Exhibit 99.1
For Immediate Release
MERCER INTERNATIONAL INC. REPORTS 2012 SECOND QUARTER RESULTS
NEW YORK, NY, August 2, 2012 - Mercer International Inc. (Nasdaq: MERC, TSX: MRI.U) today reported results for the second quarter ended June 30, 2012. Operating EBITDA* in the second quarter of 2012 was €32.9 million ($42.2 million), compared to €50.1 million ($72.1 million) in the second quarter of 2011 and €30.6 million ($40.1 million) in the first quarter of 2012.
For the second quarter of 2012, we had net income of €1.5 million ($1.9 million), or €0.03 ($0.04) per basic share, compared to net income of €14.4 million ($20.7 million), or €0.32 ($0.46) per basic share, in the second quarter of 2011 and net income of €1.2 million ($1.6 million), or €0.02 ($0.03) per basic share, for the first quarter of 2012.
Summary Financial Highlights
| | | | | | | | | | | | | | | | | | | | |
| | | Q2 | | | Q1 | | | Q2 | | | YTD | | | YTD | |
| | | 2012 | | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
| | | (in millions of Euros, other than per share amounts) | |
Pulp revenues | | € | 186.0 | | | € | 199.4 | | | € | 217.3 | | | € | 385.5 | | | € | 427.7 | |
Energy and chemical revenues | | | 18.0 | | | | 18.9 | | | | 17.2 | | | | 36.9 | | | | 33.1 | |
Operating income | | | 18.3 | | | | 16.2 | | | | 36.2 | | | | 34.5 | | | | 72.9 | |
Operating EBITDA | | | 32.9 | | | | 30.6 | | | | 50.1 | | | | 63.5 | | | | 100.9 | |
Gain (loss) on derivative instruments | | | 1.3 | | | | 0.9 | | | | (2.3 | ) | | | 2.2 | | | | 9.9 | |
Foreign exchange gain on debt | | | — | | | | — | | | | 0.3 | | | | — | | | | 1.5 | |
Income tax benefit (provision) | | | (2.3 | ) | | | (0.7 | ) | | | (3.6 | ) | | | (3.0 | ) | | | (4.4 | ) |
Net income attributable to common shareholders | | | 1.5 | | | | 1.2 | | | | 14.4 | | | | 2.7 | | | | 43.4 | |
Net income per share attributable to common shareholders | | | | | | | | | | | | | | | | | | | | |
Basic | | € | 0.03 | | | € | 0.02 | | | € | 0.32 | | | € | 0.05 | | | € | 0.97 | |
Diluted | | € | 0.03 | | | € | 0.02 | | | € | 0.26 | | | € | 0.05 | | | € | 0.77 | |
Common shares outstanding at period end (000s) | | | 55,816 | | | | 55,779 | | | | 45,828 | | | | 55,816 | | | | 45,828 | |
Summary Operating Highlights | | | | | | | | | | | | | | | | | | | | |
| | | Q2 | | | Q1 | | | Q2 | | | YTD | | | YTD | |
| | | 2012 | | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
Pulp production (‘000 ADMTs) | | | 365.0 | | | | 380.3 | | | | 367.9 | | | | 745.4 | | | | 726.5 | |
Scheduled production downtime (‘000 ADMTs) | | | 22.6 | | | | — | | | | 16.2 | | | | 22.6 | | | | 19.9 | |
Pulp sales (‘000 ADMTs) | | | 349.2 | | | | 384.8 | | | | 357.6 | | | | 734.0 | | | | 706.6 | |
Average NBSK pulp list price in Europe ($/ADMT)(1) | | | 837 | | | | 837 | | | | 1,017 | | | | 837 | | | | 988 | |
Average NBSK pulp list price in Europe (€/ADMT) | | | 652 | | | | 638 | | | | 706 | | | | 645 | | | | 704 | |
Average pulp sales realizations (€/ADMT)(2) | | | 526 | | | | 512 | | | | 599 | | | | 519 | | | | 596 | |
| (1) | Source: RISI, PPPC pricing report. |
| (2) | Average realized pulp prices for the periods indicated reflect customer discounts and pulp price movements between the order and shipment date. |
| * | Operating EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States (“GAAP”) and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. See page 12 of the financial tables included in this press release for a reconciliation of net income (loss) attributable to common shareholders to Operating EBITDA. |
| | | | | | | | | | | | | | | | | | | | |
| | | Q2 | | | Q1 | | | Q2 | | | YTD | | | YTD | |
| | | 2012 | | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
Energy production (‘000 MWh) | | | 425.4 | | | | 436.2 | | | | 419.6 | | | | 861.7 | | | | 827.3 | |
Energy sales (‘000 MWh) | | | 182.7 | | | | 182.4 | | | | 175.9 | | | | 365.1 | | | | 333.8 | |
Average spot currency exchange rates: | | | | | | | | | | | | | | | | | | | | |
€ / $(3) | | | 0.7795 | | | | 0.7623 | | | | 0.6946 | | | | 0.7710 | | | | 0.7122 | |
C$ / $(3) | | | 1.0102 | | | | 1.0009 | | | | 0.9677 | | | | 1.0056 | | | | 0.9765 | |
C$ / €(4) | | | 1.2959 | | | | 1.3129 | | | | 1.3934 | | | | 1.3044 | | | | 1.3711 | |
| (3) | Average Federal Reserve Bank of New York noon spot rate over the reporting period. |
| (4) | Average Bank of Canada noon spot rate over the reporting period. |
President’s Comments
Mr. Jimmy S.H. Lee, President and Chairman, stated: “Despite a weak NBSK pulp price environment and approximately 23 days of scheduled maintenance downtime at our Rosenthal mill, we achieved Operating EBITDA of €32.9 million, primarily as a result of strong pulp production at our Celgar and Stendal mills combined with strong energy sales at all of our mills.”
Mr. Lee continued: “Pulp prices decreased in the second quarter of 2012 due to economic uncertainty in Europe and a softening of Chinese demand. Overall, at the end of the second quarter, list prices in Europe were approximately $820 per ADMT and in North America and China were approximately $900 and $660 per ADMT, respectively. Although we currently believe that NBSK pulp prices will decline slightly during the traditionally slower summer months, we believe that the market is bottoming and we currently anticipate that NBSK pulp prices will begin to gradually increase in the medium term.”
Mr. Lee added: “We continue to implement capital projects designed to enhance our mills’ technical capabilities and improve operating efficiencies. We completed an upgrade to the Rosenthal mill’s recovery boiler in the second quarter of 2012 to reduce the mill’s emissions, increase production capacity and lower operating costs. Our Project Blue Mill at our Stendal mill is also currently on schedule.”
Mr. Lee continued: “Fiber costs at our German mills continued to decline primarily due to weak demand from European particle board producers. We also currently anticipate that our Celgar mill’s fiber costs will begin to decline slightly in the third quarter.”
Mr. Lee concluded: “In connection with our focus on the growing bio-energy market, our Stendal mill had €3.2 million in revenues from the sale of a bio-chemical called tall oil. Tall oil is a by-product of our production process and is used as both a chemical additive and as a green energy source. We currently expect the proceeds from the sale of tall oil to remain stable in future periods.”
Page 2
Three Months Ended June 30, 2012 Compared to Three Months Ended June 30, 2011
Total revenues for the three months ended June 30, 2012 decreased to €204.1 million ($261.9 million) from €234.5 million ($337.7 million) in the same period in 2011, due to lower average pulp realizations. Pulp revenues for the three months ended June 30, 2012 decreased to €186.0 million from €217.3 million in the comparative period of 2011, primarily due to lower pulp prices, partially offset by a stronger U.S. dollar relative to the Euro.
Revenues from the sale of excess energy increased by approximately 6% in the second quarter to €14.8 million from €13.9 million in the same quarter last year, as a result of higher energy sales at our Celgar mill and record energy sales at our Stendal mill. Revenues from the sale of a biochemical called “tall oil” were €3.2 million in the second quarter, compared to €3.3 million in the same period last year.
Pulp production marginally decreased to 365,047 ADMTs in the second quarter, from 367,914 ADMTs in the same quarter of 2011, primarily due to annual maintenance shut down at our Rosenthal mill, partially offset by increased production rates at our Celgar and Stendal mills. We had 23 days (approximately 22,600 ADMTs) of scheduled maintenance downtime at our Rosenthal mill in the second quarter of 2012 in order to perform annual maintenance and to upgrade the mill’s recovery process.
Pulp sales volume marginally decreased to 349,177 ADMTs in the second quarter from 357,585 ADMTs in the comparative period of 2011, primarily as a result of decreased demand in Europe. Average pulp sales realizations decreased to €526 ($675) per ADMT in the second quarter of 2012, compared to €599 ($863) per ADMT in the same period last year, due to lower pulp prices, partially offset by a stronger U.S. dollar relative to the Euro.
Costs and expenses in the second quarter of 2012 decreased to €185.8 million from €198.3 million in the comparative period of 2011, primarily due to lower fiber costs.
On average, our per unit fiber costs in the current quarter decreased by approximately 7% from the same period in 2011, due to lower fiber costs in Germany caused by reduced demand for fiber from the European particle board industry. Fiber costs at our Celgar mill were slightly higher, primarily due to increased demand for fiber. As we move into the third quarter, we currently expect fiber prices at our German mills to decrease slightly due to continued weakness in the particle board industry, partially offset by reduced harvesting rates, while we currently expect fiber prices at our Celgar mill to decline slightly through the third quarter due to increased sawmill activity.
Page 3
Selling, general and administrative expenses were unchanged at €8.6 million in the second quarter of 2012, compared to the second quarter of 2011.
For the second quarter of 2012, operating income decreased to €18.3 million from €36.2 million in the comparative quarter of 2011, primarily due to lower average pulp realizations, partially offset by a stronger U.S. dollar relative to the Euro.
Interest expense in the second quarter of 2012 decreased to €13.9 million from €14.9 million in the comparative quarter of 2011, primarily due to the conversion of our remaining convertible notes in 2011 and lower debt levels associated with the Stendal mill.
Our Stendal mill recorded an unrealized loss of €0.3 million on our interest rate derivative in the current quarter, compared to an unrealized loss of €2.3 million in the same quarter of last year. We also recorded an unrealized gain of €1.6 million related to a fixed price pulp swap contract entered into in the second quarter of 2012.
In the second quarter of 2012, the noncontrolling shareholder’s interest in the Stendal mill’s income was €1.6 million, compared to €1.5 million in the same quarter last year.
In the second quarter of 2012, Operating EBITDA decreased to €32.9 million from €50.1 million in the second quarter of 2011. Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and non-recurring capital asset impairment charges. Operating EBITDA has significant limitations as an analytical tool and should not be considered in isolation or as a substitute for our results as reported under GAAP. See page 12 of the financial tables included in the press release for a reconciliation of net income (loss) attributable to common shareholders to Operating EBITDA.
We reported net income attributable to common shareholders of €1.5 million, or €0.03 per basic and diluted share, for the second quarter of 2012. In the second quarter of 2011, we reported net income attributable to common shareholders of €14.4 million, or €0.32 per basic and €0.26 per diluted share.
Six Months Ended June 30, 2012 Compared to Six Months Ended June 30, 2011
Total revenues for the six months ended June 30, 2012 decreased to €422.4 million ($548.0 million) from €460.8 million ($647.0 million) in the same period in 2011, due to lower average pulp realizations, partially offset by higher energy revenues. Pulp revenues for the six months ended June 30, 2012 decreased to €385.5 million from €427.7 million in the comparative period of 2011, primarily due to lower pulp prices, partially offset by a stronger U.S. dollar relative to the Euro.
Page 4
Revenues from the sale of excess energy increased by approximately 12% in the first half of 2012 to a record €30.9 million from €27.6 million in the same period last year, as a result of strong pulp production at our Stendal and Celgar mills. Revenues from the sale of tall oil increased to €6.0 million in the first half of 2012, compared to €5.5 million in the same period last year.
Costs and expenses in the first half of 2012 remained relatively stable at €387.9 million, compared to €388.0 million in the same period of 2011, primarily due to higher sales volumes offset by reduced fiber costs.
On average, our per unit fiber costs in the first half of 2012 decreased by approximately 5% from the same period in 2011, primarily due to lower fiber costs in Germany caused by decreased demand from the European particle board industry.
For the first half of 2012, operating income decreased to €34.5 million from €72.9 million in the comparative period of 2011, primarily due to lower pulp prices, partially offset by a stronger U.S. dollar relative to the Euro.
Interest expense in the first half of 2012 decreased to €28.0 million from €30.8 million in the comparative period of 2011, primarily due to the conversion of our remaining convertible notes in 2011 and lower debt levels associated with the Stendal mill.
In the first half of 2012, Operating EBITDA decreased to €63.5 million from €100.9 million in the first half of 2011. Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and non-recurring capital asset impairment charges. Operating EBITDA has significant limitations as an analytical tool and should not be considered in isolation or as a substitute for our results as reported under GAAP. See page 12 of the financial tables included in the press release for a reconciliation of net income (loss) attributable to common shareholders to Operating EBITDA.
We reported net income attributable to common shareholders of €2.7 million, or €0.05 per basic and diluted share, for the first half of 2012, which included a non-cash unrealized gain of €2.2 million on the pulp price and Stendal interest rate derivatives, partially offset by a non-cash charge for stock compensation of €0.9 million. In the first half of 2011, we reported net income attributable to common shareholders of €43.4 million, or €0.97 per basic and €0.77 per diluted share, which included a non-cash unrealized gain of €9.9 million on the Stendal interest rate derivative and a €1.5 million non-cash foreign currency translation gain on our debt, partially offset by a non-cash charge for stock compensation of €2.5 million.
Page 5
Liquidity and Capital Resources
The following table is a summary of selected financial information as at the dates indicated:
| | | | | | | | |
| | | As at June 30,
2012 | | | As at December 31,
2011 | |
| | | (in thousands) | |
Financial Position | | | | | | | | |
Cash and cash equivalents | | € | 130,887 | | | € | 105,072 | |
Marketable securities(1) | | | 10,368 | | | | 12,372 | |
Working capital | | | 239,354 | | | | 247,159 | |
Property, plant and equipment | | | 816,892 | | | | 820,974 | |
Total assets | | | 1,225,695 | | | | 1,217,250 | |
Long-term liabilities | | | 795,087 | | | | 807,641 | |
Total equity | | | 289,868 | | | | 283,542 | |
| (1) | Principally comprised of German federal government bonds with a maturity of less than one year. |
As at June 30, 2012, we had approximately €26.4 million and C$36.3 million available under our Rosenthal and Celgar facilities, respectively. As at June 30, 2012, approximately €467.9 million was outstanding under our Stendal mill’s loan facility, compared to €486.1 million as at June 30, 2011.
Restricted Group
The following table is a summary of selected financial information for the Restricted Group (which, under the indenture for our 2017 9.5% Senior Notes, is comprised of Mercer International Inc., certain holding subsidiaries and our Rosenthal and Celgar mills) as at the dates indicated:
| | | | | | | | |
| | | As at June 30,
2012 | | | As at December 31,
2011 | |
| | | (in thousands) | |
Financial Position | | | | | | | | |
Cash and cash equivalents | | € | 50,096 | | | € | 44,829 | |
Marketable securities(1) | | | 10,368 | | | | 12,372 | |
Working capital | | | 141,916 | | | | 149,973 | |
Property, plant and equipment | | | 355,633 | | | | 353,925 | |
Total assets | | | 665,623 | | | | 658,844 | |
Long-term liabilities | | | 267,713 | | | | 262,770 | |
Total equity | | | 342,869 | | | | 344,415 | |
| (1) | Principally comprised of German federal government bonds with a maturity of less than one year. |
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 Friday, August 3, 2012 at 10:00 AM (Eastern Daylight Time). Listeners can access the conference call live and archived
Page 6
through September 3, 2012, over the Internet at http://investor.shareholder.com/media/eventdetail.cfm?eventid=116555&Company ID=MERC&e=1&mediaKey=1AE35D7DABC3ECD95E2779DA87354812 or through a link on the Company’s home page at http://www.mercerint.com. 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 September 3, 2012 at 11:59 PM (Eastern Standard Time) through a link on the Company’s Investors/News Releases page at http://www.mercerint.com/s/newsreleases.asp.
Mercer International Inc. is a global pulp manufacturing company. To obtain further information on the company, please visit its web site at http://www.mercerint.com.
The preceding includes forward looking statements which involve known and unknown risks and uncertainties which may cause our actual results in future periods to differ materially from forecasted results. Among those factors which could cause actual results to differ materially are the following: the highly cyclical nature of our business, raw material costs, our level of indebtedness, competition, foreign exchange and interest rate fluctuations, our use of derivatives, expenditures for capital projects, environmental regulation and compliance, disruptions to our production, market conditions and other risk factors listed from time to time in our SEC reports.
APPROVED BY:
Jimmy S.H. Lee
Chairman & President
(604) 684-1099
David M. Gandossi
Executive Vice-President &
Chief Financial Officer
(604) 684-1099
-FINANCIAL TABLES FOLLOW-
Page 7
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands of Euros)
| | | | | | | | |
| | | June 30,
2012 | | | December 31,
2011 | |
ASSETS | | | | | | | | |
Current assets | | | | | | | | |
Cash and cash equivalents | | € | 130,887 | | | € | 105,072 | |
Marketable securities | | | 10,201 | | | | 12,216 | |
Receivables | | | 103,923 | | | | 120,487 | |
Inventories | | | 118,220 | | | | 120,539 | |
Prepaid expenses and other | | | 8,592 | | | | 8,162 | |
Deferred income tax | | | 8,271 | | | | 6,750 | |
| | | | | | | | |
Total current assets | | | 380,094 | | | | 373,226 | |
| | | | | | | | |
Long-term assets | | | | | | | | |
Property, plant and equipment | | | 816,892 | | | | 820,974 | |
Deferred note issuance and other | | | 12,561 | | | | 10,763 | |
Deferred income tax | | | 16,148 | | | | 12,287 | |
| | | | | | | | |
| | | 845,601 | | | | 844,024 | |
| | | | | | | | |
Total assets | | € | 1,225,695 | | | € | 1,217,250 | |
| | | | | | | | |
LIABILITIES | | | | | | | | |
Current liabilities | | | | | | | | |
Accounts payable and other | | € | 103,879 | | | € | 99,640 | |
Pension and other post-retirement benefit obligations | | | 773 | | | | 756 | |
Debt | | | 36,088 | | | | 25,671 | |
| | | | | | | | |
Total current liabilities | | | 140,740 | | | | 126,067 | |
| | | | | | | | |
Long-term liabilities | | | | | | | | |
Debt | | | 694,150 | | | | 708,415 | |
Unrealized interest rate derivative losses | | | 51,791 | | | | 52,391 | |
Pension and other post-retirement benefit obligations | | | 31,798 | | | | 31,197 | |
Capital leases and other | | | 13,453 | | | | 13,053 | |
Deferred income tax | | | 3,895 | | | | 2,585 | |
| | | | | | | | |
| | | 795,087 | | | | 807,641 | |
| | | | | | | | |
Total liabilities | | | 935,827 | | | | 933,708 | |
| | | | | | | | |
EQUITY | | | | | | | | |
Shareholders’ equity | | | | | | | | |
Share capital | | | 248,371 | | | | 247,642 | |
Paid-in capital | | | (4,726 | ) | | | (4,857 | ) |
Retained earnings | | | 40,673 | | | | 37,985 | |
Accumulated other comprehensive income | | | 21,825 | | | | 21,346 | |
| | | | | | | | |
Total shareholders’ equity | | | 306,143 | | | | 302,116 | |
| | | | | | | | |
Noncontrolling deficit | | | (16,275 | ) | | | (18,574 | ) |
| | | | | | | | |
Total equity | | | 289,868 | | | | 283,542 | |
| | | | | | | | |
Total liabilities and equity | | € | 1,225,695 | | | € | 1,217,250 | |
| | | | | | | | |
(1)
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands of Euros, except per share data)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Six Months Ended | |
| | | June 30, | | | June 30, | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
Revenues | | | | | | | | | | | | | | | | |
Pulp | | € | 186,036 | | | € | 217,274 | | | € | 385,475 | | | € | 427,732 | |
Energy and chemicals | | | 18,026 | | | | 17,221 | | | | 36,945 | | | | 33,093 | |
| | | | | | | | | | | | | | | | |
| | | 204,062 | | | | 234,495 | | | | 422,420 | | | | 460,825 | |
Costs and expenses | | | | | | | | | | | | | | | | |
Operating costs | | | 162,617 | | | | 175,815 | | | | 340,387 | | | | 341,365 | |
Operating depreciation and amortization | | | 14,525 | | | | 13,869 | | | | 28,812 | | | | 27,945 | |
| | | | | | | | | | | | | | | | |
| | | 26,920 | | | | 44,811 | | | | 53,221 | | | | 91,515 | |
Selling, general and administrative expenses | | | 8,624 | | | | 8,600 | | | | 18,682 | | | | 18,660 | |
| | | | | | | | | | | | | | | | |
Operating income | | | 18,296 | | | | 36,211 | | | | 34,539 | | | | 72,855 | |
| | | | | | | | | | | | | | | | |
Other income (expense) | | | | | | | | | | | | | | | | |
Interest expense | | | (13,863 | ) | | | (14,883 | ) | | | (27,996 | ) | | | (30,789 | ) |
Gain (loss) on derivative instruments | | | 1,343 | | | | (2,339 | ) | | | 2,219 | | | | 9,904 | |
Foreign exchange gain on debt | | | — | | | | 342 | | | | — | | | | 1,453 | |
Other income (expense) | | | (368 | ) | | | 136 | | | | (778 | ) | | | 463 | |
| | | | | | | | | | | | | | | | |
Total other income (expense) | | | (12,888 | ) | | | (16,744 | ) | | | (26,555 | ) | | | (18,969 | ) |
| | | | | | | | | | | | | | | | |
Income before income taxes | | | 5,408 | | | | 19,467 | | | | 7,984 | | | | 53,886 | |
Income tax benefit (provision) – current | | | (6,281 | ) | | | (1,478 | ) | | | (6,337 | ) | | | (2,297 | ) |
– deferred | | | 4,016 | | | | (2,140 | ) | | | 3,340 | | | | (2,140 | ) |
| | | | | | | | | | | | | | | | |
Net income | | | 3,143 | | | | 15,849 | | | | 4,987 | | | | 49,449 | |
Less: net income attributable to noncontrolling interest | | | (1,628 | ) | | | (1,466 | ) | | | (2,299 | ) | | | (6,013 | ) |
| | | | | | | | | | | | | | | | |
Net income attributable to common shareholders | | € | 1,515 | | | € | 14,383 | | | € | 2,688 | | | € | 43,436 | |
| | | | | | | | | | | | | | | | |
Net income per share attributable to common shareholders | | | | | | | | | | | | | | | | |
Basic | | € | 0.03 | | | € | 0.32 | | | € | 0.05 | | | € | 0.97 | |
| | | | | | | | | | | | | | | | |
Diluted | | € | 0.03 | | | € | 0.26 | | | € | 0.05 | | | € | 0.77 | |
| | | | | | | | | | | | | | | | |
(2)
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands of Euros)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Six Months Ended | |
| | | June 30, | | | June 30, | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
Cash flows from (used in) operating activities | | | | | | | | | | | | | | | | |
Net income attributable to common shareholders | | € | 1,515 | | | € | 14,383 | | | € | 2,688 | | | € | 43,436 | |
Adjustments to reconcile net income attributable to common shareholders to cash flows from operating activities | | | | | | | | | | | | | | | | |
Loss (gain) on derivative instruments | | | (1,343 | ) | | | 2,339 | | | | (2,219 | ) | | | (9,904 | ) |
Foreign exchange gain on debt | | | — | | | | (342 | ) | | | — | | | | (1,453 | ) |
Depreciation and amortization | | | 14,588 | | | | 13,929 | | | | 28,938 | | | | 28,067 | |
Accretion expense | | | — | | | | 289 | | | | — | | | | 759 | |
Noncontrolling interest | | | 1,628 | | | | 1,466 | | | | 2,299 | | | | 6,013 | |
Deferred income taxes | | | (4,016 | ) | | | 2,140 | | | | (3,340 | ) | | | 2,140 | |
Stock compensation expense | | | (6 | ) | | | 471 | | | | 862 | | | | 2,539 | |
Pension and other post-retirement expense, net of funding | | | (41 | ) | | | 7 | | | | (55 | ) | | | (7 | ) |
Other | | | 73 | | | | 919 | | | | 866 | | | | 1,603 | |
Changes in current assets and liabilities | | | | | | | | | | | | | | | | |
Receivables | | | 12,338 | | | | 5,523 | | | | 15,023 | | | | 12,700 | |
Inventories | | | (8,296 | ) | | | (8,399 | ) | | | 3,442 | | | | (4,086 | ) |
Accounts payable and accrued expenses | | | 805 | | | | (833 | ) | | | 3,454 | | | | 24,555 | |
Other | | | (86 | ) | | | 485 | | | | 1,338 | | | | 844 | |
| | | | | | | | | | | | | | | | |
Net cash from (used in) operating activities | | | 17,159 | | | | 32,377 | | | | 53,296 | | | | 107,206 | |
| | | | | | | | | | | | | | | | |
Cash flows from (used in) investing activities | | | | | | | | | | | | | | | | |
Purchase of property, plant and equipment | | | (9,838 | ) | | | (7,756 | ) | | | (18,303 | ) | | | (15,825 | ) |
Proceeds on sale of property, plant and equipment | | | 113 | | | | 27 | | | | 339 | | | | 380 | |
Proceeds on sale of marketable securities | | | 2,008 | | | | — | | | | 2,008 | | | | — | |
Note receivable | | | — | | | | 375 | | | | — | | | | 771 | |
| | | | | | | | | | | | | | | | |
Net cash from (used in) investing activities | | | (7,717 | ) | | | (7,354 | ) | | | (15,956 | ) | | | (14,674 | ) |
| | | | | | | | | | | | | | | | |
Cash flows from (used in) financing activities | | | | | | | | | | | | | | | | |
Repayment of notes payable and debt | | | (1,584 | ) | | | — | | | | (11,710 | ) | | | (30,351 | ) |
Repayment of capital lease obligations | | | (448 | ) | | | (638 | ) | | | (1,059 | ) | | | (1,493 | ) |
Repayment of credit facilities, net | | | (3,759 | ) | | | — | | | | — | | | | (14,652 | ) |
Payment of note issuance costs | | | — | | | | — | | | | (1,621 | ) | | | — | |
Proceeds from government grants | | | 1,692 | | | | 4,837 | | | | 2,322 | | | | 8,949 | |
| | | | | | | | | | | | | | | | |
Net cash from (used in) financing activities | | | (4,099 | ) | | | 4,199 | | | | (12,068 | ) | | | (37,547 | ) |
| | | | | | | | | | | | | | | | |
Effect of exchange rate changes on cash and cash equivalents | | | 1,348 | | | | (668 | ) | | | 543 | | | | (2,212 | ) |
| | | | | | | | | | | | | | | | |
Net increase in cash and cash equivalents | | | 6,691 | | | | 28,554 | | | | 25,815 | | | | 52,773 | |
Cash and cash equivalents, beginning of period | | | 124,196 | | | | 123,241 | | | | 105,072 | | | | 99,022 | |
| | | | | | | | | | | | | | | | |
Cash and cash equivalents, end of period | | € | 130,887 | | | € | 151,795 | | | € | 130,887 | | | € | 151,795 | |
| | | | | | | | | | | | | | | | |
(3)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheets
(Unaudited)
(In thousands of Euros)
The terms of the indenture governing our 9.5% senior unsecured notes requires 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, 2012 and 2011, 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, 2012 | |
| | | Restricted
Group | | | Unrestricted
Subsidiaries | | | Eliminations | | | Consolidated
Group | |
ASSETS | | | | | | | | | | | | | | | | |
Current assets | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | € | 50,096 | | | € | 80,791 | | | € | — | | | € | 130,887 | |
Marketable securities | | | 10,201 | | | | — | | | | — | | | | 10,201 | |
Receivables | | | 55,430 | | | | 48,493 | | | | — | | | | 103,923 | |
Inventories | | | 70,562 | | | | 47,658 | | | | — | | | | 118,220 | |
Prepaid expenses and other | | | 5,749 | | | | 2,843 | | | | — | | | | 8,592 | |
Deferred income tax | | | 4,919 | | | | 3,352 | | | | — | | | | 8,271 | |
| | | | | | | | | | | | | | | | |
Total current assets | | | 196,957 | | | | 183,137 | | | | — | | | | 380,094 | |
Long-term assets | | | | | | | | | | | | | | | | |
Property, plant and equipment | | | 355,633 | | | | 461,259 | | | | — | | | | 816,892 | |
Deferred note issuance and other | | | 6,384 | | | | 6,177 | | | | — | | | | 12,561 | |
Deferred income tax | | | 8,878 | | | | 7,270 | | | | — | | | | 16,148 | |
Due from unrestricted group | | | 97,771 | | | | — | | | | (97,771 | ) | | | — | |
| | | | | | | | | | | | | | | | |
Total assets | | € | 665,623 | | | € | 657,843 | | | € | (97,771 | ) | | € | 1,225,695 | |
| | | | | | | | | | | | | | | | |
LIABILITIES | | | | | | | | | | | | | | | | |
Current liabilities | | | | | | | | | | | | | | | | |
Accounts payable and other | | € | 53,180 | | | € | 50,699 | | | € | — | | | € | 103,879 | |
Pension and other post-retirement benefit obligations | | | 773 | | | | — | | | | — | | | | 773 | |
Debt | | | 1,088 | | | | 35,000 | | | | — | | | | 36,088 | |
| | | | | | | | | | | | | | | | |
Total current liabilities | | | 55,041 | | | | 85,699 | | | | — | | | | 140,740 | |
Long-term liabilities | | | | | | | | | | | | | | | | |
Debt | | | 225,560 | | | | 468,590 | | | | — | | | | 694,150 | |
Due to restricted group | | | — | | | | 97,771 | | | | (97,771 | ) | | | — | |
Unrealized interest rate derivative losses | | | — | | | | 51,791 | | | | — | | | | 51,791 | |
Pension and other post-retirement benefit obligations | | | 31,798 | | | | — | | | | — | | | | 31,798 | |
Capital leases and other | | | 6,460 | | | | 6,993 | | | | — | | | | 13,453 | |
Deferred income tax | | | 3,895 | | | | — | | | | — | | | | 3,895 | |
| | | | | | | | | | | | | | | | |
Total liabilities | | | 322,754 | | | | 710,844 | | | | (97,771 | ) | | | 935,827 | |
| | | | | | | | | | | | | | | | |
EQUITY | | | | | | | | | | | | | | | | |
Total shareholders’ equity (deficit) | | | 342,869 | | | | (36,726 | ) | | | — | | | | 306,143 | |
Noncontrolling deficit | | | — | | | | (16,275 | ) | | | — | | | | (16,275 | ) |
| | | | | | | | | | | | | | | | |
Total liabilities and equity | | € | 665,623 | | | € | 657,843 | | | € | (97,771 | ) | | € | 1,225,695 | |
| | | | | | | | | | | | | | | | |
(4)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheets
(Unaudited)
(In thousands of Euros)
| | | | | | | | | | | | | | | | |
| | | December 31, 2011 | |
| | | Restricted
Group | | | Unrestricted
Subsidiaries | | | Eliminations | | | Consolidated
Group | |
ASSETS | | | | | | | | | | | | | | | | |
Current assets | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | € | 44,829 | | | € | 60,243 | | | € | — | | | € | 105,072 | |
Marketable securities | | | 12,216 | | | | — | | | | — | | | | 12,216 | |
Receivables | | | 62,697 | | | | 57,790 | | | | — | | | | 120,487 | |
Inventories | | | 71,692 | | | | 48,847 | | | | — | | | | 120,539 | |
Prepaid expenses and other | | | 5,019 | | | | 3,143 | | | | — | | | | 8,162 | |
Deferred income tax | | | 5,179 | | | | 1,571 | | | | — | | | | 6,750 | |
| | | | | | | | | | | | | | | | |
Total current assets | | | 201,632 | | | | 171,594 | | | | — | | | | 373,226 | |
Long-term assets | | | | | | | | | | | | | | | | |
Property, plant and equipment | | | 353,925 | | | | 467,049 | | | | — | | | | 820,974 | |
Deferred note issuance and other | | | 5,971 | | | | 4,792 | | | | — | | | | 10,763 | |
Deferred income tax | | | 8,492 | | | | 3,795 | | | | — | | | | 12,287 | |
Due from unrestricted group | | | 88,824 | | | | — | | | | (88,824 | ) | | | — | |
| | | | | | | | | | | | | | | | |
Total assets | | € | 658,844 | | | € | 647,230 | | | € | (88,824 | ) | | € | 1,217,250 | |
| | | | | | | | | | | | | | | | |
LIABILITIES | | | | | | | | | | | | | | | | |
Current liabilities | | | | | | | | | | | | | | | | |
Accounts payable and other | | € | 49,815 | | | € | 49,825 | | | € | — | | | € | 99,640 | |
Pension and other post-retirement benefit obligations | | | 756 | | | | — | | | | — | | | | 756 | |
Debt | | | 1,088 | | | | 24,583 | | | | — | | | | 25,671 | |
| | | | | | | | | | | | | | | | |
Total current liabilities | | | 51,659 | | | | 74,408 | | | | — | | | | 126,067 | |
Long-term liabilities | | | | | | | | | | | | | | | | |
Debt | | | 222,384 | | | | 486,031 | | | | — | | | | 708,415 | |
Due to restricted group | | | — | | | | 88,824 | | | | (88,824 | ) | | | — | |
Unrealized interest rate derivative losses | | | — | | | | 52,391 | | | | — | | | | 52,391 | |
Pension and other post-retirement benefit obligations | | | 31,197 | | | | — | | | | — | | | | 31,197 | |
Capital leases and other | | | 6,604 | | | | 6,449 | | | | — | | | | 13,053 | |
Deferred income tax | | | 2,585 | | | | — | | | | — | | | | 2,585 | |
| | | | | | | | | | | | | | | | |
Total liabilities | | | 314,429 | | | | 708,103 | | | | (88,824 | ) | | | 933,708 | |
| | | | | | | | | | | | | | | | |
EQUITY | | | | | | | | | | | | | | | | |
Total shareholders’ equity (deficit) | | | 344,415 | | | | (42,299 | ) | | | — | | | | 302,116 | |
Noncontrolling deficit | | | — | | | | (18,574 | ) | | | — | | | | (18,574 | ) |
| | | | | | | | | | | | | | | | |
Total liabilities and equity | | € | 658,844 | | | € | 647,230 | | | € | (88,824 | ) | | € | 1,217,250 | |
| | | | | | | | | | | | | | | | |
(5)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations
(Unaudited)
(In thousands of Euros)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, 2012 | |
| | | Restricted
Group | | | Unrestricted
Subsidiaries | | | Eliminations | | | Consolidated
Group | |
Revenues | | | | | | | | | | | | | | | | |
Pulp | | € | 103,745 | | | € | 82,291 | | | € | — | | | € | 186,036 | |
Energy and chemicals | | | 6,460 | | | | 11,566 | | | | — | | | | 18,026 | |
| | | | | | | | | | | | | | | | |
| | | 110,205 | | | | 93,857 | | | | — | | | | 204,062 | |
| | | | | | | | | | | | | | | | |
Operating costs | | | 94,762 | | | | 67,855 | | | | — | | | | 162,617 | |
Operating depreciation and amortization | | | 7,807 | | | | 6,718 | | | | — | | | | 14,525 | |
Selling, general and administrative expenses | | | 5,406 | | | | 3,218 | | | | — | | | | 8,624 | |
| | | | | | | | | | | | | | | | |
| | | 107,975 | | | | 77,791 | | | | — | | | | 185,766 | |
| | | | | | | | | | | | | | | | |
Operating income | | | 2,230 | | | | 16,066 | | | | — | | | | 18,296 | |
| | | | | | | | | | | | | | | | |
Other income (expense) | | | | | | | | | | | | | | | | |
Interest expense | | | (5,934 | ) | | | (9,312 | ) | | | 1,383 | | | | (13,863 | ) |
Gain (loss) on derivative instruments | | | 1,619 | | | | (276 | ) | | | — | | | | 1,343 | |
Other income (expense) | | | 915 | | | | 100 | | | | (1,383 | ) | | | (368 | ) |
| | | | | | | | | | | | | | | | |
Total other income (expense) | | | (3,400 | ) | | | (9,488 | ) | | | — | | | | (12,888 | ) |
| | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | (1,170 | ) | | | 6,578 | | | | — | | | | 5,408 | |
Income tax provision | | | (1,398 | ) | | | (867 | ) | | | — | | | | (2,265 | ) |
| | | | | | | | | | | | | | | | |
Net income (loss) | | | (2,568 | ) | | | 5,711 | | | | — | | | | 3,143 | |
Less: net income attributable to noncontrolling interest | | | — | | | | (1,628 | ) | | | — | | | | (1,628 | ) |
| | | | | | | | | | | | | | | | |
Net income (loss) attributable to common shareholders | | € | (2,568 | ) | | € | 4,083 | | | € | — | | | € | 1,515 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | Three Months Ended June 30, 2011 | |
| | | Restricted
Group | | | Unrestricted
Subsidiaries | | | Eliminations | | | Consolidated
Group | |
Revenues | | | | | | | | | | | | | | | | |
Pulp | | € | 125,238 | | | € | 92,036 | | | € | — | | | € | 217,274 | |
Energy and chemicals | | | 5,701 | | | | 11,520 | | | | — | | | | 17,221 | |
| | | | | | | | | | | | | | | | |
| | | 130,939 | | | | 103,556 | | | | — | | | | 234,495 | |
| | | | | | | | | | | | | | | | |
Operating costs | | | 100,209 | | | | 75,606 | | | | — | | | | 175,815 | |
Operating depreciation and amortization | | | 7,401 | | | | 6,468 | | | | — | | | | 13,869 | |
Selling, general and administrative expenses | | | 5,301 | | | | 3,299 | | | | — | | | | 8,600 | |
| | | | | | | | | | | | | | | | |
| | | 112,911 | | | | 85,373 | | | | — | | | | 198,284 | |
| | | | | | | | | | | | | | | | |
Operating income | | | 18,028 | | | | 18,183 | | | | — | | | | 36,211 | |
| | | | | | | | | | | | | | | | |
Other income (expense) | | | | | | | | | | | | | | | | |
Interest expense | | | (6,433 | ) | | | (9,684 | ) | | | 1,234 | | | | (14,883 | ) |
Gain (loss) on derivative instruments | | | — | | | | (2,339 | ) | | | — | | | | (2,339 | ) |
Foreign exchange gain on debt | | | 342 | | | | — | | | | — | | | | 342 | |
Other income (expense) | | | 1,305 | | | | 65 | | | | (1,234 | ) | | | 136 | |
| | | | | | | | | | | | | | | | |
Total other income (expense) | | | (4,786 | ) | | | (11,958 | ) | | | — | | | | (16,744 | ) |
| | | | | | | | | | | | | | | | |
Income before income taxes | | | 13,242 | | | | 6,225 | | | | — | | | | 19,467 | |
Income tax provision | | | (2,851 | ) | | | (767 | ) | | | — | | | | (3,618 | ) |
| | | | | | | | | | | | | | | | |
Net income | | | 10,391 | | | | 5,458 | | | | — | | | | 15,849 | |
Less: net income attributable to noncontrolling interest | | | — | | | | (1,466 | ) | | | — | | | | (1,466 | ) |
| | | | | | | | | | | | | | | | |
Net income attributable to common shareholders | | € | 10,391 | | | € | 3,992 | | | € | — | | | € | 14,383 | |
| | | | | | | | | | | | | | | | |
(6)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations
(Unaudited)
(In thousands of Euros)
| | | | | | | | | | | | | | | | |
| | | Six Months Ended June 30, 2012 | |
| | | Restricted
Group | | | Unrestricted
Subsidiaries | | | Eliminations | | | Consolidated
Group | |
Revenues | | | | | | | | | | | | | | | | |
Pulp | | € | 213,634 | | | € | 171,841 | | | € | — | | | € | 385,475 | |
Energy and chemicals | | | 14,451 | | | | 22,494 | | | | — | | | | 36,945 | |
| | | | | | | | | | | | | | | | |
| | | 228,085 | | | | 194,335 | | | | — | | | | 422,420 | |
| | | | | | | | | | | | | | | | |
Operating costs | | | 193,098 | | | | 147,289 | | | | — | | | | 340,387 | |
Operating depreciation and amortization | | | 15,447 | | | | 13,365 | | | | — | | | | 28,812 | |
Selling, general and administrative expenses | | | 11,927 | | | | 6,755 | | | | — | | | | 18,682 | |
| | | | | | | | | | | | | | | | |
| | | 220,472 | | | | 167,409 | | | | — | | | | 387,881 | |
| | | | | | | | | | | | | | | | |
Operating income | | | 7,613 | | | | 26,926 | | | | — | | | | 34,539 | |
| | | | | | | | | | | | | | | | |
Other income (expense) | | | | | | | | | | | | | | | | |
Interest expense | | | (11,744 | ) | | | (18,976 | ) | | | 2,724 | | | | (27,996 | ) |
Gain (loss) on derivative instruments | | | 1,619 | | | | 600 | | | | — | | | | 2,219 | |
Other income (expense) | | | 1,740 | | | | 206 | | | | (2,724 | ) | | | (778 | ) |
| | | | | | | | | | | | | | | | |
Total other income (expense) | | | (8,385 | ) | | | (18,170 | ) | | | — | | | | (26,555 | ) |
| | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | (772 | ) | | | 8,756 | | | | — | | | | 7,984 | |
Income tax provision | | | (2,113 | ) | | | (884 | ) | | | — | | | | (2,997 | ) |
| | | | | | | | | | | | | | | | �� |
Net income (loss) | | | (2,885 | ) | | | 7,872 | | | | — | | | | 4,987 | |
Less: net income attributable to noncontrolling interest | | | — | | | | (2,299 | ) | | | — | | | | (2,299 | ) |
| | | | | | | | | | | | | | | | |
Net income (loss) attributable to common shareholders | | € | (2,885 | ) | | € | 5,573 | | | € | — | | | € | 2,688 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | Six Months Ended June 30, 2011 | |
| | | Restricted
Group | | | Unrestricted
Subsidiaries | | | Eliminations | | | Consolidated
Group | |
Revenues | | | | | | | | | | | | | | | | |
Pulp | | € | 240,464 | | | € | 187,268 | | | € | — | | | € | 427,732 | |
Energy and chemicals | | | 11,547 | | | | 21,546 | | | | — | | | | 33,093 | |
| | | | | | | | | | | | | | | | |
| | | 252,011 | | | | 208,814 | | | | — | | | | 460,825 | |
| | | | | | | | | | | | | | | | |
Operating costs | | | 186,200 | | | | 155,165 | | | | — | | | | 341,365 | |
Operating depreciation and amortization | | | 15,015 | | | | 12,930 | | | | — | | | | 27,945 | |
Selling, general and administrative expenses | | | 11,492 | | | | 7,168 | | | | — | | | | 18,660 | |
| | | | | | | | | | | | | | | | |
| | | 212,707 | | | | 175,263 | | | | — | | | | 387,970 | |
| | | | | | | | | | | | | | | | |
Operating income | | | 39,304 | | | | 33,551 | | | | — | | | | 72,855 | |
| | | | | | | | | | | | | | | | |
Other income (expense) | | | | | | | | | | | | | | | | |
Interest expense | | | (13,706 | ) | | | (19,535 | ) | | | 2,452 | | | | (30,789 | ) |
Gain (loss) on derivative instruments | | | — | | | | 9,904 | | | | — | | | | 9,904 | |
Foreign exchange gain on debt | | | 1,453 | | | | — | | | | — | | | | 1,453 | |
Other income (expense) | | | 2,584 | | | | 331 | | | | (2,452 | ) | | | 463 | |
| | | | | | | | | | | | | | | | |
Total other income (expense) | | | (9,669 | ) | | | (9,300 | ) | | | — | | | | (18,969 | ) |
| | | | | | | | | | | | | | | | |
Income before income taxes | | | 29,635 | | | | 24,251 | | | | — | | | | 53,886 | |
Income tax provision | | | (3,375 | ) | | | (1,062 | ) | | | — | | | | (4,437 | ) |
| | | | | | | | | | | | | | | | |
Net income | | | 26,260 | | | | 23,189 | | | | — | | | | 49,449 | |
Less: net income attributable to noncontrolling interest | | | — | | | | (6,013 | ) | | | — | | | | (6,013 | ) |
| | | | | | | | | | | | | | | | |
Net income attributable to common shareholders | | € | 26,260 | | | € | 17,176 | | | € | — | | | € | 43,436 | |
| | | | | | | | | | | | | | | | |
(7)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Cash Flows
(Unaudited)
(In thousands of Euros)
| | | | | | | | | | | | |
| | | Three Months Ended June 30, 2012 | |
| | | Restricted
Group | | | Unrestricted
Group | | | Consolidated
Group | |
Cash flows from (used in) operating activities | | | | | | | | | | | | |
Net income (loss) attributable to common shareholders | | € | (2,568 | ) | | € | 4,083 | | | € | 1,515 | |
Adjustments to reconcile net income (loss) attributable to common shareholders to cash flows from operating activities | | | | | | | | | | | | |
Loss (gain) on derivative instruments | | | (1,619 | ) | | | 276 | | | | (1,343 | ) |
Depreciation and amortization | | | 7,870 | | | | 6,718 | | | | 14,588 | |
Noncontrolling interest | | | — | | | | 1,628 | | | | 1,628 | |
Deferred income taxes | | | 1,240 | | | | (5,256 | ) | | | (4,016 | ) |
Stock compensation expense | | | (6 | ) | | | — | | | | (6 | ) |
Pension and other post-retirement expense, net of funding | | | (41 | ) | | | — | | | | (41 | ) |
Other | | | (535 | ) | | | 608 | | | | 73 | |
Changes in current assets and liabilities | | | | | | | | | | | | |
Receivables | | | 7,833 | | | | 4,505 | | | | 12,338 | |
Inventories | | | (1,765 | ) | | | (6,531 | ) | | | (8,296 | ) |
Accounts payable and accrued expenses | | | (3,155 | ) | | | 3,960 | | | | 805 | |
Other(1) | | | (1,514 | ) | | | 1,428 | | | | (86 | ) |
| | | | | | | | | | | | |
Net cash from (used in) operating activities | | | 5,740 | | | | 11,419 | | | | 17,159 | |
| | | | | | | | | | | | |
Cash flows from (used in) investing activities | | | | | | | | | | | | |
Purchase of property, plant and equipment | | | (8,815 | ) | | | (1,023 | ) | | | (9,838 | ) |
Proceeds on sale of property, plant and equipment | | | 51 | | | | 62 | | | | 113 | |
Proceeds on sale of marketable securities | | | 2,008 | | | | — | | | | 2,008 | |
| | | | | | | | | | | | |
Net cash from (used in) investing activities | | | (6,756 | ) | | | (961 | ) | | | (7,717 | ) |
| | | | | | | | | | | | |
Cash flows from (used in) financing activities | | | | | | | | | | | | |
Repayment of notes payable and debt | | | (1,584 | ) | | | — | | | | (1,584 | ) |
Repayment of capital lease obligations | | | (180 | ) | | | (268 | ) | | | (448 | ) |
Repayment of credit facilities | | | (3,759 | ) | | | — | | | | (3,759 | ) |
Proceeds from government grants | | | 1,692 | | | | — | | | | 1,692 | |
| | | | | | | | | | | | |
Net cash from (used in) financing activities | | | (3,831 | ) | | | (268 | ) | | | (4,099 | ) |
Effect of exchange rate changes on cash and cash equivalents | | | 1,348 | | | | — | | | | 1,348 | |
| | | | | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | (3,499 | ) | | | 10,190 | | | | 6,691 | |
Cash and cash equivalents, beginning of period | | | 53,595 | | | | 70,601 | | | | 124,196 | |
| | | | | | | | | | | | |
Cash and cash equivalents, end of period | | € | 50,096 | | | € | 80,791 | | | € | 130,887 | |
| | | | | | | | | | | | |
| (1) | Includes intercompany working capital related transactions. |
(8)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Cash Flows
(Unaudited)
(In thousands of Euros)
| | | | | | | | | | | | |
| | | Three Months Ended June 30, 2011 | |
| | | Restricted
Group | | | Unrestricted
Group | | | Consolidated
Group | |
Cash flows from (used in) operating activities | | | | | | | | | | | | |
Net income (loss) attributable to common shareholders | | € | 10,391 | | | € | 3,992 | | | € | 14,383 | |
Adjustments to reconcile net income (loss) attributable to common shareholders to cash flows from operating activities | | | | | | | | | | | | |
Loss (gain) on derivative instruments | | | — | | | | 2,339 | | | | 2,339 | |
Foreign exchange gain on debt | | | (342 | ) | | | — | | | | (342 | ) |
Depreciation and amortization | | | 7,461 | | | | 6,468 | | | | 13,929 | |
Accretion expense | | | 289 | | | | — | | | | 289 | |
Noncontrolling interest | | | — | | | | 1,466 | | | | 1,466 | |
Deferred income taxes | | | 2,140 | | | | — | | | | 2,140 | |
Stock compensation expense | | | 471 | | | | — | | | | 471 | |
Pension and other post-retirement expense, net of funding | | | 7 | | | | — | | | | 7 | |
Other | | | 232 | | | | 687 | | | | 919 | |
Changes in current assets and liabilities | | | | | | | | | | | | |
Receivables | | | 7,972 | | | | (2,449 | ) | | | 5,523 | |
Inventories | | | 2,616 | | | | (11,015 | ) | | | (8,399 | ) |
Accounts payable and accrued expenses | | | 2,721 | | | | (3,554 | ) | | | (833 | ) |
Other(1) | | | (2,147 | ) | | | 2,632 | | | | 485 | |
| | | | | | | | | | | | |
Net cash from (used in) operating activities | | | 31,811 | | | | 566 | | | | 32,377 | |
| | | | | | | | | | | | |
Cash flows from (used in) investing activities | | | | | | | | | | | | |
Purchase of property, plant and equipment | | | (6,293 | ) | | | (1,463 | ) | | | (7,756 | ) |
Proceeds on sale of property, plant and equipment | | | 16 | | | | 11 | | | | 27 | |
Note receivable | | | 375 | | | | — | | | | 375 | |
| | | | | | | | | | | | |
Net cash from (used in) investing activities | | | (5,902 | ) | | | (1,452 | ) | | | (7,354 | ) |
| | | | | | | | | | | | |
Cash flows from (used in) financing activities | | | | | | | | | | | | |
Repayment of capital lease obligations | | | (339 | ) | | | (299 | ) | | | (638 | ) |
Proceeds from government grants | | | 4,837 | | | | — | | | | 4,837 | |
| | | | | | | | | | | | |
Net cash from (used in) financing activities | | | 4,498 | | | | (299 | ) | | | 4,199 | |
Effect of exchange rate changes on cash and cash equivalents | | | (668 | ) | | | — | | | | (668 | ) |
| | | | | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | 29,739 | | | | (1,185 | ) | | | 28,554 | |
Cash and cash equivalents, beginning of period | | | 57,202 | | | | 66,039 | | | | 123,241 | |
| | | | | | | | | | | | |
Cash and cash equivalents, end of period | | € | 86,941 | | | € | 64,854 | | | € | 151,795 | |
| | | | | | | | | | | | |
| (1) | Includes intercompany working capital related transactions. |
(9)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Cash Flows
(Unaudited)
(In thousands of Euros)
| | | | | | | | | | | | |
| | | Six Months Ended June 30, 2012 | |
| | | Restricted
Group | | | Unrestricted
Group | | | Consolidated
Group | |
Cash flows from (used in) operating activities | | | | | | | | | | | | |
Net income (loss) attributable to common shareholders | | € | (2,885 | ) | | € | 5,573 | | | € | 2,688 | |
Adjustments to reconcile net income (loss) attributable to common shareholders to cash flows from operating activities | | | | | | | | | | | | |
Loss (gain) on derivative instruments | | | (1,619 | ) | | | (600 | ) | | | (2,219 | ) |
Depreciation and amortization | | | 15,573 | | | | 13,365 | | | | 28,938 | |
Noncontrolling interest | | | — | | | | 2,299 | | | | 2,299 | |
Deferred income taxes | | | 1,916 | | | | (5,256 | ) | | | (3,340 | ) |
Stock compensation expense | | | 862 | | | | — | | | | 862 | |
Pension and other post-retirement expense, net of funding | | | (55 | ) | | | — | | | | (55 | ) |
Other | | | (477 | ) | | | 1,343 | | | | 866 | |
Changes in current assets and liabilities | | | | | | | | | | | | |
Receivables | | | 5,723 | | | | 9,300 | | | | 15,023 | |
Inventories | | | 2,253 | | | | 1,189 | | | | 3,442 | |
Accounts payable and accrued expenses | | | 2,380 | | | | 1,074 | | | | 3,454 | |
Other(1) | | | (7,988 | ) | | | 9,326 | | | | 1,338 | |
| | | | | | | | | | | | |
Net cash from (used in) operating activities | | | 15,683 | | | | 37,613 | | | | 53,296 | |
| | | | | | | | | | | | |
Cash flows from (used in) investing activities | | | | | | | | | | | | |
Purchase of property, plant and equipment | | | (13,033 | ) | | | (5,270 | ) | | | (18,303 | ) |
Proceeds on sale of property, plant and equipment | | | 237 | | | | 102 | | | | 339 | |
Proceeds on sale of marketable securities | | | 2,008 | | | | — | | | | 2,008 | |
| | | | | | | | | | | | |
Net cash from (used in) investing activities | | | (10,788 | ) | | | (5,168 | ) | | | (15,956 | ) |
| | | | | | | | | | | | |
Cash flows from (used in) financing activities | | | | | | | | | | | | |
Repayment of notes payable and debt | | | (2,127 | ) | | | (9,583 | ) | | | (11,710 | ) |
Repayment of capital lease obligations | | | (366 | ) | | | (693 | ) | | | (1,059 | ) |
Payment of note issuance costs | | | — | | | | (1,621 | ) | | | (1,621 | ) |
Proceeds from government grants | | | 2,322 | | | | — | | | | 2,322 | |
| | | | | | | | | | | | |
Net cash from (used in) financing activities | | | (171 | ) | | | (11,897 | ) | | | (12,068 | ) |
Effect of exchange rate changes on cash and cash equivalents | | | 543 | | | | — | | | | 543 | |
| | | | | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | 5,267 | | | | 20,548 | | | | 25,815 | |
Cash and cash equivalents, beginning of period | | | 44,829 | | | | 60,243 | | | | 105,072 | |
| | | | | | | | | | | | |
Cash and cash equivalents, end of period | | € | 50,096 | | | € | 80,791 | | | € | 130,887 | |
| | | | | | | | | | | | |
| (1) | Includes intercompany working capital related transactions. |
(10)
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Cash Flows
(Unaudited)
(In thousands of Euros)
| | | | | | | | | | | | |
| | | Six Months Ended June 30, 2011 | |
| | | Restricted
Group | | | Unrestricted
Group | | | Consolidated
Group | |
Cash flows from (used in) operating activities | | | | | | | | | | | | |
Net income (loss) attributable to common shareholders | | € | 26,260 | | | € | 17,176 | | | € | 43,436 | |
Adjustments to reconcile net income (loss) attributable to common shareholders to cash flows from operating activities | | | | | | | | | | | | |
Loss (gain) on derivative instruments | | | — | | | | (9,904 | ) | | | (9,904 | ) |
Foreign exchange gain on debt | | | (1,453 | ) | | | — | | | | (1,453 | ) |
Depreciation and amortization | | | 15,137 | | | | 12,930 | | | | 28,067 | |
Accretion expense | | | 759 | | | | — | | | | 759 | |
Noncontrolling interest | | | — | | | | 6,013 | | | | 6,013 | |
Deferred income taxes | | | 2,140 | | | | — | | | | 2,140 | |
Stock compensation expense | | | 2,539 | | | | — | | | | 2,539 | |
Pension and other post-retirement expense, net of funding | | | (7 | ) | | | — | | | | (7 | ) |
Other | | | 365 | | | | 1,238 | | | | 1,603 | |
Changes in current assets and liabilities | | | | | | | | | | | | |
Receivables | | | 14,231 | | | | (1,531 | ) | | | 12,700 | |
Inventories | | | 2,365 | | | | (6,451 | ) | | | (4,086 | ) |
Accounts payable and accrued expenses | | | 13,683 | | | | 10,872 | | | | 24,555 | |
Other(1) | | | (3,869 | ) | | | 4,713 | | | | 844 | |
| | | | | | | | | | | | |
Net cash from (used in) operating activities | | | 72,150 | | | | 35,056 | | | | 107,206 | |
| | | | | | | | | | | | |
Cash flows from (used in) investing activities | | | | | | | | | | | | |
Purchase of property, plant and equipment | | | (12,001 | ) | | | (3,824 | ) | | | (15,825 | ) |
Proceeds on sale of property, plant and equipment | | | 19 | | | | 361 | | | | 380 | |
Note receivable | | | 771 | | | | — | | | | 771 | |
| | | | | | | | | | | | |
Net cash from (used in) investing activities | | | (11,211 | ) | | | (3,463 | ) | | | (14,674 | ) |
| | | | | | | | | | | | |
Cash flows from (used in) financing activities | | | | | | | | | | | | |
Repayment of notes payable and debt | | | (15,768 | ) | | | (14,583 | ) | | | (30,351 | ) |
Repayment of capital lease obligations | | | (861 | ) | | | (632 | ) | | | (1,493 | ) |
Repayment of credit facilities, net | | | (14,652 | ) | | | — | | | | (14,652 | ) |
Proceeds from government grants | | | 8,841 | | | | 108 | | | | 8,949 | |
| | | | | | | | | | | | |
Net cash from (used in) financing activities | | | (22,440 | ) | | | (15,107 | ) | | | (37,547 | ) |
Effect of exchange rate changes on cash and cash equivalents | | | (2,212 | ) | | | — | | | | (2,212 | ) |
| | | | | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | 36,287 | | | | 16,486 | | | | 52,773 | |
Cash and cash equivalents, beginning of period | | | 50,654 | | | | 48,368 | | | | 99,022 | |
| | | | | | | | | | | | |
Cash and cash equivalents, end of period | | € | 86,941 | | | € | 64,854 | | | € | 151,795 | |
| | | | | | | | | | | | |
| (1) | Includes intercompany working capital related transactions. |
(11)
MERCER INTERNATIONAL INC.
COMPUTATION OF OPERATING EBITDA
(Unaudited)
(In thousands of Euros)
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.
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. The following tables set forth the net income (loss) attributable to common shareholders to Operating EBITDA for both the consolidated group and our Restricted Group:
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
June 30, | | | Six Months Ended
June 30, | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
| | | (in thousands) | | | (in thousands) | |
Net income attributable to common shareholders | | € | 1,515 | | | € | 14,383 | | | € | 2,688 | | | € | 43,436 | |
Net income attributable to noncontrolling interest | | | 1,628 | | | | 1,466 | | | | 2,299 | | | | 6,013 | |
Income tax provision | | | 2,265 | | | | 3,618 | | | | 2,997 | | | | 4,437 | |
Interest expense | | | 13,863 | | | | 14,883 | | | | 27,996 | | | | 30,789 | |
Other expense (income) | | | 368 | | | | (136 | ) | | | 778 | | | | (463 | ) |
Foreign exchange gain on debt | | | — | | | | (342 | ) | | | — | | | | (1,453 | ) |
Loss (gain) on derivative instruments | | | (1,343 | ) | | | 2,339 | | | | (2,219 | ) | | | (9,904 | ) |
| | | | | | | | | | | | | | | | |
Operating income | | | 18,296 | | | | 36,211 | | | | 34,539 | | | | 72,855 | |
Add: Depreciation and amortization | | | 14,588 | | | | 13,929 | | | | 28,938 | | | | 28,067 | |
| | | | | | | | | | | | | | | | |
Operating EBITDA | | € | 32,884 | | | € | 50,140 | | | € | 63,477 | | | € | 100,922 | |
| | | | | | | | | | | | | | | | |
| | |
| | | Three Months Ended
June 30, | | | Six Months Ended
June 30, | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
| | | (in thousands) | | | (in thousands) | |
Restricted Group | | | | | | | | | | | | | | | | |
Net income (loss) attributable to common shareholders(1) | | € | (2,568 | ) | | € | 10,391 | | | € | (2,885 | ) | | € | 26,260 | |
Income tax provision | | | 1,398 | | | | 2,851 | | | | 2,113 | | | | 3,375 | |
Interest expense | | | 5,934 | | | | 6,433 | | | | 11,744 | | | | 13,706 | |
Other expense (income) | | | (915 | ) | | | (1,305 | ) | | | (1,740 | ) | | | (2,584 | ) |
Foreign exchange gain on debt | | | — | | | | (342 | ) | | | — | | | | (1,453 | ) |
Loss (gain) on derivative instruments | | | (1,619 | ) | | | — | | | | (1,619 | ) | | | — | |
| | | | | | | | | | | | | | | | |
Operating income | | | 2,230 | | | | 18,028 | | | | 7,613 | | | | 39,304 | |
Add: Depreciation and amortization | | | 7,870 | | | | 7,461 | | | | 15,573 | | | | 15,137 | |
| | | | | | | | | | | | | | | | |
Operating EBITDA | | € | 10,100 | | | € | 25,489 | | | € | 23,186 | | | € | 54,441 | |
| | | | | | | | | | | | | | | | |
| (1) | For the Restricted Group, net income (loss) attributable to common shareholders and net income (loss) are the same. |
# # #
(12)
