NEW YORK, Nov. 6 /CNW/ -- Mercer International Inc. (Nasdaq: MERC), (TSX:
MRI.U) today reported results for the third quarter of 2006.
Highlights of the 2006 Third Quarter
<<
* Revenues increased by approximately 18% to euro 175.2 million from
euro 148.9 million in the comparative period of 2005, due to higher pulp
prices and sales from our Stendal pulp mill.
* Operating EBITDA increased by approximately 119% to euro 48.0 million
in
the third quarter compared to euro 21.9 million in the comparable period
of 2005, primarily as a result of higher pulp prices and a significant
improvement in the results of our Celgar pulp mill. 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 10 of
the financial tables included in this press release.
* Pulp markets strengthened quarter over quarter. Average list prices
for
NBSK pulp in Europe were $708 per ADMT in the third quarter of 2006 and
$665 per ADMT in the second quarter of 2006, compared to $580 per ADMT
in the third quarter of 2005.
* Mill net pulp realizations increased to euro 482 per ADMT in the third
quarter of 2006 from euro 453 and euro 398 per ADMT in the prior quarter
of 2006 and the third quarter of 2005, respectively.
* We recorded an aggregate net unrealized loss of euro 14.5 million on
our
outstanding derivatives in the third quarter of 2006, compared to an
aggregate net unrealized gain of euro 3.3 million thereon in the
comparative period of 2005.
* We had net income of euro 6.7 million, or euro 0.20 per basic and
euro 0.19 per diluted share, in the current quarter, compared to a net
loss of euro 5.6 million, or euro 0.17 per basic and diluted share, in
the same period of 2005.
President's Comments
>>
Mr. Jimmy S.H. Lee, President and Chairman, stated: "During the third
quarter of 2006:
<<
* Our strong results reflect strengthening pulp markets compared to the
prior and comparative quarter.
* All three of our pulp mills performed well and in particular our Celgar
mill had much better results as our planned initiatives are taking
effect.
* The Stendal mill ramp up proceeds substantially as scheduled. In the
quarter, it operated above its initial rated capacity and production and
sales revenues were up by approximately 14% and 33%, respectively, over
the prior quarter.
Mr. Lee added:
* Further to our objective of building a focused and profitable pulp
company, we have increased our exposure to NBSK pulp in October by
acquiring a further 7% interest in the Stendal mill for euro 8.1
million, of which euro 6.7 million was paid by a note that, at our
election, we can satisfy in our common shares. We have also reduced our
exposure to the paper industry as, in August, we disposed of our equity
interest in the Heidenau paper mill and an interest in a Swiss specialty
paper mill for cash proceeds of euro 5.0 million and a secured note of
euro 5.0 million.
* In November 2006, Mr. George Malpass joined our Board. Mr. Malpass was
formerly the CEO and a director of a British Columbia forest products
company and has been a director of two other public forest products
companies. George's appointment to the Board adds additional broad
industry knowledge and public company experience to the Board. This
appointment is in addition to the previously announced appointments of
Claes-Inge Isacson to Chief Operating Officer and David Ure to Vice
President, Controller.
>>
Mr. Lee continued: "We are continuing to see improvements in pulp prices
and demand in all of our markets which we currently believe should result in
higher prices in the upcoming months. In October 2006, list NBSK prices
increased to approximately $730 per ton in Europe and approximately $700 per
ton in Asia. These price improvements are being partially offset by upward
pressure on fiber prices."
Mr. Lee concluded: "Looking forward for the balance of the year, we
expect the current strength in pulp markets to continue and, with our large,
modern and efficient pulp mills, we are well positioned to generate solid
results for our stakeholders."
Summary Selected Highlights
<<
Q3 Q2 YTD Q3 YTD
2006 2006 2006 2005 2005
(in millions of
Euro, except
where otherwise
stated)
Revenues euro 175.2 euro 166.7 euro 501.0 euro 148.9 euro 376.4
Sales of emission
allowances - 7.6 13.2 6.1 12.4
Income from
operations 34.4 10.9 56.8 7.9 16.2
Operating EBITDA(1) 48.0 25.7 99.1 21.9 55.1
Interest expense 22.1 23.1 68.1 21.9 63.3
Unrealized gain
(loss) on
derivative
instruments (14.5) 44.7 71.0 3.3 (70.3)
Unrealized foreign
exchange gain
(loss) on debt (0.7) 6.1 11.5 5.9 (1.6)
Net income (loss) 6.7 18.4 41.7 (5.6)
(87.4)
Income (loss) per share
Basic euro 0.20 euro 0.56 euro 1.26 euro (0.17) euro(2.86)
Diluted euro 0.19 euro 0.45 euro 1.05 euro (0.17) euro(2.86)
(1) For a definition of Operating EBITDA, see page 5 of this press
release
and for a reconciliation of net income (loss) to Operating EBITDA, see
page 10 of the financial tables included in this press release.
Q3 Q2 YTD Q3 YTD
2006 2006 2006 2005 2005
Production ('000 tons)
Pulp production by mill:
Rosenthal 84.1 67.4 227.6 83.4 240.6
Stendal 144.2 139.7 414.8 126.2 357.8
Celgar 118.9 100.7 331.0 118.0 289.9
Total pulp
production 347.2 307.8 973.4 327.6 888.3
Sales ('000 tons)
Pulp sales volume by mill:
Rosenthal 80.6 73.0 229.9 86.8 241.6
Stendal 144.9 136.9 422.3 120.4 243.3
Celgar 112.7 119.4 342.4 125.1 325.4
Total pulp sales
volume(1) 338.2 329.3 994.6 332.3 810.3
Mill net pulp price
realizations (euro/ADMT)(2) 482 453 454 398 402
NBSK list price in Europe
(US$/ADMTs) 708 665 663 580 611
(1) Excluding intercompany pulp sales volumes of 2,774 ADMTs in Q3 2006,
4,871 ADMTs in Q2 2006, 12,631 ADMTs in YTD 2006, 3,057 ADMTs in Q3
2005 and 10,651 ADMTs in YTD 2005, respectively.
(2) Excluding revenues from third party transportation activities.
>>
Three Months Ended September 30, 2006 Compared to Three Months Ended
September 30, 2005
Revenues for the three months ended September 30, 2006 increased to euro
175.2 million from euro 148.9 million in the comparative period of 2005,
primarily due to higher pulp prices and sales from our Stendal pulp mill. Pulp
sales by volume increased to 338,201 ADMTs in the third quarter of 2006 from
332,282 ADMTs in the comparative period of 2005.
Cost of sales and general, administrative and other expenses in the third
quarter of 2006 decreased to euro 140.8 million from euro 141.0 million in the
comparative period of 2005.
<<
Pulp Operations
>>
For the third quarter of 2006, revenues from our pulp operations
increased to euro 164.9 million from euro 133.4 million in the same period a
year ago. List prices for NBSK pulp in Europe were approximately euro 556
($708) per ADMT in the third quarter of 2006, euro 529 ($665) per ADMT in the
second quarter of 2006 and approximately euro 476 ($580) per ADMT in the
comparative third quarter of last year.
Mill net pulp sales realizations increased to euro 482 per ADMT on
average in the third quarter of 2006 from euro 398 per ADMT in the third
quarter of 2005, primarily as a result of higher prices.
Cost of sales and general, administrative and other expenses for the pulp
operations increased to euro 132.8 million in the third quarter of 2006 from
euro 125.5 million in the comparative period of 2005, primarily as a result of
the absence of the sale of emission allowances and higher sales from our
Stendal mill.
Fiber costs at our German pulp mills increased by approximately 10% in
the third quarter of 2006 versus the same quarter of 2005, primarily because
of increased demand for wood residuals. In the third quarter of 2006, fiber
costs at our Celgar mill increased by approximately 6% versus the same quarter
of 2005, primarily because of fluctuations in regional woodchip availability.
We expect that reduced fiber availability during the winter harvesting season
will result in continued upward pressure on fiber prices into the last part of
2006 and into the first part of 2007.
For the third quarter of 2006, operating income from our pulp operations
increased by approximately 267% to euro 33.8 million from euro 9.2 million in
the comparative quarter of 2005, primarily as a result of higher pulp prices
and improved operating results at our Celgar mill.
In the third quarter of 2006, income from operations increased to euro
34.4 million from euro 7.9 million in the same quarter last year. Interest
expense in the third quarter of 2006 increased marginally to euro 22.1 million
from euro 21.9 million in the year ago period.
<<
Derivative Instruments and Minority Interest
>>
We recorded a net unrealized non-cash holding loss of euro 14.5 million
before minority interests upon the marked to market valuation of Stendal's
outstanding foreign currency and interest rate derivatives at the end of the
current quarter, compared to a net realized and unrealized non-cash holding
gain of euro 3.1 million before minority interests upon the marked to market
valuation of our outstanding derivatives in the comparative quarter of 2005.
In the third quarter of 2006, minority interest, representing the two
minority shareholders' proportionate interest in the Stendal mill, was euro
6.0 million, compared to euro 5.7 million in the third quarter of 2005.
<<
Paper Operations
>>
In August 2006, we disposed of our equity interest in the Heidenau paper
mill and our interest in a Swiss specialty paper mill for cash proceeds of
euro 5.0 million and a secured note of euro 5.0 million. We recorded a gain
of euro 0.4 million on this transaction. We now currently operate one paper
mill at Fahrbrucke, that we do not consider part of our core operations. We
are continuing to explore and consider strategic options for such mill,
including a sale, closure or divestiture thereof.
Revenues from our paper operations were euro 10.3 million in the current
quarter, compared to euro 15.5 million in the comparative period of 2005. For
the third quarter of 2006, the operating loss of our paper operations
decreased to euro 0.3 million from euro 1.1 million in the third quarter of
2005.
<<
Earnings Per Share and Operating EBITDA
>>
We generated "Operating EBITDA" of euro 48.0 million and euro 21.9
million in the three months ended September 30, 2006 and 2005, respectively.
Operating EBITDA is defined as income (loss) from 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 10 of the financial tables
included in this press release.
We reported net income for the third quarter of 2006 of euro 6.7 million,
or euro 0.20 per basic and euro 0.19 per diluted share, which included an
aggregate of euro 15.2 million of unrealized losses on our outstanding
derivatives and a foreign exchange loss on our long-term debt. In the third
quarter of 2005, we reported a net loss of euro 5.6 million, or euro 0.17 per
basic and diluted share, which reflected the inclusion of interest expense of
euro 14.7 million related to our Stendal mill and the net realized and
unrealized gain of euro 3.1 million on our interest rate and currency
derivatives and the unrealized non-cash foreign exchange gain of euro 5.9
million on our 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 7, 2006 at 10:00 AM EST. Listeners can access the conference call
live and archived 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=36530. 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 14, 2006 at 11:59 p.m. (Eastern
Standard Time). The replay number is (800) 642-1687, and the passcode is
1285017.
Mercer International Inc. is a global pulp and paper 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
September 30, 2006 and December 31, 2005
(Euros in thousands)
September 30, December 31,
2006 2005
ASSETS
Current Assets
Cash and cash equivalents euro 69,373 euro 83,547
Cash restricted -- 7,039
Receivables 83,853 74,315
Note receivable, current portion 7,230 --
Inventories 62,508 81,147
Prepaid expenses and other 5,626 5,474
Total current assets 228,590 251,522
Long-Term Assets
Cash restricted 57,000 24,573
Property, plant and equipment 994,805 1,024,662
Investments 1,396 6,314
Deferred note issuance and other costs 7,329 8,364
Deferred income tax 43,189 78,381
Note receivable, less current portion 4,036 --
1,107,755 1,142,294
Total assets euro 1,336,345 euro 1,393,816
LIABILITIES
Current Liabilities
Accounts payable and accrued expenses euro 103,321 euro 112,726
Debt, current portion 40,903 27,601
Total current liabilities 144,224 140,327
Long-Term Liabilities
Debt, less current portion 883,096 922,619
Unrealized foreign exchange rate
derivative loss 16,506 61,979
Unrealized interest rate derivative
losses 52,022 78,646
Pension and other post-retirement
benefit obligations 16,631 17,113
Capital leases and other 8,893 9,945
Deferred income tax 19,130 14,444
996,278 1,104,746
Total liabilities 1,140,502 1,245,073
Minority Interest -- --
SHAREHOLDERS' EQUITY
Common shares 181,731 181,586
Additional paid-in capital, stock options 123 14
Deficit (6,233) (47,970)
Accumulated other comprehensive income 20,222 15,113
Total shareholders' equity 195,843 148,743
Total liabilities and
shareholders' equity euro 1,336,345 euro 1,393,816
(1)
MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 2006 and 2005
(Unaudited)
(Euros in thousands, except per share data)
2006 2005
Revenues euro 500,954 euro 376,430
Costs and expenses:
Cost of sales 433,432 350,185
67,522 26,245
General and administrative expenses (24,344) (22,399)
Sale of emission allowances 13,246 12,353
Gain on sale of assets 359 -
Income from operations 56,783 16,199
Other income (expense)
Interest expense (68,129) (63,320)
Investment income 4,096 1,594
Unrealized foreign exchange gain (loss)
on debt 11,469 (1,591)
Realized loss on derivative instruments (5,219) (2,455)
Unrealized gain (loss) on derivative
instruments 76,251 (67,804)
Impairment of investments - (1,699)
Total other income (expense) 18,468 (135,275)
Income (loss) before income taxes and
minority interest 75,251 (119,076)
Income tax (provision) benefit (40,388) 14,627
Income (loss) before minority interest 34,863 (104,449)
Minority interest 6,874 17,076
Net income (loss) euro 41,737 euro (87,373)
(Deficit) retained earnings, beginning of
period (47,970) 69,176
Deficit, end of period euro (6,233) euro (18,197)
Income (loss) per share
Basic euro 1.26 euro (2.86)
Diluted euro 1.05 euro (2.86)
(2)
MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 2006 and 2005
(Unaudited)
(Euros in thousands, except per share data)
2006 2005
Revenues euro 175,185 euro 148,928
Costs and expenses:
Cost of sales 135,387 140,018
39,798 8,910
General and administrative expenses (5,753) (7,083)
Sale of emission allowances - 6,065
Gain on sale of assets 359 -
Income from operations 34,404 7,892
Other income (expense)
Interest expense (22,092) (21,911)
Investment income 1,085 613
Unrealized foreign exchange gain (loss)
on debt (704) 5,918
Realized loss on derivative instruments - (284)
Unrealized gain (loss) on derivative
instruments (14,473) 3,335
Total other expense (36,184) (12,329)
Loss before income taxes and minority
interest (1,780) (4,437)
Income tax (provision) benefit 2,532 (6,785)
Income (loss) before minority interest 752 (11,222)
Minority interest 5,976 5,667
Net income (loss) euro 6,728 euro (5,555)
Deficit, beginning of period (12,961) (12,642)
Deficit, end of period euro (6,233) euro (18,197)
Income (loss) per share
Basic euro 0.20 euro (0.17)
Diluted euro 0.19 euro (0.17)
(3)
MERCER INTERNATIONAL INC.
BUSINESS SEGMENT INFORMATION
For the Nine Months Ended September 30, 2006 and 2005
(Unaudited)
(Euros in thousands)
Rosenthal Celgar Stendal Total
Pulp Pulp Pulp Pulp
Nine Months Ended
September 30, 2006
Sales to external
customers euro 109,225 euro 157,431 euro 190,514 euro 457,170
Intersegment net
sales (1,022) (103) 7,326 6,201
108,203 157,328 197,840 463,371
Operating costs 73,333 140,343 143,022 356,698
Operating depreciation
and amortization 10,857 9,491 21,210 41,558
General and
administrative 5,565 7,484 7,852 20,901
Gain on sale of assets -- -- -- --
(Sale) purchase of
emission allowances (3,651) -- (9,595) (13,246)
86,104 157,318 162,489 405,911
Income (loss) from
operations 22,099 10 35,351 57,460
Interest expense
Investment income
Unrealized foreign
exchange gain on debt
Derivative financial
instruments, net
Income before income
taxes and minority
interest
Segment assets euro 324,824 euro 239,258 euro 729,148 euro 1,293,230
Corporate,
Paper Other and Consolidated
Eliminations Total
Nine Months Ended
September 30, 2006
Sales to external
customers euro 43,784 euro -- euro 500,954
Intersegment net sales (139) (6,062) --
43,645 (6,062) 500,954
Operating costs 40,038 (5,645) 391,091
Operating depreciation
and amortization 551 232 42,341
General and administrative 2,828 615 24,344
Gain on sale of assets (359) -- (359)
(Sale) purchase of emission
allowances -- -- (13,246)
43,058 (4,798) 444,171
Income (loss) from operations 587 (1,264) 56,783
Interest expense (68,129)
Investment income 4,096
Unrealized foreign exchange
gain on debt 11,469
Derivative financial
instruments, net 71,032
Income before income taxes
and minority interest euro 75,251
Segment assets euro 5,564 euro 37,551 euro 1,336,345
Rosenthal Celgar(1) Stendal Total
Pulp Pulp Pulp Pulp
Nine Months Ended
September 30, 2005
Sales to external
customers euro 103,058 euro 97,458 euro 128,919 euro 329,435
Intersegment net
sales -- -- 4,679 4,679
103,058 97,458 133,598 334,114
Operating costs 73,146 86,438 112,739 272,323
Operating depreciation
and amortization 10,173 7,083 20,179 37,435
General and
administrative 5,441 5,285 3,120 13,846
(Sale) purchase of
emission allowances (4,402) -- (7,951) (12,353)
84,358 98,806 128,087 311,251
Income (loss) from
operations 18,700 (1,348) 5,511 22,863
Interest expense
Investment income
Unrealized foreign
exchange loss on debt
Derivative financial
instruments, net
Impairment of
investments
Loss before income
taxes and minority
interest
Segment assets euro 341,732 euro 251,918 euro 787,388 euro 1,381,038
Corporate,
Paper Other and Consolidated
Eliminations Total
Nine Months Ended
September 30, 2005
Sales to external
customers euro 46,995 euro -- euro 376,430
Intersegment net sales -- (4,679) --
46,995 (4,679) 376,430
Operating costs 44,879 (5,879) 311,323
Operating depreciation
and amortization 592 835 38,862
General and administrative 3,720 4,833 22,399
(Sale) purchase of
emission allowances -- -- (12,353)
49,191 (211) 360,231
Income (loss) from operations (2,196) (4,468) 16,199
Interest expense (63,320)
Investment income 1,594
Unrealized foreign exchange
loss on debt (1,591)
Derivative financial
instruments, net (70,259)
Impairment of investments (1,699)
Loss before income taxes
and minority interest euro (119,076)
Segment assets euro 22,783 euro 5,416 euro 1,409,237
(1) The results of the Celgar pulp mill are from the date of its
acquisition on February 14, 2005.
(4)
MERCER INTERNATIONAL INC.
BUSINESS SEGMENT INFORMATION
For the Three Months Ended September 30, 2006 and 2005
(Unaudited)
(Euros in thousands)
Rosenthal Celgar Stendal Total
Pulp Pulp Pulp Pulp
Three Months Ended
September 30, 2006
Sales to external
customers euro 40,284 euro 56,620 euro 68,004 euro 164,908
Intersegment net
sales (870) (126) 2,638 1,642
39,414 56,494 70,642 166,550
Operating costs 23,880 41,641 47,451 112,972
Operating depreciation
and amortization 3,107 3,200 7,081 13,388
General and
administrative 1,973 2,545 1,912 6,430
Gain on sale of assets -- -- -- --
28,960 47,386 56,444 132,790
Income (loss) from
operations 10,454 9,108 14,198 33,760
Interest expense
Investment income
Unrealized foreign
exchange gain on debt
Derivative financial
instruments, net
Loss before income
taxes and minority
interest
Corporate,
Paper Other and Consolidated
Eliminations Total
Three Months Ended
September 30, 2006
Sales to external customers euro 10,277 euro -- euro 175,185
Intersegment net sales (247) (1,395) --
10,030 (1,395) 175,185
Operating costs 10,067 (1,211) 121,828
Operating depreciation and
amortization 95 76 13,559
General and administrative 552 (1,229) 5,753
Gain on sale of assets (359) -- (359)
10,355 (2,364) 140,781
Income (loss) from operations (325) 969 34,404
Interest expense (22,092)
Investment income 1,085
Unrealized foreign exchange
gain on debt (704)
Derivative financial
instruments, net (14,473)
Loss before income taxes and
minority interest euro (1,780)
Rosenthal Celgar Stendal Total
Pulp Pulp Pulp Pulp
Three Months Ended
September 30, 2005
Sales to external
customers euro 37,122 euro 48,978 euro 47,313 euro 133,413
Intersegment
net sales -- -- 1,339 1,339
37,122 48,978 48,652 134,752
Operating costs 25,741 45,884 41,193 112,818
Operating depreciation
and amortization 3,543 2,986 6,725 13,254
General and
administrative 1,631 2,448 1,443 5,522
(Sale) purchase of
emission allowances (2,267) -- (3,798) (6,065)
28,648 51,318 45,563 125,529
Income (loss) from
operations 8,474 (2,340) 3,089 9,223
Interest expense
Investment income
Derivative financial
instruments, net
Unrealized foreign
exchange loss on debt
Loss before income
taxes and minority
interest
Corporate,
Paper Other and Consolidated
Eliminations Total
Three Months Ended
September 30, 2005
Sales to external customers euro 15,515 euro -- euro 148,928
Intersegment net sales -- (1,339) --
15,515 (1,339) 148,928
Operating costs 15,278 (2,057) 126,039
Operating depreciation
and amortization 213 512 13,979
General and administrative 1,158 403 7,083
(Sale) purchase of emission
allowances -- -- (6,065)
16,649 (1,142) 141,036
Income (loss) from operations (1,134) (197) 7,892
Interest expense (21,911)
Investment income 613
Derivative financial
instruments, net 3,051
Unrealized foreign exchange
loss on debt 5,918
Loss before income taxes and
minority interest euro (4,437)
(5)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheet
As at September 30, 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. excluding its subsidiaries ("Mercer Inc.") and our
restricted subsidiaries under the indenture, collectively referred to as the
"Restricted Group". From February 14, 2005, the Restricted Group includes
Mercer Inc., certain holding subsidiaries and Rosenthal, and the Celgar mill.
The Restricted Group excludes our paper operations and the Stendal mill.
September 30, 2006
<<
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
ASSETS
Current assets
Cash and cash
equivalents euro 37,381 euro 31,992 euro -- euro 69,373
Cash restricted -- -- -- --
Receivables 45,683 38,170 -- 83,853
Note receivable,
current portion 1,963 5,267 -- 7,230
Inventories 38,951 23,557 -- 62,508
Prepaid expenses
and other 3,271 2,355 -- 5,626
Total current assets 127,249 101,341 -- 228,590
Cash restricted -- 57,000 -- 57,000
Property, plant
and equipment 424,205 570,600 -- 994,805
Other 3,118 5,607 -- 8,725
Deferred income tax 17,093 26,096 -- 43,189
Due from unrestricted
group 48,352 -- (48,352) --
Note receivable,
less current
portion -- 4,036 -- 4,036
Total assets euro 620,017 euro 764,680 euro (48,352) euro 1,336,345
LIABILITIES
Current liabilities
Accounts payable
and accrued
expenses euro 41,532 euro 61,789 euro -- euro 103,321
Debt, current
portion -- 40,903 -- 40,903
Total current
liabilities 41,532 102,692 -- 144,224
Debt, less
current portion 317,999 565,097 -- 883,096
Due to restricted
group -- 48,352 (48,352) --
Unrealized
derivative loss -- 68,528 -- 68,528
Other 21,213 4,311 -- 25,524
Deferred income tax 2,604 16,526 -- 19,130
Total liabilities 383,348 805,506 (48,352) 1,140,502
SHAREHOLDERS' EQUITY
Total shareholders'
equity (deficit) 236,669 (40,826)(1) -- 195,843
Total liabilities
and shareholders'
equity euro 620,017 euro 764,680 euro (48,352) euro 1,336,345
(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.
(6)
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 34,757 euro -- euro 83,547
Cash restricted -- 7,039 -- 7,039
Receivables 41,349 32,966 -- 74,315
Inventories 47,100 34,047 -- 81,147
Prepaid expenses
and other 2,940 2,534 -- 5,474
Total current assets 140,179 111,343 -- 251,522
Cash restricted -- 24,573 -- 24,573
Property, plant
and equipment 404,151 620,511 -- 1,024,662
Other 10,533 4,145 -- 14,678
Deferred income tax 24,303 54,078 -- 78,381
Due from
unrestricted
group 46,412 -- (46,412) --
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 64,646 euro -- euro 111,513
Construction costs
payable -- 1,213 -- 1,213
Debt, current portion -- 27,601 -- 27,601
Total current
liabilities 46,867 93,460 -- 140,327
Debt, less current
portion 342,023 580,596 -- 922,619
Due to restricted
group -- 46,412 (46,412) --
Unrealized derivative
loss -- 140,625 -- 140,625
Other 20,722 6,336 -- 27,058
Deferred income tax 1,851 12,593 -- 14,444
Total liabilities 411,463 880,022 (46,412) 1,245,073
SHAREHOLDERS' EQUITY
Total shareholders'
equity (deficit) 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.
(7)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations
For the Nine Months Ended September 30, 2006 and 2005
(Unaudited)
(Euros in thousands)
Nine Months Ended September 30, 2006
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
Revenues euro 265,531 euro 241,485 euro (6,062) euro 500,954
Operating costs 214,093 176,998 -- 391,091
Operating
depreciation and
amortization 20,580 21,761 -- 42,341
General and
administrative
expenses 13,664 10,680 -- 24,344
(Sale) purchase
of emission
allowances (3,651) (9,595) -- (13,246)
Gain on sale of
assets -- (359) -- (359)
244,686 199,485 -- 444,171
Income from
operations 20,845 42,000 (6,062) 56,783
Other income (expense)
Interest expense (24,602) (46,182) 2,655 (68,129)
Investment income 3,262 2,283 (1,449) 4,096
Unrealized foreign
exchange gain
on debt 11,469 -- -- 11,469
Derivative financial
instruments, net -- 71,032 -- 71,032
Total other (expense)
income (9,871) 27,133 1,206 18,468
Income (loss) before
income taxes and
minority interest 10,974 69,133 (4,856) 75,251
Income tax provision (8,094) (32,102) (192) (40,388)
Income (loss) before
minority interest 2,880 37,031 (5,048) 34,863
Minority interest -- 6,874 -- 6,874
Net income (loss) euro 2,880 euro 43,905 euro (5,048) euro 41,737
Nine Months Ended September 30, 2005
Restricted Unrestricted Consolidated
Group Eliminations Subsidiaries Group
Revenues euro 200,516 euro 175,914 euro -- euro 376,430
Operating costs 158,384 152,939 -- 311,323
Operating
depreciation and
amortization 17,431 20,771 660 38,862
General and
administrative 15,559 6,840 -- 22,399
(Sale) purchase of
emission allowances (4,402) (7,951) -- (12,353)
186,972 172,599 660 360,231
Income (loss)
from operations 13,544 3,315 (660) 16,199
Other income (expense)
Interest expense (23,918) (41,351) 1,949 (63,320)
Investment income 2,313 1,230 (1,949) 1,594
Unrealized foreign
exchange loss
on debt (1,591) -- -- (1,591)
Derivative financial
instruments, net (494) (69,765) -- (70,259)
Impairment of
investments (1,699) -- -- (1,699)
Total other expense (25,389) (109,886) -- (135,275)
Loss before income
taxes and
minority
interest (11,845) (106,571) (660) (119,076)
Income tax
(provision) benefit (7,867) 22,494 -- 14,627
Loss before
minority interest (19,712) (84,077) (660) (104,449)
Minority interest -- 17,076 -- 17,076
Net loss euro(19,712) euro(67,001) euro(660) euro(87,373)
(8)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations
For the Three Months Ended September 30, 2006 and 2005
(Unaudited)
(Euros in thousands)
Three Months Ended September 30, 2006
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
Revenues euro 95,908 euro 80,672 euro (1,395) euro 175,185
Operating costs 65,705 51,689 4,434 121,828
Operating
depreciation and
amortization 6,383 7,176 - 13,559
General and
administrative
expenses 3,289 2,464 - 5,753
Gain on sale of
assets - (359) - (359)
75,377 60,970 4,434 140,781
Income (loss)
from operations 20,531 19,702 (5,829) 34,404
Other income (expense)
Interest expense (8,160) (14,827) 895 (22,092)
Investment income 1,143 (369) 311 1,085
Foreign exchange
loss on debt (704) - - (704)
Derivative financial
instruments, net - (14,473) - (14,473)
Total other (expense)
income (7,721) (29,669) 1,206 (36,184)
Income (loss)
before income
taxes and
minority interest 12,810 (9,967) (4,623) (1,780)
Income tax provision (1,189) 3,913 (192) 2,532
Income (loss)
before minority
interest 11,621 (6,054) (4,815) 752
Minority interest - 5,976 - 5,976
Net income
(loss) euro 11,621 euro (78) euro (4,815) euro 6,728
Three Months Ended September 30, 2005
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
Revenues euro 86,100 euro 62,828 euro - euro 148,928
Operating costs 71,124 54,915 - 126,039
Operating
depreciation and
amortization 6,602 7,155 222 13,979
General and
administrative 4,482 2,601 - 7,083
(Sale) purchase
of emission
allowances (2,267) (3,798) - (6,065)
79,941 60,873 222 141,036
Income from
operations 6,159 1,955 (222) 7,892
Other income (expense)
Interest expense (7,987) (14,780) 856 (21,911)
Investment income 1,016 453 (856) 613
Unrealized foreign
exchange gain
on debt 5,918 - - 5,918
Derivative financial
instruments, net (31) 3,082 - 3,051
Total other income
(expense) (1,084) (11,245) - (12,329)
Income (loss)
before income
taxes and
minority
interest 5,075 (9,290) (222) (4,437)
Income tax (provision)
benefit (3,091) (3,694) - (6,785)
Income (loss)
before minority
interest 1,984 (12,984) (222) (11,222)
Minority interest - 5,667 - 5,667
Net income
(loss) euro 1,984 euro (7,317) euro (222) euro (5,555)
(9)
MERCER INTERNATIONAL INC.
COMPUTATION OF OPERATING EBITDA
For the Nine Months and Three Months Ended September 30, 2006 and 2005
(Unaudited)
(Euros in thousands)
Nine Months Ended
September 30,
2006 2005(1)
(in thousands)
Net income (loss) euro 41,737 euro (87,373)
Minority interest (6,874) (17,076)
Income taxes (benefit) 40,388 (14,627)
Interest expense 68,129 63,320
Investment income (4,096) (1,594)
Foreign exchange (gain) loss on debt (11,469) 1,591
Derivative financial instruments, net (gain) loss (71,032) 70,259
Impairment of investments - 1,699
Income from operations 56,783 16,199
Add: Depreciation and amortization 42,341 38,862
Operating EBITDA euro 99,124 euro 55,061
Three Months Ended
September 30,
2006 2005
(in thousands)
Net income (loss) euro 6,728 euro (5,555)
Minority interest (5,976) (5,667)
Income taxes (benefit) (2,532) 6,785
Interest expense 22,092 21,911
Investment income (1,085) (613)
Foreign exchange (gain) loss on debt 704 (5,918)
Derivative financial instruments, net (gain) loss 14,473 (3,051)
Income from operations 34,404 7,892
Add: Depreciation and amortization 13,559 13,979
Operating EBITDA euro 47,963 euro 21,871
(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.
(10)
MERCER INTERNATIONAL INC.
COMPUTATION OF RESTRICTED GROUP OPERATING EBITDA
For the Nine Months and Three Months Ended September 30, 2006 and 2005
(Unaudited)
(Euros in thousands)
Nine Months Ended
September 30,
2006 2005(1)
(in thousands)
Restricted Group(2)
Net income (loss) euro 2,880 euro (19,712)
Income taxes 8,094 7,867
Interest expense 24,602 23,918
Investment and other income (3,262) (2,313)
Derivative financial instruments, net - 494
Unrealized foreign exchange (gain) loss on debt (11,469) 1,591
Impairment of investments - 1,699
Income from operations 20,845 13,544
Add: Depreciation and amortization 20,580 17,431
Operating EBITDA euro 41,425 euro 30,975
Three Months Ended
September 30,
2006 2005
(in thousands)
Restricted Group(1)
Net income euro 11,621 euro 1,984
Income taxes 1,189 3,091
Interest expense 8,160 7,987
Investment and other expense (income) (1,143) (1,016)
Derivative financial instruments, net - 31
Unrealized foreign exchange (gain) loss on debt 704 (5,918)
Income from operations 20,531 6,159
Add: Depreciation and amortization 6,383 6,602
Operating EBITDA euro 26,914 euro 12,761
(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.
(11)
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