SECURITIES AND EXCHANGE COMMISSION
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Washington | 91-6087550 | |
(State or other jurisdiction | (I.R.S. Employer | |
of incorporation or organization) | Identification No.) |
(Address of office)
(Registrant’s telephone number, including area code)
FORM 10-Q
QUARTERLY REPORT — PAGE 2
(Unaudited)
(Euros in thousands)
June 30, | December 31, | |||||||
2005 | 2004 | |||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | € | 105,874 | € | 49,568 | ||||
Cash restricted | 37,951 | 45,295 | ||||||
Receivables | 75,344 | 54,687 | ||||||
Inventories | 92,037 | 52,898 | ||||||
Prepaid expenses and other | 7,057 | 4,961 | ||||||
Total current assets | 318,263 | 207,409 | ||||||
Long-Term Assets | ||||||||
Cash restricted | 19,074 | 47,538 | ||||||
Property, plant and equipment | 1,109,394 | 936,035 | ||||||
Investments | 4,728 | 5,079 | ||||||
Deferred note issuance and other costs | 9,132 | 5,069 | ||||||
Deferred income tax | 78,238 | 54,519 | ||||||
1,220,566 | 1,048,240 | |||||||
Total assets | € | 1,538,829 | € | 1,255,649 | ||||
LIABILITIES | ||||||||
Current Liabilities | ||||||||
Accounts payable and accrued expenses | € | 101,399 | € | 56,542 | ||||
Construction costs payable | 34,090 | 65,436 | ||||||
Debt, current portion | 97,618 | 107,090 | ||||||
Total current liabilities | 233,107 | 229,068 | ||||||
Long-Term Liabilities | ||||||||
Debt, less current portion | 952,555 | 777,272 | ||||||
Unrealized foreign exchange rate derivative losses | 47,685 | — | ||||||
Unrealized interest rate derivative losses | 95,946 | 75,471 | ||||||
Pension and other post-retirement benefit obligations | 15,728 | — | ||||||
Capital leases and other | 9,800 | 9,035 | ||||||
Deferred income tax | 4,143 | 2,062 | ||||||
1,125,857 | 863,840 | |||||||
Total liabilities | 1,358,964 | 1,092,908 | ||||||
Minority Interest | — | — | ||||||
SHAREHOLDERS’ EQUITY | ||||||||
Shares of beneficial interest | 180,916 | 83,397 | ||||||
Additional paid-in capital, stock options | 14 | 14 | ||||||
Retained earnings (deficit) | (12,642 | ) | 69,176 | |||||
Accumulated other comprehensive income | 11,577 | 10,154 | ||||||
Total shareholders’ equity | 179,865 | 162,741 | ||||||
Total liabilities and shareholders’ equity | € | 1,538,829 | € | 1,255,649 | ||||
FORM 10-Q
QUARTERLY REPORT — PAGE 3
(Unaudited)
(Euros in thousands, except for loss per share)
2005 | 2004 | |||||||
Revenues | € | 227,502 | € | 100,651 | ||||
Costs and expenses: | ||||||||
Cost of sales | 210,167 | 88,628 | ||||||
General and administrative expenses | 15,316 | 14,228 | ||||||
Gain on sale of emission credits | (6,288 | ) | — | |||||
Flooding losses and expenses, less grant income | — | 669 | ||||||
Total costs and expenses | 219,195 | 103,525 | ||||||
Income (loss) from operations | 8,307 | (2,874 | ) | |||||
Other income (expense): | ||||||||
Interest expense | (41,463 | ) | (5,354 | ) | ||||
Investment income | 981 | 1,464 | ||||||
Realized loss on derivative financial instruments | (295 | ) | — | |||||
Unrealized gain (loss) on derivative financial instruments | (73,015 | ) | 7,028 | |||||
Unrealized foreign exchange loss on debt | (7,509 | ) | — | |||||
Impairment of investments | (1,645 | ) | — | |||||
Total other (income) expense | (122,946 | ) | 3,138 | |||||
Income (loss) before income taxes and minority interest | (114,639 | ) | 264 | |||||
Income tax (provision) benefit | 21,412 | (199 | ) | |||||
Income (loss) before minority interest | (93,227 | ) | 65 | |||||
Minority interest | 11,409 | (2,790 | ) | |||||
Net loss | (81,818 | ) | (2,725 | ) | ||||
Retained earnings, beginning of period | 69,176 | 49,196 | ||||||
Retained earnings (deficit), end of period | € | (12,642 | ) | € | 46,471 | |||
Loss per share | ||||||||
Basic and diluted | € | (2.80 | ) | € | (0.16 | ) | ||
FORM 10-Q
QUARTERLY REPORT — PAGE 4
(Unaudited)
(Euros in thousands, except for loss per share)
2005 | 2004 | |||||||
Revenues | € | 129,609 | € | 50,335 | ||||
Costs and expenses: | ||||||||
Cost of sales | 119,178 | 43,210 | ||||||
General and administrative expenses | 7,518 | 7,687 | ||||||
Gain on sale of emission credits | (6,288 | ) | — | |||||
Flooding losses and expenses, less grant income | — | 416 | ||||||
Total costs and expenses | 120,408 | 51,313 | ||||||
Income (loss) from operations | 9,201 | (978 | ) | |||||
Other income (expense): | ||||||||
Interest expense | (22,200 | ) | (2,366 | ) | ||||
Investment income | 806 | 530 | ||||||
Unrealized gain (loss) on derivative financial instruments | (69,451 | ) | 29,473 | |||||
Unrealized foreign exchange loss on debt | (9,806 | ) | — | |||||
Total other income (expense) | (100,651 | ) | 27,637 | |||||
Income (loss) before income taxes and minority interest | (91,450 | ) | 26,659 | |||||
Income tax (provision) benefit | 24,447 | (219 | ) | |||||
Income (loss) before minority interest | (67,003 | ) | 26,440 | |||||
Minority interest | 4,852 | (10,199 | ) | |||||
Net income (loss) | (62,151 | ) | 16,241 | |||||
Retained earnings, beginning of period | 49,509 | 30,230 | ||||||
Retained earnings (deficit), end of period | € | (12,642 | ) | € | 46,471 | |||
Income (loss) per share | ||||||||
Basic | € | (1.88 | ) | € | 0.94 | |||
Diluted | € | (1.88 | ) | € | 0.57 | |||
FORM 10-Q
QUARTERLY REPORT — PAGE 5
(Unaudited)
(Euros in thousands)
2005 | 2004 | |||||||
Net loss | € | (81,818 | ) | € | (2,725 | ) | ||
Other comprehensive income (loss): | ||||||||
Foreign currency translation adjustments | 1,118 | 2,352 | ||||||
Unrealized gains on securities | ||||||||
Unrealized holding gains (losses) arising during the period | 305 | (250 | ) | |||||
Other comprehensive income | 1,423 | 2,102 | ||||||
Total comprehensive loss | € | (80,395 | ) | € | (623 | ) | ||
FORM 10-Q
QUARTERLY REPORT — PAGE 6
(Unaudited)
(Euros in thousands)
2005 | 2004 | |||||||
Net income (loss) | € | (62,151 | ) | € | 16,241 | |||
Other comprehensive income (loss): | ||||||||
Foreign currency translation adjustments | 1,750 | 696 | ||||||
Unrealized gains on securities | ||||||||
Unrealized holding gains (losses) arising during the period | — | 257 | ||||||
Other comprehensive income | 1,750 | 953 | ||||||
Total comprehensive income (loss) | € | (60,401 | ) | € | 17,194 | |||
FORM 10-Q
QUARTERLY REPORT — PAGE 7
(Unaudited)
(Euros in thousands)
2005 | 2004 | |||||||
Cash Flows from (used in) Operating Activities: | ||||||||
Net loss | € | (81,818 | ) | € | (2,725 | ) | ||
Adjustments to reconcile net loss to cash flows from operating activities | ||||||||
Cumulative unrealized losses (gains) on derivatives | 73,015 | (7,028 | ) | |||||
Depreciation and amortization | 25,299 | 12,607 | ||||||
Unrealized foreign exchange loss on debt | 7,509 | — | ||||||
Impairment of investments and securities | 1,645 | — | ||||||
Minority interest | (11,409 | ) | 2,790 | |||||
Deferred income taxes | (21,638 | ) | — | |||||
Stock compensation expense | 72 | 616 | ||||||
Other | 125 | 204 | ||||||
Changes in current assets and liabilities | ||||||||
Receivables | (20,742 | ) | (2,489 | ) | ||||
Inventories | (16,757 | ) | (17,995 | ) | ||||
Accounts payable and accrued expenses | 41,319 | 12,166 | ||||||
Other | (1,853 | ) | (1,224 | ) | ||||
Net cash used in operating activities | (5,233 | ) | (3,078 | ) | ||||
Cash Flows from (used in) Investing Activities: | ||||||||
Purchase of property, plant and equipment | (8,493 | ) | (117,327 | ) | ||||
Acquisition of Celgar pulp mill | (146,608 | ) | — | |||||
Sale of available-for-sale securities | — | 1,161 | ||||||
Other | — | 115 | ||||||
Net cash used in investing activities | (155,101 | ) | (116,051 | ) | ||||
Cash Flows from (used in) Financing Activities: | ||||||||
Cash restricted | 35,808 | (7,468 | ) | |||||
Decrease in construction costs payable | (31,346 | ) | (22,974 | ) | ||||
Proceeds from borrowings of notes payable and debt | 325,195 | 126,000 | ||||||
Repayment of notes payable and debt | (183,691 | ) | (14,782 | ) | ||||
Proceeds from investment grants | 342 | 28,710 | ||||||
Repayment of capital lease obligations | (1,907 | ) | (633 | ) | ||||
Issuance of shares of beneficial interest | 66,645 | 582 | ||||||
Net cash from financing activities | 211,046 | 109,435 | ||||||
Effect of exchange rate changes on cash and cash equivalents | 5,594 | (63 | ) | |||||
Net increase (decrease) in cash and cash equivalents | 56,306 | (9,757 | ) | |||||
Cash and cash equivalents, beginning of period | 49,568 | 51,993 | ||||||
Cash and cash equivalents, end of period | € | 105,874 | € | 42,236 | ||||
FORM 10-Q
QUARTERLY REPORT — PAGE 8
FOR SIX MONTHS ENDED JUNE 30, 2005
(Euros in thousands, except for shares and per share data)
FORM 10-Q
QUARTERLY REPORT — PAGE 9
FOR SIX MONTHS ENDED JUNE 30, 2005
(Euros in thousands, except for shares and per share data)
Six Months Ended June 30, | ||||||||
2005 | 2004 | |||||||
Net Loss | ||||||||
As reported | € | (81,818 | ) | € | (2,725 | ) | ||
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of any related tax effects | (21 | ) | (29 | ) | ||||
Pro forma | € | (81,839 | ) | € | (2,754 | ) | ||
Basic and Diluted Loss Per Share | ||||||||
As reported | € | (2.80 | ) | € | (0.16 | ) | ||
Pro forma | € | (2.80 | ) | € | (0.16 | ) | ||
Three Months Ended June 30, | ||||||||
2005 | 2004 | |||||||
Net Income (Loss) | ||||||||
As reported | € | (62,151 | ) | € | 16,241 | |||
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of any related tax effects | (11 | ) | (14 | ) | ||||
Pro forma | € | (62,162 | ) | € | 16,227 | |||
Basic and Diluted Income (Loss) Per Share | ||||||||
As reported | € | (1.88 | ) | € | 0.94 | |||
Pro forma | € | (1.88 | ) | € | 0.57 | |||
FORM 10-Q
QUARTERLY REPORT — PAGE 10
FOR SIX MONTHS ENDED JUNE 30, 2005
(Euros in thousands, except for shares and per share data)
Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Income (loss) from continuing operations – basic | € | (81,818 | ) | € | (2,725 | ) | € | (62,151 | ) | € | 16,241 | |||||
Interest on convertible notes, net of tax | — | — | — | 69 | ||||||||||||
Income (loss) from continuing operations – diluted | € | (81,818 | ) | € | (2,725 | ) | € | (62,151 | ) | € | 16,310 | |||||
Weighted average number of common shares outstanding: | ||||||||||||||||
Basic | 29,270,388 | 17,290,504 | 33,055,103 | 17,290,504 | ||||||||||||
Effect of dilutive shares: | ||||||||||||||||
Stock options and awards | — | — | — | 457,385 | ||||||||||||
Convertible notes | — | — | — | 10,645,161 | ||||||||||||
Diluted | 29,270,388 | 17,290,504 | 33,055,103 | 28,393,050 | ||||||||||||
Income (loss) from continuing operations per share: | ||||||||||||||||
Basic | € | (2.80 | ) | € | (0.16 | ) | € | (1.88 | ) | € | 0.94 | |||||
Diluted | € | (2.80 | ) | € | (0.16 | ) | € | (1.88 | ) | € | 0.57 | |||||
FORM 10-Q
QUARTERLY REPORT — PAGE 11
FOR SIX MONTHS ENDED JUNE 30, 2005
(Euros in thousands, except for shares and per share data)
Purchase price: | ||||
Cash (including defined working capital) | € | 142,940 | ||
Equity – shares of beneficial interest | 30,814 | |||
Estimated acquisition costs | 3,668 | |||
€ | 177,422 | |||
Net assets acquired: | ||||
Receivables | € | 32 | ||
Inventories | 19,969 | |||
Prepaids and other assets | 616 | |||
Property, plant and equipment | 175,096 | |||
Accrued expenses and other liabilities | (4,103 | ) | ||
Pension plan and post-retirement benefits obligation | (14,188 | ) | ||
€ | 177,422 | |||
FORM 10-Q
QUARTERLY REPORT — PAGE 12
FOR SIX MONTHS ENDED JUNE 30, 2005
(Euros in thousands, except for shares and per share data)
Six Months Ended | ||||||||
June 30, | ||||||||
2005 | 2004 | |||||||
Total revenues | € | 249,225 | € | 197,875 | ||||
Net income (loss) | € | (90,637 | ) | € | 6,347 | |||
Income (loss) from continuing operations per share: | ||||||||
Basic and diluted | € | (2.74 | ) | € | 0.20 |
FORM 10-Q
QUARTERLY REPORT — PAGE 13
FOR SIX MONTHS ENDED JUNE 30, 2005
(Euros in thousands, except for shares and per share data)
Corporate, | ||||||||||||||||||||||||||||
Rosenthal | Celgar(1) | Stendal | Total | Other and | Consolidated | |||||||||||||||||||||||
Pulp | Pulp | Pulp | Pulp | Paper | Eliminations | Total | ||||||||||||||||||||||
Six Months Ended June 30, 2005 | ||||||||||||||||||||||||||||
Sales to external customers | € | 65,936 | € | 48,480 | € | 81,606 | € | 196,022 | € | 31,480 | € | — | € | 227,502 | ||||||||||||||
Intersegment net sales | — | — | 3,340 | 3,340 | — | (3,340 | ) | — | ||||||||||||||||||||
65,936 | 48,480 | 84,946 | 199,362 | 31,480 | (3,340 | ) | 227,502 | |||||||||||||||||||||
Operating costs | 47,405 | 40,554 | 71,546 | 159,505 | 29,601 | (3,822 | ) | 185,284 | ||||||||||||||||||||
Depreciation and amortization | 6,630 | 4,097 | 13,454 | 24,181 | 379 | 323 | 24,883 | |||||||||||||||||||||
General and administrative | 3,810 | 2,837 | 1,677 | 8,324 | 2,562 | 4,430 | 15,316 | |||||||||||||||||||||
Emission credits | (2,135 | ) | — | (4,153 | ) | (6,288 | ) | — | — | (6,288 | ) | |||||||||||||||||
55,710 | 47,488 | 82,524 | 185,722 | 32,542 | 931 | 219,195 | ||||||||||||||||||||||
Income (loss) from operations | 10,226 | 992 | 2,422 | 13,640 | (1,062 | ) | (4,271 | ) | 8,307 | |||||||||||||||||||
Interest expense | (41,463 | ) | ||||||||||||||||||||||||||
Investment income | 981 | |||||||||||||||||||||||||||
Derivative financial instruments, net | (73,310 | ) | ||||||||||||||||||||||||||
Foreign exchange gain on debt | (7,509 | ) | ||||||||||||||||||||||||||
Impairment of investments | (1,645 | ) | ||||||||||||||||||||||||||
(122,946 | ) | |||||||||||||||||||||||||||
Loss before income taxes and minority interest | € | (114,639 | ) | |||||||||||||||||||||||||
Segment assets | € | 347,935 | € | 244,361 | € | 906,244 | € | 1,498,540 | € | 24,294 | € | 15,995 | € | 1,538,829 | ||||||||||||||
Six Months Ended June 30, 2004 | ||||||||||||||||||||||||||||
Sales to external customers | € | 71,031 | € | — | € | 927 | € | 71,958 | € | 28,693 | € | — | € | 100,651 | ||||||||||||||
Intersegment net sales | 1,179 | — | — | 1,179 | — | (1,179 | ) | — | ||||||||||||||||||||
72,210 | — | 927 | 73,137 | 28,693 | (1,179 | ) | 100,651 | |||||||||||||||||||||
Operating costs | 49,125 | — | — | 49,125 | 27,213 | (317 | ) | 76,021 | ||||||||||||||||||||
Depreciation and amortization | 11,136 | — | 12 | 11,148 | 1,141 | 318 | 12,607 | |||||||||||||||||||||
General and administrative | 4,636 | — | 5,448 | 10,084 | 2,643 | 1,501 | 14,228 | |||||||||||||||||||||
Flooding grants, less losses and expenses | — | — | — | — | 669 | — | 669 | |||||||||||||||||||||
64,897 | — | 5,460 | 70,357 | 31,666 | 1,502 | 103,525 | ||||||||||||||||||||||
Income (loss) from operations | 7,313 | — | (4,533 | ) | 2,780 | (2,973 | ) | (2,681 | ) | (2,874 | ) | |||||||||||||||||
Interest expense | (5,354 | ) | ||||||||||||||||||||||||||
Investment and other income | 1,464 | |||||||||||||||||||||||||||
Derivative financial instruments, net | 7,028 | |||||||||||||||||||||||||||
3,138 | ||||||||||||||||||||||||||||
Income before income taxes and minority interest | € | 264 | ||||||||||||||||||||||||||
Segment assets | € | 365,342 | € | — | € | 663,193 | € | 1,028,535 | € | 28,320 | € | (10,899 | ) | € | 1,045,956 | |||||||||||||
(1) | The results of the Celgar pulp mill are from the date of its acquisition on February 14, 2005. |
FORM 10-Q
QUARTERLY REPORT — PAGE 14
FOR SIX MONTHS ENDED JUNE 30, 2005
(Euros in thousands, except for shares and per share data)
Corporate, | ||||||||||||||||||||||||||||
Rosenthal | Celgar(1) | Stendal | Total | Other and | Consolidated | |||||||||||||||||||||||
Pulp | Pulp | Pulp | Pulp | Paper | Eliminations | Total | ||||||||||||||||||||||
Three Months Ended June 30, 2005 | ||||||||||||||||||||||||||||
Sales to external customers | € | 31,840 | € | 40,864 | € | 40,808 | € | 113,512 | € | 16,097 | € | — | € | 129,609 | ||||||||||||||
Intersegment net sales | — | — | 1,786 | 1,786 | — | (1,786 | ) | — | ||||||||||||||||||||
31,840 | 40,864 | 42,594 | 115,298 | 16,097 | (1,786 | ) | 129,609 | |||||||||||||||||||||
Operating costs | 22,217 | 35,419 | 34,411 | 92,047 | 15,370 | (2,135 | ) | 105,282 | ||||||||||||||||||||
Depreciation and amortization | 3,362 | 3,274 | 6,773 | 13,409 | 198 | 289 | 13,896 | |||||||||||||||||||||
General and administrative | 1,909 | 1,162 | 702 | 3,773 | 1,326 | 2,419 | 7,518 | |||||||||||||||||||||
Emission credits | (2,135 | ) | — | (4,153 | ) | (6,288 | ) | — | — | (6,288 | ) | |||||||||||||||||
25,353 | 39,855 | 37,733 | 102,941 | 16,894 | 573 | 120,408 | ||||||||||||||||||||||
Income (loss) from operations | 6,487 | 1,009 | 4,861 | 12,357 | (797 | ) | (2,359 | ) | 9,201 | |||||||||||||||||||
Interest expense | (22,200 | ) | ||||||||||||||||||||||||||
Investment income | 806 | |||||||||||||||||||||||||||
Derivative financial instruments, net | (69,451 | ) | ||||||||||||||||||||||||||
Foreign exchange(loss) on debt | (9,806 | ) | ||||||||||||||||||||||||||
Impairment of investments | — | |||||||||||||||||||||||||||
(100,651 | ) | |||||||||||||||||||||||||||
Loss before income taxes and minority interest | € | (91,450 | ) | |||||||||||||||||||||||||
Three Months Ended June 30, 2004 | ||||||||||||||||||||||||||||
Sales to external customers | € | 36,022 | € | — | € | 927 | € | 36,949 | € | 13,386 | € | — | € | 50,335 | ||||||||||||||
Intersegment net sales | 750 | — | — | 750 | — | (750 | ) | — | ||||||||||||||||||||
36,772 | — | 927 | 37,699 | 13,386 | (750 | ) | 50,335 | |||||||||||||||||||||
Operating costs | 23,318 | — | — | 23,318 | 13,455 | 123 | 36,896 | |||||||||||||||||||||
Depreciation and amortization | 5,554 | — | 12 | 5,566 | 589 | 159 | 6,314 | |||||||||||||||||||||
General and administrative | 2,648 | — | 2,707 | 5,355 | 1,469 | 863 | 7,687 | |||||||||||||||||||||
Flooding grants, less losses and expenses | — | — | — | — | 416 | — | 416 | |||||||||||||||||||||
31,520 | — | 2,719 | 34,239 | 15,929 | 1,145 | 51,313 | ||||||||||||||||||||||
Income (loss) from operations | 5,252 | — | (1,792 | ) | 3,460 | (2,543 | ) | (1,895 | ) | (978 | ) | |||||||||||||||||
Interest expense | (2,366 | ) | ||||||||||||||||||||||||||
Investment and other income | 530 | |||||||||||||||||||||||||||
Derivative financial instruments, net | 29,473 | |||||||||||||||||||||||||||
27,637 | ||||||||||||||||||||||||||||
Income before income taxes and minority interest | € | 26,659 | ||||||||||||||||||||||||||
(1) | The results of the Celgar pulp mill are from the date of its acquisition on February 14, 2005. |
FORM 10-Q
QUARTERLY REPORT — PAGE 15
FOR SIX MONTHS ENDED JUNE 30, 2005
(Euros in thousands, except for shares and per share data)
June 30, 2005 | December 31, 2004 | |||||||
Raw materials | € | 53,217 | € | 38,679 | ||||
Work in process and finished goods | 38,820 | 14,219 | ||||||
€ | 92,037 | € | 52,898 | |||||
Six Months Ended June 30, 2005 | ||||||||
Pension Benefits | Post-Retirement Benefits | |||||||
Service cost | �� | € | 245 | € | 107 | |||
Interest cost | 481 | 234 | ||||||
Expected return on plan assets | (471 | ) | — | |||||
Net periodic benefit cost | € | 255 | € | 341 | ||||
Three Months Ended June 30, 2005 | ||||||||
Pension Benefits | Post-Retirement Benefits | |||||||
Service cost | € | 161 | € | 58 | ||||
Interest cost | 323 | 146 | ||||||
Expected return on plan assets | (321 | ) | — | |||||
Net periodic benefit cost | € | 163 | € | 204 | ||||
Six Months Ended June 30, | ||||||||
2005 | 2004 | |||||||
Realized loss on derivative financial instruments | € | (295 | ) | € | — | |||
Unrealized net loss on interest rate derivatives | € | (20,475 | ) | € | (1,716 | ) | ||
Unrealized net gain (loss) on foreign exchange derivatives | (52,372 | ) | 8,744 | |||||
Unrealized loss on natural gas forward supply contract | (168 | ) | — | |||||
Unrealized gain (loss) on derivative financial instruments | € | (73,015 | ) | € | 7,028 | |||
FORM 10-Q
QUARTERLY REPORT — PAGE 16
FOR SIX MONTHS ENDED JUNE 30, 2005
(Euros in thousands, except for shares and per share data)
Three Months Ended June 30, | ||||||||
2005 | 2004 | |||||||
Unrealized net gain (loss) on interest rate derivatives | € | (20,819 | ) | € | 15,751 | |||
Unrealized net gain (loss) on foreign exchange derivatives | (48,274 | ) | 13,722 | |||||
Unrealized loss on natural gas forward supply contract | (358 | ) | — | |||||
Unrealized gain (loss) on derivative financial instruments | € | (69,451 | ) | € | 29,473 | |||
FORM 10-Q
QUARTERLY REPORT — PAGE 17
FOR SIX MONTHS ENDED JUNE 30, 2005
(Euros in thousands, except for shares and per share data)
FORM 10-Q
QUARTERLY REPORT — PAGE 18
FOR SIX MONTHS ENDED JUNE 30, 2005
(Euros in thousands, except for shares and per share data)
June 30, 2005 | ||||||||||||||||
Restricted | Unrestricted | Consolidated | ||||||||||||||
Group | Subsidiaries | Eliminations | Group | |||||||||||||
ASSETS | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | € | 62,792 | € | 43,082 | € | — | € | 105,874 | ||||||||
Cash restricted | — | 37,951 | — | 37,951 | ||||||||||||
Receivables | 42,748 | 32,665 | (69 | ) | 75,344 | |||||||||||
Inventories | 54,127 | 37,910 | — | 92,037 | ||||||||||||
Prepaid expenses and other | 3,631 | 3,426 | — | 7,057 | ||||||||||||
Total current assets | 163,298 | 155,034 | (69 | ) | 318,263 | |||||||||||
Cash restricted | — | 19,074 | — | 19,074 | ||||||||||||
Property, plant and equipment | 393,047 | 716,785 | (438 | ) | 1,109,394 | |||||||||||
Other | 9,741 | 4,119 | — | 13,860 | ||||||||||||
Deferred income tax | 22,855 | 55,383 | — | 78,238 | ||||||||||||
Due from unrestricted group | 44,621 | — | (44,621 | ) | — | |||||||||||
Total assets | € | 633,562 | € | 950,395 | € | (45,128 | ) | € | 1,538,829 | |||||||
LIABILITIES | ||||||||||||||||
Current liabilities | ||||||||||||||||
Accounts payable and accrued expenses | € | 43,780 | € | 57,688 | € | (69 | ) | € | 101,399 | |||||||
Construction costs payable | — | 34,090 | — | 34,090 | ||||||||||||
Debt, current portion | — | 97,618 | — | 97,618 | ||||||||||||
Total current liabilities | 43,780 | 189,396 | (69 | ) | 233,107 | |||||||||||
Debt, less current portion | 353,033 | 599,522 | — | 952,555 | ||||||||||||
Due to restricted group | — | 44,621 | (44,621 | ) | — | |||||||||||
Unrealized derivatives loss | — | 143,631 | — | 143,631 | ||||||||||||
Other | 18,555 | 6,973 | — | 25,528 | ||||||||||||
Deferred income tax | 1,883 | 2,260 | — | 4,143 | ||||||||||||
Total liabilities | 417,251 | 986,403 | (44,690 | ) | 1,358,964 | |||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||||||
Total shareholders’ equity | 216,311 | (36,008 | )(1) | (438 | ) | 179,865 | ||||||||||
Total liabilities and shareholders’ equity | € | 633,562 | € | 950,395 | € | (45,128 | ) | € | 1,538,829 | |||||||
(1) | Shareholders' equity does not include government grants received or receivable related to the Stendal mill. Shareholders' equity is impacted by the unrealized non-cash marked to market valuation losses on derivative financial instruments. |
FORM 10-Q
QUARTERLY REPORT — PAGE 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR SIX MONTHS ENDED JUNE 30, 2005
(Euros in thousands, except for shares and per share data)
December 31, 2004 | ||||||||||||||||
Restricted | Unrestricted | Consolidated | ||||||||||||||
Group | Subsidiaries | Eliminations | Group | |||||||||||||
ASSETS | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | € | 45,487 | € | 4,081 | € | — | € | 49,568 | ||||||||
Cash restricted | — | 45,295 | — | 45,295 | ||||||||||||
Receivables | 21,791 | 33,060 | (164 | ) | 54,687 | |||||||||||
Inventories | 13,911 | 38,987 | — | 52,898 | ||||||||||||
Prepaid expenses and other | 1,995 | 2,966 | — | 4,961 | ||||||||||||
Total current assets | 83,184 | 124,389 | (164 | ) | 207,409 | |||||||||||
Cash restricted | 28,464 | 19,074 | — | 47,538 | ||||||||||||
Property, plant and equipment | 213,678 | 722,394 | (37 | ) | 936,035 | |||||||||||
Other | 5,936 | 4,212 | — | 10,148 | ||||||||||||
Deferred income tax | 26,592 | 27,927 | — | 54,519 | ||||||||||||
Due from unrestricted group | 43,467 | — | (43,467 | ) | — | |||||||||||
Total assets | € | 401,321 | € | 897,996 | € | (43,668 | ) | € | 1,255,649 | |||||||
LIABILITIES | ||||||||||||||||
Current liabilities | ||||||||||||||||
Accounts payable and accrued expenses | € | 19,615 | € | 37,091 | € | (164 | ) | € | 56,542 | |||||||
Construction costs payable | — | 65,436 | — | 65,436 | ||||||||||||
Debt, current portion | 15,089 | 92,001 | — | 107,090 | ||||||||||||
Total current liabilities | 34,704 | 194,528 | (164 | ) | 229,068 | |||||||||||
Debt, less current portion | 224,542 | 552,730 | — | 777,272 | ||||||||||||
Due to restricted group | — | 43,467 | (43,467 | ) | — | |||||||||||
Unrealized interest rate derivative | — | 75,471 | — | 75,471 | ||||||||||||
Other | 1,878 | 7,157 | — | 9,035 | ||||||||||||
Deferred income tax | 1,719 | 343 | — | 2,062 | ||||||||||||
Total liabilities | 262,843 | 873,696 | (43,631 | ) | 1,092,908 | |||||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||||||
Total shareholders’ equity | 138,478 | 24,300 | (37 | ) | 162,741 | |||||||||||
Total liabilities and shareholders’ equity | € | 401,321 | € | 897,996 | € | (43,668 | ) | € | 1,255,649 | |||||||
FORM 10-Q
QUARTERLY REPORT — PAGE 20
FOR SIX MONTHS ENDED JUNE 30, 2005
(Euros in thousands, except for shares and per share data)
Six Months Ended June 30, 2005 | ||||||||||||||||
Restricted | Unrestricted | Consolidated | ||||||||||||||
Group | Subsidiaries | Eliminations | Group | |||||||||||||
Revenues | € | 114,416 | € | 113,086 | € | — | € | 227,502 | ||||||||
Operating costs | 87,260 | 98,024 | — | 185,284 | ||||||||||||
Operating depreciation and amortization | 10,829 | 13,616 | 438 | 24,883 | ||||||||||||
General and administrative | 11,077 | 4,239 | — | 15,316 | ||||||||||||
Gain on sale of emission credits | (2,135 | ) | (4,153 | ) | — | (6,288 | ) | |||||||||
107,031 | 111,726 | 438 | 219,195 | |||||||||||||
Income (loss) from operations | 7,385 | 1,360 | (438 | ) | 8,307 | |||||||||||
Other income (expense) | ||||||||||||||||
Interest expense | (15,985 | ) | (26,571 | ) | 1,093 | (41,463 | ) | |||||||||
Investment income | 1,297 | 777 | (1,093 | ) | 981 | |||||||||||
Derivative financial instruments, net | (463 | ) | (72,847 | ) | — | (73,310 | ) | |||||||||
Unrealized foreign exchange loss on debt | (7,509 | ) | — | — | (7,509 | ) | ||||||||||
Impairment of investments | (1,645 | ) | — | — | (1,645 | ) | ||||||||||
Total other expense | (24,305 | ) | (98,641 | ) | — | (122,946 | ) | |||||||||
Loss before income taxes and minority interest | (16,920 | ) | (97,281 | ) | (438 | ) | (114,639 | ) | ||||||||
Income tax (provision) benefit | (4,776 | ) | 26,188 | — | 21,412 | |||||||||||
Loss before minority interest | (21,696 | ) | (71,093 | ) | (438 | ) | (93,227 | ) | ||||||||
Minority interest | — | 11,409 | — | 11,409 | ||||||||||||
Net loss | € | (21,696 | ) | € | (59,684 | ) | € | (438 | ) | € | (81,818 | ) | ||||
Six Months Ended June 30, 2004 | ||||||||||||||||
Restricted | Unrestricted | Consolidated | ||||||||||||||
Group | Subsidiaries | Eliminations | Group | |||||||||||||
Revenues | € | 72,210 | € | 29,620 | € | (1,179 | ) | € | 100,651 | |||||||
Operating costs | 48,675 | 27,213 | 133 | 76,021 | ||||||||||||
Operating depreciation and amortization | 11,136 | 1,153 | 318 | 12,607 | ||||||||||||
General and administrative | 6,295 | 8,091 | (158 | ) | 14,228 | |||||||||||
Flooding grants, less losses and expenses | — | 669 | — | 669 | ||||||||||||
66,106 | 37,126 | 293 | 103,525 | |||||||||||||
Income (loss) from operations | 6,104 | (7,506 | ) | (1,472 | ) | (2,874 | ) | |||||||||
Other income (expense) | ||||||||||||||||
Interest expense | (6,023 | ) | (452 | ) | 1,121 | (5,354 | ) | |||||||||
Investment and other income (expense) | 1,745 | (214 | ) | (67 | ) | 1,464 | ||||||||||
Derivative financial instruments, net | (5,272 | ) | 12,300 | — | 7,028 | |||||||||||
Total other expense | (9,550 | ) | 11,634 | 1,054 | 3,138 | |||||||||||
Income (loss) before income taxes and minority interest | (3,446 | ) | 4,128 | (418 | ) | 264 | ||||||||||
Income tax provision | (199 | ) | — | — | (199 | ) | ||||||||||
Income (loss) before minority interest | (3,645 | ) | 4,128 | (418 | ) | 65 | ||||||||||
Minority interest | — | (2,790 | ) | — | (2,790 | ) | ||||||||||
Net income (loss) | € | (3,645 | ) | € | 1,338 | € | (418 | ) | € | (2,725 | ) | |||||
FORM 10-Q
QUARTERLY REPORT — PAGE 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR SIX MONTHS ENDED JUNE 30, 2005
(Euros in thousands, except for shares and per share data)
Three Months Ended June 30, 2005 | ||||||||||||||||
Restricted | Unrestricted | Consolidated | ||||||||||||||
Group | Subsidiaries | Eliminations | Group | |||||||||||||
Revenues | € | 72,704 | € | 56,905 | € | — | € | 129,609 | ||||||||
Operating costs | 57,287 | 47,995 | — | 105,282 | ||||||||||||
Operating depreciation and amortization | 6,704 | 6,971 | 221 | 13,896 | ||||||||||||
General and administrative | 5,490 | 2,028 | — | 7,518 | ||||||||||||
Gain on sale of emission credits | (2,135 | ) | (4,153 | ) | — | (6,288 | ) | |||||||||
67,346 | 52,841 | 221 | 120,408 | |||||||||||||
Income (loss) from operations | 5,358 | 4,064 | (221 | ) | 9,201 | |||||||||||
Other income (expense) | ||||||||||||||||
Interest expense | (8,314 | ) | (14,585 | ) | 699 | (22,200 | ) | |||||||||
Investment income | 970 | 467 | (631 | ) | 806 | |||||||||||
Derivative financial instruments, net | (358 | ) | (69,093 | ) | — | (69,451 | ) | |||||||||
Unrealized foreign exchange loss on debt | (9,806 | ) | — | — | (9,806 | ) | ||||||||||
Impairment of investments | (467 | ) | — | 467 | — | |||||||||||
Total other income (expense) | (17,975 | ) | (83,211 | ) | 535 | (100,651 | ) | |||||||||
Income (loss) before income taxes and minority interest | (12,617 | ) | (79,147 | ) | 314 | (91,450 | ) | |||||||||
Income tax (provision) benefit | (1,661 | ) | 26,108 | — | 24,447 | |||||||||||
Income (loss) before minority interest | (14,278 | ) | (53,039 | ) | 314 | (67,003 | ) | |||||||||
Minority interest | — | 4,852 | — | 4,852 | ||||||||||||
Net income (loss) | € | (14,278 | ) | € | (48,187 | ) | € | 314 | € | (62,151 | ) | |||||
Three Months Ended June 30, 2004 | ||||||||||||||||
Restricted | Unrestricted | Consolidated | ||||||||||||||
Group | Subsidiaries | Eliminations | Group | |||||||||||||
Revenues | € | 36,772 | € | 14,313 | € | (750 | ) | € | 50,335 | |||||||
Operating costs | 23,318 | 13,455 | 123 | 36,896 | ||||||||||||
Operating depreciation and amortization | 5,554 | 601 | 159 | 6,314 | ||||||||||||
General and administrative | 3,181 | 4,176 | 330 | 7,687 | ||||||||||||
Flooding grants, less losses and expenses. | — | 416 | — | 416 | ||||||||||||
32,053 | 18,648 | 612 | 51,313 | |||||||||||||
Income (loss) from operations | 4,719 | (4,335 | ) | (1,362 | ) | (978 | ) | |||||||||
Other income (expense) | ||||||||||||||||
Interest expense | (1,947 | ) | 114 | (533 | ) | (2,366 | ) | |||||||||
Derivative financial instruments, net | (382 | ) | 29,855 | — | 29,473 | |||||||||||
Investment and other income (expense) | 639 | (364 | ) | 255 | 530 | |||||||||||
Total other income (expense) | (1,690 | ) | 29,605 | (278 | ) | 27,637 | ||||||||||
Income (loss) before income taxes and minority interest | 3,029 | 25,270 | (1,640 | ) | 26,659 | |||||||||||
Income tax provision | (199 | ) | (20 | ) | — | (219 | ) | |||||||||
Income (loss) before minority interest | 2,830 | 25,250 | (1,640 | ) | 26,440 | |||||||||||
Minority interest | — | (10,199 | ) | — | (10,199 | ) | ||||||||||
Net income (loss) | € | 2,830 | € | 15,051 | € | (1,640 | ) | € | 16,241 | |||||||
FORM 10-Q
QUARTERLY REPORT — PAGE 22
Six Months Ended June 30, | ||||||||
2005 | 2004 | |||||||
(ADMTs) | ||||||||
Sales Volume by Product Class | ||||||||
Pulp sales volume by mill: | ||||||||
Rosenthal | 154,800 | 156,334 | ||||||
Celgar | 118,188 | — | ||||||
Stendal | 204,988 | — | ||||||
Total pulp sales volume(1) | 477,976 | 156,334 | ||||||
Paper sales volume | 34,478 | 32,789 | ||||||
Total sales volume(1) | 512,454 | 189,123 | ||||||
FORM 10-Q
QUARTERLY REPORT — PAGE 23
Six Months Ended June 30, | ||||||||
2005 | 2004 | |||||||
(in thousands) | ||||||||
Revenues by Product Class | ||||||||
Pulp revenues by mill: | ||||||||
Rosenthal | € | 65,936 | € | 71,031 | ||||
Celgar | 48,480 | — | ||||||
Stendal | 81,606 | 927 | ||||||
Total pulp revenues(1) | 196,022 | 71,958 | ||||||
Paper revenues | 31,480 | 28,693 | ||||||
Total revenues(1) | € | 227,502 | € | 100,651 | ||||
(1) | Excluding intercompany sales volumes of 7,594 and 2,549 ADMTs of pulp and intercompany net sales revenues of approximately€3.3 million and€1.1 million in the six months ended June 30, 2005 and 2004, respectively. |
Six Months Ended June 30, | ||||||||
2005 | 2004 | |||||||
(ADMTs) | ||||||||
Production by Product Class | ||||||||
Pulp production by mill: | ||||||||
Rosenthal | 157,315 | 159,384 | ||||||
Celgar | 171,833 | — | ||||||
Stendal | 231,719 | — | ||||||
Total pulp production | 560,867 | 159,384 | ||||||
Paper production | 33,937 | 32,407 | ||||||
Total production | 594,804 | 191,791 | ||||||
FORM 10-Q
QUARTERLY REPORT — PAGE 24
FORM 10-Q
QUARTERLY REPORT — PAGE 25
FORM 10-Q
QUARTERLY REPORT — PAGE 26
Six Months Ended | ||||||||
June 30, | ||||||||
2005 | 2004 | |||||||
(in thousands) | ||||||||
(unaudited) | ||||||||
Net loss | € | (81,818 | ) | € | (2,725 | ) | ||
Minority interest | (11,409 | ) | 2,790 | |||||
Income taxes (benefit) | (21,412 | ) | 199 | |||||
Interest expense | 41,463 | 5,354 | ||||||
Investment income | (981 | ) | (1,464 | ) | ||||
Derivative financial instruments, net | 73,310 | (7,028 | ) | |||||
Foreign exchange loss on debt | 7,509 | — | ||||||
Impairment of investments | 1,645 | — | ||||||
Income (loss) from operations | 8,307 | (2,874 | ) | |||||
Add: Depreciation and amortization | 24,883 | 12,607 | ||||||
Operating EBITDA | € | 33,190 | € | 9,733 | ||||
FORM 10-Q
QUARTERLY REPORT — PAGE 27
Three Months Ended June 30, | ||||||||
2005 | 2004 | |||||||
(ADMTs) | ||||||||
Sales Volume by Product Class | ||||||||
Pulp sales volume by mill: | ||||||||
Rosenthal | 75,996 | 74,841 | ||||||
Celgar | 99,841 | — | ||||||
Stendal | 102,915 | — | ||||||
Total pulp sales volume(1) | 278,752 | 74,841 | ||||||
Paper sales volume | 17,840 | 15,383 | ||||||
Total sales volume(1) | 296,592 | 90,224 | ||||||
(in thousands) | ||||||||
Revenues by Product Class | ||||||||
Pulp revenues by mill: | ||||||||
Rosenthal | € | 31,840 | € | 36,022 | ||||
Celgar | 40,864 | — | ||||||
Stendal | 40,808 | 927 | ||||||
Total pulp revenues(1) | 113,512 | 36,949 | ||||||
Paper revenues | 16,097 | 13,386 | ||||||
Total revenues(1) | € | 129,609 | € | 50,335 | ||||
(1) | Excluding intercompany sales volumes of 4,105 and 1,540 ADMTs of pulp and intercompany net sales revenues of approximately€1.8 million and€0.8 million in the three months ended June 30, 2005 and 2004, respectively. |
Three Months Ended June 30, | ||||||||
2005 | 2004 | |||||||
(ADMTs) | ||||||||
Production by Product Class | ||||||||
Pulp production by mill: | ||||||||
Rosenthal | 81,443 | 80,317 | ||||||
Stendal | 123,738 | — | ||||||
Celgar | 111,071 | — | ||||||
Total pulp production | 316,252 | 80,317 | ||||||
Paper production | 17,979 | 15,339 | ||||||
Total production | 334,231 | 95,656 | ||||||
FORM 10-Q
QUARTERLY REPORT — PAGE 28
FORM 10-Q
QUARTERLY REPORT — PAGE 29
FORM 10-Q
QUARTERLY REPORT — PAGE 30
Three Months Ended | ||||||||
June 30, | ||||||||
2005 | 2004 | |||||||
(in thousands) | ||||||||
(unaudited) | ||||||||
Net income (loss) | € | (62,151 | ) | € | 16,241 | |||
Minority interest | (4,852 | ) | 10,199 | |||||
Income taxes (benefit) | (24,447 | ) | 219 | |||||
Interest expense | 22,200 | 2,366 | ||||||
Investment income | (806 | ) | (530 | ) | ||||
Derivative financial instruments, net | 69,451 | (29,473 | ) | |||||
Foreign exchange loss on debt | 9,806 | — | ||||||
Income (loss) from operations | 9,201 | (978 | ) | |||||
Add: Depreciation and amortization | 13,896 | 6,314 | ||||||
Operating EBITDA | € | 23,097 | € | 5,336 | ||||
As at | As at | |||||||
June 30, | December 31, | |||||||
2005 | 2004 | |||||||
(in thousands) | ||||||||
(unaudited) | ||||||||
Financial Position | ||||||||
Cash and cash equivalents | € | 105,874 | € | 49,568 | ||||
Working capital (deficit) | 85,156 | (21,659 | ) | |||||
Property, plant and equipment | 1,109,394 | 936,035 | ||||||
Total assets | 1,538,829 | 1,255,649 | ||||||
Long-term liabilities | 1,125,857 | (1) | 863,840 | |||||
Shareholders’ equity | 179,865 | 162,741 |
(1) | Includes€28.6 million outstanding under the revolving credit facilities for the Rosenthal and Celgar mills. |
FORM 10-Q
QUARTERLY REPORT — PAGE 31
FORM 10-Q
QUARTERLY REPORT — PAGE 32
FORM 10-Q
QUARTERLY REPORT — PAGE 33
FORM 10-Q
QUARTERLY REPORT — PAGE 34
FORM 10-Q
QUARTERLY REPORT — PAGE 35
Six Months Ended | ||||||||
June 30, | ||||||||
2005 | 2004 | |||||||
(in thousands) | ||||||||
(unaudited) | ||||||||
Restricted Group(1)(2) | ||||||||
Net loss | € | (21,696 | ) | € | (3,645 | ) | ||
Income taxes | 4,776 | 199 | ||||||
Interest expense | 15,985 | 6,023 | ||||||
Investment and other income | (1,297 | ) | (1,745 | ) | ||||
Derivative financial instruments, net | 463 | 5,272 | ||||||
Foreign exchange loss on debt | 7,509 | — | ||||||
Impairment of investments | 1,645 | — | ||||||
Income from operations | 7,385 | 6,104 | ||||||
Add: Depreciation and amortization | 10,829 | 11,136 | ||||||
Operating EBITDA | € | 18,214 | € | 17,240 | ||||
(1) | The results of the Celgar pulp mill are not included for the six months ended June 30, 2004. | |
(2) | See Note 10 of the financial statements included elsewhere herein for a reconciliation to our consolidated results. |
FORM 10-Q
QUARTERLY REPORT — PAGE 36
Three Months Ended | ||||||||
June 30, | ||||||||
2005 | 2004 | |||||||
(in thousands) | ||||||||
(unaudited) | ||||||||
Restricted Group(1)(2) | ||||||||
Net income (loss) | € | (14,278 | ) | € | 2,830 | |||
Income taxes | 1,661 | 199 | ||||||
Interest expense | 8,314 | 1,947 | ||||||
Investment and other income | (970 | ) | (639 | ) | ||||
Derivative financial instruments, net | 358 | 382 | ||||||
Foreign exchange loss on debt | 9,806 | — | ||||||
Impairment of investments | 467 | — | ||||||
Income from operations | 5,358 | 4,719 | ||||||
Add: Depreciation and amortization | 6,704 | 5,554 | ||||||
Operating EBITDA | € | 12,063 | € | 10,273 | ||||
(1) | The results of the Celgar pulp mill are not included for the three months ended June 30, 2004. | |
(2) | See Note 10 of the financial statements included elsewhere herein for a reconciliation to our consolidated results. |
FORM 10-Q
QUARTERLY REPORT — PAGE 37
As at | As at | |||||||
June 30, | December 31, | |||||||
2005 | 2004 | |||||||
(in thousands) | ||||||||
(unaudited) | ||||||||
Restricted Group Financial Position(1)(2) | ||||||||
Cash and cash equivalents | € | 62,792 | € | 45,487 | ||||
Working capital | 119,518 | 48,480 | ||||||
Property, plant and equipment | 393,047 | 213,678 | ||||||
Total assets | 633,562 | 401,321 | ||||||
Long-term liabilities | 373,471 | 228,139 | ||||||
Shareholders’ equity | 216,311 | 138,478 |
(1) | The financial position of the Celgar pulp mill is not included as at December 31, 2004. | |
(2) | See Note 10 of the financial statements included elsewhere herein for a reconciliation to our consolidated results. |
FORM 10-Q
QUARTERLY REPORT — PAGE 38
FORM 10-Q
QUARTERLY REPORT — PAGE 39
FORM 10-Q
QUARTERLY REPORT — PAGE 40
Recognized Gain | Recognized Gain | |||||||||||||||
(Loss) in | (Loss) in | |||||||||||||||
Six Months Ended | Three Months Ended | |||||||||||||||
Derivative Instrument | Maturity Date | Notional Amount | June 30, 2005 | June 30, 2005 | ||||||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||||||
(in millions) | (in thousands) | (in thousands) | ||||||||||||||
Interest Rate Derivatives | ||||||||||||||||
Rosenthal Interest Rate Cap Agreements(1) | Settled | $ | 178.3 | € | (295 | ) | € | - | ||||||||
Stendal Interest Rate Swaps(2) | October 2017 | € | 1,147.5 | (20,475 | ) | (20,819 | ) | |||||||||
€ | (20,770 | ) | € | (20,819 | ) | |||||||||||
Foreign Exchange Rate Derivatives | ||||||||||||||||
Stendal Currency Swap(3) | October 2017 | € | 306.3 | € | (24,571 | ) | € | (22,278 | ) | |||||||
Stendal Currency Swap(4) | October 2017 | € | 153.2 | (12,778 | ) | (11,027 | ) | |||||||||
Stendal Currency Swap(5) | October 2017 | € | 153.2 | (10,336 | ) | (10,336 | ) | |||||||||
Stendal Currency Forward | September 2005 | $ | 25.0 | (379 | ) | (393 | ) | |||||||||
Stendal Currency Forward | September 2005 | $ | 25.0 | (1,497 | ) | (1,497 | ) | |||||||||
Stendal Currency Forward | February 2006 | $ | 50.0 | (2,811 | ) | (2,743 | ) | |||||||||
€ | (52,372 | ) | € | (48,274 | ) | |||||||||||
(1) | Rosenthal had entered into two forward interest rate contracts with notional amounts of $106.2 million (2003: $118.6 million) and $72.1 million (2003: $74.0 million), both maturing on September 28, 2007 with a strike rate of 6.8%. These derivatives were settled in February 2005. | |
(2) | In connection with the Stendal Loan Facility, in 2002 Stendal entered into the Stendal Interest Rate Swaps, which are variable-to-fixed interest rate swaps, for the term of the Stendal Loan Facility, with respect to an aggregate maximum amount of approximately€612.6 million of the principal amount of the long-term indebtedness under the Stendal Loan Facility. The swaps took effect on October 1, 2002 and are comprised of three contracts. The first contract commenced in October 2002 for a notional amount of€4.1 million, gradually increasing to€464.9 million, with an interest rate of 3.795%, and matured in May 2004. The second contract commenced in May 2004 for a notional amount of€464.9 million, gradually increasing to€612.6 million, with an interest rate of 5.28%, and matures in April 2005. The third contract commenced in April 2005 for a notional amount of€612.6 million, with an interest rate of 5.28%, and the notional amount gradually decreases and the contract terminates upon the maturity of the Stendal Loan Facility in October 2017. As at December 31, 2004 and June 30, 2005, the notional amounts of the outstanding two contracts was€612.6 million and€612.6 million, respectively. | |
(3) | For€306.3 million of the outstanding principal amount under the Stendal Loan Facility, all repayment installments from February 7, 2005 until October 2, 2017 were swapped into U.S. dollar amounts at a rate of U.S. 1.2960. The interest rate was swapped into the following payments: pay six-month U.S. dollar to LIBOR rate plus 12 basis points and receive the six-month Euribor. | |
(4) | For€153.2 million of the outstanding principal amount under the Stendal Loan Facility, all repayment installments from April 1, 2005 until October 2, 2017 were swapped into U.S. dollar amounts at a rate of U.S. 1.2990. The interest rate was swapped into the following payments: pay six-month U.S. dollar to LIBOR rate plus 13 basis points and receive the six-month Euribor. | |
(5) | For€153.2 million of the outstanding principal amount under the Stendal Loan Facility, all repayment installments from April 18, 2005 until October 2, 2017 were swapped into U.S. dollar amounts at a rate of U.S. 1.2799. The interest rate was swapped into the following payments: pay six-month U.S. dollar to LIBOR rate plus 13 basis points and receive the six-month Euribor. |
FORM 10-Q
QUARTERLY REPORT — PAGE 41
FORM 10-Q
QUARTERLY REPORT — PAGE 42
Votes For | Votes Withheld | Abstentions and Broker Non-Votes | ||||||||||
Jimmy S.H. Lee | 26,502,486 | 77,690 | — | |||||||||
William D. McCartney | 26,503,186 | 76,990 | — |
(a) | Exhibits |
Exhibit | ||
No. | Description | |
4.1* | Amendment to Registration Rights Agreement dated May 30, 2005 between Mercer International Inc. and KPMG Inc. | |
4.2* | Registration Rights Agreement dated February 10, 2005 between Mercer International Inc. and Royal Bank of Canada. | |
4.3* | Amendment to Registration Rights Agreement dated May 30, 2005 between Mercer International Inc. and Royal Bank of Canada. | |
31.1 | Section 302 Certification of Chief Executive Officer | |
31.2 | Section 302 Certification of Chief Financial Officer | |
32.1** | Section 906 Certification of Chief Executive Officer |
FORM 10-Q
QUARTERLY REPORT — PAGE 43
Exhibit | ||
No. | Description | |
32.2** | Section 906 Certification of Chief Financial Officer |
* | Incorporated by reference to Form 8-K filed on November 23, 2004, as amended on June 3, 2005. | |
** | In accordance with Release 33-8212 of the Commission, these Certifications: (i) are “furnished” to the Commission and are not “filed” for the purposes of liability under the Securities Exchange Act of 1934, as amended; and (ii) are not to be subject to automatic incorporation by reference into any of the Company’s registration statements filed under the Securities Act of 1933, as amended for the purposes of liability thereunder or any offering memorandum, unless the Company specifically incorporates them by reference therein. |
FORM 10-Q
QUARTERLY REPORT — PAGE 44
MERCER INTERNATIONAL INC. | ||||
By: | /s/ David M. Gandossi | |||
David M. Gandossi | ||||
Secretary and Chief Financial Officer | ||||
FORM 10-Q
QUARTERLY REPORT — PAGE 45