Mercer International (MERC) 8-K Mercer International Inc. Reports 2006 First Quarter Results

EXHIBIT 99.1

	FOR:	MERCER INTERNATIONAL INC.
	APPROVED BY:	Jimmy S.H. Lee
		Chairman & President
		(604) 684-1099
		David M. Gandossi
		Executive Vice-President &
		Chief Financial Officer
		(604) 684-1099
For Immediate Release
		Financial Dynamics
		Investors: Eric Boyriven, Alexandra Tramont
		Media: Scot Hoffman
		(212) 850-5600

MERCER INTERNATIONAL INC. REPORTS 2006 FIRST QUARTER RESULTS

          NEW YORK, NY, May 5, 2006 — 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)
	(unaudited)
Results of Operations
Revenues	€	159,064		€	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.

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Mercer Reports 2006 First Quarter Results Page 2

	As at			As at
	March 31, 2006			March 31, 2005
	(in thousands)
Financial Position (Current)
Cash and cash equivalents	€	80,350		€	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€7.0 million of government grants in 2006, which we expect to receive in 2006, and approximately€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€159.1 million from€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€25.4 million in the first quarter from€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€22.9 million in the first quarter of 2006 from€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€44.4 million on our interest rate and currency derivatives in the first quarter of 2006, compared to a net unrealized loss of€3.6 million on our outstanding derivatives in the comparative period of 2005. We had a realized loss of€3.6 million on certain currency forwards that matured in the current quarter, compared to a realized loss of€0.3 million in the comparative period of 2005. We also recorded an unrealized non-cash foreign exchange gain on our

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Mercer Reports 2006 First Quarter Results Page 3

long-term debt of€6.1 million in the current quarter due to the weakening of the U.S. dollar, compared to an unrealized gain of€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€425 per ADMT in the first quarter of 2006 from€413 and€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	€	33,727	€	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	€	159,064	€	97,893

(1) Excluding intercompany sales volumes of 4,986 ADMTs and 3,489 ADMTs of pulp and intercompany net sales revenues of approximately€2.4 million and€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€159.1 million from€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

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Mercer Reports 2006 First Quarter Results Page 4

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€153.2 million from€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€141.8 million from€82.5 million in the same period a year ago. List prices for NBSK pulp in Europe were approximately€514 ($618) per ADMT in the first quarter of 2006 and€506 ($600) per ADMT in the fourth quarter of 2005, compared to approximately€490 ($642) per ADMT in the comparative period of last year.

          Mill net pulp sales realizations increased to€425 per ADMT on average in the first quarter of 2006 from€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€137.5 million in the first quarter of 2006 from€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€5.6 million resulting from the sale of emission allowances.

          Depreciation for the pulp operations increased to€13.6 million in the first quarter of 2006, from€10.8 million in the comparative period of 2005, primarily as a result of depreciation associated with the Celgar mill.

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Mercer Reports 2006 First Quarter Results Page 5

          For the first quarter of 2006, our pulp operations generated operating income of€12.2 million, versus operating income of€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€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€17.2 million from€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€16.9 million from€15.6 million in the comparative quarter of 2005.

          For the first quarter of 2006, our paper operations generated operating income of€0.5 million, compared to an operating loss of€0.3 million in the first quarter of 2005.

          In the first quarter of 2006, we had income from operations of€11.5 million, compared to a loss from operations of€0.9 million in the same quarter last year. Interest expense in the first quarter of 2006 increased to€22.9 million from€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€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€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€3.6 million on certain currency forwards which had matured, compared to a realized loss of€0.3 million on derivative instruments in the first quarter of 2005.

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Mercer Reports 2006 First Quarter Results Page 6

          In the first quarter of 2006, minority interest, representing the two minority shareholders’ proportionate interest in the Stendal mill, was€0.4 million, compared to€6.6 million in the first quarter of 2005.

          We reported net income for the first quarter of 2006 of€16.6 million, or€0.50 per basic and€0.41 per diluted share, which reflected an unrealized gain of€44.4 million on our outstanding derivatives, an unrealized non-cash foreign exchange gain on our long-term debt of€6.1 million and improved results at our German pulp mills. In the first quarter of 2005, we reported a net loss of€19.7 million, or€0.77 per basic share and diluted share, which included net losses on our derivatives of€3.9 million and a non-cash impairment charge of€1.6 million relating to investments.

          We generated “Operating EBITDA” of€25.4 million and€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.

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Mercer Reports 2006 First Quarter Results Page 7

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€66.5 million as planned by drawing€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€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€25.4 million from€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€44.4 million and an unrealized foreign exchange gain on our indebtedness of€6.1 million. Net income for the first quarter of 2006 was€16.6 million or€0.50 per basic share and€0.41 per diluted share. In the first quarter of 2005, we reported a loss of€19.7 million or€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.”

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Mercer Reports 2006 First Quarter Results Page 8

          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 athttp://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 athttp://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.

-FINANCIAL TABLES FOLLOW-

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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	€	80,350		€	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	€	1,404,503		€	1,393,816
LIABILITIES
Current Liabilities
Accounts payable and accrued expenses	€	110,685		€	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	€	1,404,503		€	1,393,816

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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	€	159,064		€	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)	€	16,588		€	(19,667	)
(Deficit) retained earnings, beginning of period		(47,970	)		69,176
(Deficit) retained earnings, end of period	€	(31,382	)	€	49,509
Income (loss) per share
Basic	€	0.50		€	(0.77	)
Diluted	€	0.41		€	(0.77	)

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MERCER INTERNATIONAL INC.

BUSINESS SEGMENT INFORMATION
For the Three Months Ended March 31, 2006 and 2005
(Unaudited)
(Euros in thousands)

																Corporate,
	Rosenthal			Celgar(1)			Stendal			Total						Other and			Consolidated
	Pulp			Pulp			Pulp			Pulp			Paper			Eliminations			Total
Three Months Ended March 31, 2006
Sales to external customers	€	34,672		€	46,297		€	60,699		€	141,668		€	17,396		€	—		€	159,064
Intersegment net sales		42			—			2,315			2,357			—			(2,357	)		—
		34,714			46,297			63,014			144,025			17,396			(2,357	)		159,064
Operating costs		23,987			45,565			48,125			117,677			15,518			(2,770	)		130,425
Operating depreciation and amortization		3,537			3,014			7,059			13,610			226			78			13,914
General and administrative		1,327			2,124			2,757			6,208			1,141			1,509			8,858
(Sale) purchase of emission allowances		(1,767	)		—			(3,871	)		(5,638	)		—			—			(5,638	)
		27,084			50,703			54,070			131,857			16,885			(1,183	)		147,559
Income (loss) from operations		7,630			(4,406	)		8,944			12,168			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																			€	37,252
Segment assets	€	348,533		€	237,558		€	770,345		€	1,356,436		€	22,032		€	26,035		€	1,404,503
Three Months Ended March 31, 2005
Sales to external customers	€	34,096		€	7,616		€	40,798		€	82,510		€	15,383		€	—		€	97,893
Intersegment net sales		—			—			1,554			1,554			—			(1,554	)		—
		34,096			7,616			42,352			84,064			15,383			(1,554	)		97,893
Operating costs		25,188			5,135			37,135			67,458			14,231			(1,687	)		80,002
Operating depreciation and amortization		3,268			823			6,681			10,772			181			34			10,987
General and administrative		1,901			1,675			975			4,551			1,236			2,011			7,798
		30,357			7,633			44,791			82,781			15,648			358			98,787
Income (loss) from operations		3,739			(17	)		(2,439	)		1,283			(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																			€	(23,189	)
Segment assets	€	349,865		€	220,739		€	915,178		€	1,485,782		€	24,911		€	20,747		€	1,531,440

(1) The results of the Celgar pulp mill are from the date of its acquisition on February 14, 2005.

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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	€	41,101	€	39,249		€	—		€	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	€	604,021	€	839,735		€	(39,253	)	€	1,404,503
LIABILITIES
Current liabilities
Accounts payable and accrued expenses	€	42,300	€	67,325		€	—		€	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	€	604,021	€	839,735		€	(39,253	)	€	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	€	48,790	€	34,757		€	—		€	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	€	625,578	€	814,650		€	(46,412	)	€	1,393,816
LIABILITIES
Current
Accounts payable and accrued expenses	€	46,867	€	64,646		€	—		€	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	€	625,578	€	814,650		€	(46,412	)	€	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	€	81,011		€	80,410		€	(2,357	)	€	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)	€	(959	)	€	20,096		€	(2,549	)	€	16,588

	March 31, 2005
	Restricted			Unrestricted						Consolidated
	Group			Subsidiaries			Eliminations			Group
Revenues	€	41,712		€	56,181		€	—		€	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	€	(7,417	)	€	(11,498	)	€	(752	)	€	(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)	€	16,588		€	(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)	€	25,419		€	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	€	(959	)	€	(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)	€	8,679		€	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)

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