Exhibit 99.1
For Immediate Release
MERCER INTERNATIONAL INC. REPORTS RECORD 2010 SECOND QUARTER OPERATING
EBITDA of€62.1 million ($79.1 million)
EBITDA of€62.1 million ($79.1 million)
NEW YORK, NY, August 3, 2010 — Mercer International Inc. (Nasdaq: MERC, TSX: MRI.U) today reported strong results for the second quarter ended June 30, 2010. Operating EBITDA in the quarter significantly increased to a record€62.1 million ($79.1 million) from€3.9 million ($5.3 million) in the second quarter of 2009 and from€31.8 million ($44.0 million) in the first quarter of 2010. Operating EBITDA is defined on page 4 of this press release and reconciled to net income (loss) attributable to common shareholders on page 8 of the financial tables in this press release.
We reported pulp revenues of€228.3 million in the second quarter of 2010, which are up 55% compared to the same period of 2009, and up 33% compared to the first quarter of 2010. Additionally, we reported net income attributable to common shareholders of€12.4 million, or€0.34 per basic share for the second quarter of 2010 which included aggregate non-cash, unrealized losses of€13.8 million, or€0.38 per basic share, on the Stendal interest rate derivatives and foreign exchange losses on our debt. In the second quarter of 2009, we reported a net loss attributable to common shareholders of€11.5 million, or€0.32 per basic share, which included an aggregate non-cash, unrealized gain of€12.6 million, or€0.35 per basic share, on the Stendal interest rate derivatives and foreign exchange gains on our debt. As at June 30, 2010 and 2009, respectively, we had 36,551,325 and 36,422,487 common shares outstanding.
Summary Financial Highlights
Q2 | Q1 | Q2 | ||||||||||
2010 | 2010 | 2009 | ||||||||||
(in millions of Euros, except where otherwise stated) | ||||||||||||
Pulp revenues | € | 228.3 | € | 171.1 | € | 147.5 | ||||||
Energy revenues | 11.9 | 9.1 | 11.4 | |||||||||
Operating income (loss) | 47.9 | 18.0 | (9.7 | ) | ||||||||
Operating EBITDA | 62.1 | 31.8 | 3.9 | |||||||||
Gain (loss) on derivative instruments | (4.5 | ) | (6.5 | ) | 7.5 | |||||||
Foreign exchange gain (loss) on debt | (9.4 | ) | (5.2 | ) | 5.2 | |||||||
Net income (loss) attributable to common shareholders | 12.4 | (7.5 | ) | (11.5 | ) | |||||||
Net income (loss) per share attributable to common shareholders | ||||||||||||
Basic | € | 0.34 | € | (0.21 | ) | € | (0.32 | ) | ||||
Diluted | € | 0.23 | € | (0.21 | ) | € | (0.32 | ) |
Summary Operating Highlights
Q2 | Q1 | Q2 | ||||||||||
2010 | 2010 | 2009 | ||||||||||
Pulp Production (‘000 ADMTs) | 359.7 | 329.5 | 349.1 | |||||||||
Scheduled Production Downtime (‘000 ADMTs) | 17.0 | 18.2 | 2.7 | |||||||||
Pulp Sales (‘000 ADMTs) | 365.0 | 332.9 | 395.4 | |||||||||
NBSK pulp list price in Europe ($/ADMT) | 957 | 860 | 602 | |||||||||
NBSK pulp list price in Europe (€/ADMT) | 752 | 621 | 442 | |||||||||
Average pulp sales realizations (€/ADMT) | 618 | 507 | 367 | |||||||||
Energy Production (‘000 MWh) | 382.5 | 337.7 | 376.0 | |||||||||
Energy Sales (‘000 MWh) | 144.2 | 107.1 | 128.5 | |||||||||
Average Spot Currency Exchange Rates: | ||||||||||||
€ / $(1) | 0.7865 | 0.7230 | 0.7347 | |||||||||
C$ / $(1) | 1.0277 | 1.0413 | 1.1678 | |||||||||
C$ /€(2) | 1.3073 | 1.4406 | 1.5890 |
(1) | Average Federal Reserve Bank of New York noon spot rate over the reporting period. | |
(2) | Average Bank of Canada noon spot rate over the reporting period. |
President’s Comments
Mr. Jimmy S.H. Lee, President and Chairman, stated: “The continued strengthening of pulp prices in the quarter to near record levels contributed to significantly increased revenues and record Operating EBITDA. During the current quarter, list prices in Europe increased by $90 per ADMT to $980 per ADMT and list prices in North America and China increased by $110 per ADMT to $1,020 and $890 per ADMT, respectively. The effect of such price increases on our financial results was further enhanced by a stronger U.S. dollar relative to the Euro.”
Mr. Lee added: “Our mills continued to perform well in the second quarter. Our Stendal mill achieved record pulp production in the period and both of our German mills achieved record energy sales this quarter. Additionally, following the completion of its annual maintenance shut in April, the Celgar mill achieved its highest ever production month in June. We believe our energy sales will continue to increase at all of our mills, and in particular at our Celgar mill once our new turbine generator set becomes operational in the fourth quarter of this year.”
Mr. Lee further added: “Under the Canadian Government’s Green Transformation Program (“GTP”), we received approximately C$57.7 million of credits, of which we allocated C$40 million to Celgar’s Green Energy Project and expect to invest the remaining C$17.7 million on high return capital projects for our Celgar mill by mid-2011.”
Mr. Lee continued: “The grants under the GTP, like the grants received by our German mills, reduce the cost basis of the assets purchased when the grants are received and are not reported in our income. This treatment is not new to Mercer. Property, plant and equipment currently has an aggregate of approximately€291 million of grants netted against it; primarily related to the construction of Stendal.”
Page 2
Mr. Lee added: “Looking ahead, in the third quarter we have 12 days of scheduled maintenance downtime at our Rosenthal mill. In addition, the turbine at the mill will be down for maintenance for approximately an additional 51 days, which was extended from 38 days to accomodate some preventative maintenance on the generator unit. During the turbine downtime, the Rosenthal mill will produce pulp at full capacity but will purchase energy instead of selling surplus energy. We currently expect the turbine downtime to result in an approximately€6.0 million negative variance in the next quarter, comprised of lost energy revenues and costs associated with energy purchases. We have no maintenance downtime scheduled for the fourth quarter of 2010.”
Mr. Lee concluded: “With our mills running at historically high levels, we are well positioned to take advantage of the strength in NBSK prices. Currently, global softwood pulp stocks are still tight at approximately 21 days. However, reduced Chinese demand and the traditional summer slowdown have resulted in downward pulp pricing in July, which may continue through the third quarter. However, we currently expect that pulp prices will generally remain strong over the mid-term.”
Three Months Ended June 30, 2010 Compared to Three Months Ended June 30, 2009
Pulp revenues for the three months ended June 30, 2010 increased by approximately 54.8% to€228.3 million from€147.5 million in the comparative period of 2009, due to significantly higher pulp prices and a stronger U.S. dollar relative to the Euro. Revenues from the sale of excess energy increased slightly to€11.9 million in the second quarter from€11.4 million in the same quarter last year, primarily due to our German mills reaching record levels of production.
Pulp production increased to 359,694 ADMTs in the current quarter from 349,129 ADMTs in the same quarter of 2009, primarily due to record levels of production at our German mills, being partially offset by the 12 days (approximately 17,000 ADMTs) of scheduled maintenance downtime at our Celgar mill. In the comparative quarter of 2009, we had three days of scheduled maintenance downtime.
Pulp sales volume decreased to 365,002 ADMTs in the current quarter from 395,378 ADMTs in the comparative period of 2009 due to unusually high sales to China in the second quarter of 2009. Average pulp sales realizations increased by 68.4% to€618 per ADMT in the second quarter of 2010, compared to€367 per ADMT in the same period last year, primarily due to significantly higher pulp prices and a stronger U.S. dollar relative to the Euro.
Page 3
Costs and expenses in the second quarter of 2010 increased to€192.3 million from€168.6 million in the comparative period of 2009, primarily due to increased fiber costs and costs associated with the annual maintenance shutdown at the Celgar mill.
On average, our fiber costs in the current quarter of 2010 increased by approximately 31.3% from the same period in 2009, primarily due to fiber costs at our German mill, which were higher due to increased demand from the European board industry.
For the second quarter of 2010, we recorded operating income of€47.9 million, compared to an operating loss of€9.7 million in the comparative quarter of 2009 primarily due to significantly improved pulp prices and a stronger U.S. dollar relative to the Euro.
Interest expense in the second quarter of 2010 increased marginally to€16.9 million from€16.3 million in the comparative quarter of 2009 due to the accretion expense related to the exchange of our convertible notes in January 2010 and our interest payments on our U.S. dollar denominated debt being slightly higher when expressed in Euros, as a result of the strengthening of the U.S. dollar relative to the Euro.
Our Stendal mill recorded an unrealized loss of€4.5 million on its outstanding interest rate derivatives in the current quarter, compared to an unrealized gain of€7.5 million in the same quarter of last year. We recorded a foreign exchange loss on our debt of€9.4 million in the second quarter of 2010 compared to a foreign exchange gain of€5.2 million in the same period last year.
In the second quarter of 2010, the noncontrolling shareholder’s interest in the Stendal mill’s income was€3.6 million, compared to a negligible amount of income in the same quarter last year.
In the second quarter of 2010, Operating EBITDA increased to€62.1 million from€3.9 million in the second quarter of 2009 and€31.8 million in the first quarter of 2010. Operating EBITDA is defined as operating income (loss) 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.
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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 (loss) attributable to common shareholders to Operating EBITDA, see page 8 of the financial tables included in this press release.
We reported net income attributable to common shareholders of€12.4 million, or€0.34 per basic share for the second quarter of 2010 which included aggregate non-cash, unrealized losses of€13.8 million on the Stendal interest rate derivatives and foreign exchange losses on our debt. In the second quarter of 2009, we reported a net loss attributable to common shareholders of€11.5 million, or€0.32 per basic and diluted share, which included an aggregate non-cash, unrealized gain of€12.6 million on the Stendal interest rate derivatives and foreign exchange gain on our debt.
Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009
Pulp revenues for the six months ended June 30, 2010 increased by approximately 44.4% to€399.4 million from€276.6 million in the comparative period of 2009, due to higher pulp prices and a stronger U.S. dollar relative to the Euro. Revenues from the sale of excess energy decreased slightly to€21.1 million from€21.9 million in the same period last year.
Operating EBITDA increased to€93.9 million in the first half of 2010 from€4.9 million in the six months ended June 30, 2009. See the discussion of our results for the second quarter of 2010 for additional information relating to Operating EBITDA and page 8 of the financial tables for a reconciliation to net income (loss) attributable to common shareholders.
We reported net income attributable to common shareholders of€4.9 million, or€0.13 per basic and€0.11 per diluted share, for the first half of 2010 which included aggregate non-cash, unrealized losses of€25.6 million on the Stendal interest derivatives and foreign exchange loss on our debt. In the first half of 2009, we reported a net loss attributable to common shareholders of€50.8 million, or€1.40 per basic and diluted share, which included net unrealized losses on the Stendal interest rate derivatives and the foreign exchange translation on our debt of€6.8 million.
Page 5
Liquidity and Capital Resources
The following table is a summary of selected financial information for the periods indicated:
As at June 30, | As at December 31, | |||||||
2010 | 2009 | |||||||
(in thousands) | ||||||||
Financial Position | ||||||||
Cash and cash equivalents | € | 62,145 | € | 51,291 | ||||
Working capital | 155,388 | 99,150 |
As at June 30, 2010, we had an aggregate amount of€506.3 million outstanding under our Stendal Loan Facility. As at June 30, 2010, we had approximately C$8.0 million and€26.4 million available under our Celgar and Rosenthal facilities, respectively.
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 Wednesday, August 4, 2010 at 10:00 AM (Eastern Daylight Time). Listeners can access the conference call live and archived through September 4, 2010, over the Internet at http://investor.shareholder.com/media/eventdetail.cfm?eventid=83161&CompanyID=MERC&e=1&mediakey=1AE35D
7DABC3ECD95E2779DA87354812 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 August 11, 2010 at 11:59 PM (Eastern Standard Time). The replay number is (800) 642-1687 for domestic callers or (706) 645-9291 for international callers, and the passcode is 85302908.
7DABC3ECD95E2779DA87354812 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 August 11, 2010 at 11:59 PM (Eastern Standard Time). The replay number is (800) 642-1687 for domestic callers or (706) 645-9291 for international callers, and the passcode is 85302908.
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.
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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 effects of the current economic and financial turmoil, 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.
APPROVED BY: | FD | |
Investors/Media: Eric Boyriven, Alexandra Tramont | ||
Jimmy S.H. Lee | (212) 850-5600 | |
Chairman & President | ||
(604) 684-1099 | ||
David M. Gandossi | ||
Executive Vice-President & | ||
Chief Financial Officer | ||
(604) 684-1099 |
-FINANCIAL TABLES FOLLOW-
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MERCER INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands of Euros)
(Unaudited)
(In thousands of Euros)
June 30, | December 31, | |||||||
2010 | 2009 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | € | 62,145 | € | 51,291 | ||||
Receivables | 125,105 | 71,143 | ||||||
Inventories | 89,582 | 72,629 | ||||||
Prepaid expenses and other | 7,448 | 5,871 | ||||||
Total current assets | 284,280 | 200,934 | ||||||
Long-term assets | ||||||||
Property, plant and equipment | 872,843 | 868,558 | ||||||
Deferred note issuance and other | 7,627 | 8,186 | ||||||
Deferred income tax | 3,860 | 3,426 | ||||||
Note receivable | 2,202 | 2,727 | ||||||
886,532 | 882,897 | |||||||
Total assets | € | 1,170,812 | € | 1,083,831 | ||||
LIABILITIES | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued expenses | € | 105,050 | € | 85,185 | ||||
Pension and other post-retirement benefit obligations | 653 | 567 | ||||||
Debt | 23,189 | 16,032 | ||||||
Total current liabilities | 128,892 | 101,784 | ||||||
Long-term liabilities | ||||||||
Debt | 845,992 | 813,142 | ||||||
Unrealized interest rate derivative losses | 63,880 | 52,873 | ||||||
Pension and other post-retirement benefit obligations | 20,932 | 17,902 | ||||||
Capital leases and other | 10,971 | 12,157 | ||||||
941,775 | 896,074 | |||||||
Total liabilities | 1,070,667 | 997,858 | ||||||
EQUITY | ||||||||
Shareholders’ equity | ||||||||
Share capital | 202,973 | 202,844 | ||||||
Paid-in capital | (5,417 | ) | (6,082 | ) | ||||
Retained earnings (deficit) | (92,380 | ) | (97,235 | ) | ||||
Accumulated other comprehensive income (loss) | 26,057 | 23,695 | ||||||
Total shareholders’ equity | 131,233 | 123,222 | ||||||
Noncontrolling interest (deficit) | (31,088 | ) | (37,249 | ) | ||||
Total equity | 100,145 | 85,973 | ||||||
Total liabilities and equity | € | 1,170,812 | € | 1,083,831 | ||||
(1)
MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(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, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Revenues | ||||||||||||||||
Pulp | € | 228,293 | € | 147,522 | € | 399,414 | € | 276,555 | ||||||||
Energy | 11,931 | 11,362 | 21,062 | 21,901 | ||||||||||||
240,224 | 158,884 | 420,476 | 298,456 | |||||||||||||
Costs and expenses | ||||||||||||||||
Operating costs | 168,275 | 149,033 | 308,684 | 281,030 | ||||||||||||
Operating depreciation and amortization | 14,106 | 13,539 | 27,830 | 26,940 | ||||||||||||
57,843 | (3,688 | ) | 83,962 | (9,514 | ) | |||||||||||
Selling, general and administrative expenses | 9,955 | 6,032 | 18,050 | 13,177 | ||||||||||||
Purchase (sale) of emission allowances | — | 16 | — | (542 | ) | |||||||||||
Operating income (loss) | 47,888 | (9,736 | ) | 65,912 | (22,149 | ) | ||||||||||
Other income (expense) | ||||||||||||||||
Interest expense | (16,898 | ) | (16,319 | ) | (33,321 | ) | (32,868 | ) | ||||||||
Investment income (loss) | 117 | 138 | 211 | (3,064 | ) | |||||||||||
Foreign exchange gain (loss) on debt | (9,371 | ) | 5,170 | (14,602 | ) | 754 | ||||||||||
Gain (loss) on extinguishment of convertible notes | — | — | (929 | ) | — | |||||||||||
Gain (loss) on derivative instruments | (4,462 | ) | 7,451 | (11,008 | ) | (7,562 | ) | |||||||||
Total other income (expense) | (30,614 | ) | (3,560 | ) | (59,649 | ) | (42,740 | ) | ||||||||
Income (loss) before income taxes | 17,274 | (13,296 | ) | 6,263 | (64,889 | ) | ||||||||||
Income tax benefit (provision) — current | (1,319 | ) | (65 | ) | (1,523 | ) | (114 | ) | ||||||||
— deferred | — | 1,888 | — | 4,919 | ||||||||||||
Net income (loss) | 15,955 | (11,473 | ) | 4,740 | (60,084 | ) | ||||||||||
Less: net loss (income) attributable to noncontrolling interest | (3,554 | ) | (3 | ) | 115 | 9,258 | ||||||||||
Net income (loss) attributable to common shareholders | € | 12,401 | € | (11,476 | ) | € | 4,855 | € | (50,826 | ) | ||||||
Net income (loss) per share attributable to common shareholders: | ||||||||||||||||
Basic | € | 0.34 | € | (0.32 | ) | € | 0.13 | € | (1.40 | ) | ||||||
Diluted | € | 0.23 | € | (0.32 | ) | € | 0.11 | € | (1.40 | ) | ||||||
(2)
MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(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, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Cash flows from (used in) operating activities | ||||||||||||||||
Net income (loss) attributable to common shareholders | € | 12,401 | € | (11,476 | ) | € | 4,855 | € | (50,826 | ) | ||||||
Adjustments to reconcile net income (loss) attributable to common shareholders to cash flows from operating activities | ||||||||||||||||
Loss (gain) on derivative instruments | 4,462 | (7,451 | ) | 11,008 | 7,562 | |||||||||||
Foreign exchange (gain) loss on debt | 9,371 | (5,170 | ) | 14,602 | (754 | ) | ||||||||||
Loss (gain) on extinguishment of convertible notes | — | — | 929 | — | ||||||||||||
Depreciation and amortization | 14,176 | 13,604 | 27,997 | 27,071 | ||||||||||||
Accretion (income) expense | 514 | — | 945 | — | ||||||||||||
Noncontrolling interest | 3,554 | 3 | (115 | ) | (9,258 | ) | ||||||||||
Deferred income taxes | — | (1,888 | ) | — | (4,919 | ) | ||||||||||
Stock compensation expense | 227 | 26 | 733 | (8 | ) | |||||||||||
Pension and other post-retirement expense, net of funding | 138 | (7 | ) | 332 | (23 | ) | ||||||||||
Inventory provisions | — | — | — | 4,587 | ||||||||||||
Other | 844 | 925 | 1,847 | (1,974 | ) | |||||||||||
Changes in current assets and liabilities | ||||||||||||||||
Receivables | (28,798 | ) | 4,727 | (45,942 | ) | 24,708 | ||||||||||
Inventories | (5,724 | ) | 21,406 | (10,983 | ) | 27,525 | ||||||||||
Accounts payable and accrued expenses | 5,377 | 15,161 | 13,332 | 7,940 | ||||||||||||
Other | 687 | (366 | ) | (594 | ) | 634 | ||||||||||
Net cash from (used in) operating activities | 17,229 | 29,494 | 18,946 | 32,265 | ||||||||||||
Cash flows from (used in) investing activities | ||||||||||||||||
Purchase of property, plant and equipment | (14,542 | ) | (7,835 | ) | (20,392 | ) | (15,541 | ) | ||||||||
Proceeds on sale of property, plant and equipment | 162 | 103 | 549 | 232 | ||||||||||||
Cash, restricted | — | — | — | 9,469 | ||||||||||||
Notes receivable | 579 | 120 | 495 | 241 | ||||||||||||
Net cash from (used in) investing activities | (13,801 | ) | (7,612 | ) | (19,348 | ) | (5,599 | ) | ||||||||
Cash flows from (used in) financing activities | ||||||||||||||||
Repayment of notes payable and debt | — | — | (8,250 | ) | (13,800 | ) | ||||||||||
Repayment of capital lease obligations | (603 | ) | (536 | ) | (1,607 | ) | (1,218 | ) | ||||||||
Proceeds from borrowings of notes payable and debt | 6,390 | — | 6,390 | 10,000 | ||||||||||||
Proceeds from government grants | 1,144 | — | 10,559 | — | ||||||||||||
Payment of deferred note issuance costs | — | — | — | (1,969 | ) | |||||||||||
Net cash from (used in) financing activities | 6,931 | (536 | ) | 7,092 | (6,987 | ) | ||||||||||
Effect of exchange rate changes on cash and cash equivalents | 3,094 | (482 | ) | 4,164 | (31 | ) | ||||||||||
Net increase (decrease) in cash and cash equivalents | 13,453 | 20,864 | 10,854 | 19,648 | ||||||||||||
Cash and cash equivalents, beginning of period | 48,692 | 41,236 | 51,291 | 42,452 | ||||||||||||
Cash and cash equivalents, end of period | € | 62,145 | € | 62,100 | € | 62,145 | € | 62,100 | ||||||||
Supplemental disclosure of cash flow information | ||||||||||||||||
Cash paid (received) during the period for | ||||||||||||||||
Interest | € | 14,604 | € | 2,952 | € | 29,033 | € | 31,210 | ||||||||
Income taxes | (37 | ) | 43 | 29 | 72 | |||||||||||
Supplemental schedule of non-cash investing and financing activities | ||||||||||||||||
Acquisition of production and other equipment under capital lease obligations | € | 318 | € | 80 | € | 530 | € | 116 | ||||||||
Decrease in accounts payable relating to investing activities | (12,843 | ) | (1,602 | ) | (13,826 | ) | (1,141 | ) |
(3)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheet
(Unaudited)
(In thousands of Euros)
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 six months ended June 30, 2010 and 2009, 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.
June 30, 2010 | ||||||||||||||||
Restricted | Unrestricted | Consolidated | ||||||||||||||
Group | Subsidiaries | Eliminations | Group | |||||||||||||
ASSETS | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | € | 39,485 | € | 22,660 | € | — | € | 62,145 | ||||||||
Receivables | 69,176 | 55,929 | — | 125,105 | ||||||||||||
Inventories | 58,250 | 31,332 | — | 89,582 | ||||||||||||
Prepaid expenses and other | 4,752 | 2,696 | — | 7,448 | ||||||||||||
Total current assets | 171,663 | 112,617 | — | 284,280 | ||||||||||||
Property, plant and equipment | 378,462 | 494,381 | — | 872,843 | ||||||||||||
Deferred note issuance and other | 3,139 | 4,488 | — | 7,627 | ||||||||||||
Deferred income tax | 3,860 | — | — | 3,860 | ||||||||||||
Due from unrestricted group | 76,008 | — | (76,008 | ) | — | |||||||||||
Note receivable | 2,202 | — | — | 2,202 | ||||||||||||
Total assets | € | 635,334 | € | 611,486 | € | (76,008 | ) | € | 1,170,812 | |||||||
LIABILITIES | ||||||||||||||||
Current liabilities | ||||||||||||||||
Accounts payable and accrued expenses | € | 65,421 | € | 39,629 | € | — | € | 105,050 | ||||||||
Pension and other post-retirement benefit obligations | 653 | — | — | 653 | ||||||||||||
Debt | 2,939 | 20,250 | — | 23,189 | ||||||||||||
Total current liabilities | 69,013 | 59,879 | — | 128,892 | ||||||||||||
Debt | 329,434 | 516,558 | — | 845,992 | ||||||||||||
Due to restricted group | — | 76,008 | (76,008 | ) | — | |||||||||||
Unrealized interest rate derivative losses | — | 63,880 | — | 63,880 | ||||||||||||
Pension and other post-retirement benefit obligations | 20,932 | — | — | 20,932 | ||||||||||||
Capital leases and other | 6,806 | 4,165 | — | 10,971 | ||||||||||||
Total liabilities | 426,185 | 720,490 | (76,008 | ) | 1,070,667 | |||||||||||
EQUITY | ||||||||||||||||
Total shareholders’ equity (deficit) | 209,149 | (77,916 | ) | — | 131,233 | |||||||||||
Noncontrolling interest (deficit) | — | (31,088 | ) | — | (31,088 | ) | ||||||||||
Total liabilities and equity | € | 635,334 | € | 611,486 | € | (76,008 | ) | € | 1,170,812 | |||||||
(4)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheet
(Unaudited)
(In thousands of Euros)
Combined Condensed Balance Sheet
(Unaudited)
(In thousands of Euros)
December 31, 2009 | ||||||||||||||||
Restricted | Unrestricted | Consolidated | ||||||||||||||
Group | Subsidiaries | Eliminations | Group | |||||||||||||
ASSETS | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | € | 20,635 | € | 30,656 | € | — | € | 51,291 | ||||||||
Receivables | 34,588 | 36,555 | — | 71,143 | ||||||||||||
Inventories | 52,897 | 19,732 | — | 72,629 | ||||||||||||
Prepaid expenses and other | 3,452 | 2,419 | — | 5,871 | ||||||||||||
Total current assets | 111,572 | 89,362 | — | 200,934 | ||||||||||||
Property, plant and equipment | 362,311 | 506,247 | — | 868,558 | ||||||||||||
Deferred note issuance and other | 3,388 | 4,798 | — | 8,186 | ||||||||||||
Deferred income tax | 3,426 | — | — | 3,426 | ||||||||||||
Due from unrestricted group | 72,553 | — | (72,553 | ) | — | |||||||||||
Note receivable | 2,727 | — | — | 2,727 | ||||||||||||
Total assets | € | 555,977 | € | 600,407 | € | (72,553 | ) | € | 1,083,831 | |||||||
LIABILITIES | ||||||||||||||||
Current liabilities | ||||||||||||||||
Accounts payable and accrued expenses | € | 51,875 | € | 33,310 | € | — | € | 85,185 | ||||||||
Pension and other post-retirement benefit obligations | 567 | — | — | 567 | ||||||||||||
Debt | 2,115 | 13,917 | — | 16,032 | ||||||||||||
Total current liabilities | 54,557 | 47,227 | — | 101,784 | ||||||||||||
Debt | 276,604 | 536,538 | — | 813,142 | ||||||||||||
Due to restricted group | — | 72,553 | (72,553 | ) | — | |||||||||||
Unrealized interest rate derivative losses | — | 52,873 | — | 52,873 | ||||||||||||
Pension and other post-retirement benefit obligations | 17,902 | — | — | 17,902 | ||||||||||||
Capital leases and other | 6,667 | 5,490 | — | 12,157 | ||||||||||||
Total liabilities | 355,730 | 714,681 | (72,553 | ) | 997,858 | |||||||||||
EQUITY | ||||||||||||||||
Total shareholders’ equity (deficit) | 200,247 | (77,025 | ) | — | 123,222 | |||||||||||
Noncontrolling interest (deficit) | — | (37,249 | ) | — | (37,249 | ) | ||||||||||
Total liabilities and equity | € | 555,977 | € | 600,407 | € | (72,553 | ) | € | 1,083,831 | |||||||
(5)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations
(Unaudited)
(In thousands of Euros)
Combined Condensed Statements of Operations
(Unaudited)
(In thousands of Euros)
Three Months Ended June 30, 2010 | ||||||||||||||||
Restricted | Unrestricted | Consolidated | ||||||||||||||
Group | Subsidiaries | Eliminations | Group | |||||||||||||
Revenues | ||||||||||||||||
Pulp | € | 124,840 | € | 103,453 | € | — | € | 228,293 | ||||||||
Energy | 3,840 | 8,091 | — | 11,931 | ||||||||||||
128,680 | 111,544 | — | 240,224 | |||||||||||||
Operating costs | 95,870 | 72,405 | — | 168,275 | ||||||||||||
Operating depreciation and amortization | 7,628 | 6,478 | — | 14,106 | ||||||||||||
Selling, general and administrative expenses and other | 6,730 | 3,225 | — | 9,955 | ||||||||||||
110,228 | 82,108 | — | 192,336 | |||||||||||||
Operating income (loss) | 18,452 | 29,436 | — | 47,888 | ||||||||||||
Other income (expense) | ||||||||||||||||
Interest expense | (7,957 | ) | (10,116 | ) | 1,175 | (16,898 | ) | |||||||||
Investment income (loss) | 1,285 | 7 | (1,175 | ) | 117 | |||||||||||
Foreign exchange gain (loss) on debt | (9,371 | ) | — | — | (9,371 | ) | ||||||||||
Gain (loss) on derivative instruments | — | (4,462 | ) | — | (4,462 | ) | ||||||||||
Total other income (expense) | (16,043 | ) | (14,571 | ) | — | (30,614 | ) | |||||||||
Income (loss) before income taxes | 2,409 | 14,865 | — | 17,274 | ||||||||||||
Income tax benefit (provision) | (334 | ) | (985 | ) | — | (1,319 | ) | |||||||||
Net income (loss) | 2,075 | 13,880 | — | 15,955 | ||||||||||||
Less: net (income) loss attributable to noncontrolling interest | — | (3,554 | ) | — | (3,554 | ) | ||||||||||
Net income (loss) attributable to common shareholders | € | 2,075 | € | 10,326 | € | — | € | 12,401 | ||||||||
Three Months Ended June 30, 2009 | ||||||||||||||||
Restricted | Unrestricted | Consolidated | ||||||||||||||
Group | Subsidiaries | Eliminations | Group | |||||||||||||
Revenues | ||||||||||||||||
Pulp | € | 76,443 | € | 71,079 | € | — | € | 147,522 | ||||||||
Energy | 3,945 | 7,417 | — | 11,362 | ||||||||||||
80,388 | 78,496 | — | 158,884 | |||||||||||||
Operating costs | 79,793 | 69,240 | — | 149,033 | ||||||||||||
Operating depreciation and amortization | 6,888 | 6,651 | — | 13,539 | ||||||||||||
Selling, general and administrative expenses and other | 3,314 | 2,734 | — | 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 | ||||||||||||
Gain (loss) on 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 | ) | |||||
(6)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations
(Unaudited)
(In thousands of Euros)
Combined Condensed Statements of Operations
(Unaudited)
(In thousands of Euros)
Six Months Ended June 30, 2010 | ||||||||||||||||
Restricted | Unrestricted | Consolidated | ||||||||||||||
Group | Subsidiaries | Eliminations | Group | |||||||||||||
Revenues | ||||||||||||||||
Pulp | € | 231,257 | € | 168,157 | € | — | € | 399,414 | ||||||||
Energy | 7,215 | 13,847 | — | 21,062 | ||||||||||||
238,472 | 182,004 | — | 420,476 | |||||||||||||
Operating costs | 177,535 | 131,149 | — | 308,684 | ||||||||||||
Operating depreciation and amortization | 14,841 | 12,989 | — | 27,830 | ||||||||||||
Selling, general and administrative expenses and other | 11,571 | 6,479 | — | 18,050 | ||||||||||||
203,947 | 150,617 | — | 354,564 | |||||||||||||
Operating income (loss) | 34,525 | 31,387 | — | 65,912 | ||||||||||||
Other income (expense) | ||||||||||||||||
Interest expense | (15,277 | ) | (20,380 | ) | 2,336 | (33,321 | ) | |||||||||
Investment income (loss) | 2,524 | 23 | (2,336 | ) | 211 | |||||||||||
Foreign exchange gain (loss) on debt | (14,602 | ) | — | — | (14,602 | ) | ||||||||||
Gain (loss) on extinguishment of convertible notes | (929 | ) | — | — | (929 | ) | ||||||||||
Gain (loss) on derivative instruments | — | (11,008 | ) | — | (11,008 | ) | ||||||||||
Total other income (expense) | (28,284 | ) | (31,365 | ) | — | (59,649 | ) | |||||||||
Income (loss) before income taxes | 6,241 | 22 | — | 6,263 | ||||||||||||
Income tax benefit (provision) | (495 | ) | (1,028 | ) | — | (1,523 | ) | |||||||||
Net income (loss) | 5,746 | (1,006 | ) | — | 4,740 | |||||||||||
Less: net (income) loss attributable to noncontrolling interest | — | 115 | — | 115 | ||||||||||||
Net income (loss) attributable to common shareholders | € | 5,746 | € | (891 | ) | € | — | € | 4,855 | |||||||
Six Months Ended June 30, 2009 | ||||||||||||||||
Restricted | Unrestricted | Consolidated | ||||||||||||||
Group | Subsidiaries | Eliminations | Group | |||||||||||||
Revenues | ||||||||||||||||
Pulp | € | 151,459 | € | 125,096 | € | — | € | 276,555 | ||||||||
Energy | 7,961 | 13,940 | — | 21,901 | ||||||||||||
159,420 | 139,036 | — | 298,456 | |||||||||||||
Operating costs | 154,228 | 126,802 | — | 281,030 | ||||||||||||
Operating depreciation and amortization | 13,592 | 13,348 | — | 26,940 | ||||||||||||
Selling, general and administrative expenses and other | 6,617 | 6,018 | — | 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 | ||||||||||||
Gain (loss) on 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 | ) | |||||
(7)
MERCER INTERNATIONAL INC.
COMPUTATION OF OPERATING EBITDA
(Unaudited)
(In thousands of Euros)
(Unaudited)
(In thousands of Euros)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Net income (loss) attributable to common shareholders | € | 12,401 | € | (11,476 | ) | € | 4,855 | € | (50,826 | ) | ||||||
Net income (loss) attributable to noncontrolling interest | 3,554 | 3 | (115 | ) | (9,258 | ) | ||||||||||
Income taxes (benefits) | 1,319 | (1,823 | ) | 1,523 | (4,805 | ) | ||||||||||
Interest expense | 16,898 | 16,319 | 33,321 | 32,868 | ||||||||||||
Investment (income) loss | (117 | ) | (138 | ) | (211 | ) | 3,064 | |||||||||
Foreign exchange (gain) loss on debt | 9,371 | (5,170 | ) | 14,602 | (754 | ) | ||||||||||
Loss on extinguishment of convertible notes | — | — | 929 | — | ||||||||||||
Loss (gain) on derivative financial instruments | 4,462 | (7,451 | ) | 11,008 | 7,562 | |||||||||||
Operating income (loss) | 47,888 | (9,736 | ) | 65,912 | (22,149 | ) | ||||||||||
Add: Depreciation and amortization | 14,176 | 13,604 | 27,997 | 27,071 | ||||||||||||
Operating EBITDA(1) | € | 62,064 | € | 3,868 | € | 93,909 | € | 4,922 | ||||||||
(1) | Operating EBITDA does not reflect the impact of a number of items that affect our net income (loss) attributable to common shareholders, 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) attributable to common shareholders 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)
(Unaudited)
(In thousands of Euros)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Restricted Group | ||||||||||||||||
Net income (loss) attributable to common shareholders(1) | € | 2,075 | € | (11,279 | ) | € | 5,746 | € | (27,283 | ) | ||||||
Income taxes (benefits) | 334 | 1,149 | 495 | 941 | ||||||||||||
Interest expense | 7,957 | 6,927 | 15,277 | 14,229 | ||||||||||||
Investment (income) loss | (1,285 | ) | (1,234 | ) | (2,524 | ) | (2,150 | ) | ||||||||
Foreign exchange (gain) loss on debt | 9,371 | (5,170 | ) | 14,602 | (754 | ) | ||||||||||
Loss on extinguishment of convertible notes | — | — | 929 | — | ||||||||||||
Operating income (loss) | 18,452 | (9,607 | ) | 34,525 | (15,017 | ) | ||||||||||
Add: Depreciation and amortization | 7,698 | 6,953 | 15,008 | 13,723 | ||||||||||||
Operating EBITDA(2) | € | 26,150 | € | (2,654 | ) | € | 49,533 | € | (1,294 | ) | ||||||
(1) | For the Restricted Group, net income (loss) attributable to common shareholders and net income (loss) are the same. | |
(2) | Operating EBITDA does not reflect the impact of a number of items that affect our net income (loss) attributable to common shareholders, 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) attributable to common shareholders or income (loss) from operations as a measure of performance, nor as an alternative to net cash from operating activities as a measure of liquidity. Operating EBITDA has significant limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. |
# # #
(8)