NEW YORK, Feb. 13 /CNW/ -- Mercer International Inc. (Nasdaq: MERC, TSX: MRI.U) today reported results for the fourth quarter and year ended December 31, 2007. In 2006, we divested our paper mills and its results are reported separately as discontinued operations.
The quarter ended December 31, 2007 concluded our best year operationally. As a result of capital and other initiatives, all three of our mills had record annual production and two of the mills set quarterly production records in the fourth quarter. While demand for NBSK pulp was strong throughout the year, price increases were more than offset by the weakening U.S. dollar and higher fiber costs.
Highlights of the 2007 Fourth Quarter
-- Revenues increased by 4% to euro 167.1 million from euro 160.5 million in the comparative quarter of 2006, primarily as a result of higher pulp prices. Average NBSK pulp list prices in Europe rose to $850 per ADMT in the quarter from $810 per ADMT in the prior quarter and $730 per ADMT in the fourth quarter of 2006. -- Our average pulp sales realizations were euro 512 per ADMT in the fourth quarter of 2007 compared to euro 520 per ADMT in the third quarter of 2007, as higher prices were more than offset by the weakening U.S. dollar. Average sales realizations in the fourth quarter of 2006 were euro 480 per ADMT. During the fourth quarter of 2007, the U.S. dollar was weaker relative to both the Euro and Canadian dollar, falling in value by 5% and 6%, respectively, compared to the third quarter of 2007 and 11% and 14% from the fourth quarter of 2006. -- Fiber prices, on average, were relatively unchanged from the third quarter but were approximately 10% higher than the fourth quarter of 2006. -- Operating EBITDA in the current quarter decreased to euro 37.2 million from euro 50.2 million in the comparative quarter in 2006 as higher productivity and improved prices were more than offset by higher fiber costs and the weakening U.S. dollar. For a definition of Operating EBITDA, see page 6 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 was euro 7.2 million, or euro 0.20 per basic and euro 0.18 per diluted share, in the current quarter which included unrealized gains on our derivatives and foreign currency denominated long-term debt of euro 5.1 million, compared to net income of euro 21.5 million, or euro 0.63 per basic and euro 0.50 per diluted share, in the same period of 2006 which included gains on our derivatives and foreign currency denominated long-term debt of euro 38.6 million.
Highlights of 2007 -- Revenues in 2007 increased by approximately 13% to euro 704.4 million from euro 624.0 million in 2006, primarily as a result of higher pulp prices and increased sales volumes. Average list prices for NBSK pulp in Europe increased to $800 per ADMT in 2007 from $680 per ADMT in 2006. -- Our average pulp sales realizations increased to euro 516 per ADMT in 2007 from euro 465 per ADMT in 2006 as higher pulp prices were partially offset by the weakening U.S. dollar. In 2007, the U.S. dollar decreased in value by approximately 8% and 5% against the Euro and the Canadian dollar, respectively, compared to 2006. -- On average, fiber costs increased by approximately 29% in 2007 from 2006. -- Operating EBITDA decreased by 15% to euro 126.2 million in 2007 from euro 148.3 million in 2006 as improved pricing, sales and productivity were more than offset by the weakening U.S. dollar and higher fiber costs. For a definition of Operating EBITDA, see page 6 of this press release and for a reconciliation of net income to Operating EBITDA, see page 7 of the financial tables included in this press release. -- Net income decreased to euro 22.2 million, or euro 0.61 per basic and euro 0.58 per diluted share, in 2007, which included gains on our derivatives and foreign currency denominated long-term debt of euro 31.3 million, compared to net income of euro 63.2 million, or euro 1.90 per basic and euro 1.58 per diluted share, in 2006, which included a net gain on our derivatives and foreign currency denominated long-term debt of euro 121.1 million. President's Comments
Mr. Jimmy S.H. Lee, President and Chairman, stated: "We are generally pleased with our operating performance during the year. Our record production reflected both capital projects initiated two years ago and our continual management focus on productivity and efficiency." He added:
-- "All three mills achieved record production in the year and two of the mills achieved quarterly records in the fourth quarter. Focused capital expenditures and other measures at our mills are complete and their efficiency benefits have met our expectations. -- Pulp markets continued to strengthen in the final quarter of 2007, ending a year of continual price increases resulting from both strong demand and a weakening U.S. dollar. Based upon the current demand levels we are seeing in the market and historically low inventory levels, we believe that there will be continued upward pressure on pricing into the first part of 2008. -- After rising in the first half of 2007, prices for fiber were relatively stable in the second half. We currently expect that the sharp deterioration in North American and European lumber markets will continue to constrain residual fiber supply in 2008, particularly in British Columbia. We believe however that demand for fiber from other manufacturers in Europe has begun to decline and this may have a dampening effect on European pricing pressure created by the weak lumber markets. -- During the year, energy production was a considerable focus area for us. In 2007, we sold more surplus energy than at any time in our history by increasing the value of our sales of surplus power by approximately 9% compared to 2006. We are pursuing several initiatives to try to enhance this core strength in 2008."
Mr. Lee concluded: "With our mills running at historically high levels, we are well positioned to take advantage of the NBSK pulp price momentum and stabilizing fiber prices in 2008, although further weakness in the U.S. dollar will adversely impact our sales realizations and margins."
Summary Selected Highlights
Q4 Q3 Q4 Year Year
2007 2007 2006 2007 2006
(in millions of Euro, except where otherwise stated)
Revenues euro 167.1 euro 191.1 euro 160.5 euro 704.4 euro 624.0 Operating income from continuing operations 22.7 21.5 36.2 69.6 92.5 Operating EBITDA(1) 37.2 35.8 50.2 126.2 148.3 Unrealized gain (loss) on derivative instruments 1.4 (5.7) 33.1 13.5 109.4 Interest expense 15.1 18.6 23.2 71.4 91.9 Foreign exchange gain on debt and distributions 3.7 4.6 3.8 11.0 15.2 Net income from continuing operations 7.3 10.7 28.6 22.4 69.2 Net income per share from continuing operations Basic euro 0.20 euro 0.30 euro 0.85 euro 0.62 euro 2.08 Diluted euro 0.18 euro 0.26 euro 0.66 euro 0.58 euro 1.72
(1) For a definition of Operating EBITDA, see page 6 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.
Q4 Q3 Q4 Year Year
2007 2007 2006 2007 2006
Pulp Production
('000 ADMTs) 370.1 361.0 328.9 1,404.7 1,302.3
Pulp Sales
('000 ADMTs) 322.9 363.5 344.4 1,352.6 1,326.4
NBSK pulp list price in Europe (US$/ADMT) 850 810 730 800 680
Average pulp sales realizations (euro/ADMT) 512 520 480 516 465
Average Spot Currency Exchange Rates: euro / $(1) 0.6901 0.7268 0.7750 0.7294 0.7962 C$ / $(1) 0.9818 1.0446 1.1393 1.0740 1.1344 C$ / euro(2) 1.4230 1.4367 1.4706 1.4690 1.4244
(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 December 31, 2007 Compared to Three Months Ended December 31, 2006
Revenues for the three months ended December 31, 2007 increased by 4% to euro 167.1 million from euro 160.5 million in the comparative period of 2006, primarily due to higher pulp prices, partially offset by an 11% and 14% weakening of the U.S. dollar versus the Euro and the Canadian dollar, respectively. List prices for NBSK pulp in Europe were approximately euro 587 ($850) per ADMT in the fourth quarter of 2007, euro 589 ($810) per ADMT in the third quarter of 2007 and approximately euro 566 ($730) per ADMT in the same period last year. Pulp sales volume decreased to 322,900 ADMTs in the fourth quarter of 2007 from 344,400 ADMTs in the comparative period of 2006. Average pulp sales realizations increased to euro 512 per ADMT in the fourth quarter of 2007 from euro 480 per ADMT in the fourth quarter of 2006, primarily as a result of higher pulp prices.
Costs and expenses in the fourth quarter of 2007 increased to euro 144.4 million from euro 124.3 million in the comparative period of 2006, primarily as a result of higher fiber costs and a credit in 2006 of euro 13.0 million for previously accrued wastewater fees.
Sales of emission allowances provided a contribution to income of euro 3.9 million and euro 2.4 million in the fourth quarter of 2007 and 2006, respectively.
After rising during the first half of 2007, fiber prices stabilized in the fourth quarter of 2007, but remained on average at elevated levels when compared to the same period a year ago. Our fiber costs in Germany in the fourth quarter of 2007 and 2006 were virtually unchanged. Fiber costs for our Celgar mill however were more heavily impacted by the weak North American housing markets and have experienced significant inflation. On average, our fiber costs increased by approximately 10% in the last quarter of 2007 from the same period of 2006. While pulp wood supply is generally available, the deterioration of the housing and lumber markets in North America is reducing sawmilling activity and residual chip supply which is expected to keep fiber costs at relatively high levels.
For the fourth quarter of 2007, operating income from continuing operations decreased by approximately 37% to euro 22.7 million from euro 36.2 million in the comparative quarter of 2006, as higher pulp prices and improved production were more than offset by exchange rates and higher fiber costs.
Interest expense in the fourth quarter of 2007 decreased to euro 15.1 million from euro 23.2 million in the comparative quarter of 2006, primarily due to a lower level of borrowing and the absence of premiums associated with our cross-currency swaps which were settled in the first quarter of 2007.
We recorded unrealized gains of euro 5.1 million on our interest rate derivatives and foreign currency denominated debt at the end of the current quarter as a result of an increase in long-term interest rates and the weaker U.S. dollar, compared to gains of euro 38.6 million on our derivatives and foreign currency denominated debt in the same quarter of last year, of which a euro 1.7 million gain was realized upon the settlement of foreign currency swaps.
In the fourth quarter of 2007, minority interest, representing the minority shareholder's interest in the Stendal mill, was euro 0.5 million, compared to euro 7.9 million in the same quarter of last year.
We generated "Operating EBITDA" of euro 37.2 million and euro 50.2 million in the three months ended December 31, 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 fourth quarter of 2007 of euro 7.3 million, or euro 0.20 per basic and euro 0.18 per diluted share, as compared to net income from continuing operations of euro 28.6 million, or euro 0.85 per basic and euro 0.66 per diluted share in the fourth quarter of 2006.
In the fourth quarter of 2007, net income was euro 7.2 million, or euro 0.20 per basic and euro 0.18 per diluted share. In the same quarter in 2006, net income was euro 21.5 million, or euro 0.63 per basic and euro 0.50 per diluted share.
Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
Revenues for the year ended December 31, 2007 increased by approximately 13% to euro 704.4 million from euro 624.0 million in 2006, primarily as a result of higher pulp prices which were partially offset by an 8% and 5% weakening of the U.S. dollar versus the Euro and the Canadian dollar, respectively. List prices for NBSK pulp in Europe were approximately euro 584 ($800) per ADMT in 2007, compared to approximately euro 541 ($680) per ADMT in 2006. Average pulp sales realizations increased to euro 516 per ADMT in the year ended December 31, 2007, from euro 465 per ADMT in 2006, primarily as a result of higher pulp prices.
Costs and expenses increased to euro 634.8 million in 2007 from euro 531.5 million in 2006, primarily as a result of higher fiber costs and higher volumes.
Weak markets for emission allowances in 2007 resulted in the contribution to income from such sales decreasing to euro 4.6 million, compared to euro 15.6 million in 2006. Partially offsetting this was a 9% increase in sales of surplus energy in 2007 compared to 2006.
Overall fiber costs increased by approximately 29% compared to 2006 as a result of both a supply imbalance and increased demand. In Germany, the supply imbalance resulted from low harvesting levels in late 2005 and 2006 which were not made up during the course of the year. Increased demand in Germany resulted from a higher consumption of wood residuals by renewable energy suppliers. A strong European lumber market and the severe winter storm at the beginning of 2007 provided some marginal price relief in the latter part of the year. Fiber costs at our Celgar mill were also higher in 2007 compared to 2006 due to reduced North American sawmill activity as a result of weakness in U.S. housing construction. Fiber costs at our Celgar mill were relatively stable over the last half of 2007, due to supply optimization and the currency impact on the mill's U.S. sourced fiber.
In 2007, operating income from continuing operations decreased to euro 69.6 million from euro 92.5 million in 2006 as higher pulp prices, sale volumes and surplus energy sales were more than offset by higher fiber costs, the weakening U.S. dollar and the reduction in sales of emission allowances.
Interest expense in 2007 decreased to euro 71.4 million from euro 91.9 million in the comparative period, primarily due to a lower level of borrowing and the absence of premiums associated with our cross-currency swaps which were settled in the first quarter of 2007.
We recorded gains of euro 31.3 million on our derivatives and foreign currency denominated long-term debt for the year ended December 31, 2007 as a result of an increase in long-term interest rates and the weaker U.S. dollar, and realized a euro 6.8 million gain upon the settlement of foreign currency swaps. In 2006, we recorded a net gain of euro 121.1 million on our derivatives and foreign currency denominated long-term debt, of which a euro 3.5 million loss was realized upon the settlement of foreign currency swaps.
In 2007, minority interest, representing the minority shareholder's proportionate interest in the Stendal mill, was euro 1.3 million of the current year earnings, compared to euro 1.1 million in 2006.
Net Income Per Share and Operating EBITDA
We generated "Operating EBITDA" of euro 126.2 million and euro 148.3 million in the year ended December 31, 2007 and 2006, respectively. For a definition of Operating EBITDA, see page 6 of this press release and 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 year ended December 31, 2007 of euro 22.4 million, or euro 0.62 per basic and euro 0.58 per diluted share, as compared to net income from continuing operations of euro 69.2 million, or euro 2.08 per basic and euro 1.72 per diluted share in 2006.
In 2007, net income was euro 22.2 million, or euro 0.61 per basic and euro 0.58 per diluted share. In 2006, net income was euro 63.2 million, or euro 1.90 per basic and euro 1.58 per diluted share.
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 Thursday, February 14, 2008 at 10:00 AM EST. Listeners can access the conference call live and archived through March 14, 2008, 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=45063. 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 February 21, 2008 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 30961639.
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
(Euros in thousands)
December 31,
2007 2006
ASSETS
Current Assets
Cash and cash equivalents euro 84,848 euro 69,367
Receivables 89,890 75,022
Note receivable, current portion 5,896 7,798
Inventories 103,610 62,857
Prepaid expenses and other 6,015 4,662
Current assets of discontinued operations - 2,094
Total current assets 290,259 221,800
Long-Term Assets
Cash restricted 33,000 57,000
Property, plant and equipment 933,258 972,143
Investments 96 1
Unrealized foreign exchange rate derivative gain - 5,933
Deferred note issuance and other costs 5,303 6,984
Deferred income tax 17,624 29,989
Note receivable, less current portion 3,977 8,744
993,258 1,080,794
Total assets euro 1,283,517 euro 1,302,594
LIABILITIES
Current Liabilities
Accounts payable and accrued expenses euro 87,000 euro 83,810
Pension and other post-retirement benefit
obligations, current portion 493 363
Debt, current portion 34,023 33,903
Current liabilities of discontinued operations - 1,926
Total current liabilities 121,516 120,002
Long-Term Liabilities
Debt, less current portion 815,832 873,928
Unrealized interest rate derivative losses 21,885 41,355
Pension and other post-retirement benefit
obligations 19,983 17,954
Capital leases and other 8,999 7,643
Deferred income tax 18,640 22,911
885,339 963,791
Total liabilities 1,006,855 1,083,793
SHAREHOLDERS' EQUITY
Common shares 202,844 195,642 Additional paid-in capital 134 154 Retained earnings 37,419 15,240 Accumulated other comprehensive income 36,265 7,765 Total shareholders' equity 276,662 218,801 Total liabilities and shareholders' equity euro 1,283,517 euro 1,302,594
(1)
MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Euros in thousands, except for income per share)
Three Months Ended Year Ended
December 31, December 31,
2007 2006 2007 2006
Revenues euro 167,146 euro 160,467 euro 704,391 euro 623,977
Costs and expenses
Operating costs 124,506 104,012 548,334 456,604
Operating depreciation
and amortization 14,397 14,044 56,400 55,834
28,243 42,411 99,657 111,539
Selling, general and
administrative expenses 9,411 8,605 34,714 34,644
(Sale) purchase of emission
allowances (3,877) (2,363) (4,643) (15,609)
Operating income from
continuing operations 22,709 36,169 69,586 92,504
Other income (expense) Interest expense (15,092) (23,162) (71,400) (91,931) Investment income (1,533) 2,007 4,453 6,090 Foreign exchange gain on debt and distributions 3,729 3,776 10,958 15,245 Realized gain (loss) on derivative instruments - 1,709 6,820 (3,510) Unrealized gain on derivative instruments 1,381 33,107 13,537 109,358 Total other (expense) income (11,515) 17,437 (35,632) (35,252)
Income before income taxes and minority interest from continuing operations 11,194 53,606 33,954 127,756 Income tax benefit (provision) Current (1,293) (60) (2,170) (584) Deferred (2,185) (16,995) (8,144) (56,859) Income before minority interest from continuing operations 7,716 36,551 23,640 70,313 Minority interest (466) (7,945) (1,251) (1,071) Net income from continuing operations 7,250 28,606 22,389 69,242 Net (loss) from discontinued operations (12) (7,133) (210) (6,032) Net income 7,238 21,473 22,179 63,210
Retained earnings (deficit), beginning of period 30,181 (6,233) 15,240 (47,970) Retained earnings, end of period euro 37,419 euro 15,240 euro 37,419 euro 15,240
Net income per share from continuing operations Basic euro 0.20 euro 0.85 euro 0.62 euro 2.08 Diluted euro 0.18 euro 0.66 euro 0.58 euro 1.72 Net income per share Basic euro 0.20 euro 0.63 euro 0.61 euro 1.90 Diluted euro 0.18 euro 0.50 euro 0.58 euro 1.58
(2)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheet
(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 months and years ended December 31, 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.
December 31, 2007
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
ASSETS
Current
Cash and cash
equivalents euro 59,371 euro 25,477 euro - euro 84,848
Receivables 37,482 52,408 - 89,890
Note receivable,
current portion 589 5,307 - 5,896
Inventories 63,444 40,166 - 103,610
Prepaid expenses and
other 3,714 2,301 - 6,015
Total current assets 164,600 125,659 - 290,259
Cash restricted - 33,000 - 33,000
Property, plant and
equipment 385,569 547,689 - 933,258
Other 5,399 - - 5,399
Deferred income tax 10,852 6,772 - 17,624
Due from unrestricted
group 57,457 - (57,457) -
Note receivable,
less current
portion 3,977 - - 3,977
Total assets euro 627,854 euro 713,120 euro (57,457) euro 1,283,517
LIABILITIES
Current
Accounts payable and accrued expenses euro 43,621 euro 43,379 euro - euro 87,000 Pension and other post-retirement benefit obligations, current portion 493 - - 493 Debt, current portion - 34,023 - 34,023 Total current liabilities 44,114 77,402 - 121,516 Debt, less current portion 273,589 542,243 - 815,832 Due to restricted group - 57,457 (57,457) - Unrealized derivative loss - 21,885 - 21,885 Capital leases and other 27,016 1,966 - 28,982 Deferred income tax 4,553 14,087 - 18,640 Total liabilities 349,272 715,040 (57,457) 1,006,855 SHAREHOLDERS' EQUITY Total shareholders' equity (deficit) 278,582 (1,920) - 276,662 Total liabilities and shareholders' equity euro 627,854 euro 713,120 euro (57,457) euro 1,283,517
(3)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheet
(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 from discontinued operations - 2,094 - 2,094 Total current assets 121,799 100,001 - 221,800 Cash restricted - 57,000 - 57,000 Property, plant and equipment 408,957 563,186 - 972,143 Other 8,155 4,763 - 12,918 Deferred income tax 14,316 15,673 - 29,989 Due from unrestricted group 51,265 - (51,265) - Note receivable, less current portion 5,023 3,721 - 8,744 Total assets euro 609,515 euro 744,344 euro (51,265) euro 1,302,594 LIABILITIES Current Accounts payable and accrued expenses euro 46,475 euro 37,335 euro - euro 83,810 Pension and other post-retirement benefit obligations, current portion 363 - - 363 Debt, current portion - 33,903 - 33,903 Current liabilities from discontinued operations - 1,926 - 1,926 Total current liabilities 46,838 73,164 - 120,002 Debt, less current portion 293,781 571,840 - 865,621 Due to restricted group - 51,265 (51,265) -
Unrealized derivative loss - 41,355 - 41,355
Capital leases and other
22,115 11,789 - 33,904
Deferred income tax 2,832 20,079 - 22,911
Total liabilities 365,566 769,492 (51,265) 1,083,793 SHAREHOLDERS' EQUITY Total shareholders' equity (deficit) 243,949 (25,148) - 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
Combined Condensed Statements of Operations
(Euros in thousands)
Three Months Ended December 31, 2007
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
Revenues euro 90,481 euro 76,665 euro - euro 167,146
Operating costs 70,547 53,959 - 124,506
Operating depreciation
and amortization 7,581 6,816 - 14,397
Selling, general and
administrative
expenses 6,336 3,075 - 9,411
(Sale) purchase of
emission allowances (1,302) (2,575) - (3,877)
Operating income
from continuing
operations 7,319 15,390 - 22,709
Other income (expense)
Interest expense (7,058) (8,981) 947 (15,092)
Investment income 1,542 (2,128) (947) (1,533)
Foreign exchange gain
on debt and
distributions 3,821 (92) - 3,729
Derivative financial
instruments, net - 1,381 - 1,381
Total other (expense)
income (1,695) (9,820) - (11,515)
Income before
income taxes and
minority interest
from continuing
operations 5,624 5,570 - 11,194
Income tax provision
Current (925) (368) - (1,293)
Deferred (570) (1,615) - (2,185)
Income before
minority
interest from
continuing
operations 4,129 3,587 - 7,716
Minority interest - (466) - (466)
Net income from
continuing
operations euro 4,129 euro 3,121 euro - euro 7,250
Net loss from
discontinued
operations euro (12) euro - euro - euro (12)
Net income euro 4,117 euro 3,121 euro - euro 7,238
Three Months Ended December 31, 2006
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
Revenues euro 95,456 euro 65,151 euro (140) euro 160,467
Operating costs 70,738 32,704 - 103,442
Operating depreciation
and amortization 7,239 6,807 - 14,046
Selling, general and
administrative
expenses 5,203 3,970 - 9,173
(Sale) purchase of
emission allowances (1,282) (1,081) - (2,363)
Operating income
from continuing
operations 13,558 22,751 (140) 36,169
Other income (expense) Interest expense (9,752) (14,315) 905 (23,162) Investment income 2,056 856 (905) 2,007 Foreign exchange gain on debt and distributions 3,776 - - 3,776 Derivative financial instruments, net - 34,816 - 34,816 Total other (expense) income (3,920) 21,357 - 17,437 Income (loss) before income taxes and minority interest from continuing operations 9,638 44,108 (140) 53,606 Income tax provision Current 32 (92) - (60) Deferred (3,004) (13,991) - (16,995) Income (loss) before minority interest from continuing operations 6,666 30,025 (140) 36,551 Minority interest - (7,945) - (7,945) Net income (loss) from continuing operations euro 6,666 euro 22,080 euro (140) euro 28,606 Net loss from discontinued operations euro - euro (7,133) euro - euro (7,133) Net income (loss) euro 6,666 euro 14,947 euro (140) euro 21,473
(5)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations
(Euros in thousands)
Year Ended December 31, 2007
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
Revenues euro 401,251 euro 303,140 euro - euro 704,391
Operating costs 315,836 232,498 - 548,334
Operating depreciation
and amortization 28,661 27,739 - 56,400
Selling, general and
administrative
expenses 21,650 13,064 - 34,714
(Sale) purchase of
emission
allowances (1,566) (3,077) - (4,643)
Operating income
from continuing
operations 36,670 32,916 - 69,586
Other income (expense)
Interest expense (28,472) (46,653) 3,725 (71,400)
Investment income 5,303 2,875 (3,725) 4,453
Foreign exchange gain
on debt and
distributions 10,629 329 - 10,958
Derivative financial
instruments, net - 20,357 - 20,357
Total other (expense)
income (12,540) (23,092) - (35,632)
Income before
income taxes and
minority interest
from continuing
operations 24,130 9,824 - 33,954
Income tax provision
Current (1,394) (776) - (2,170)
Deferred (5,034) (3,110) - (8,144)
Income before
minority interest
from continuing
operations 17,702 5,938 - 23,640
Minority interest - (1,251) - (1,251)
Net income from
continuing
operations euro 17,702 euro 4,687 euro - euro 22,389
Net loss from
discontinued
operations euro (210) euro - euro - euro (210)
Net income euro 17,492 euro 4,687 euro - euro 22,179
Year Ended December 31, 2006
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
Revenues euro 360,986 euro 262,991 euro - euro 623,977
Operating costs 280,837 175,767 - 456,604
Operating depreciation
and amortization 27,819 28,015 - 55,834
Selling, general and
administrative
expenses 22,861 11,783 - 34,644
(Sale) purchase of
emission allowances (4,933) (10,676) - (15,609)
Operating income
from continuing
operations 34,402 58,102 - 92,504
Other income (expense)
Interest expense (34,354) (61,137) 3,560 (91,931)
Investment income 5,316 4,334 (3,560) 6,090
Derivative financial
instruments, net - 105,848 - 105,848
Foreign exchange gain
on debt and
distributions 15,245 - - 15,245
Total other (expense)
income (13,793) 49,045 - 35,252
Income before
income taxes and
minority interest
from continuing
operations 20,609 107,147 - 127,756
Income tax provision
Current (290) (294) - (584)
Deferred (10,968) (45,891) - (56,859)
Income before
minority interest
from continuing
operations 9,351 60,962 - 70,313
Minority interest - (1,071) - (1,071)
Net income from
continuing
operations euro 9,351 euro 59,891 euro - euro 69,242
Net loss from
discontinued
operations euro - euro (6,032) euro - euro (6,032)
Net income euro 9,351 euro 53,859 euro - euro 63,210
(6)
MERCER INTERNATIONAL INC.
COMPUTATION OF OPERATING EBITDA
(Unaudited)
(Euros in thousands)
Three Months Ended
December 31,
2007 2006
Net income from continuing operations euro 7,250 euro 28,606 Minority interest 466 7,945 Income taxes 3,478 17,055 Interest expense 15,092 23,162 Investment expense (income) 1,533 (2,007) Unrealized foreign exchange gain on debt (3,729) (3,776) Derivative financial instruments, net gain (1,381) (34,816) Operating income from continuing operations 22,709 36,169 Add: Depreciation and amortization 14,461 14,044 Operating EBITDA(1) euro 37,170 euro 50,213
Year Ended
December 31,
2007 2006
Net income from continuing operations euro 22,389 euro 69,242 Minority interest 1,251 1,071 Income taxes 10,314 57,443 Interest expense 71,400 91,931 Investment income (4,453) (6,090) Unrealized foreign exchange gain on debt (10,958) (15,245) Derivative financial instruments, net gain (20,357) (105,848) Operating income from continuing operations 69,586 92,504 Add: Depreciation and amortization 56,658 55,834 Operating EBITDA(1) euro 126,244 euro 148,338
(1) 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.
(7)
MERCER INTERNATIONAL INC.
COMPUTATION OF RESTRICTED GROUP OPERATING EBITDA
(Unaudited)
(Euros in thousands)
Three Months Ended
December 31,
2007 2006
Restricted Group
Net income euro 4,129 euro 6,666
Income taxes 1,495 2,972
Interest expense 7,058 9,752
Investment and other income (1,542) (2,056)
Unrealized foreign exchange gain on debt (3,821) (3,776)
Operating income from operations 7,319 13,558
Add: Depreciation and amortization 7,648 7,239
Operating EBITDA(1) euro 14,967 euro 20,797
Year Ended
December 31,
2007 2006
Restricted Group
Net income euro 17,702 euro 9,351
Income taxes 6,428 11,258
Interest expense 28,472 34,354
Investment and other (income) (5,303) (5,316)
Unrealized foreign exchange gain on debt (10,629) (15,245)
Operating income from operations 36,670 34,402
Add: Depreciation and amortization 28,919 27,819
Operating EBITDA(1) euro 65,589 euro 62,221
(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)