SECURITIES AND EXCHANGE COMMISSION
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Washington (State or other jurisdiction of incorporation or organization) | 47-0956945 (I.R.S. Employer Identification No.) |
(Address of office)
(Registrant’s telephone number, including area code)
Large accelerated filero | Accelerated filerþ | Non-accelerated filero | Smaller reporting companyo | |||
(Do not check if a smaller reporting company) |
(In thousands of Euros)
June 30, | December 31, | |||||||
2009 | 2008 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | € | 62,100 | € | 42,452 | ||||
Cash, restricted | 3,531 | 13,000 | ||||||
Receivables | 76,865 | 100,158 | ||||||
Inventories (Note 4) | 69,486 | 98,457 | ||||||
Prepaid expenses and other | 3,532 | 4,834 | ||||||
Total current assets | 215,514 | 258,901 | ||||||
Long-term assets | ||||||||
Property, plant and equipment | 875,876 | 881,704 | ||||||
Investments (Note 9) | 92 | 419 | ||||||
Deferred note issuance and other costs | 8,219 | 4,011 | ||||||
Deferred income tax | 2,133 | 3,036 | ||||||
Note receivable, less current portion | 3,175 | 3,529 | ||||||
889,495 | 892,699 | |||||||
Total assets | € | 1,105,009 | € | 1,151,600 | ||||
LIABILITIES | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued expenses | € | 94,731 | € | 87,517 | ||||
Pension and other post-retirement benefit obligations, current portion | 555 | 510 | ||||||
Debt, current portion (Note 5) | 39,999 | 16,500 | ||||||
Total current liabilities | 135,285 | 104,527 | ||||||
Long-term liabilities | ||||||||
Debt, less current portion (Note 5) | 810,426 | 837,918 | ||||||
Unrealized interest rate derivative losses (Notes 6 and 9) | 54,675 | 47,112 | ||||||
Pension and other post-retirement benefit obligations (Note 7) | 13,385 | 12,846 | ||||||
Capital leases and other | 9,698 | 11,267 | ||||||
Deferred income tax | — | 5,827 | ||||||
888,184 | 914,970 | |||||||
Total liabilities | 1,023,469 | 1,019,497 | ||||||
EQUITY | ||||||||
Shareholders’ equity | ||||||||
Share capital (Note 8) | 202,844 | 202,844 | ||||||
Paid-in capital | (5,871 | ) | 299 | |||||
Retained earnings (deficit) | (85,872 | ) | (35,046 | ) | ||||
Accumulated other comprehensive income (loss) | 7,658 | (1,872 | ) | |||||
Total shareholders’ equity | 118,759 | 166,225 | ||||||
Noncontrolling interest (deficit) (Note 10) | (37,219 | ) | (34,122 | ) | ||||
Total equity | 81,540 | 132,103 | ||||||
Total liabilities and equity | € | 1,105,009 | € | 1,151,600 | ||||
Commitments and Contingencies (Note 11) | ||||||||
Subsequent Events (Note 12) |
(In thousands of Euros, except per share data)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Revenues | ||||||||||||||||
Pulp | € | 147,522 | € | 170,585 | € | 276,555 | € | 349,686 | ||||||||
Energy | 11,362 | 6,066 | 21,901 | 13,781 | ||||||||||||
158,884 | 176,651 | 298,456 | 363,467 | |||||||||||||
Costs and expenses | ||||||||||||||||
Operating costs | 149,033 | 148,968 | 281,030 | 296,124 | ||||||||||||
Operating depreciation and amortization | 13,539 | 13,514 | 26,940 | 27,635 | ||||||||||||
(3,688 | ) | 14,169 | (9,514 | ) | 39,708 | |||||||||||
Selling, general and administrative expenses | 6,032 | 7,953 | 13,177 | 14,849 | ||||||||||||
Purchase (sale) of emission allowances | 16 | — | (542 | ) | — | |||||||||||
Operating income (loss) | (9,736 | ) | 6,216 | (22,149 | ) | 24,859 | ||||||||||
Other income (expense) | ||||||||||||||||
Interest expense | (16,319 | ) | (16,013 | ) | (32,868 | ) | (32,633 | ) | ||||||||
Investment income (loss) | 138 | 1,421 | (3,064 | ) | 1,731 | |||||||||||
Foreign exchange gain (loss) on debt | 5,170 | 238 | 754 | 6,269 | ||||||||||||
Unrealized gain (loss) on derivative instruments (Note 6) | 7,451 | 20,580 | (7,562 | ) | 12,730 | |||||||||||
Total other income (expense) | (3,560 | ) | 6,226 | (42,740 | ) | (11,903 | ) | |||||||||
Income (loss) before income taxes | (13,296 | ) | 12,442 | (64,889 | ) | 12,956 | ||||||||||
Income tax benefit (provision) — current | (65 | ) | (213 | ) | (114 | ) | 163 | |||||||||
— deferred | 1,888 | (7,922 | ) | 4,919 | (9,126 | ) | ||||||||||
Net income (loss) | (11,473 | ) | 4,307 | (60,084 | ) | 3,993 | ||||||||||
Less: net loss (income) attributable to noncontrolling interest | (3 | ) | (3,436 | ) | 9,258 | (253 | ) | |||||||||
Net income (loss) attributable to common shareholders | (11,476 | ) | 871 | (50,826 | ) | 3,740 | ||||||||||
Retained earnings (deficit), beginning of period | (74,396 | ) | 40,288 | (35,046 | ) | 37,419 | ||||||||||
Retained earnings (deficit), end of period | € | (85,872 | ) | € | 41,159 | € | (85,872 | ) | € | 41,159 | ||||||
Net income (loss) per share attributable to common shareholders (Note 3): | ||||||||||||||||
Basic and diluted | € | (0.32 | ) | € | 0.02 | € | (1.40 | ) | € | 0.10 | ||||||
(In thousands of Euros)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Net income (loss) | € | (11,473 | ) | € | 4,307 | € | (60,084 | ) | € | 3,993 | ||||||
Other comprehensive income (loss): | ||||||||||||||||
Foreign currency translation adjustment | 14,581 | 2,056 | 9,195 | (8,048 | ) | |||||||||||
Unrealized gains (losses) on securities arising during the period | 21 | 3 | 335 | (22 | ) | |||||||||||
Other comprehensive income (loss) | 14,602 | 2,059 | 9,530 | (8,070 | ) | |||||||||||
Total comprehensive income (loss) | 3,129 | 6,366 | (50,554 | ) | (4,077 | ) | ||||||||||
Comprehensive (income) loss attributable to noncontrolling interest | (3 | ) | (3,436 | ) | 9,258 | (253 | ) | |||||||||
Comprehensive income (loss) attributable to common shareholders | € | 3,126 | € | 2,930 | € | (41,296 | ) | € | (4,330 | ) | ||||||
(In thousands of Euros)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Cash flows from (used in) operating activities: | ||||||||||||||||
Net income (loss) attributable to common shareholders | € | (11,476 | ) | € | 871 | € | (50,826 | ) | € | 3,740 | ||||||
Adjustments to reconcile net income (loss) attributable to common shareholders to cash flows from operating activities | ||||||||||||||||
Unrealized (gain) loss on derivative instruments | (7,451 | ) | (20,580 | ) | 7,562 | (12,730 | ) | |||||||||
Foreign exchange (gain) loss on debt | (5,170 | ) | (238 | ) | (754 | ) | (6,269 | ) | ||||||||
Loss (gain) on sale of assets | 34 | 64 | (25 | ) | (958 | ) | ||||||||||
Operating depreciation and amortization | 13,539 | 13,514 | 26,940 | 27,635 | ||||||||||||
Non-operating amortization | 65 | 70 | 131 | 141 | ||||||||||||
Noncontrolling interest | 3 | 3,436 | (9,258 | ) | 253 | |||||||||||
Deferred income taxes | (1,888 | ) | 7,922 | (4,919 | ) | 9,126 | ||||||||||
Stock compensation expense | 26 | 207 | (8 | ) | 355 | |||||||||||
Pension and other post-retirement expense | 337 | 491 | 668 | 1,006 | ||||||||||||
Pension and other post-retirement benefit funding | (344 | ) | (676 | ) | (691 | ) | (1,125 | ) | ||||||||
Inventory provisions | — | — | 4,587 | — | ||||||||||||
Other | 893 | 9 | 1,337 | (50 | ) | |||||||||||
Changes in current assets and liabilities | ||||||||||||||||
Receivables | 4,728 | (6,845 | ) | 25,137 | (10,678 | ) | ||||||||||
Inventories | 21,406 | (8,389 | ) | 27,525 | (7,683 | ) | ||||||||||
Accounts payable and accrued expenses | 15,161 | 17,181 | 7,940 | 5,801 | ||||||||||||
Other | (369 | ) | (1,232 | ) | 203 | 865 | ||||||||||
Net cash from (used in) operating activities | 29,494 | 5,805 | 35,549 | 9,429 | ||||||||||||
Cash flows from (used in) investing activities: | ||||||||||||||||
Purchase of property, plant and equipment | (7,835 | ) | (4,859 | ) | (15,541 | ) | (7,861 | ) | ||||||||
Proceeds on sale of property, plant and equipment | 103 | 653 | 232 | 1,613 | ||||||||||||
Cash, restricted | — | — | 9,469 | — | ||||||||||||
Notes receivable | 120 | 5,303 | 241 | 5,303 | ||||||||||||
Net cash from (used in) investing activities | (7,612 | ) | 1,097 | (5,599 | ) | (945 | ) | |||||||||
Cash flows from (used in) financing activities: | ||||||||||||||||
Repayment of notes payable and debt | — | — | (13,800 | ) | (16,891 | ) | ||||||||||
Repayment of capital lease obligations | (536 | ) | (194 | ) | (1,218 | ) | (832 | ) | ||||||||
Proceeds from borrowings of notes payable and debt | — | 8,431 | 10,000 | 8,431 | ||||||||||||
Payment of deferred note issuance costs | — | — | (5,253 | ) | — | |||||||||||
Net cash from (used in) financing activities | (536 | ) | 8,237 | (10,271 | ) | (9,292 | ) | |||||||||
Effect of exchange rate changes on cash and cash equivalents | (482 | ) | (1,579 | ) | (31 | ) | (745 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents | 20,864 | 13,560 | 19,648 | (1,553 | ) | |||||||||||
Cash and cash equivalents, beginning of period | 41,236 | 69,735 | 42,452 | 84,848 | ||||||||||||
Cash and cash equivalents, end of period | € | 62,100 | € | 83,295 | € | 62,100 | € | 83,295 | ||||||||
(In thousands of Euros)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Supplemental disclosure of cash flow information: | ||||||||||||||||
Cash paid (received) during the period for: | ||||||||||||||||
Interest | € | 2,952 | € | 4,280 | € | 31,210 | € | 30,766 | ||||||||
Income taxes | 43 | (332 | ) | 72 | (318 | ) | ||||||||||
Supplemental schedule of non-cash investing and financing activities: | ||||||||||||||||
Acquisition of production and other equipment under capital lease obligations | € | 80 | € | 977 | € | 116 | € | 3,699 | ||||||||
Increase (decrease) in accounts payable relating to investing activities | (1,602 | ) | — | (1,141 | ) | — |
(In thousands of Euros, except per share data)
(Unaudited)
(In thousands of Euros, except per share data)
(Unaudited)
(In thousands of Euros, except per share data)
(Unaudited)
(In thousands of Euros, except per share data)
(Unaudited)
(In thousands of Euros, except per share data)
(Unaudited)
(In thousands of Euros, except per share data)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Net income (loss) attributable to common shareholders — basic and diluted | € | (11,476 | ) | € | 871 | € | (50,826 | ) | € | 3,740 | ||||||
Net income (loss) per share attributable to common shareholders: | ||||||||||||||||
Basic and diluted | € | (0.32 | ) | € | 0.02 | € | (1.40 | ) | € | 0.10 | ||||||
Weighted average number of common shares outstanding: | ||||||||||||||||
Basic(1) | 36,289,181 | 36,252,360 | 36,287,115 | 36,252,360 | ||||||||||||
Effect of dilutive instruments: | ||||||||||||||||
Performance rights | — | 61,837 | — | — | ||||||||||||
Stock options and awards | — | 149,546 | — | 153,986 | ||||||||||||
Diluted | 36,289,181 | 36,463,743 | 36,287,115 | 36,406,346 | ||||||||||||
(1) | The basic weighted average number of shares excludes performance and restricted stock which have been issued, but have not vested as at June 30, 2009 and 2008. |
(Unaudited)
(In thousands of Euros, except per share data)
June 30, 2009 | December 31, 2008 | |||||||
Raw materials | € | 21,012 | € | 38,225 | ||||
Finished goods | 26,067 | 37,881 | ||||||
Work in process and other | 22,407 | 22,351 | ||||||
€ | 69,486 | € | 98,457 | |||||
(Unaudited)
(In thousands of Euros, except per share data)
June 30, 2009 | December 31, 2008 | |||||||
Note payable to bank, included in a total loan facility of€827,950 to finance the construction related to the Stendal mill (a) | € | 522,823 | € | 531,073 | ||||
Senior notes due February 2013, interest at 9.25% accrued and payable semi-annually, unsecured (b) | 221,128 | 222,718 | ||||||
Subordinated convertible notes due October 2010, interest at 8.5% accrued and payable semi-annually (c) | 47,974 | 48,319 | ||||||
Credit agreement with a lender with respect to a revolving credit facility of C$40 million (d) | 13,499 | 18,186 | ||||||
Loan payable to the noncontrolling shareholder of the Stendal mill (e) (Note 10) | 35,001 | 34,122 | ||||||
Credit agreement with a bank with respect to a revolving credit facility of€40 million (f) | 10,000 | — | ||||||
850,425 | 854,418 | |||||||
Less: current portion | (39,999 | ) | (16,500 | ) | ||||
�� | ||||||||
Debt, less current portion | € | 810,426 | € | 837,918 | ||||
Matures | Amount | |||
2009 | € | 8,250 | ||
2010(1) | 85,390 | |||
2011 | 23,167 | |||
2012 | 24,583 | |||
2013 | 261,128 | |||
Thereafter | 447,907 | |||
€ | 850,425 | |||
(1) | Includes revolving credit facility principal amounts totalling€23,499. |
(a) | Note payable to bank, included in a total loan facility of€827,950 to finance the construction related to the Stendal mill (“Stendal Loan Facility”), interest at rates varying from Euribor plus 0.90% to Euribor plus 1.50% (rates on amounts of borrowing at June 30, 2009 range from 2.59% to 3.19%), principal due in required installments beginning September 30, 2006 until September 30, 2017, collateralized by the assets of the Stendal mill, and at June 30, 2009, restricted cash amounting to€3,531, with 48% and 32% guaranteed by the Federal Republic of Germany and the State of Saxony-Anhalt, respectively, of up to€500,323 of outstanding principal, subject to a debt service reserve account required to pay amounts due in the following twelve months under the terms of the Stendal Loan Facility; payment of dividends is only permitted if certain cash flow requirements are met. |
(Unaudited)
(In thousands of Euros, except per share data)
On March 13, 2009, the Company finalized an agreement with its lenders to amend its Stendal Loan Facility. The amendment defers approximately€164,000 of scheduled principal payments until the maturity date, September 30, 2017, including approximately€20,000,€26,000,€21,000 of scheduled principal payments in 2009, 2010, and 2011, respectively. Additionally, the Company made a€10,000 capital contribution to the Stendal mill, and incurred amendment fees totaling approximately€5,800.See Note 10 - - Noncontrolling Interest. | ||
(b) | In February 2005, the Company issued $310 million of senior notes due February 2013, which bear interest at 9.25% accrued, are payable semi-annually, and are unsecured. On or after February 15, 2009, the Company may redeem all or a part of the notes at redemption prices (expressed as a percentage of principal amount) equal to 104.63% for the twelve month period beginning on February 15, 2009, 102.31% for the twelve month period beginning on February 15, 2010, and 100.00% beginning on February 15, 2011 and at any time thereafter, plus accrued and unpaid interest. | |
(c) | As at June 30, 2009, the subordinated convertible notes had approximately $67.3 million of principal outstanding. The subordinated convertible notes are due October 2010, bear interest at 8.5% accrued and payable semi-annually, are convertible at any time by the holder into common shares of the Company at $7.75 per share and are unsecured. The Company may redeem for cash all or a portion of these notes at any time on or after October 15, 2008 at 100% of the principal amount of the notes plus accrued and unpaid interest up to the redemption date. The holders of the convertible notes will have the option to require the Company to purchase for cash all or a portion of the notes not previously redeemed upon a specified change of control at a price equal to 100% of the principal. See Note 12 — Subsequent Events. | |
(d) | Credit agreement with respect to a revolving credit facility of C$40 million for the Celgar mill, on a three year term. Borrowings under the credit agreement are secured by pulp mill inventory and receivables. Canadian dollar denominated amounts bear interest at bankers acceptance plus 2.25% or Canadian prime plus 0.50%. U.S. dollar denominated amounts bear interest at LIBOR plus 2.25% or U.S. base plus 0.50%. As at June 30, 2009, this facility was drawn by C$22.0 million and was accruing interest at a rate of approximately 2.67%. The credit agreement matures May 19, 2010, but is subject to a one-year extension at the Company’s request. |
(Unaudited)
(In thousands of Euros, except per share data)
(e) | Loan payable to the noncontrolling shareholder of the Stendal mill bears interest at 7%, and is accrued semi-annually. The loan payable is unsecured, subordinated to all liabilities of the Stendal mill, and is due in 2017. The balance includes principal and accrued interest. | |
(f) | Credit agreement with respect to a revolving credit facility of€40,000 for the Rosenthal mill. Borrowings under the credit agreement are secured by pulp mill inventory and receivables and bear interest at Euribor plus 1.55%. As at June 30, 2009, this facility was drawn by€10,000 and was accruing interest at a rate of 3.94%. The credit agreement matures February 15, 2010. See Note 12 — Subsequent Events. |
(Unaudited)
(In thousands of Euros, except per share data)
Three Months Ended June 30, | ||||||||||||||||
2009 | 2008 | |||||||||||||||
Post- | Post- | |||||||||||||||
Pension | Retirement | Pension | Retirement | |||||||||||||
Benefits | Benefits | Benefits | Benefits | |||||||||||||
Service cost | € | 14 | € | 84 | € | 195 | € | 124 | ||||||||
Interest cost | 377 | 203 | 335 | 198 | ||||||||||||
Expected return on plan assets | (317 | ) | — | (381 | ) | — | ||||||||||
Recognized net loss (gain) | 35 | (59 | ) | — | 20 | |||||||||||
Net periodic benefit cost | € | 109 | € | 228 | € | 149 | € | 342 | ||||||||
(Unaudited)
(In thousands of Euros, except per share data)
Six Months Ended June 30, | ||||||||||||||||
2009 | 2008 | |||||||||||||||
Post- | Post- | |||||||||||||||
Pension | Retirement | Pension | Retirement | |||||||||||||
Benefits | Benefits | Benefits | Benefits | |||||||||||||
Service cost | € | 28 | € | 167 | € | 399 | € | 254 | ||||||||
Interest cost | 747 | 401 | 686 | 405 | ||||||||||||
Expected return on plan assets | (628 | ) | — | (780 | ) | — | ||||||||||
Recognized net loss (gain) | 69 | (116 | ) | — | 42 | |||||||||||
Net periodic benefit cost | € | 216 | € | 452 | € | 305 | € | 701 | ||||||||
(Unaudited)
(In thousands of Euros, except per share data)
June 30, 2009 | December 31, 2008 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Amount | Value | Amount | Value | |||||||||||||
Cash and cash equivalents | € | 62,100 | € | 62,100 | € | 42,452 | € | 42,452 | ||||||||
Cash, restricted | 3,531 | 3,531 | 13,000 | 13,000 | ||||||||||||
Investments | 92 | 92 | 419 | 419 | ||||||||||||
Receivables | 76,865 | 76,865 | 100,158 | 100,158 | ||||||||||||
Notes receivable | 3,825 | 3,825 | 4,171 | 4,171 | ||||||||||||
Accounts payable and accrued expenses | 94,731 | 94,731 | 87,517 | 87,517 | ||||||||||||
Debt | 850,425 | 662,695 | 854,418 | 704,901 | ||||||||||||
Interest rate derivative contracts — liability | 54,675 | 54,675 | 47,112 | 47,112 |
(Unaudited)
(In thousands of Euros, except per share data)
Fair value measurements at June 30, 2009 using: | ||||||||||||||||
Quoted prices in | ||||||||||||||||
active markets for | Significant other | Significant | ||||||||||||||
identical assets | observable inputs | unobservable inputs | ||||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||||||
Assets | ||||||||||||||||
Investments (a) | € | 92 | € | — | € | — | € | 92 | ||||||||
Liabilities | ||||||||||||||||
Derivatives (b) | ||||||||||||||||
- Interest rate swaps | € | — | € | 54,675 | € | — | € | 54,675 | ||||||||
(a) | Based on observable market data. | |
(b) | Based on observable inputs for the liability (interest rates and yield curves observable at specific intervals). |
(Unaudited)
(In thousands of Euros, except per share data)
Balance as at | Application of new | Revised balance as at | ||||||||||
December 31, 2008 | accounting standard | December 31, 2008 | ||||||||||
Description | (a) | (b) | ||||||||||
Long-term liabilities | ||||||||||||
Debt, less current portion | € | 803,796 | € | 34,122 | € | 837,918 | ||||||
Total liabilities | 985,375 | 34,122 | 1,019,497 | |||||||||
Equity | ||||||||||||
Shareholders’ equity | ||||||||||||
Share capital | 202,844 | — | 202,844 | |||||||||
Paid-in capital | 299 | — | 299 | |||||||||
Retained earnings (deficit) | (35,046 | ) | — | (35,046 | ) | |||||||
Accumulated other comprehensive income | (1,872 | ) | — | (1,872 | ) | |||||||
Total shareholders’ equity | 166,225 | — | 166,225 | |||||||||
Noncontrolling interest | — | (34,122 | ) | (34,122 | ) | |||||||
Total equity | 166,225 | (34,222 | ) | 132,103 | ||||||||
Total liabilities and equity | € | 1,151,600 | € | — | € | 1,151,600 | ||||||
(a) | As at December 31, 2008, the cumulative net losses of the Company’s 70.58% subsidiary (the “Stendal mill”) which were attributable to the noncontrolling shareholder amounted to€34,122, and were applied to the loans payable to the noncontrolling shareholder. The net obligation reported at December 31, 2008 was nil. In accordance with FAS 160, the noncontrolling shareholder’s equity interest is required to be reclassified to equity in the Consolidated Balance Sheet. As a result, the Company retrospectively applied this presentation and disclosure requirement. | |
(b) | Revised balance as at December 31, 2008 represents the Company’s Consolidated Balance Sheet reclassified in accordance with FAS 160. |
(Unaudited)
(In thousands of Euros, except per share data)
(Unaudited)
(In thousands of Euros, except per share data)
(Unaudited)
(In thousands of Euros, except per share data)
June 30, 2009 | ||||||||||||||||
Restricted | Unrestricted | Consolidated | ||||||||||||||
Group | Subsidiaries | Eliminations | Group | |||||||||||||
ASSETS | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | € | 33,842 | € | 28,258 | € | — | € | 62,100 | ||||||||
Cash, restricted | — | 3,531 | — | 3,531 | ||||||||||||
Receivables | 36,888 | 39,977 | — | 76,865 | ||||||||||||
Inventories | 48,394 | 21,092 | — | 69,486 | ||||||||||||
Prepaid expenses and other | 2,041 | 1,491 | — | 3,532 | ||||||||||||
Total current assets | 121,165 | 94,349 | — | 215,514 | ||||||||||||
Property, plant and equipment | 357,462 | 518,414 | — | 875,876 | ||||||||||||
Other | 3,204 | 5,107 | — | 8,311 | ||||||||||||
Deferred income tax | 2,133 | — | — | 2,133 | ||||||||||||
Due from unrestricted group | 68,465 | — | (68,465 | ) | — | |||||||||||
Note receivable, less current portion | 3,175 | — | — | 3,175 | ||||||||||||
Total assets | € | 555,604 | € | 617,870 | € | (68,465 | ) | € | 1,105,009 | |||||||
LIABILITIES | ||||||||||||||||
Current liabilities | ||||||||||||||||
Accounts payable and accrued expenses | € | 50,436 | € | 44,295 | € | — | € | 94,731 | ||||||||
Pension and other post-retirement benefit obligations, current portion | 555 | — | — | 555 | ||||||||||||
Debt, current portion | 23,499 | 16,500 | — | 39,999 | ||||||||||||
Total current liabilities | 74,490 | 60,795 | — | 135,285 | ||||||||||||
Debt, less current portion | 269,102 | 541,324 | — | 810,426 | ||||||||||||
Due to restricted group | — | 68,465 | (68,465 | ) | — | |||||||||||
Unrealized interest rate derivative losses | — | 54,675 | — | 54,675 | ||||||||||||
Pension and other post-retirement benefit obligations | 13,385 | — | — | 13,385 | ||||||||||||
Capital leases and other | 6,210 | 3,488 | — | 9,698 | ||||||||||||
Total liabilities | 363,187 | 728,747 | (68,465 | ) | 1,023,469 | |||||||||||
EQUITY | ||||||||||||||||
Total shareholders’ equity (deficit) | 192,417 | (73,658 | ) | — | 118,759 | |||||||||||
Noncontrolling interest (deficit) | — | (37,219 | ) | — | (37,219 | ) | ||||||||||
Total liabilities and equity | € | 555,604 | € | 617,870 | € | (68,465 | ) | € | 1,105,009 | |||||||
(Unaudited)
(In thousands of Euros, except per share data)
December 31, 2008 | ||||||||||||||||
Restricted | Unrestricted | Consolidated | ||||||||||||||
Group | Subsidiaries | Eliminations | Group | |||||||||||||
ASSETS | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | € | 26,176 | € | 16,276 | € | — | € | 42,452 | ||||||||
Cash, restricted | — | 13,000 | — | 13,000 | ||||||||||||
Receivables | 57,258 | 42,900 | — | 100,158 | ||||||||||||
Inventories | 59,801 | 38,656 | — | 98,457 | ||||||||||||
Prepaid expenses and other | 3,215 | 1,619 | — | 4,834 | ||||||||||||
Total current assets | 146,450 | 112,451 | — | 258,901 | ||||||||||||
Property, plant and equipment | 351,009 | 530,695 | — | 881,704 | ||||||||||||
Other | 4,425 | 5 | — | 4,430 | ||||||||||||
Deferred income tax | 3,036 | — | — | 3,036 | ||||||||||||
Due from unrestricted group | 55,925 | — | (55,925 | ) | — | |||||||||||
Note receivable, less current portion | 3,529 | — | — | 3,529 | ||||||||||||
Total assets | € | 564,374 | € | 643,151 | € | (55,925 | ) | € | 1,151,600 | |||||||
LIABILITIES | ||||||||||||||||
Current liabilities | ||||||||||||||||
Accounts payable and accrued expenses | € | 44,450 | € | 43,067 | € | — | € | 87,517 | ||||||||
Pension and other post-retirement benefit obligations, current portion | 510 | — | — | 510 | ||||||||||||
Debt, current portion | — | 16,500 | — | 16,500 | ||||||||||||
Total current liabilities | 44,960 | 59,567 | — | 104,527 | ||||||||||||
Debt, less current portion | 289,222 | 548,696 | — | 837,918 | ||||||||||||
Due to restricted group | — | 55,925 | (55,925 | ) | — | |||||||||||
Unrealized interest rate derivative losses | — | 47,112 | — | 47,112 | ||||||||||||
Pension and other post-retirement benefit obligations | 12,846 | — | — | 12,846 | ||||||||||||
Capital leases and other | 7,167 | 4,100 | — | 11,267 | ||||||||||||
Deferred income tax | — | 5,827 | — | 5,827 | ||||||||||||
Total liabilities | 354,195 | 721,227 | (55,925 | ) | 1,019,497 | |||||||||||
EQUITY | ||||||||||||||||
Total shareholders’ equity (deficit) | 210,179 | (43,954 | ) | — | 166,225 | |||||||||||
Noncontrolling interest (deficit) | — | (34,122 | ) | — | (34,122 | ) | ||||||||||
Total liabilities and equity | € | 564,374 | € | 643,151 | € | (55,925 | ) | € | 1,151,600 | |||||||
(Unaudited)
(In thousands of Euros, except per share data)
Three Months Ended June 30, 2009 | ||||||||||||||||
Restricted | Unrestricted | Consolidated | ||||||||||||||
Group | Subsidiaries | Eliminations | Group | |||||||||||||
Revenues | € | 80,388 | € | 78,496 | € | — | € | 158,884 | ||||||||
Operating costs | 78,813 | 70,220 | — | 149,033 | ||||||||||||
Operating depreciation and amortization | 6,888 | 6,651 | — | 13,539 | ||||||||||||
Selling, general and administrative expenses and other | 4,294 | 1,754 | — | 6,048 | ||||||||||||
89,995 | 78,625 | — | 168,620 | |||||||||||||
Operating income (loss) | (9,607 | ) | (129 | ) | — | (9,736 | ) | |||||||||
Other income (expense) | ||||||||||||||||
Interest expense | (6,927 | ) | (10,513 | ) | 1,121 | (16,319 | ) | |||||||||
Investment income (loss) | 1,234 | 25 | (1,121 | ) | 138 | |||||||||||
Foreign exchange gain (loss) on debt | 5,170 | — | — | 5,170 | ||||||||||||
Derivative instruments | — | 7,451 | — | 7,451 | ||||||||||||
Total other income (expense) | (523 | ) | (3,037 | ) | — | (3,560 | ) | |||||||||
Income (loss) before income taxes | (10,130 | ) | (3,166 | ) | — | (13,296 | ) | |||||||||
Income tax benefit (provision) | (1,149 | ) | 2,972 | — | 1,823 | |||||||||||
Net income (loss) | (11,279 | ) | (194 | ) | — | (11,473 | ) | |||||||||
Less: net (income) loss attributable to noncontrolling interest | — | (3 | ) | — | (3 | ) | ||||||||||
Net income (loss) attributable to common shareholders | € | (11,279 | ) | € | (197 | ) | € | — | € | (11,476 | ) | |||||
Three Months Ended June 30, 2008 | ||||||||||||||||
Restricted | Unrestricted | Consolidated | ||||||||||||||
Group | Subsidiaries | Eliminations | Group | |||||||||||||
Revenues | € | 99,888 | € | 76,763 | € | — | € | 176,651 | ||||||||
Operating costs | 90,132 | 58,836 | — | 148,968 | ||||||||||||
Operating depreciation and amortization | 6,774 | 6,740 | — | 13,514 | ||||||||||||
Selling, general and administrative expenses and other | 4,865 | 3,088 | — | 7,953 | ||||||||||||
101,771 | 68,664 | — | 170,435 | |||||||||||||
Operating income (loss) | (1,883 | ) | 8,099 | — | 6,216 | |||||||||||
Other income (expense) | ||||||||||||||||
Interest expense | (6,370 | ) | (10,614 | ) | 971 | (16,013 | ) | |||||||||
Investment income (loss) | 1,557 | 835 | (971 | ) | 1,421 | |||||||||||
Foreign exchange gain (loss) on debt | (248 | ) | 486 | — | 238 | |||||||||||
Derivative instruments | — | 20,580 | — | 20,580 | ||||||||||||
Total other income (expense) | (5,061 | ) | 11,287 | — | 6,226 | |||||||||||
Income (loss) before income taxes | (6,944 | ) | 19,386 | — | 12,442 | |||||||||||
Income tax benefit (provision) | (1,303 | ) | (6,832 | ) | — | (8,135 | ) | |||||||||
Net income (loss) | (8,247 | ) | 12,554 | — | 4,307 | |||||||||||
Less: net (income) loss attributable to noncontrolling interest | — | (3,436 | ) | — | (3,436 | ) | ||||||||||
Net income (loss) attributable to common shareholders | € | (8,247 | ) | € | 9,118 | € | — | € | 871 | |||||||
(Unaudited)
(In thousands of Euros, except per share data)
Six Months Ended June 30, 2009 | ||||||||||||||||
Restricted | Unrestricted | Consolidated | ||||||||||||||
Group | Subsidiaries | Eliminations | Group | |||||||||||||
Revenues | € | 159,420 | € | 139,036 | € | — | € | 298,456 | ||||||||
Operating costs | 152,129 | 128,901 | — | 281,030 | ||||||||||||
Operating depreciation and amortization | 13,592 | 13,348 | — | 26,940 | ||||||||||||
Selling, general and administrative expenses and other | 8,716 | 3,919 | — | 12,635 | ||||||||||||
174,437 | 146,168 | — | 320,605 | |||||||||||||
Operating income (loss) | (15,017 | ) | (7,132 | ) | — | (22,149 | ) | |||||||||
Other income (expense) | ||||||||||||||||
Interest expense | (14,229 | ) | (20,869 | ) | 2,230 | (32,868 | ) | |||||||||
Investment income (loss) | 2,150 | (2,984 | ) | (2,230 | ) | (3,064 | ) | |||||||||
Foreign exchange gain (loss) on debt | 754 | — | — | 754 | ||||||||||||
Derivative instruments | — | (7,562 | ) | — | (7,562 | ) | ||||||||||
Total other income (expense) | (11,325 | ) | (31,415 | ) | — | (42,740 | ) | |||||||||
Income (loss) before income taxes | (26,342 | ) | (38,547 | ) | — | (64,889 | ) | |||||||||
Income tax benefit (provision) | (941 | ) | 5,746 | — | 4,805 | |||||||||||
Net income (loss) | (27,283 | ) | (32,801 | ) | — | (60,084 | ) | |||||||||
Less: net (income) loss attributable to noncontrolling interest | — | 9,258 | — | 9,258 | ||||||||||||
Net income (loss) attributable to common shareholders | € | (27,283 | ) | € | (23,543 | ) | € | — | € | (50,826 | ) | |||||
Six Months Ended June 30, 2008 | ||||||||||||||||
Restricted | Unrestricted | Consolidated | ||||||||||||||
Group | Subsidiaries | Eliminations | Group | |||||||||||||
Revenues | € | 204,476 | € | 158,991 | € | — | € | 363,467 | ||||||||
Operating costs | 171,274 | 124,850 | — | 296,124 | ||||||||||||
Operating depreciation and amortization | 14,195 | 13,440 | — | 27,635 | ||||||||||||
Selling, general and administrative expenses and other | 8,609 | 6,240 | — | 14,849 | ||||||||||||
194,078 | 144,530 | — | 338,608 | |||||||||||||
Operating income (loss) | 10,398 | 14,461 | — | 24,859 | ||||||||||||
Other income (expense) | ||||||||||||||||
Interest expense | (13,082 | ) | (21,481 | ) | 1,930 | (32,633 | ) | |||||||||
Investment income (loss) | 3,293 | 368 | (1,930 | ) | 1,731 | |||||||||||
Foreign exchange gain (loss) on debt | 6,379 | (110 | ) | — | 6,269 | |||||||||||
Derivative instruments | — | 12,730 | — | 12,730 | ||||||||||||
Total other income (expense) | (3,410 | ) | (8,493 | ) | — | (11,903 | ) | |||||||||
Income (loss) before income taxes | 6,988 | 5,968 | — | 12,956 | ||||||||||||
Income tax benefit (provision) | (3,457 | ) | (5,506 | ) | — | (8,963 | ) | |||||||||
Net income (loss) | 3,531 | 462 | — | 3,993 | ||||||||||||
Less: net (income) loss attributable to noncontrolling interest | — | (253 | ) | — | (253 | ) | ||||||||||
Net income (loss) attributable to common shareholders | € | 3,531 | € | 209 | € | — | € | 3,740 | ||||||||
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
QUARTERLY REPORT - PAGE 29
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Pulp Production (‘000 ADMTs) | 349.1 | 356.8 | 694.7 | 717.7 | ||||||||||||
Scheduled Production Downtime (‘000 ADMTs) | 0.6 | 15.2 | 0.6 | 16.6 | ||||||||||||
Pulp Sales (‘000 ADMTs) | 395.4 | 347.3 | 732.0 | 695.4 | ||||||||||||
Pulp Revenues (in millions) | € | 147.5 | € | 170.6 | € | 276.6 | € | 349.7 | ||||||||
NBSK pulp list prices in Europe ($/ADMT) | $ | 602 | $ | 900 | $ | 593 | $ | 890 | ||||||||
NBSK pulp list prices in Europe (€/ADMT) | € | 442 | € | 576 | € | 445 | € | 581 | ||||||||
Average pulp sales realizations (€/ADMT)(1) | € | 367 | € | 485 | € | 372 | € | 498 | ||||||||
Energy Production (‘000 MWh) | 376.0 | 365.5 | 732.3 | 730.5 | ||||||||||||
Energy Sales (‘000 MWh) | 128.5 | 114.6 | 240.8 | 228.7 | ||||||||||||
Energy Revenue (in millions) | € | 11.4 | € | 6.1 | € | 21.9 | € | 13.8 | ||||||||
Average energy sales realizations (€/MWh) | € | 88 | € | 53 | € | 91 | € | 60 | ||||||||
Average Spot Currency Exchange Rates(2): | ||||||||||||||||
€ / $ | 0.7338 | 0.6401 | 0.7502 | 0.6530 | ||||||||||||
C$ / $ | 1.1671 | 1.0099 | 1.2062 | 1.0070 | ||||||||||||
C$ /€ | 1.5890 | 1.5783 | 1.6054 | 1.5420 |
(1) | List price less discounts and commissions. | |
(2) | Average Bank of Canada noon spot rates over the reporting period. |
QUARTERLY REPORT - PAGE 30
QUARTERLY REPORT - PAGE 31
QUARTERLY REPORT - PAGE 32
Three Months Ended | ||||||||
June 30, | ||||||||
2009 | 2008 | |||||||
(in thousands) | ||||||||
Net income (loss) attributable to common shareholders | € | (11,476 | ) | € | 871 | |||
Net income (loss) attributable to noncontrolling interest | 3 | 3,436 | ||||||
Income taxes (benefits) | (1,823 | ) | 8,135 | |||||
Interest expense | 16,319 | 16,013 | ||||||
Investment (income) loss | (138 | ) | (1,421 | ) | ||||
Unrealized foreign exchange loss (gain) on debt | (5,170 | ) | (238 | ) | ||||
Derivative financial instruments | (7,451 | ) | (20,580 | ) | ||||
Operating income (loss) | (9,736 | ) | 6,216 | |||||
Add: Depreciation and amortization | 13,604 | 13,584 | ||||||
Operating EBITDA | € | 3,868 | € | 19,800 | ||||
QUARTERLY REPORT - PAGE 33
Six Months Ended | ||||||||
June 30, | ||||||||
2009 | 2008 | |||||||
(in thousands) | ||||||||
Net income (loss) attributable to common shareholders | € | (50,826 | ) | € | 3,740 | |||
Net income (loss) attributable to noncontrolling interest | (9,258 | ) | 253 | |||||
Income taxes (benefits) | (4,805 | ) | 8,963 | |||||
Interest expense | 32,868 | 32,633 | ||||||
Investment (income) loss | 3,064 | (1,731 | ) | |||||
Unrealized foreign exchange loss (gain) on debt | (754 | ) | (6,269 | ) | ||||
Derivative financial instruments | 7,562 | (12,730 | ) | |||||
Operating income (loss) | (22,149 | ) | 24,859 | |||||
Add: Depreciation and amortization | 27,071 | 27,776 | ||||||
Operating EBITDA | € | 4,922 | € | 52,635 | ||||
QUARTERLY REPORT - PAGE 34
As at | As at | |||||||
June 30, | December 31, | |||||||
2009 | 2008 | |||||||
(in thousands) | ||||||||
Financial Position | ||||||||
Cash and cash equivalents | € | 62,100 | € | 42,452 | ||||
Cash, restricted | 3,531 | 13,000 | ||||||
Working capital | 80,229 | 154,374 | ||||||
Property, plant and equipment | 875,876 | 881,704 | ||||||
Total assets | 1,105,009 | 1,151,600 | ||||||
Long-term liabilities | 888,184 | 914,970 | ||||||
Total equity | 81,540 | 132,103 |
QUARTERLY REPORT - PAGE 35
QUARTERLY REPORT - PAGE 36
QUARTERLY REPORT - PAGE 37
QUARTERLY REPORT - PAGE 38
Three Months Ended | ||||||||
June 30, | ||||||||
2009 | 2008 | |||||||
(in thousands) | ||||||||
Restricted Group | ||||||||
Net income (loss) attributable to common shareholders(1) | € | (11,279 | ) | € | (8,247 | ) | ||
Income taxes (benefits) | 1,149 | 1,303 | ||||||
Interest expense | 6,927 | 6,370 | ||||||
Investment (income) loss | (1,234 | ) | (1,557 | ) | ||||
Unrealized foreign exchange (gain) loss on debt | (5,170 | ) | 248 | |||||
Operating income (loss) | (9,607 | ) | (1,883 | ) | ||||
Add: Depreciation and amortization | 6,953 | 6,844 | ||||||
Operating EBITDA(1) | € | (2,654 | ) | € | 4,961 | |||
(1) | See Note 13 of the interim consolidated financial statements included elsewhere herein for a reconciliation to our consolidated results. |
QUARTERLY REPORT - PAGE 39
QUARTERLY REPORT - PAGE 40
Six Months Ended | ||||||||
June 30, | ||||||||
2009 | 2008 | |||||||
(in thousands) | ||||||||
Restricted Group | ||||||||
Net income (loss) attributable to common shareholders(1) | € | (27,283 | ) | € | 3,531 | |||
Income taxes (benefits) | 941 | 3,457 | ||||||
Interest expense | 14,229 | 13,082 | ||||||
Investment (income) loss | (2,150 | ) | (3,293 | ) | ||||
Unrealized foreign exchange (gain) loss on debt | (754 | ) | (6,379 | ) | ||||
Operating income (loss) | (15,017 | ) | 10,398 | |||||
Add: Depreciation and amortization | 13,723 | 14,336 | ||||||
Operating EBITDA(1) | € | (1,294 | ) | € | 24,734 | |||
(1) | See Note 13 of the interim consolidated financial statements included elsewhere herein for a reconciliation to our consolidated results. |
As at | As at | |||||||
June 30, | December 31, | |||||||
2009 | 2008 | |||||||
(in thousands) | ||||||||
Restricted Group Financial Position(1) | ||||||||
Cash and cash equivalents | € | 33,842 | € | 26,176 | ||||
Working capital | 46,675 | 101,490 | ||||||
Property, plant and equipment | 357,462 | 351,009 | ||||||
Total assets | 555,604 | 564,374 | ||||||
Long-term liabilities | 288,697 | 309,235 | ||||||
Total equity | 192,417 | 210,179 |
(1) | See Note 13 of the interim consolidated financial statements included elsewhere herein for a reconciliation to our consolidated results. |
QUARTERLY REPORT - PAGE 41
QUARTERLY REPORT - PAGE 42
• | our markets; |
• | demand and prices for our products; |
• | our level of indebtedness; |
• | raw material costs and supply; |
• | energy prices, sales and our initiatives to enhance sales of surplus energy; |
• | capital expenditures; |
• | the economy; |
• | foreign exchange rates — particularly the U.S. dollar and Canadian dollar; and |
• | derivatives. |
QUARTERLY REPORT - PAGE 43
QUARTERLY REPORT - PAGE 44
QUARTERLY REPORT - PAGE 45
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
QUARTERLY REPORT - PAGE 46
ITEM 4. | CONTROLS AND PROCEDURES |
QUARTERLY REPORT - PAGE 47
ITEM 1. | LEGAL PROCEEDINGS |
ITEM 1A. | RISK FACTORS |
ITEM 2. | UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
QUARTERLY REPORT - PAGE 48
ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
For | Withheld | Abstentions and Broker Non-Votes | ||||||||||
Jimmy S.H. Lee | 24,074,610 | 447,461 | — | |||||||||
Kenneth A. Shields | 24,120,503 | 355,675 | — | |||||||||
William D. McCartney | 24,121,580 | 353,521 | — | |||||||||
Graeme A. Witts | 24,120,503 | 355,675 | — | |||||||||
Eric Lauritzen | 24,115,605 | 365,471 | — | |||||||||
Guy W. Adams | 24,114,610 | 367,461 | — | |||||||||
George Malpass | 24,116,105 | 364,471 | — |
For | Against | Abstentions and Broker Non-Votes | ||||||||||
Ratification of appointment of PricewaterhouseCoopers LLP | 24,099,617 | 281,917 | 93,062 |
ITEM 5. | OTHER INFORMATION |
ITEM 6. | EXHIBITS |
Exhibit | ||
No. | Description | |
31.1 | Section 302 Certification of Chief Executive Officer | |
31.2 | Section 302 Certification of Chief Financial Officer | |
32.1* | Section 906 Certification of Chief Executive Officer | |
32.2* | Section 906 Certification of Chief Financial Officer |
* | In accordance with Release 33-8212 of the Commission, these Certifications: (i) are “furnished” to the Commission and are not “filed” for the purposes of liability under the Securities Exchange Act of 1934, as amended; and (ii) are not to be subject to automatic incorporation by reference into any of the Company’s registration statements filed under the Securities Act of 1933, as amended for the purposes of liability thereunder or any offering memorandum, unless the Company specifically incorporates them by reference therein. |
QUARTERLY REPORT - PAGE 49
MERCER INTERNATIONAL INC. | ||||
By: | /s/ David M. Gandossi | |||
David M. Gandossi | ||||
Secretary and Chief Financial Officer | ||||
QUARTERLY REPORT - PAGE 50