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Mercer International Inc. Reports 2008 Third Quarter Results NEW YORK, Oct. 27, 2008 (GLOBE NEWSWIRE) -- Mercer International
Inc. (NasdaqGM:MERC - News) (Toronto:MRI-U.TO - News) today reported results for
the third quarter of 2008. Revenues and Operating EBITDA
in the third quarter of 2008 decreased to EUR 178.6 million
(US$268.2 million) and EUR 24.0 million (US$36.0 million)
from EUR 191.1 million (US$262.9 million) and EUR 35.8 million
(US$49.3 million), respectively, in the third quarter of
2007 as we were impacted by significantly less favorable
market conditions in the latter half of the current quarter.
Operating EBITDA is defined on page 4 of this press release
and reconciled to net income from continuing operations
on page 7 of the financial tables in this press release. Summary Financial Highlights
Q3 Q2 Q3
2008 2008 2007
------ ------ ------
(in millions of Euro, except
where otherwise stated)
Revenues 178.6 170.6 191.1
Operating income from continuing
operations 9.9 6.2 21.5
Operating EBITDA 24.0 19.8 35.8
Unrealized gain (loss) on derivative
instruments (8.2) 20.6 (5.7)
Foreign exchange gain (loss) on debt (9.6) 0.2 4.6
Net income (loss) from continuing
operations (17.2) 0.9 10.7
Net income (loss) per share
Basic (0.47) 0.02 0.29
Diluted (0.47) 0.02 0.26
Cash 75.8 83.3 69.4
Working capital 173.1 169.5 150.7
Summary Operating Highlights
Q3 Q2 Q3
2008 2008 2007
------ ------ ------
Pulp Production ('000 ADMTs) 368.4 356.8 361.0
Scheduled Production Downtime
('000 ADMTs) 9.0 15.0 8.0
Pulp Sales ('000 ADMTs) 363.8 347.3 363.5
NBSK pulp list price in Europe
(US$/ADMT) 878 900 810
NBSK pulp list price in Europe (EUR/ADMT) 585 576 589
Average pulp sales realizations
(EUR/ADMT)(1) 484 485 520
Average Spot Currency Exchange Rates:
EUR / $(2) 0.6658 0.6401 0.7268
C$ / $(2) 1.0416 1.0099 1.0446
C$ / EUR(3) 1.5620 1.5783 1.4367
-----------------------------
(1) List price, less discounts and commissions.
(2) Average Federal Reserve Bank of New York noon spot rate over the
reporting period.
(3) Average Bank of Canada noon spot rate over the reporting period.
President's Comments Mr. Jimmy S.H. Lee, President and Chairman, stated: ``Our mills operationally performed well in the current quarter and our Celgar mill achieved a record production month. Our energy initiatives, including the Celgar green-energy project, are progressing as planned and we currently expect revenues from sales of surplus energy by our German mills to increase by approximately EUR 16.0 million per annum beginning in January 2009 with the anticipated implementation of higher biomass energy tariffs under Germany's Renewable Energy Resources Act.'' Mr. Lee continued: ``While we are monitoring and evaluating the risk posed by the instability in global financial markets to us as well as to our customers and suppliers we currently believe that our financial position is solid and that we are currently well-positioned to weather this economic downturn. At the end of the current quarter we had cash and cash equivalents of EUR 75.8 million, working capital of EUR 173.1 million and approximately EUR 43.0 million available in undrawn lines of credit.'' Mr. Lee added: ``Slowing global economies are having an adverse impact on pulp demand and prices which have sharply declined over the past month. However, the recent strengthening of the U.S. dollar versus the Euro and the Canadian dollar, which since the end of the third quarter to date have decreased by approximately 11.3% and 20.2%, respectively, in value against the U.S. dollar, is helping to offset pulp price decreases. A stronger U.S. dollar is beneficial to us because, although NBSK pulp is primarily quoted in U.S. dollars, our production costs are principally incurred in Euros and Canadian dollars. We also currently expect that the prevailing market conditions will exert downward pressure on a number of our costs such as freight and fiber costs.'' Mr. Lee concluded: ``Although we expect the current market weakness to continue in the near term, we will keep managing those areas of our business that we can control and focus on our strategic operating initiatives. Our underlying business remains strong and the low-cost nature of our mills will continue to provide us with competitive strengths over other higher cost producers, some of whom we believe to be sustaining cash losses and who may begin taking production downtime as a result of today's challenging market environment. We currently believe that a rebalancing among producers in the industry will help contribute to a recovery of pulp prices and that we will be well-positioned to realize on such price improvements when the market turns.'' Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007 Revenues for the three months ended September 30, 2008 decreased by 6.5% to EUR 178.6 million from EUR 191.1 million in the comparative period of 2007, due to the weaker U.S. dollar relative to the Euro which more than offset higher pulp prices. Pulp production increased to 368,378 ADMTs in the current quarter, from 360,986 ADMTs in the same quarter of 2007 as all of our mills generally performed well. We took a total of 10 days scheduled maintenance downtime at our mills in the current quarter and expect to take 12 days at our Stendal mill in the fourth quarter. Pulp sales volume remained largely unchanged at 363,775 ADMTs in the current quarter compared to 363,523 ADMTs in the comparative period of 2007. Average pulp sales realizations were EUR 484 per ADMT in the current quarter of 2008 compared to EUR 520 per ADMT in the third quarter of 2007 as higher pulp prices were more than offset by the weakness in the U.S. dollar during the period. Costs and expenses in the third quarter of 2008 decreased marginally to EUR 168.7 million from EUR 169.7 million in the comparative period of 2007. On average, our fiber costs increased by approximately 2.6% in the third quarter of 2008 from the same period of 2007. In Germany fiber costs decreased slightly as the sustained production curtailments by large parts of the European board industry continue and demand for fiber remains generally low. Fiber costs at our Celgar mill increased in the current quarter from the prior quarter and the same period last year as a result of increased whole log chipping and higher freight costs incurred in the delivery of wood chips to the mill. Overall, we currently expect fiber prices in Germany in the fourth quarter and early part of 2009 to remain generally level with third quarter prices. Fiber costs at our Celgar mill are also expected to remain at current levels in the near term and to decrease as we move into 2009 as a result of fiber initiatives implemented at the mill including improvements in transportation logistics and woodroom efficiencies. During the third quarter of 2008, our raw material inventories increased to EUR 47.0 million from EUR 30.8 million at the end of the second quarter of 2008 as we built up inventories in preparation for the slower winter harvesting season. Our pulp inventories increased to EUR 57.1 million in the third quarter of 2008 from EUR 52.2 million at the end of the prior quarter. Pulp inventories at our Celgar mill increased as sales to China slowed considerably in the latter part of the third quarter as a result of the build-up of pulp stocks by Chinese buyers earlier this year. Pulp inventories at our Rosenthal and Stendal mills were generally consistent with the second quarter. In the current quarter, sales of surplus energy were approximately 7.2% higher than in the third quarter of 2007. For the third quarter of 2008, operating income from continuing operations decreased to EUR 9.9 million from EUR 21.5 million in the comparative quarter of 2007, primarily due to lower sales realizations. Interest expense in the third quarter of 2008 decreased to EUR 16.4 million from EUR 17.3 million in the comparative quarter of 2007, primarily due to lower levels of borrowing. We recorded an unrealized loss of EUR 8.2 million before minority interests on our interest rate derivatives at the end of the current quarter, compared to an unrealized loss of EUR 5.7 million before minority interests in the same quarter of last year. We recorded a foreign exchange loss on our debt of EUR 9.6 million in the third quarter of 2008 compared to a gain of EUR 4.6 million in the same period last year. In the third quarter of 2008, the minority shareholder's interest in the Stendal loss was EUR 3.3 million, compared to EUR 0.7 million of income in the same quarter of last year. In the third quarter of 2008, Operating EBITDA was EUR 24.0 million compared to EUR 35.8 million in the third quarter of 2007 and EUR 19.8 million in the prior quarter of 2008. 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 a net loss from continuing operations for the third quarter of 2008 of EUR 17.2 million, or EUR 0.47 per basic and diluted share, as compared to net income from continuing operations of EUR 10.7 million, or EUR 0.30 per basic share and EUR 0.26 per diluted share in the third quarter of 2007. As at September 30, 2008 and 2007, respectively, we had 36,422,487 and 36,285,027 common shares outstanding. Capital Resources Given the unprecedented events in the financial markets over the past few weeks, we are providing additional information concerning our capital resources as well as our long-term debt commitments. The following table is a summary of selected financial information for the periods indicated:
As at As at
September 30, December 31,
2008 2007
------------ ------------
(in thousands)
Financial Position
Cash and cash equivalents EUR 75,779 EUR 84,848
Working capital 173,132 168,743
Property, plant and equipment 904,653 933,258
Total assets 1,249,708 1,283,517
Long-term liabilities 872,743 885,339
Shareholders' equity 252,096 276,662
As at September 30, 2008, our cash and cash equivalents were EUR 75.8 million, working capital was EUR 173.1 million and we had approximately EUR 43.0 million in available undrawn lines of credit. Government Grants A significant portion of the capital investments at our German mills, including the construction of the Stendal mill, were financed through grants from the German federal and state governments. Since 1999, our German mills have benefited from an aggregate EUR 383.0 million in such government grants. We do not report these grants in our income but rather account for them as a reduction of the cost basis of the assets purchased when the grants are received. As a result, the assets reflected in our financial assets are net of these grants. Stendal Project Debt The largest portion of our long-term debt is the project loan facility (the ``Stendal Facility''), established by our 70% owned subsidiary, Stendal, to build and operate the Stendal mill. The Stendal Facility is non-recourse to Mercer Inc. and our other operating subsidiaries and mills. As the Stendal Facility is guaranteed up to 80% by German federal and state governments, it benefits from lower interest costs and other credit terms that would not otherwise be available. As at September 30, 2008, the amount outstanding was EUR 531.0 million. The Stendal Facility is amortizing debt and matures in 2017. Other Indebtedness Both our Rosenthal and Celgar mills have working capital facilities in place which mature in February 2010 and May 2009, respectively. As at September 30, 2008, we had not drawn any amount under the EUR 40.0 million Rosenthal facility and had drawn approximately C$35.2 million under the C$40.0 million Celgar facility. We have US$310.0 million (EUR 220.2 million) in principal amount of unsecured senior notes, or Senior Notes, outstanding which mature in February 2013 and for which we pay interest at the rate of 9.25% on February 15 and August 15 of each year. While the indenture governing our Senior Notes limits, among other things, our ability to incur additional indebtedness and pay dividends, it does not contain any financial ``maintenance'' covenants and there are no scheduled principal payments until maturity. In addition, we have US$67.3 million (EUR 47.8 million) in principal amount of unsecured convertible notes, or Convertible Notes, which mature in October 2010. We pay interest on the Convertible Notes semi-annually on April 15 and October 15 of each year at the rate of 8.5%. The indenture governing these notes also does not impose financial ``maintenance'' covenants on us. Restricted Group / Unrestricted Group As a result of the ``project'' type financing arranged by our 70% subsidiary, Stendal, to build the Stendal mill, pursuant to the terms of our Senior Notes we have established a debt capital structure which essentially bifurcates our Company into two groups, a ``Restricted Group'' and an ``Unrestricted Group.'' The Restricted Group is comprised of Mercer Inc., our Rosenthal and Celgar mills and certain holding subsidiaries. The Unrestricted Group is comprised of the Stendal mill and certain holding subsidiaries. This structure was implemented in part to ``ring-fence'' and isolate the non-recourse project debt of Stendal. We report our results of operations on a consolidated basis and, pursuant to the terms of the Senior Notes, separately for our Restricted Group. The following table is a summary of selected financial information for the Restricted Group for the periods indicated.
As at As at
September 30, December 31,
2008 2007
------------ ------------
(in thousands)
Financial Position
Cash and cash equivalents EUR 61,689 EUR 59,371
Working capital 136,895 120,486
Property, plant and equipment 370,672 385,569
Total assets 641,845 627,854
Long-term liabilities 329,397 305,158
Shareholders' equity 261,754 278,582
As at September 30, 2008, our Restricted Group had cash and cash equivalents of EUR 61.7 million, working capital of EUR 136.9 million and approximately EUR 43.0 million in available undrawn lines of credit. Nine Months Ended September 30, 2008 Compared to Nine Months Ended September 30, 2007 Revenues for the nine months ended September 30, 2008 decreased to EUR 528.3 million from EUR 537.2 million in the comparative period of 2007, as higher sales volumes and pulp prices were more than offset by the weaker U.S. dollar versus the Euro. Operating EBITDA was EUR 76.6 million in the first nine months of 2008 compared to EUR 89.1 million in the nine months ended September 30, 2007. 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. See the discussion of our results for the third quarter of 2008 for additional information relating to Operating EBITDA and page 7 of the financial tables for a reconciliation to net income from continuing operations. We reported net loss from continuing operations for the first nine months of 2008 of EUR 13.4 million, or EUR 0.37 per basic and diluted share. In the first nine months of 2007, we reported net income from continuing operations of EUR 15.1 million, or EUR 0.42 per basic share and EUR 0.40 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 Tuesday, October 28, 2008 at 10:00 AM (Eastern Daylight Time). Listeners can access the conference call live and archived through November 28, 2008, over the Internet at http://investor.shareholder.com/media/eventdetail.cfm?mediaid=33609&c=MERC&mediakey=EA9C777BCE92CA0E80F3CFA153ED15FD&e=0 or through a link on the Company's News/Financial page at http://www.mercerint.com/s/NewsReleases.asp. 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 4, 2008 at 11:59 PM (Eastern Daylight Time). The replay number is (800) 642-1687 for domestic callers or (706) 645-9291 for international callers, and the passcode is 68980180. 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 our 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: the highly cyclical nature of our business, raw material costs, our level of indebtedness, competition, foreign exchange and interest rate fluctuations, our use of derivatives, expenditures for capital projects, environmental regulation and compliance, disruptions to our production, market conditions and other risk factors listed from time to time in our SEC reports.
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands of Euros)
September 30, December 31,
2008 2007
------------ -----------
ASSETS
Current assets
Cash and cash equivalents 75,779 84,848
Receivables 81,503 89,890
Note receivable, current portion 628 5,896
Inventories 129,965 103,610
Prepaid expenses and other 10,126 6,015
----------- ----------
Total current assets 298,001 290,259
----------- ----------
Long-term assets
Cash, restricted 13,000 33,000
Property, plant and equipment 904,653 933,258
Investments 646 96
Deferred note issuance and other costs 4,326 5,303
Deferred income tax 25,432 17,624
Note receivable, less current portion 3,650 3,977
----------- ----------
951,707 993,258
----------- ----------
Total assets 1,249,708 1,283,517
=========== ==========
LIABILITIES
Current liabilities
Accounts payable and accrued expenses 87,315 87,000
Pension and other post-retirement
benefit obligations, current portion 955 493
Debt, current portion 36,599 34,023
----------- ----------
Total current liabilities 124,869 121,516
----------- ----------
Long-term liabilities
Debt, less current portion 795,445 815,832
Unrealized interest rate derivative
losses 17,370 21,885
Pension and other post-retirement
benefit obligations 18,361 19,983
Capital leases and other 12,290 8,999
Deferred income tax 29,277 18,640
----------- ----------
872,743 885,339
----------- ----------
Total liabilities 997,612 1,006,855
----------- ----------
SHAREHOLDERS' EQUITY
Share capital 203,438 202,844
Additional paid-in capital 461 134
Retained earnings 23,986 37,419
Accumulated other comprehensive income 24,211 36,265
----------- ----------
Total shareholders' equity 252,096 276,662
----------- ----------
Total liabilities and shareholders'
equity 1,249,708 1,283,517
=========== ==========
(1)
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands of Euros, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -----------------
2008 2007 2008 2007
-------- -------- ------- -------
Revenues 178,603 191,111 528,289 537,245
Costs and expenses
Operating costs 144,762 148,529 427,105 426,831
Operating depreciation
and amortization 14,033 14,284 41,668 42,003
------- ------- ------- -------
19,808 28,298 59,516 68,411
Selling, general and
administrative expenses 9,954 6,841 24,803 22,300
(Sale) purchase of
emission allowances -- -- -- (766)
------- ------- ------- -------
Operating income from
continuing operations 9,854 21,457 34,713 46,877
------- ------- ------- -------
Other income (expense)
Interest expense (16,424) (17,299) (49,057) (54,108)
Investment income (loss) (2,031) 1,491 (300) 3,786
Foreign exchange gain
(loss) on debt (9,560) 4,626 (3,291) 7,229
Realized gain on
derivative instruments -- -- -- 6,820
Unrealized gain (loss)
on derivative instruments (8,215) (5,696) 4,515 12,156
------- ------- ------- -------
Total other income
(expense) (36,230) (16,878) (48,133) (24,117)
------- ------- ------- -------
Income (loss) before
income taxes and
minority interest from
continuing operations (26,376) 4,579 (13,420) 22,760
Income tax benefit
(provision) - current (231) (144) (68) (877)
- deferred 6,144 7,013 (2,982) (5,959)
------- ------- ------- -------
Income (loss) before
minority interest from
continuing operations (20,463) 11,448 (16,470) 15,924
Minority interest 3,290 (742) 3,037 (785)
------- ------- ------- -------
Net income (loss) from
continuing operations (17,173) 10,706 (13,433) 15,139
Net loss from
discontinued operations -- (10) -- (198)
------- ------- ------- -------
Net income (loss) (17,173) 10,696 (13,433) 14,941
Retained earnings,
beginning of period 41,159 19,485 37,419 15,240
------- ------- ------- -------
Retained earnings, end
of period 23,986 30,181 23,986 30,181
======= ======= ======= =======
Net income (loss) from
continuing operations
per share:
Basic (0.47) 0.30 (0.37) 0.42
======= ======= ======= =======
Diluted (0.47) 0.26 (0.37) 0.40
======= ======= ======= =======
Net income (loss) per share:
Basic (0.47) 0.29 (0.37) 0.41
======= ======= ======= =======
Diluted (0.47) 0.26 (0.37) 0.39
======= ======= ======= =======
(2)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheet
(Unaudited)
(In thousands of Euros)
The terms of the indenture governing our 9.25% senior unsecured notes
require that we provide the results of operations and financial
condition of Mercer International Inc. and our restricted subsidiaries
under the indenture, collectively referred to as the "Restricted
Group". As at and during the three and nine months ended September 30,
2008 and 2007, 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.
September 30, 2008
------------------------------------------------------
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
------------ ------------ ------------ ------------
ASSETS
Current
Cash and cash
equivalents 61,689 14,090 -- 75,779
Receivables 37,388 44,115 -- 81,503
Note receiv-
able, current
portion 628 -- -- 628
Inventories 80,543 49,422 -- 129,965
Prepaid
expenses
and other 7,341 2,785 -- 10,126
------------ ------------ ------------ ------------
Total current
assets 187,589 110,412 -- 298,001
Cash,
restricted -- 13,000 -- 13,000
Property,
plant and
equipment 370,672 533,981 -- 904,653
Other 4,967 5 -- 4,972
Deferred
income tax 20,321 5,111 -- 25,432
Due from
unrestricted
group 54,646 -- (54,646) --
Note receiv-
able, less
current
portion 3,650 -- -- 3,650
------------ ------------ ------------ ------------
Total assets 641,845 662,509 (54,646) 1,249,708
============ ============ ============ ============
LIABILITIES
Current
Accounts
payable and
accrued
expenses 49,739 37,576 -- 87,315
Pension and
other post-
retirement
benefit obli-
gations,
current
portion 955 -- -- 955
Debt,
current
portion -- 36,599 -- 36,599
------------ ------------ ------------ ------------
Total current
liabilities 50,694 74,175 -- 124,869
Debt, less
current
portion 291,372 504,073 -- 795,445
Due to
restricted
group -- 54,646 (54,646) --
Unrealized
derivative
loss -- 17,370 -- 17,370
Pension and
other post-
retirement
benefit
obligations 18,361 -- -- 18,361
Capital
leases and
other 7,599 4,691 -- 12,290
Deferred
income tax 12,065 17,212 -- 29,277
------------ ------------ ------------ ------------
Total liabil-
ities 380,091 672,167 (54,646) 997,612
------------ ------------ ------------ ------------
SHAREHOLDERS'
EQUITY
Total share-
holders'
equity
(deficit) 261,754 (9,658) -- 252,096
------------ ------------ ------------ ------------
Total liabil-
ities and
shareholders'
equity 641,845 662,509 (54,646) 1,249,708
============ ============ ============ ============
(3)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheet
(Unaudited)
(In thousands of Euros)
December 31, 2007
------------------------------------------------------
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
------------ ------------ ------------ ------------
ASSETS
Current
Cash and cash
equivalents 59,371 25,477 -- 84,848
Receivables 37,482 52,408 -- 89,890
Note receiv-
able, 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 receiv-
able, less
current
portion 3,977 -- -- 3,977
------------ ------------ ------------ ------------
Total assets 627,854 713,120 (57,457) 1,283,517
============ ============ ============ ============
LIABILITIES
Current
Accounts
payable and
accrued
expenses 43,621 43,379 -- 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
Pension and
other post-
retirement
benefit
obligations 19,983 -- -- 19,983
Capital leases
and other 7,033 1,966 -- 8,999
Deferred
income tax 4,553 14,087 -- 18,640
------------ ------------ ------------ ------------
Total
liabilities 349,272 715,040 (57,457) 1,006,855
------------ ------------ ------------ ------------
SHAREHOLDERS'
EQUITY
Total share-
holders'
equity
(deficit) 278,582 (1,920) -- 276,662
------------ ------------ ------------ ------------
Total liabil-
ities and
shareholders'
equity 627,854 713,120 (57,457) 1,283,517
============ ============ ============ ============
(4)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations
(Unaudited)
(In thousands of Euros)
Three Months Ended September 30, 2008
------------------------------------------------------
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
------------ ------------ ------------ ------------
Revenues 102,604 75,999 -- 178,603
------------ ------------ ------------ ------------
Operating costs 88,718 56,044 -- 144,762
Operating
depreciation
and
amortization 7,333 6,700 -- 14,033
Selling,
general and
administrative
expenses 6,585 3,369 -- 9,954
------------ ------------ ------------ ------------
102,636 66,113 -- 168,749
------------ ------------ ------------ ------------
Operating
income
(loss)
from
continuing
operations (32) 9,886 -- 9,854
------------ ------------ ------------ ------------
Other income
(expense)
Interest
expense (8,617) (10,719) 2,912 (16,424)
Investment
income (loss) 3,609 (2,728) (2,912) (2,031)
Foreign
exchange
gain (loss)
on debt (9,560) -- -- (9,560)
Derivative
financial
instruments -- (8,215) -- (8,215)
------------ ------------ ------------ ------------
Total other
income
(expense) (14,568) (21,662) -- (36,230)
------------ ------------ ------------ ------------
Income
(loss)
before
income
taxes and
minority
interest
from
continuing
operations (14,600) (11,776) -- (26,376)
Income tax
benefit
(provision) 5,173 740 -- 5,913
------------ ------------ ------------ ------------
Income
(loss)
before
minority
interest
from
continuing
operations (9,427) (11,036) -- (20,463)
Minority
interest -- 3,290 -- 3,290
------------ ------------ ------------ ------------
Net income
(loss) (9,427) (7,746) -- (17,173)
============ ============ ============ ============
Three Months Ended September 30, 2007
------------------------------------------------------
Restricted Unrestricted Consolidated
Group Subsidiary Eliminations Group
------------ ------------ ------------ ------------
Revenues 106,530 84,581 -- 191,111
------------ ------------ ------------ ------------
Operating costs 84,545 63,984 -- 148,529
Operating
depreciation
and
amortization 7,419 6,865 -- 14,284
Selling,
general and
administrative
expenses 3,610 3,231 -- 6,841
------------ ------------ ------------ ------------
95,574 74,080 -- 169,654
------------ ------------ ------------ ------------
Operating
income
(loss)
from
continuing
operations 10,956 10,501 -- 21,457
------------ ------------ ------------ ------------
Other income
(expense)
Interest
expense (6,996) (11,240) 937 (17,299)
Investment
income (loss) 1,321 1,107 (937) 1,491
Foreign
exchange
gain (loss)
on debt 4,545 81 -- 4,626
Derivative
financial
instruments,
net -- (5,696) -- (5,696)
------------ ------------ ------------ ------------
Total other
income
(expense) (1,130) (15,748) -- (16,878)
------------ ------------ ------------ ------------
Income
(loss)
before
income
taxes and
minority
interest
from
continuing
operations 9,826 (5,247) -- 4,579
Income tax
benefit
(provision) (783) 7,652 -- 6,869
------------ ------------ ------------ ------------
Income
before
minority
interest
from
continuing
operations 9,043 2,405 -- 11,448
Minority
interest -- (742) -- (742)
------------ ------------ ------------ ------------
Net income
(loss)
from
continuing
operations 9,043 1,663 -- 10,706
Net income
(loss)
from
dis-
continued
operations (10) -- -- (10)
------------ ------------ ------------ ------------
Net income 9,033 1,663 -- 10,696
============ ============ ============ ============
(5)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations
(Unaudited)
(In thousands of Euros)
Nine Months Ended September 30, 2008
------------------------------------------------------
Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group
------------ ------------ ------------ ------------
Revenues 301,400 226,889 -- 528,289
------------ ------------ ------------ ------------
Operating costs 254,312 172,793 -- 427,105
Operating
depreciation
and
amortization 21,528 20,140 -- 41,668
Selling,
general and
administrative
expenses 15,194 9,609 -- 24,803
(Sale) purchase
of emission
allowances -- -- -- --
------------ ------------ ------------ ------------
291,034 202,542 -- 493,576
------------ ------------ ------------ ------------
Operating
income
(loss)from
continuing
operations 10,366 24,347 -- 34,713
------------ ------------ ------------ ------------
Other income
(expense)
Interest
expense (19,769) (32,200) 2,912 (49,057)
Investment
income
(loss) 4,972 (2,360) (2,912) (300)
Foreign
exchange
gain (loss)
on debt (3,181) (110) -- (3,291)
Derivative
financial
instruments -- 4,515 -- 4,515
------------ ------------ ------------ ------------
Total other
income
(expense) (17,978) (30,155) -- (48,133)
============ ============ ============ ============
Income
(loss)
before
income
taxes and
minority
interest (7,612) (5,808) -- (13,420)
Income tax
benefit
(provision) 1,716 (4,766) -- (3,050)
------------ ------------ ------------ ------------
Income
(loss)
before
minority
interest (5,896) (10,574) -- (16,470)
Minority
interest -- 3,037 -- 3,037
------------ ------------ ------------ ------------
Net income
(loss) (5,896) (7,537) -- (13,433)
============ ============ ============ ============
Nine Months Ended September 30, 2007
------------------------------------------------------
Restricted Unrestricted Consolidated
Group Subsidiary Eliminations Group
------------ ------------ ------------ ------------
Revenues 310,770 226,475 -- 537,245
------------ ------------ ------------ ------------
Operating costs 248,292 178,539 -- 426,831
Operating
depreciation
and
amortization 21,080 20,923 -- 42,003
Selling,
general and
administrative
expenses 12,315 9,985 -- 22,300
(Sale) purchase
of emission
allowances (268) (498) -- (766)
------------ ------------ ------------ ------------
281,419 208,949 -- 490,368
------------ ------------ ------------ ------------
Operating
income
(loss)
from
continuing
operations 29,351 17,526 -- 46,877
------------ ------------ ------------ ------------
Other income
(expense)
Interest
expense (21,414) (35,472) 2,778 (54,108)
Investment
income 3,761 2,803 (2,778) 3,786
Foreign
exchange
gain (loss)
on debt 6,808 421 -- 7,229
Derivative
financial
instruments,
net -- 18,976 -- 18,976
------------ ------------ ------------ ------------
Total other
income
(expense) (10,845) (13,272) -- (24,117)
------------ ------------ ------------ ------------
Income
(loss)
before
income
taxes and
minority
interest
from
continuing
operations 18,506 4,254 -- 22,760
Income tax
benefit
(provision) (4,933) (1,903) -- (6,836)
------------ ------------ ------------ ------------
Income
(loss)
before
minority
interest
from
continuing
operations 13,573 2,351 -- 15,924
Minority
interest -- (785) -- (785)
------------ ------------ ------------ ------------
Net income
(loss)
from
continuing
operations 13,573 1,566 -- 15,139
Net income
(loss)
from dis-
continued
operations (198) -- -- (198)
------------ ------------ ------------ ------------
Net income
(loss) 13,375 1,566 -- 14,941
============ ============ ============ ============
(6)
MERCER INTERNATIONAL INC.
COMPUTATION OF OPERATING EBITDA
(Unaudited)
(In thousands of Euros)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
Net income (loss) from
continuing operations (17,173) 10,706 (13,433) 15,139
Minority interest (3,290) 742 (3,037) 785
Income taxes (benefits) (5,913) (6,869) 3,050 6,836
Interest expense 16,424 17,299 49,057 54,108
Investment (income) loss 2,031 (1,491) 300 (3,786)
Unrealized foreign exchange
(gain) loss on debt 9,560 (4,626) 3,291 (7,229)
Derivative financial
instruments 8,215 5,696 (4,515) (18,976)
-------- -------- -------- --------
Operating income from
continuing operations 9,854 21,457 34,713 46,877
Add: Depreciation and
amortization 14,103 14,351 41,879 42,197
-------- -------- -------- --------
Operating EBITDA(1) 23,957 35,808 76,592 89,074
======== ======== ======== ========
------------------------------
(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.
COMPUTATION OF RESTRICTED GROUP OPERATING EBITDA
(Unaudited)
(In thousands of Euros)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
Restricted Group
Net income (loss) from
continuing operations(1) (9,427) 9,043 (5,896) 13,573
Income taxes (benefits) (5,173) 783 (1,716) 4,933
Interest expense 8,617 6,996 19,769 21,414
Investment (income) loss (3,609) (1,321) (4,972) (3,761)
Unrealized foreign exchange
(gain) loss on debt 9,560 (4,545) 3,181 (6,808)
-------- -------- -------- --------
Operating income (loss) from
continuing operations (32) 10,956 10,366 29,351
Add: Depreciation and
amortization 7,403 7,486 21,739 21,274
-------- -------- -------- --------
Operating EBITDA(2) 7,371 18,442 32,105 50,625
======== ======== ======== ========
-----------------------------
(1) For the Restricted Group, net income (loss) from continuing
operations and net income (loss) are the same in 2008 only.
(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.
(7)
Contact: Mercer International Inc.
Jimmy S.H. Lee, Chairman & President
(604) 684-1099
David M. Gandossi, Executive Vice-President & Chief
Financial Officer
(604) 684-1099
FD
Investors:
Eric Boyriven
Alexandra Tramont
Media:
Jordana Miller
(212) 850-5600
Source: Mercer International Inc.
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