 million in the three months ended September 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 7 of the financial tables included in this press release.
We reported net income from continuing operations for the third quarter of 2007 of euro 10.7 million, or euro 0.30 per basic and euro 0.26 per diluted share, which included an aggregate net unrealized loss of euro 1.1 million on our outstanding derivatives and foreign currency denominated long-term debt. In the third quarter of 2006, we reported net income from continuing operations of euro 6.1 million, or euro 0.18 per basic and diluted share, which included a net unrealized loss of euro 15.2 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 Tuesday, November 6, 2007 at 10:00 AM EST. Listeners can access the conference call live and archived through December 6, 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=42599. Please allow 15 minutes prior to the call to visit the site and download and install any necessary audio software. A replay of this call will be available approximately two hours after the live call ends until November 13, 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, and the passcode is 18699285.
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.
MERCER INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Euros in thousands)
September 30, December 31,
2007 2006
ASSETS
Current assets
Cash and cash equivalents euro 69,441 euro 69,367
Receivables 97,380 75,022
Note receivable, current portion 5,998 7,798
Inventories 96,791 62,857
Prepaid expenses and other 6,356 4,662
Current assets of discontinued operations 1,537 2,094
Total current assets 277,503 221,800
Long-term assets
Cash, restricted 33,000 57,000
Property, plant and equipment 949,046 972,143
Investments 72 1
Unrealized foreign exchange rate
derivative gain - 5,933
Deferred note issuance and other costs 5,949 6,984
Deferred income tax 18,016 29,989
Note receivable, less current portion 4,239 8,744
1,010,322 1,080,794
Total assets euro 1,287,825 euro 1,302,594
LIABILITIES
Current liabilities
Accounts payable and
accrued expenses euro 91,293 euro 84,173
Debt, current portion 34,023 33,903
Current liabilities of discontinued
operations 610 1,926
Total current liabilities 125,926 120,002
Long-term liabilities
Debt, less current portion 822,331 873,928
Unrealized interest rate derivative loss 23,266 41,355
Pension and other post-retirement benefit
obligations 19,625 17,954
Capital leases 5,350 6,202
Deferred income tax 16,698 22,911
Other long-term liabilities 3,714 1,441
890,984 963,791
Total liabilities 1,016,910 1,083,793
Minority interest - -
SHAREHOLDERS' EQUITY Common shares 202,845 195,642 Additional paid-in capital 134 154 Retained earnings 30,181 15,240 Accumulated other comprehensive income 37,755 7,765 Total shareholders' equity 270,915 218,801 Total liabilities and shareholders' equity euro 1,287,825 euro 1,302,594
(1)
MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Euros in thousands, except for income per share)
Three Months Nine Months
Ended Ended
September 30, September 30,
2007 2006 2007 2006
Revenues euro 191,111 euro 171,248 euro 537,245 euro 463,510
Costs and expenses
Operating costs 149,440 117,186 429,637 358,740
Operating depreciation
and amortization 14,284 13,465 42,003 41,790
27,387 40,597 65,605 62,980
General and
administrative
expenses 5,930 5,839 19,494 19,891
(Sale) purchase of
emission allowances - - (766) (13,246)
Operating income from
continuing operations 21,457 34,758 46,877 56,335
Other income (expense)
Interest expense (18,599) (23,041) (56,308) (68,769)
Investment income 2,791 1,080 5,986 4,083
Unrealized foreign
exchange gain (loss)
on debt 4,626 (704) 7,229 11,469
Realized gain (loss) on
derivative instruments - - 6,820 (5,219)
Unrealized (loss) gain on
derivative instruments (5,696) (14,473) 12,156 76,251
Total other (expense)
income (16,878) (37,138) (24,117) 17,815
Income (loss) before income taxes
and minority interest from
continuing operations 4,579 (2,380) 22,760 74,150
Income tax benefit
(provision)
- current (144) (302) (877) (524)
- deferred 7,013 2,834 (5,959) (39,864)
Income before minority
interest from continuing
operations 11,448 152 15,924 33,762
Minority interest (742) 5,976 (785) 6,874
Net income from
continuing operations 10,706 6,128 15,139 40,636
Net (loss) income from
discontinued operations (10) 600 (198) 1,101
Net income 10,696 6,728 14,941 41,737
Retained earnings (deficit), beginning of period 19,485 (12,961) 15,240 (47,970) Retained earnings (deficit), end of period euro 30,181 euro (6,233) euro 30,181 euro (6,233)
Net income per share from
continuing operations
Basic euro 0.30 euro 0.18 euro 0.42 euro 1.22
Diluted euro 0.26 euro 0.18 euro 0.40 euro 1.03
Income per share
Basic euro 0.29 euro 0.20 euro 0.41 euro 1.26
Diluted euro 0.26 euro 0.19 euro 0.39 euro 1.05
(2)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheet
As at September 30, 2007
(Unaudited)
(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 three and nine months ended September 30, 2007 and 2006, 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 and up to December 31, 2006 the discontinued paper operations.
September 30, 2007
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
ASSETS
Current assets
Cash and
cash equivalents euro 48,993 euro 20,448 euro - euro 69,441
Receivables 46,413 50,967 - 97,380
Note receivable,
current portion 599 5,399 - 5,998
Inventories 57,161 39,630 - 96,791
Prepaid expenses
and other 3,762 2,594 - 6,356
Current assets from
discontinued
operations 1,537 - - 1,537
Total current assets 158,465 119,038 - 277,503
Cash, restricted - 33,000 - 33,000
Property, plant
and equipment 395,864 553,182 - 949,046
Other 6,021 - - 6,021
Deferred income tax 11,233 6,783 - 18,016
Due from unrestricted
group 56,561 - (56,561) -
Note receivable, less
current portion 4,239 - - 4,239
Total assets euro 632,383 euro 712,003 euro (56,561) euro 1,287,825
LIABILITIES Current Accounts payable and accrued expenses euro 46,023 euro 45,270 euro - euro 91,293 Debt, current portion - 34,023 - 34,023 Current liabilities from discontinued operations 610 - - 610 Total current liabilities 46,633 79,293 - 125,926 Debt, less current portion 280,847 541,484 - 822,331 Due to restricted group - 56,561 (56,561) - Unrealized derivative loss - 23,266 - 23,266 Capital leases 3,847 1,503 - 5,350 Deferred income tax 4,214 12,484 - 16,698 Other long-term liabilities 23,327 12 - 23,339 Total liabilities 358,868 714,603 (56,561) 1,016,910
SHAREHOLDERS' EQUITY Total shareholders' equity (deficit) 273,515 (2,600) - 270,915 Total liabilities and shareholders' equity euro 632,383 euro 712,003 euro (56,561) euro 1,287,825
(3)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheet
As at December 31, 2006
(Unaudited)
(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 from 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
(4)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
For the Three Months Ended September 30, 2007 and 2006
(Unaudited)
(Euros in thousands)
Three Months Ended September 30, 2007
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
Revenues euro 106,530 euro 84,581 euro - euro 191,111
Operating costs 84,769 64,671 - 149,440
Operating
depreciation
and amortization 7,419 6,865 - 14,284
General and
administrative
expenses 3,386 2,544 - 5,930
(Sale) purchase of
emission allowances - - - -
95,574 74,080 - 169,654
Operating income
from continuing
operations 10,956 10,501 - 21,457
Other income (expense)
Interest expense (6,996) (12,540) 937 (18,599)
Investment income 1,321 2,407 (937) 2,791
Unrealized foreign
exchange gain
on debt 4,545 81 - 4,626
Derivative financial
instruments, net - (5,696) - (5,696)
Total other expense (1,130) (15,748) - (16,878)
Income (loss)
before income
taxes and
minority interest
from continuing
operations 9,826 (5,247) - 4,579
Income tax benefit
(provision) - current (13) (131) - (144)
- deferred (770) 7,783 - 7,013
Income before
minority interest
from continuing
operations 9,043 2,405 - 11,448
Minority interest - (742) - (742)
Net income from
continuing
operations 9,043 1,663 - 10,706
Net loss from
discontinued
operations (10) - - (10)
Net income euro 9,033 euro 1,663 euro - euro 10,696
Three Months Ended September 30, 2006
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
Revenues euro 95,779 euro 75,469 euro - euro 171,248
Operating costs 65,595 51,591 - 117,186
Operating depreciation
and amortization 6,383 7,082 - 13,465
General and
administrative
expenses 3,399 2,440 - 5,839
(Sale) purchase of
emission allowances - - - -
75,377 61,113 - 136,490
Operating income
from continuing
operations 20,402 14,356 - 34,758
Other income (expense)
Interest expense (8,160) (15,776) 895 (23,041)
Investment income 1,142 833 (895) 1,080
Unrealized foreign
exchange loss
on debt (704) - - (704)
Derivative financial
instruments, net - (14,473) - (14,473)
Total other expense (7,722) (29,416) - (37,138)
Income (loss)
before income
taxes and
minority interest
from continuing
operations 12,680 (15,060) - (2,380)
Income tax benefit
(provision) - current (100) (202) - (302)
- deferred (1,281) 4,115 - 2,834
Income (loss)
before minority
interest from
continuing
operations 11,299 (11,147) - 152
Minority interest - 5,976 - 5,976
Net income
(loss) from
continuing
operations 11,299 (5,171) - 6,128
Net income from
discontinued
operations - 600 - 600
Net income
(loss) euro 11,299 euro (4,571) euro - euro 6,728
(5)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
For the Nine Months Ended September 30, 2007 and 2006
(Unaudited)
(Euros in thousands)
Nine Months Ended September 30, 2007
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
Revenues euro 310,770 euro 226,475 euro - euro 537,245
Operating costs 249,052 180,585 - 429,637
Operating
depreciation and
amortization 21,080 20,923 - 42,003
General and
administrative
expenses 11,548 7,943 - 19,491
(Sale) purchase
of emission
allowances (261) (502) - (763)
281,419 208,949 - 490,368
Operating income
from continuing
operations 29,351 17,526 - 46,877
Other income (expense)
Interest expense (21,414) (37,672) 2,778 (56,308)
Investment income 3,761 5,003 (2,778) 5,986
Unrealized foreign
exchange gain on debt 6,808 421 - 7,229
Derivative financial
instruments, net - 18,976 - 18,976
Total other expense (10,845) (13,272) - (24,117)
Income before income
taxes and minority
interest from
continuing
operations 18,506 4,254 - 22,760
Income tax
provision - current (469) (408) - (877)
- deferred (4,464) (1,495) - (5,959)
Income before minority
interest from continuing
operations 13,573 2,351 - 15,924
Minority interest - (785) - (785)
Net income from
continuing
operations 13,573 1,566 - 15,139
Net loss from
discontinued
operations (198) - - (198)
Net income euro 13,375 euro 1,566 euro - euro 14,941
Nine Months Ended September 30, 2006
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
Revenues euro 265,531 euro 197,979 euro - euro 463,510
Operating costs 214,873 143,867 - 358,740
Operating depreciation
and amortization 20,580 21,210 - 41,790
General and
administrative expenses 12,884 7,007 - 19,891
(Sale) purchase of
emission allowances (3,651) (9,595) - (13,246)
244,686 162,489 - 407,175
Operating income from
continuing operations 20,845 35,490 - 56,335
Other income (expense) Interest expense (24,602) (46,822) 2,655 (68,769) Investment income 3,261 3,477 (2,655) 4,083 Unrealized foreign exchange gain on debt 11,469 - - 11,469 Derivative financial instruments, net - 71,032 - 71,032 Total other income (expense) (9,872) 27,687 - 17,815 Income before income taxes and minority interest from continuing operations 10,973 63,177 - 74,150 Income tax provision - current (322) (202) - (524) - deferred (7,964) (31,900) - (39,864) Income before minority interest from continuing operations 2,687 31,075 - 33,762 Minority interest - 6,874 - 6,874 Net income from continuing operations 2,687 37,949 - 40,636 Net income from discontinued operations - 1,101 - 1,101
Net income euro 2,687 euro 39,050 euro - euro 41,737
(6)
MERCER INTERNATIONAL INC.
COMPUTATION OF OPERATING EBITDA
For the Three Months and Nine Months Ended September 30, 2007 and 2006
(Unaudited)
(Euros in thousands)
Three Months Ended
September 30,
2007 2006
(in thousands)
Net income from continuing operations euro 10,706 euro 6,128 Minority interest 742 (5,976) Income taxes (6,869) (2,532) Interest expense 18,599 23,041 Investment income (2,791) (1,080) Unrealized foreign exchange (gain) loss on debt (4,626) 704 Derivative financial instruments, net gain 5,696 14,473 Operating income from continuing operations 21,457 34,758 Add: Depreciation and amortization 14,351 13,465 Operating EBITDA(1) euro 35,808 euro 48,223
Nine Months Ended
September 30,
2007 2006
(in thousands)
Net income from continuing operations euro 15,139 euro 40,636 Minority interest 785 (6,874) Income taxes 6,836 40,388 Interest expense 56,308 68,769 Investment income (5,986) (4,083) Unrealized foreign exchange gain on debt (7,229) (11,469) Derivative financial instruments, net gain (18,976) (71,032) Operating income from continuing operations 46,877 56,335 Add: Depreciation and amortization 42,197 41,790 Operating EBITDA(1) euro 89,074 euro 98,125
(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.
(7)
COMPUTATION OF RESTRICTED GROUP OPERATING EBITDA
For the Three Months and Nine Months Ended September 30, 2007 and 2006
(Unaudited)
(Euros in thousands)
Three Months Ended
September 30,
2007 2006
(in thousands)
Restricted Group
Net income from continuing operations euro 9,043 euro 11,299
Income taxes 783 1,381
Interest expense 6,996 8,160
Investment and other income (1,321) (1,142)
Unrealized foreign exchange (gain) loss on debt (4,545) 704
Operating income from continuing operations 10,956 20,402
Add: Depreciation and amortization 7,486 6,383
Operating EBITDA(1) euro 18,442 euro 26,785
Nine Months Ended
September 30,
2007 2006
(in thousands)
Restricted Group
Net income from continuing operations euro 13,573 euro 2,687
Income taxes 4,933 8,286
Interest expense 21,414 24,602
Investment and other income (3,761) (3,261)
Unrealized foreign exchange gain on debt (6,808) (11,469)
Operating income from continuing operations 29,351 20,845
Add: Depreciation and amortization 21,274 20,580
Operating EBITDA(1) euro 50,625 euro 41,425
(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.
(8)