NEW YORK, May 5 /PRNewswire-FirstCall/ -- Mercer International Inc. (Nasdaq: MERC; TSX: MRI.U) today reported results for the first quarter of 2006.
Summary Selected Highlights
Three Months Ended March 31,
2006 2005
(in thousands)
Results of Operations (unaudited)
Revenues euro 159,064 euro 97,893
Income (loss) from operations 11,505 (894)
Operating EBITDA(1) 25,419 10,093
Interest expense Stendal 15,283 11,845
Interest expense other 7,642 7,418
Realized loss on derivative instruments (3,562) (295)
Unrealized gain (loss) on derivative instruments 44,377 (3,564)
Unrealized foreign exchange gain on debt 6,113 2,297
Net income (loss) 16,588 (19,667)
Income (loss) per share
Basic 0.50 (0.77)
Diluted 0.41 (0.77)
Other Data
Total pulp sales volume(2) (ADMTs) 327,101 199,224
Mill net pulp price realizations (per ADMT)(3) 425 409
(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.
(2) Excluding intercompany sales volumes of 4,986 ADMTs and 3,489 ADMTs of
pulp in the three months ended March 31, 2006 and 2005, respectively.
(3) Excluding revenues from third party transportation activities.
As at As at
March 31, 2006 March 31, 2005
(in thousands)
Financial Position (Current)
Cash and cash equivalents euro 80,350 euro 83,547
Cash restricted 6,298 7,039
Receivables 78,472 74,315
Inventories 71,295 81,147
Prepaid expenses and other 5,191 5,474
Accounts payable and accrued expenses (109,625) (111,513)
Construction costs payable (1,060) (1,213)
Debt, current portion (74,338) (27,601)
Working capital(1) 56,583 111,195
(1) Does not include approximately euro 7.0 million of government grants
in 2006, which we expect to receive in 2006, and approximately euro
65.9 million of government grants in 2005, all of which has been
received, related to the Stendal mill from German federal and state
governments.
Certain key factors affecting our 2006 first quarter results include:
* Revenues increased by over 60% to euro 159.1 million from euro 97.9
million in the comparative period of 2005, primarily due to the
inclusion of sales from our Celgar pulp mill for the full quarter and
higher sales from the Stendal pulp mill.
* Operating EBITDA increased by approximately 152% to euro 25.4 million in
the first quarter from euro 10.1 million in the 2005 comparative quarter
because of improving pulp markets and improved results from our Stendal
and Rosenthal mills. 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.
* Interest expense increased to euro 22.9 million in the first quarter of
2006 from euro 19.3 million in the comparative period of 2005 reflecting
higher borrowings associated with the Stendal mill and incremental
interest on our $310 million 9.25% senior notes issued in February 2005.
* The Stendal mill ramp up is proceeding substantially as scheduled. In
the quarter, it operated at approximately 95% of its initial rated
capacity, and production and sales revenues were up by approximately 21%
and 49%, respectively, over the same period of 2005. Further, Stendal
mill net realizations also improved as a result of higher pulp prices,
increased contract sales in Europe and lower spot market sales in Asian
markets.
* We recorded a net unrealized gain of euro 44.4 million on our interest
rate and currency derivatives in the first quarter of 2006, compared to
a net unrealized loss of euro 3.6 million on our outstanding derivatives
in the comparative period of 2005. We had a realized loss of euro 3.6
million on certain currency forwards that matured in the current
quarter, compared to a realized loss of euro 0.3 million in the
comparative period of 2005. We also recorded an unrealized non-cash
foreign exchange gain on our long-term debt of euro 6.1 million in the
current quarter due to the weakening of the U.S. dollar, compared to an
unrealized gain of euro 2.3 million in the first quarter of 2005.
* Pulp markets strengthened quarter over quarter. Average list prices for
NBSK pulp in Europe were $618 per ADMT in the first quarter of 2006 and
$600 per ADMT in the fourth quarter of 2005, compared to $642 per ADMT
in the first quarter of 2005.
* Mill net pulp realizations increased to euro 425 per ADMT in the first
quarter of 2006 from euro 413 and euro 409 per ADMT in the fourth and
first quarters of 2005, respectively.
Results of Operations - 2006 First Quarter
Selected production and sales data for the three months ended March 31, 2006 and 2005 is as follows:
Three Months Ended March 31,
2006 2005
(ADMTs)
Production by Product Class:
Pulp production by mill:
Rosenthal 76,154 75,872
Stendal 130,877 107,981
Celgar 111,437 60,762
Total pulp production 318,468 244,615
Paper production 17,175 15,958
Total production 335,643 260,573
Sales Volume by Product Class:
Pulp sales volume by mill:
Rosenthal 76,226 78,804
Stendal 140,514 102,073
Celgar 110,361 18,347
Total pulp sales volume(1) 327,101 199,224
Paper sales volume 16,602 16,638
Total sales volume(1) 343,703 215,862
Revenues by Product Class: (in thousands)
Pulp revenues by mill:
Rosenthal euro 33,727 euro 33,389
Stendal 59,781 40,528
Celgar 46,297 7,616
Total pulp revenues(1) 139,805 81,533
Paper revenues 17,238 15,366
Total pulp and paper sales
revenues(1) 157,043 96,899
Third party transportation revenues 2,021 994
Total sales revenues euro 159,064 euro 97,893
(1) Excluding intercompany sales volumes of 4,986 ADMTs and 3,489 ADMTs of
pulp and intercompany net sales revenues of approximately euro 2.4
million and euro 1.6 million in the three months ended March 31, 2006
and 2005, respectively.
Revenues for the three months ended March 31, 2006 increased to euro 159.1 million from euro 97.9 million in the comparative period of 2005, primarily due to the inclusion of sales from our Celgar mill for the full quarter of 2006 and higher sales from the Stendal mill. Pulp sales by volume increased to 327,101 ADMTs in the first quarter of 2006 from 199,224 ADMTs in the comparative period of 2005.
Cost of sales and general, administrative and other expenses in the first quarter of 2006 increased to euro 153.2 million from euro 98.8 million in the comparative period of 2005, primarily as a result of the inclusion of a full quarter of results of our Celgar mill and higher production at our Stendal mill.
For the first quarter of 2006, revenues from our pulp operations increased to euro 141.8 million from euro 82.5 million in the same period a year ago. List prices for NBSK pulp in Europe were approximately euro 514 ($618) per ADMT in the first quarter of 2006 and euro 506 ($600) per ADMT in the fourth quarter of 2005, compared to approximately euro 490 ($642) per ADMT in the comparative period of last year.
Mill net pulp sales realizations increased to euro 425 per ADMT on average in the first quarter of 2006 from euro 409 per ADMT in the first quarter of 2005, primarily as a result of higher pulp prices.
Cost of sales and general, administrative and other expenses for the pulp operations increased to euro 137.5 million in the first quarter of 2006 from euro 82.8 million in the comparative period of 2005, primarily due to the inclusion of the results of the Celgar mill and higher sales at our Stendal mill.
Fiber costs at our German pulp mills increased by approximately 12.3% in the first quarter of 2006 versus the same quarter of 2005. This resulted from severe winter conditions in Germany and central Europe during the period, which caused sawmillers and log harvesters to curtail operations which reduced fiber availability and increased fiber costs. In the first quarter of 2006, average fiber costs at our Celgar mill decreased by approximately 22% versus the same quarter of 2005, primarily because of increased woodchip availability resulting from higher production at regional sawmills.
In the first quarter of 2006, we recorded a contribution to income from operations of euro 5.6 million resulting from the sale of emission allowances.
Depreciation for the pulp operations increased to euro 13.6 million in the first quarter of 2006, from euro 10.8 million in the comparative period of 2005, primarily as a result of depreciation associated with the Celgar mill.
For the first quarter of 2006, our pulp operations generated operating income of euro 12.2 million, versus operating income of euro 1.3 million in the comparative quarter of 2005, primarily due to the higher operating income at our German pulp mills, including a contribution of euro 5.6 million from the sale of emission allowances, partially offset by an operating loss at our Celgar mill. As NBSK pulp is generally quoted in U.S. dollars, the overall strength of the Canadian dollar versus the U.S. dollar negatively impacted our Celgar mill's sales realizations and results. Further, near the end of the first quarter of 2006, our Celgar mill took approximately two weeks of planned maintenance downtime, of which approximately five days were in March and the balance in April.
Revenues from our paper operations in the current quarter increased to euro 17.2 million from euro 15.4 million in the same quarter of last year as a result of higher sales volumes and a change in the product mix.
Cost of sales and general, administrative and other expenses for the paper operations in the first quarter of 2006 increased to euro 16.9 million from euro 15.6 million in the comparative quarter of 2005.
For the first quarter of 2006, our paper operations generated operating income of euro 0.5 million, compared to an operating loss of euro 0.3 million in the first quarter of 2005.
In the first quarter of 2006, we had income from operations of euro 11.5 million, compared to a loss from operations of euro 0.9 million in the same quarter last year. Interest expense in the first quarter of 2006 increased to euro 22.9 million from euro 19.3 million in the year ago period, due to higher borrowings relating to the Stendal mill and incremental interest on our $310 million senior note issue completed in February 2005.
Stendal entered into certain foreign currency derivatives to swap all of its long-term bank indebtedness from Euros to U.S. dollars in 2005 and certain currency forwards. In addition, Stendal previously entered into interest rate swaps to fix the interest rate on its outstanding bank indebtedness. Due to the weakening of the U.S. dollar versus the Euro and an increase in long-term interest rates, we recorded a net unrealized non-cash holding gain of euro 44.4 million before minority interests upon the marked to market valuation of such derivatives that were outstanding at the end of the current quarter, compared to a net non-cash holding loss of euro 3.6 million before minority interests upon the marked to market valuation of our outstanding derivatives in the comparative quarter of 2005. In the first quarter of 2006, we had a realized loss of euro 3.6 million on certain currency forwards which had matured, compared to a realized loss of euro 0.3 million on derivative instruments in the first quarter of 2005.
In the first quarter of 2006, minority interest, representing the two minority shareholders' proportionate interest in the Stendal mill, was euro 0.4 million, compared to euro 6.6 million in the first quarter of 2005.
We reported net income for the first quarter of 2006 of euro 16.6 million, or euro 0.50 per basic and euro 0.41 per diluted share, which reflected an unrealized gain of euro 44.4 million on our outstanding derivatives, an unrealized non-cash foreign exchange gain on our long-term debt of euro 6.1 million and improved results at our German pulp mills. In the first quarter of 2005, we reported a net loss of euro 19.7 million, or euro 0.77 per basic share and diluted share, which included net losses on our derivatives of euro 3.9 million and a non-cash impairment charge of euro 1.6 million relating to investments.
We generated "Operating EBITDA" of euro 25.4 million and euro 10.1 million in the three months ended March 31, 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 loss to Operating EBITDA, see page 7 of the financial tables included in this press release.
President's Comments
Mr. Jimmy S.H. Lee, President and Chairman, stated: "During the first quarter of 2006:
* Pulp markets were stronger than the last and comparative quarters of
2005. NBSK list prices in Europe, which were $600 per ADMT in December
2005, improved to $630 per ADMT at the end of the quarter. Further,
during the period, list prices in Asian markets improved by
approximately $50 per ADMT.
* Our ramp up of the Stendal mill continued substantially on plan. It
operated at approximately 95% of its initial rated capacity and
production and revenues were up by approximately 21% and 49%,
respectively, over the same period of 2005. It also recorded
substantially better operating results. Stendal also built up its debt
service account, which approximates one year's worth of principal and
interest under its project loan facility, to euro 66.5 million as
planned by drawing euro 42.0 million under a tranche of such facility.
This account is recorded as a long-term asset and is a principal reason
for our reduction in working capital at March 31, 2006.
* Improvements in pulp prices and markets were partially offset by
seasonal reduced fiber availability and higher fiber costs at our German
pulp mills. Conversely, our Celgar mill enjoyed a reduction in fiber
costs as its regional sawmills ramped up production. The Celgar mill's
lower fiber costs and other operating improvements were offset by the
continuing strength of the Canadian dollar versus the U.S. dollar in the
period and planned maintenance downtime. The Celgar mill's euro 20
million capital plan to increase efficiency, production and quality and
lower costs continued substantially on plan.
* Our global pulp sales and marketing team worked effectively and
increased the amount of contract regular business to our most transport
logical customers and reduced the amount of spot sales.
Mr. Lee continued: "Our first quarter results reflect generally improving pulp markets. Despite some production slow downs and higher fiber costs at our German pulp mills because of reduced fiber availability and five days of maintenance downtime at our Celgar mill, our Operating EBITDA increased by approximately 152% to euro 25.4 million from euro 10.1 million in the prior period."
Mr. Lee continued: "During the current period, we recorded a non-cash marked to market gain on our derivative instruments of euro 44.4 million and an unrealized foreign exchange gain on our indebtedness of euro 6.1 million. Net income for the first quarter of 2006 was euro 16.6 million or euro 0.50 per basic share and euro 0.41 per diluted share. In the first quarter of 2005, we reported a loss of euro 19.7 million or euro 0.77 per share." He added: "The market for emission allowances is relatively new and volatile and at the end of April 2006, such market weakened materially. Based upon our current activities to date, we currently estimate that our overall emission allowances sales in 2006 will be at or near our total for 2005."
Mr. Lee continued: "Looking forward, we are seeing improvements in pulp prices and demand in all of our markets which we currently believe should result in further price improvement in the upcoming months. List NBSK prices have further increased in April 2006 in Europe to approximately $650 per tonne and in Asia to approximately $570 per tonne."
Mr. Lee concluded: "We believe that our large, modern and efficient NBSK pulp mills have us well-positioned to realize upon the improving NBSK pulp market to create value for our stakeholders."
In conjunction with this release, Mercer International will host a conference call, which will be simultaneously broadcast live over the Internet. Management will host the call, which is scheduled for Monday, May 8, 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=33761. 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 May 15, 2006 at 11:59 p.m. (Eastern Standard Time). The replay number is (800) 642-1687, and the passcode is 8776197.
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.mercerinternational.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
March 31, 2006 and December 31, 2005
(Euros in thousands)
March 31, December 31,
2006 2005
ASSETS
Current Assets
Cash and cash equivalents euro 80,350 euro 83,547
Cash restricted 6,298 7,039
Receivables 78,472 74,315
Inventories 71,295 81,147
Prepaid expenses and other 5,191 5,474
Total current assets 241,606 251,522
Long-Term Assets
Cash restricted 66,537 24,573
Property, plant and equipment 1,013,529 1,024,662
Investments 7,443 6,314
Deferred note issuance and other costs 8,019 8,364
Deferred income tax 67,369 78,381
1,162,897 1,142,294
Total assets euro 1,404,503 euro 1,393,816
LIABILITIES
Current Liabilities
Accounts payable and accrued expenses euro 110,685 euro 112,726
Debt, current portion 74,338 27,601
Total current liabilities 185,023 140,327
Long-Term Liabilities
Debt, less current portion 904,957 922,619
Unrealized foreign exchange rate derivative
loss 45,162 61,979
Unrealized interest rate derivative losses 55,141 78,646
Pension and other post-retirement benefit
obligations 16,647 17,113
Capital leases and other 10,875 9,945
Deferred income tax 24,214 14,444
1,056,996 1,104,746
Total liabilities 1,242,019 1,245,073
Minority Interest - -
SHAREHOLDERS' EQUITY
Common shares 181,586 181,586
Additional paid-in capital, stock options 50 14
Deficit (31,382) (47,970)
Accumulated other comprehensive income 12,230 15,113
Total shareholders' equity 162,484 148,743
Total liabilities and shareholders'
equity euro 1,404,503 euro 1,393,816
(1)
MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
(Euros in thousands, except per share data)
2006 2005
Revenues euro 159,064 euro 97,893
Costs and expenses:
Cost of sales 144,339 90,989
14,725 6,904
General and administrative expenses (8,858) (7,798)
Sale (purchase) of emission allowances 5,638 -
Income (loss) from operations 11,505 (894)
Other income (expense)
Interest expense (22,925) (19,263)
Investment income 1,744 175
Unrealized foreign exchange gain on debt 6,113 2,297
Realized loss on derivative instruments (3,562) (295)
Unrealized gain (loss) on derivative
instruments 44,377 (3,564)
Impairment of investments - (1,645)
Total other income (expense) 25,747 (22,295)
Income (loss) before income taxes and minority
interest 37,252 (23,189)
Income tax provision (21,113) (3,035)
Income (loss) before minority interest 16,139 (26,224)
Minority interest 449 6,557
Net income (loss) euro 16,588 euro (19,667)
(Deficit) retained earnings, beginning
of period (47,970) 69,176
(Deficit) retained earnings, end of
period euro (31,382) euro 49,509
Income (loss) per share
Basic euro 0.50 euro (0.77)
Diluted euro 0.41 euro (0.77)
(2)
MERCER INTERNATIONAL INC.
BUSINESS SEGMENT INFORMATION
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
(Euros in thousands)
Rosenthal Celgar(1) Stendal Total
Pulp Pulp Pulp Pulp
Three Months Ended
March 31, 2006
Sales to external
customers euro 34,672 euro 46,297 euro 60,699 euro 141,668
Intersegment net
sales 42 - 2,315 2,357
34,714 46,297 63,014 144,025
Operating costs 23,987 45,565 48,125 117,677
Operating depreciation
and amortization 3,537 3,014 7,059 13,610
General and
administrative 1,327 2,124 2,757 6,208
(Sale) purchase of
emission allowances (1,767) - (3,871) (5,638)
27,084 50,703 54,070 131,857
Income (loss) from
operations 7,630 (4,406) 8,944 12,168
Interest expense
Investment income
Derivative financial
instruments, net
Unrealized foreign
exchange gain on debt
Income before income
taxes and minority
interest
Segment assets euro 348,533 euro 237,558 euro 770,345 euro 1,356,436
Three Months Ended
March 31, 2005
Sales to external
customers euro 34,096 euro 7,616 euro 40,798 euro 82,510
Intersegment net
sales - - 1,554 1,554
34,096 7,616 42,352 84,064
Operating costs 25,188 5,135 37,135 67,458
Operating
depreciation and
amortization 3,268 823 6,681 10,772
General and
administrative 1,901 1,675 975 4,551
30,357 7,633 44,791 82,781
Income (loss) from
operations 3,739 (17) (2,439) 1,283
Interest expense
Investment income
Derivative financial
instruments, net
Unrealized foreign
exchange gain on debt
Impairment of
investments
Loss before income
taxes and minority
interest
Segment assets euro 349,865 euro 220,739 euro 915,178 euro 1,485,782
Corporate,
Other and Consolidated
Paper Eliminations Total
Three Months Ended
March 31, 2006
Sales to external
customers euro 17,396 euro - euro 159,064
Intersegment net sales - (2,357) -
17,396 (2,357) 159,064
Operating costs 15,518 (2,770) 130,425
Operating depreciation and
amortization 226 78 13,914
General and administrative 1,141 1,509 8,858
(Sale) purchase of emission
allowances - - (5,638)
16,885 (1,183) 147,559
Income (loss) from operations 511 (1,174) 11,505
Interest expense (22,925)
Investment income 1,744
Derivative financial
instruments, net 40,815
Unrealized foreign
exchange gain on debt 6,113
Income before income
taxes and minority
interest euro 37,252
Segment assets euro 22,032 euro 26,035 euro 1,404,503
Three Months Ended
March 31, 2005
Sales to external
customers euro 15,383 euro - euro 97,893
Intersegment net sales - (1,554) -
15,383 (1,554) 97,893
Operating costs 14,231 (1,687) 80,002
Operating depreciation
and amortization 181 34 10,987
General and administrative 1,236 2,011 7,798
15,648 358 98,787
Income (loss) from
operations (265) (1,912) (894)
Interest expense (19,263)
Investment income 175
Derivative financial
instruments, net (3,859)
Unrealized foreign exchange
gain on debt 2,297
Impairment of investments (1,645)
Loss before income taxes
and minority interest euro (23,189)
Segment assets euro 24,911 euro 20,747 euro 1,531,440
(1) The results of the Celgar pulp mill are from the date of its
acquisition on February 14, 2005.
(3)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheet
As at March 31, 2006
(Euros in thousands)
The terms of the indenture governing our 9.25% senior unsecured notes requires that we provide the results of operations and financial condition of Mercer International Inc. excluding its subsidiaries ("Mercer Inc.") and our restricted subsidiaries under the indenture, collectively referred to as the "Restricted Group". As at and during the three months ended March 31, 2006, the Restricted Group was comprised of Mercer Inc., certain holding subsidiaries and Rosenthal, and the Celgar mill. As at and during the year ended December 31, 2005, the Restricted Group was comprised of Mercer Inc., certain holding subsidiaries and Rosenthal, and the Celgar mill from the date of its acquisition on February 14, 2005. The Restricted Group excludes our paper operations and the Stendal mill.
March 31, 2006
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
ASSETS
Current assets
Cash and cash
equivalents euro 41,101 euro 39,249 euro - euro 80,350
Cash restricted - 6,298 - 6,298
Receivables 37,327 41,145 - 78,472
Inventories 44,466 26,829 - 71,295
Prepaid expenses
and other 2,823 2,368 - 5,191
Total current assets 125,717 115,889 - 241,606
Cash restricted - 66,537 - 66,537
Property, plant and
equipment 398,256 615,273 - 1,013,529
Other 11,361 4,101 - 15,462
Deferred income tax 29,434 37,935 - 67,369
Due from unrestricted
group 39,253 - (39,253) -
Total assets euro 604,021 euro 839,735 euro (39,253) euro 1,404,503
LIABILITIES
Current liabilities
Accounts payable
and accrued
expenses euro 42,300 euro 67,325 euro - euro 109,625
Construction
costs payable - 1,060 - 1,060
Debt, current portion - 74,338 - 74,338
Total current
liabilities 42,300 142,723 - 185,023
Debt, less current
portion 328,984 575,973 - 904,957
Due to restricted group - 39,253 (39,253) -
Unrealized derivatives
loss - 100,303 - 100,303
Other 20,964 6,558 - 27,522
Deferred income tax 9,683 14,531 - 24,214
Total liabilities 401,931 879,341 (39,253) 1,242,019
SHAREHOLDERS' EQUITY
Total shareholders'
equity (deficit) 202,090 (39,606)(1) - 162,484
Total liabilities
and shareholders'
equity euro 604,021 euro 839,735 euro (39,253) euro 1,404,503
(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.
(4)
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.
(5)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
(Euros in thousands)
March 31, 2006
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
Revenues euro 81,011 euro 80,410 euro (2,357) euro 159,064
Operating costs 69,139 61,286 - 130,425
Operating
depreciation
and amortization 6,629 7,285 - 13,914
General and
administrative 4,960 3,898 - 8,858
(Sale) purchase of
emission allowances (1,767) (3,871) - (5,638)
78,961 68,598 - 147,559
Income (loss) from
operations 2,050 11,812 (2,357) 11,505
Other income (expense)
Interest expense (8,463) (15,337) 875 (22,925)
Investment income 2,261 358 (875) 1,744
Derivative financial
instruments, net (79) 40,894 - 40,815
Foreign exchange
gain on debt 6,113 - - 6,113
Total other expense (168) 25,915 - 25,747
Income (loss) before
income taxes and
minority interest 1,882 37,727 (2,357) 37,252
Income tax provision (2,841) (18,080) (192) (21,113)
Income (loss)
before minority
interest (959) 19,647 (2,549) 16,139
Minority interest - 449 - 449
Net income
(loss) euro (959) euro 20,096 euro (2,549) euro 16,588
March 31, 2005
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
Revenues euro 41,712 euro 56,181 euro - euro 97,893
Operating costs 29,973 50,029 - 80,002
Operating
depreciation
and amortization 4,125 6,645 217 10,987
General and
administrative 5,587 2,211 - 7,798
39,685 58,885 217 98,787
Income (loss) from
operations 2,027 (2,704) (217) (894)
Other income (expense)
Interest expense (7,671) (11,986) 394 (19,263)
Investment income 328 309 (462) 175
Derivative financial
instruments, net (105) (3,754) - (3,859)
Foreign exchange
gain on debt 2,297 - - 2,297
Impairment of
investments (1,178) - (467) (1,645)
Total other expense (6,329) (15,431) (535) (22,295)
Loss before income
taxes and minority
interest (4,302) (18,135) (752) (23,189)
Income tax provision (3,115) 80 - (3,035)
Loss before minority
interest (7,417) (18,055) (752) (26,224)
Minority interest - 6,557 - 6,557
Net loss euro (7,417) euro (11,498) euro (752) euro (19,667)
(6)
MERCER INTERNATIONAL INC.
COMPUTATION OF OPERATING EBITDA
For the Quarters Ended March 31, 2006 and 2005
(Unaudited)
(Euros in thousands)
Three Months Ended
March 31,
2006 2005(1)
(in thousands)
Net income (loss) euro 16,588 euro (19,667)
Minority interest (449) (6,557)
Income taxes 21,113 3,035
Interest expense 22,925 19,263
Investment income (1,744) (175)
Derivative financial instruments, net
loss (gain) (40,815) 3,859
Foreign exchange gain on debt (6,113) (2,297)
Impairment of investments - 1,645
Income (loss) from operations 11,505 (894)
Add: Depreciation and amortization 13,914 10,987
Operating EBITDA(2) euro 25,419 euro 10,093
(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.
COMPUTATION OF RESTRICTED GROUP OPERATING EBITDA
For the Quarters Ended March 31, 2006 and 2005
(Unaudited)
(Euros in thousands)
Three Months Ended
March 31,
2006 2005(1)
(in thousands)
Restricted Group
Net loss euro (959) euro (7,417)
Income taxes 2,841 3,115
Interest expense 8,463 7,671
Investment and other income (2,261) (328)
Derivative financial instruments, net loss 79 105
Foreign exchange gain on debt (6,113) (2,297)
Impairment of investments - 1,178
Income from operations 2,050 2,027
Add: Depreciation and amortization 6,629 4,125
Operating EBITDA(2) euro 8,679 euro 6,152
(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.
(7)
