NEW YORK, March 3 /PRNewswire-FirstCall/ -- Mercer International
Inc. (Nasdaq: MERC; TSX: MRI.U) today reported results for the
fourth quarter and year ended December 31, 2005. Summary Selected
Highlights Three Months Ended Year Ended December 31, December 31,
2005 2004 2005 2004 (in thousands) Results of Operations
(unaudited) Revenues euro 137,478 euro 89,201 euro 513,908 euro
237,212 Income (loss) from operations 145 (10,347) 16,344 (17,972)
Operating EBITDA(1) 13,324 1,580 68,385 17,172 Interest expense
Stendal (15,797) (10,302) (56,789) (12,190) Interest expense other
(7,743) (3,893) (30,071) (11,559) Realized and unrealized gain
(loss) on interest rate and foreign currency derivative financial
instruments, net(2) (1,703) 13,213 (71,763) 12,136 Unrealized
foreign exchange gain (loss) on debt (2,565) - (4,156) - Net income
(loss) (29,773) 32,584 (117,146) 19,980 Income (loss) per share
Basic (0.90) 1.87 (3.75) 1.15 Diluted (0.90) 1.14 (3.75) 0.89 Other
Data Total pulp sales volume(3) (ADMTs) 291,046 192,254 1,101,304
421,176 Mill net pulp price realizations (per ADMT)(4) euro 413
euro 389 euro 407 euro 423 (1) For a definition of Operating
EBITDA, see page 7 of this press release and for a reconciliation
of net income (loss) to Operating EBITDA, see page 11 of the
financial tables included in this press release. (2) Unrealized
non-cash marked to market valuation gain (loss), except for a
realized loss of euro 2.5 million in the year ended December 31,
2005. (3) Excluding intercompany sales volumes of 3,638 ADMTs and
2,859 ADMTs of pulp in the three months ended December 31, 2005 and
2004, respectively, and 14,289 ADMTs and 6,756 ADMTs of pulp in the
year ended December 31, 2005 and 2004, respectively. (4) Excluding
revenues from third party transportation activities. As at As at
December 31, December 31, 2005 2004 (in thousands) Financial
Position (Current) Cash and cash equivalents euro 83,547 euro
49,568 Cash restricted 7,039 45,295 Receivables 74,315 54,687
Inventories 81,147 52,898 Prepaid expenses and other 5,474 4,961
Accounts payable and accrued expenses (111,513) (56,542)
Construction costs payable (1,213) (65,436) Debt, current portion
(27,601) (107,090) Working capital (deficit)(1) 111,195 (21,659)
(1) Does not include approximately euro 7.0 million of government
grants in 2005, which we expect to receive in 2006, and
approximately euro 65.9 million of government grants in 2004, all
of which we received in 2005, related to the Stendal mill from the
federal and state governments of Germany. Certain key factors
affecting our 2005 fourth quarter results include: * Revenues
increased by euro 48.3 million over the comparative period of 2004
to euro 137.5 million, primarily due to the inclusion of sales from
our Celgar pulp mill. * Operating EBITDA increased to euro 13.3
million in the fourth quarter from euro 1.6 million in the
comparative quarter of 2004 reflecting higher pulp sales and a
contribution to income from operations of euro 4.9 million
resulting from the sale of emission allowances. For a definition of
Operating EBITDA, see page 7 of this press release and for a
reconciliation of net loss to Operating EBITDA, see page 11 of the
financial tables included in this press release. * Interest expense
increased to euro 23.5 million in the fourth quarter of 2005 from
euro 14.2 million in the comparative period of 2004 reflecting
higher borrowings associated with the Stendal mill and interest on
our $310 million 9.25% senior notes issued in February 2005. * The
Stendal mill ramp up is proceeding substantially as scheduled. In
the quarter, it operated at approximately 88% of its initial rated
capacity. Its working capital build up, interest expense and
start-up losses have been financed through its project loan
facility according to plan. * We recorded a net loss of euro 1.7
million on our interest rate and currency derivatives in the fourth
quarter of 2005, compared to a net gain of euro 13.2 million
thereon in the comparative period of 2004. We also recorded an
unrealized non-cash foreign exchange loss on our long-term debt of
euro 2.6 million in the current quarter due to the weakening of the
Euro versus the U.S. dollar. * Pulp markets were generally soft,
but strengthened marginally from the third quarter of 2005. Average
list prices for NBSK pulp in Europe were $580 per ADMT in the third
quarter of 2005 and $600 per ADMT in the fourth quarter of 2005,
compared to $603 per ADMT in the fourth quarter of 2004. The
decrease in pulp list prices from the fourth quarter of 2004 was
generally offset by the strengthening of the U.S. dollar versus the
Euro. Certain key factors affecting our results for the year ended
December 31, 2005 included: * Revenues in 2005 increased by euro
276.7 million over the comparative period of 2004 to euro 513.9
million, because of higher sales at our Stendal mill and the
inclusion of results from our Celgar pulp mill from February 2005.
* Operating EBITDA increased to euro 68.4 million in 2005 from euro
17.2 million in 2004 reflecting higher pulp sales and a
contribution to income from operations of euro 17.3 million
resulting from the sale of emission allowances. For a definition of
Operating EBITDA, see page 7 of this press release and for a
reconciliation of net loss to Operating EBITDA, see page 11 of the
financial tables included in this press release. * Interest expense
increased to euro 86.9 million in 2005 from euro 23.7 million in
2004 because of euro 56.8 million of interest associated with the
Stendal mill and euro 20.4 million of interest relating to our $310
million 9.25% senior notes. In 2004, most of the interest
associated with the Stendal mill was capitalized until
mid-September, when the mill was started up. * We recorded a net
loss of euro 71.8 million on our interest rate and currency
derivatives in 2005 (of which euro 69.3 million was an unrealized
non-cash holding loss and euro 2.5 million was a realized loss),
compared to a net gain of euro 12.1 million thereon in 2004 (of
which euro 32.3 million was an unrealized non-cash holding loss and
euro 44.4 million was a realized gain). * Pulp markets were
generally weak in 2005. Average list prices for NBSK pulp in Europe
decreased to approximately $610 per ADMT from approximately $616
per ADMT in 2004, but such decrease was partially offset by the
strengthening of the U.S. dollar versus the Euro. The strengthening
of the Canadian dollar from February 14, 2005, the date of the
acquisition of the Celgar mill, by approximately 5.6% versus the
U.S. dollar adversely affected the results of our Celgar mill.
Results of Operations - 2005 Fourth Quarter Selected production and
sales data for the three months ended December 31, 2005 and 2004 is
as follows: Three Months Ended December 31, 2005 2004 (ADMTs)
Production by Product Class: Pulp production by mill: Rosenthal
75,935 82,785 Celgar 99,088 - Stendal 121,249 132,694 Total pulp
production 296,272 215,479 Paper production 15,514 14,996 Total
production 311,786 230,475 Sales Volume by Product Class: Pulp
sales volume by mill: Rosenthal 76,599 78,471 Celgar 101,115 -
Stendal 113,332 113,783 Total pulp sales volume(1) 291,046 192,254
Paper sales volume 14,973 14,781 Total sales volume(1) 306,019
207,035 Revenues by Product Class: (in thousands) Pulp revenues by
mill: Rosenthal euro 34,135 euro 34,190 Celgar 41,755 - Stendal
47,112 41,673 Total pulp revenues(1) 123,002 75,863 Paper revenues
14,476 13,338 Total revenues(1) euro 137,478 euro 89,201 (1)
Excluding intercompany sales volumes of 3,638 ADMTs and 2,859 ADMTs
of pulp and intercompany net sales revenues of approximately euro
1.6 million and euro 1.0 million in the three months ended December
31, 2005 and 2004, respectively. Revenues for the three months
ended December 31, 2005 increased to euro 137.5 million from euro
89.2 million in the comparative period of 2004, primarily due to
the inclusion of sales from our Celgar mill. Pulp sales by volume
were 291,046 ADMTs in the fourth quarter of 2005, compared to
192,254 ADMTs in the comparative period of 2004. Cost of sales and
general, administrative and other expenses in the fourth quarter of
2005 increased to euro 137.3 million from euro 99.5 million in the
comparative period of 2004, primarily as a result of the inclusion
of the results of our Celgar mill. For the fourth quarter of 2005,
revenues from our pulp operations increased to euro 123.0 million
from euro 75.9 million in the same period a year ago, primarily as
a result of the inclusion of sales from our Celgar mill. List
prices for NBSK pulp in Europe were approximately euro 506 ($600)
per ADMT in the fourth quarter of 2005, compared to approximately
euro 446 ($603) per ADMT in the comparative period of last year.
Pulp sales realizations increased to euro 413 per ADMT on average
in the fourth quarter of 2005 from euro 389 per ADMT in the fourth
quarter of 2004, primarily as the strengthening of the U.S. dollar
versus the Euro enabled our German pulp mills to improve mill net
selling prices. Cost of sales and general, administrative and other
expenses for the pulp operations increased to euro 123.6 million in
the fourth quarter of 2005 from euro 87.6 million in the
comparative period of 2004, primarily due to the inclusion of the
results of the Celgar mill. In the fourth quarter of 2005, we
recorded a contribution to income from operations of euro 4.9
million resulting from the sale of emission allowances.
Depreciation for the pulp operations increased to euro 13.5 million
in the fourth quarter of 2005, from euro 11.8 million in the
comparative period of 2004, primarily as a result of depreciation
associated with the Celgar mill. For the fourth quarter of 2005,
our pulp operations generated operating income of euro 1.0 million,
versus an operating loss of euro 10.7 million in the comparative
quarter of 2004, primarily due to the higher operating income at
our German pulp mills, partially offset by an operating loss at our
Celgar mill. As NBSK pulp is generally quoted in U.S. dollars, the
overall strengthening of the Canadian dollar versus the U.S. dollar
reduced the sales realizations of our Celgar mill and negatively
impacted its results. Revenues from our paper operations in the
current quarter increased to euro 14.5 million from euro 13.6
million in the same quarter of last year as a result of higher
sales volumes and a change in the product mix. Cost of sales and
general, administrative and other expenses for the paper operations
in the fourth quarter of 2005 increased to euro 14.6 million from
euro 12.8 million in the comparative quarter of 2004. For the
fourth quarter of 2005, our paper operations generated an operating
loss of euro 0.1 million, compared to operating income of euro 0.8
million in the fourth quarter of 2004. In the fourth quarter of
2005, we had income from operations of euro 0.1 million, compared
to a loss from operations of euro 10.3 million in the same quarter
last year. Interest expense in the fourth quarter of 2005 increased
to euro 23.5 million from euro 14.2 million in the year ago period,
due to higher borrowings relating to the Stendal mill and interest
on our $310 million senior note issue completed in February 2005.
Stendal entered into certain foreign currency derivatives to swap
all of its long-term bank indebtedness from Euros to U.S. dollars
and certain currency forwards in 2005. Due to the strengthening of
the U.S. dollar versus the Euro, we recorded a net unrealized
non-cash holding loss of euro 13.7 million before minority
interests upon the marked to market valuation of such currency
derivatives that were outstanding at the end of the current quarter
and a marginal net loss before minority interests in respect of
such currency derivatives that matured in the quarter. In the
comparative quarter of 2004, we realized a gain of euro 29.7
million before minority interests upon the settlement of the
currency derivatives of Rosenthal and Stendal. In the fourth
quarter of 2005, as a result of an increase in long-term European
interest rates, we also recorded a net unrealized non-cash holding
gain of euro 12.0 million before minority interests on the marked
to market valuation of the Stendal interest rate derivatives,
compared to a net unrealized non-cash holding loss of euro 16.5
million before minority interests on the interest rate derivatives
of Stendal and Rosenthal in the fourth quarter of 2004. We also
recorded an unrealized non-cash foreign exchange loss on our
long-term debt of euro 2.6 million in the current quarter due to
the weakening of the Euro versus the U.S. dollar. In the fourth
quarter of 2005, minority interest, representing the two minority
shareholders' proportionate interest in the Stendal mill, was euro
0.6 million, compared to euro (1.5) million in the fourth quarter
of 2004. We reported a net loss for the fourth quarter of 2005 of
euro 29.8 million, or euro 0.90 per basic and diluted share, which
reflected generally weak markets, increased interest expense of
euro 23.5 million, the net realized and unrealized loss of euro 1.7
million on our interest rate and currency derivatives and the
unrealized non-cash foreign exchange loss on our long-term debt of
euro 2.6 million. In the fourth quarter of 2004, we reported net
income of euro 32.6 million, or euro 1.87 per basic share and euro
1.14 per diluted share, which included an income tax benefit of
euro 44.1 million relating to a reorganization of certain
subsidiary companies. We generated "Operating EBITDA" of euro 13.3
million and euro 1.6 million in the three months ended December 31,
2005 and 2004, respectively. Operating EBITDA is defined as income
(loss) from operations plus depreciation and amortization and
non-recurring capital asset impairment charges. Management uses
Operating EBITDA as a benchmark measurement of its own operating
results, and as a benchmark relative to its competitors. Management
considers it to be a meaningful supplement to operating income as a
performance measure primarily because depreciation expense and
non-recurring capital asset impairment charges are not an actual
cash cost, and depreciation expense varies widely from company to
company in a manner that management considers largely independent
of the underlying cost efficiency of their operating facilities. In
addition, we believe Operating EBITDA is commonly used by
securities analysts, investors and other interested parties to
evaluate our financial performance. Operating EBITDA does not
reflect the impact of a number of items that affect our net income
(loss), including financing costs and the effect of derivative
instruments. Operating EBITDA is not a measure of financial
performance under GAAP, and should not be considered as an
alternative to net income (loss) or income (loss) from operations
as a measure of performance, nor as an alternative to net cash from
operating activities as a measure of liquidity. Operating EBITDA
has significant limitations as an analytical tool, and should not
be considered in isolation, or as a substitute for analysis of our
results as reported under GAAP. For a reconciliation of net loss to
Operating EBITDA, see page 11 of the financial tables included in
this press release. Results of Operations - 2005 Revenues for the
year ended December 31, 2005 increased to euro 513.9 million from
euro 237.2 million in the comparative period of 2004, because of
higher pulp sales resulting from the inclusion of a full year of
results of our Stendal mill and the results of our Celgar mill from
February 2005. Pulp sales by volume were 1,101,304 ADMTs in 2005,
compared to 421,716 ADMTs in 2004. Cost of sales and general,
administrative and other expenses in the year ended December 31,
2005 increased to euro 497.6 million from euro 255.2 million in the
comparative period of 2004, primarily as a result of the inclusion
of a full year's results of our Stendal mill and the results of our
Celgar mill. We commenced expensing all of the costs, including
interest, relating to the Stendal mill effective September 2004
when the mill was started up, prior to which most of the costs,
including interest, relating to the Stendal mill were capitalized
during its construction. In the year ended December 31, 2005,
revenues from our pulp operations increased to euro 452.4 million
from euro 182.5 million in 2004, primarily as a result of the
inclusion of a full year's sales of our Stendal mill and sales from
our Celgar mill. List prices for NBSK pulp in Europe were
approximately euro 490 ($610) per ADMT in 2005, compared to
approximately euro 496 ($616) per ADMT last year. The decrease in
NBSK pulp prices was partially offset by the strengthening of the
U.S. dollar versus the Euro in 2005. Pulp sales realizations
decreased to euro 407 per ADMT on average in the year ended
December 31, 2005 from euro 423 per ADMT in 2004, primarily as a
result of lower price realizations of the Stendal and Celgar mills.
The Stendal mill sold pulp at a discounted price as a result of its
ramp up and the Celgar mill sells a large portion of its production
in Asian markets which had lower prices than European markets. Cost
of sales and general, administrative and other expenses for the
pulp operations increased to euro 434.9 million in the year ended
December 31, 2005 from euro 190.4 million in 2004, primarily as a
result of euro 322.0 million of operating costs related to the
Stendal and Celgar mills. In the year ended December 31, 2005, we
recorded a contribution to income from operations of euro 17.3
million resulting from the sale of emission allowances by our
German pulp mills. Depreciation for the pulp operations increased
to euro 50.9 million in the current period, from euro 26.8 million
in 2004, primarily as a result of euro 37.8 million of depreciation
from the Stendal and Celgar mills, partially offset by lower
depreciation at the Rosenthal mill. For the year ended December 31,
2005, the pulp operations generated operating income of euro 23.9
million, versus an operating loss of euro 5.1 million last year,
primarily as a result of higher operating income at our German pulp
mills including income from operations of euro 8.3 million from our
Stendal mill, partially offset by an operating loss at our Celgar
mill. The overall strength of the Canadian dollar versus the U.S.
dollar in 2005 negatively impacted the results of our Celgar mill.
Paper sales in the year ended December 31, 2005 were euro 61.5
million, compared with euro 55.0 million in the same period of last
year as a result of higher sales volumes and a shift in the product
mix at our paper mills. Cost of sales and general, administrative
and other expenses for the paper operations in the year ended
December 31, 2005 decreased to euro 63.8 million from euro 64.7
million in the year ended December 31, 2004. For the year ended
December 31, 2005, our paper operations generated an operating loss
of euro 2.3 million, compared to an operating loss of euro 9.8
million in 2004, which included a non-cash impairment charge of
euro 6.0 million in 2004. In the year ended December 31, 2005, we
had income from operations of euro 16.3 million, compared to a loss
from operations of euro 18.0 million last year, primarily as a
result of higher income from our German pulp mills. Interest
expense in the year ended December 31, 2005 increased to euro 86.9
million from euro 23.7 million a year ago, due to interest
associated with our $310 million senior note issue completed in
February 2005 and higher borrowings relating to the Stendal mill.
We capitalized most of the interest relating to the Stendal mill
prior to its start up in mid-September 2004. Due to the
strengthening of the U.S. dollar versus the Euro in 2005, we
recorded a net unrealized non-cash holding loss of euro 66.1
million before minority interests upon the marked to market
valuation of Stendal's currency derivatives that were outstanding
at the end of the 2005 period and a net realized loss of euro 2.2
million before minority interests in respect of such currency
derivatives that matured during the period. In 2004, we recorded a
realized gain of euro 44.5 million before minority interests upon
the settlement of the currency derivatives relating to the Stendal
and Rosenthal mills due to the weakening of the U.S. dollar versus
the Euro in 2004. In 2005, as a result of a decrease in long-term
European interest rates, we also recorded an unrealized non-cash
holding loss of euro 3.2 million before minority interests on the
marked to market valuation of the interest rate contracts relating
to Stendal and a net realized loss of euro 0.3 million before
minority interests upon the settlement of the interest rate
contracts relating to Rosenthal. In 2004, we recorded a net
unrealized non-cash holding loss of euro 32.3 million before
minority interests on the marked to market valuation of the
Rosenthal and Stendal interest rate contracts. We also recorded an
unrealized non-cash foreign exchange loss on our long-term debt of
euro 4.2 million in 2005 due to the weakening of the Euro versus
the U.S. dollar. In the year ended December 31, 2005, minority
interest, representing the two minority shareholders' proportionate
interest in the Stendal mill, was euro 17.7 million, compared to
euro 2.5 million in 2004. In 2005, we recorded an adjustment of
euro 1.7 million for the non-cash impact of other-than-temporary
impairment losses on our available-for-sale securities and a loan
receivable. We reported a net loss for the year ended December 31,
2005 of euro 117.1 million, or euro 3.75 per basic and diluted
share, which reflected generally weak pulp markets, the realized
and unrealized net losses on our currency and interest rate
derivatives of euro 71.8 million and interest expense relating to
our Stendal mill of euro 56.8 million, partially offset by a
non-cash benefit for income taxes of euro 10.8 million. In 2004, we
reported net income of euro 20.0 million, or euro 1.15 per basic
share and euro 0.89 per diluted share, which included an income tax
benefit of euro 44.2 million relating to the reorganization of
certain of our subsidiary companies. We generated "Operating
EBITDA" of euro 68.4 million and euro 17.2 million in the years
ended December 31, 2005 and 2004, respectively. Operating EBITDA is
defined as income (loss) from operations plus depreciation and
amortization and non-recurring capital asset impairment charges.
For a definition of Operating EBITDA, see page 7 of this press
release and, for a reconciliation of net loss to Operating EBITDA,
see page 11 of the financial tables included in this press release.
President's Comments Mr. Jimmy S.H. Lee, President and Chairman,
stated: "In many respects, 2005 was a milestone year for our
Company. During the year: * We ramped up production at our Stendal
mill and, in the last quarter, it operated at approximately 88% of
its initial rated capacity. The production ramp up was largely in
line with our plans and, in 2006, we currently expect it to operate
at or slightly better than its initial rated capacity. The planned
increase in production should lower Stendal's unit costs of
production. * In December, we took approximately 11 days of planned
downtime at the Stendal mill for maintenance and to install two new
digesters. When these digesters are fully integrated, they are
expected to increase Stendal's production capacity to in excess of
600,000 ADMTs. * We acquired the Celgar pulp mill with a rated
capacity of approximately 430,000 ADMTs to expand our business,
diversify our operations and revenues and better service our
customers. We are implementing an approximately euro 20.0 million
capital plan to improve efficiency and reliability and reduce its
operating costs. The plan is also expected to increase the Celgar
mill's capacity to approximately 470,000 ADMTs. * We established a
new sales and marketing team to coordinate and supervise our global
pulp sales to improve realizations by increasing our contracted
regular business, focus on our most transport logical customers and
better service customers on a global basis. As a result, in 2006 we
are now handling the vast majority of North America pulp sales
directly, increasing our contract business and lowering spot sales.
Further, in 2006 we plan to materially increase our Celgar mill's
pulp sales to the North American market, which generally has higher
pulp prices, by shifting product from certain Asian markets, which
have lower prices. Mr. Lee continued: "Our fourth quarter results
reflect generally soft pulp markets. List prices for NBSK pulp in
Europe were $600 per ADMT in December and generally lower in Asia.
Further, during the quarter, we took approximately 30 days of
planned downtime across our three pulp mills for regular
maintenance which reduced production by 38,159 ADMTs. Also,
improvements in our Celgar mill's production costs were more than
offset by the negative impact on its results from the strength of
the Canadian dollar versus the U.S. dollar. Despite these
challenges, we continued our focus on improving efficiency and cost
controls and, during the period, Operating EBITDA increased to euro
13.3 million from euro 1.6 million in the prior period." Mr. Lee
continued: "NBSK list prices in Europe started the year at
approximately $635 per tonne and declined to approximately $580
over the year before recovering somewhat to approximately $600 at
year end. Prices in Asia, and in particular China, were generally
much softer. Our non-cash marked to market loss for the year on our
derivative instruments was euro 69.3 million. For the year, we
reported interest expense of euro 86.9 million, which reflected
both interest expense associated with the acquisition of our Celgar
mill and a full year of interest expense related to the Stendal
mill. In 2004, substantially all of the interest expense associated
with the Stendal mill was capitalized until mid-September." Mr. Lee
continued: "Looking forward, we are seeing improving pulp demand in
all our markets which should result in some price improvement. List
prices in Europe have now improved to approximately $620 per tonne
and producers are seeking a further $20 per tonne price increase in
the first quarter of 2006. In 2006, current list prices in Asian
markets have also increased by approximately $50 per tonne compared
to the 2005 fourth quarter levels." Mr. Lee further stated: "In
addition, the recent continued softness in pulp markets has
resulted in several mill shutdowns which has removed capacity from
the market and other facilities are predicted to potentially be
shut down. We believe that this shakeout of older, smaller and
higher cost facilities will improve pricing and assist us in
becoming a preferred supplier for customers seeking a long-term,
stable and reliable supply of NBSK pulp." Mr. Lee concluded: "By
focusing our production on large, modern and efficient NBSK pulp
mills, we believe we are well positioned to realize on any
improvements in NBSK pulp markets and to create value for our
stakeholders." In conjunction with this release, Mercer
International will host a conference call, which will be
simultaneously broadcast live over the Internet. Management will
host the call, which is scheduled for Monday, March 6, 2006 at
10:00 AM EST. Listeners can access the conference call live and
archived over the Internet through a link at the company's web site
at http://www.mercerinternational.com/, or at
http://phx.corporate-/
ir.net/playerlink.zhtml?c=62074&s=wm&e=1195268. 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 March 13, 2006 at 11:59 p.m. (Eastern Standard Time). The
replay number is (800) 642-1687, and the passcode is 4249268.
Mercer International Inc. is a global pulp and paper manufacturing
company. To obtain further information on the company, please visit
its web site at http://www.mercerint.com/en/newsCurrent.cfm. The
preceding includes forward looking statements which involve known
and unknown risks and uncertainties which may cause the Company's
actual results in future periods to differ materially from
forecasted results. Among those factors which could cause actual
results to differ materially are the following: market conditions,
competition and other risk factors listed from time to time in the
company's SEC reports. MERCER INTERNATIONAL INC. CONSOLIDATED
BALANCE SHEETS December 31, 2005 and 2004 (Euros in thousands)
December 31, December 31, 2005 2004 ASSETS Current Assets Cash and
cash equivalents euro 83,547 euro 49,568 Cash restricted 7,039
45,295 Receivables 74,315 54,687 Inventories 81,147 52,898 Prepaid
expenses and other 5,474 4,961 Total current assets 251,522 207,409
Long-Term Assets Cash restricted 24,573 47,538 Property, plant and
equipment 1,024,662 936,035 Investments 6,314 5,079 Deferred note
issuance and other costs 8,364 5,069 Deferred income tax 78,381
54,519 1,142,294 1,048,240 Total assets 1,393,816 1,255,649
LIABILITIES Current Liabilities Accounts payable and accrued
expenses 111,513 56,542 Construction costs payable 1,213 65,436
Debt, current portion 27,601 107,090 Total current liabilities
140,327 229,068 Long-Term Liabilities Debt, less current portion
922,619 777,272 Unrealized foreign exchange rate derivative loss
61,979 - Unrealized interest rate derivative loss 78,646 75,471
Pension and other post-retirement benefit obligations 17,113 -
Capital leases and other 9,945 9,035 Deferred income tax 14,444
2,062 1,104,746 863,840 Total liabilities 1,245,073 1,092,908
SHAREHOLDERS' EQUITY Shares of beneficial interest 181,586 83,397
Additional paid-in capital, stock options 14 14 Retained earnings
(deficit) (47,970) 69,176 Accumulated other comprehensive income
15,113 10,154 Total shareholders' equity 148,743 162,741 Total
liabilities and shareholders' equity euro 1,393,816 euro 1,255,649
(1) MERCER INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended December 31, 2005 and 2004 (Unaudited)
(Euros in thousands, except per share data) 2005 2004 Revenues euro
137,478 euro 89,201 Costs and expenses: Cost of sales 134,240
93,736 3,238 (4,535) General and administrative expenses (8,032)
(5,812) Sale (purchase) of emission allowances 4,939 - Income
(loss) from operations 145 (10,347) Other income (expense):
Interest expense (23,540) (14,195) Investment income 873 1,269
Realized gain on derivative financial instruments 199 44,467
Unrealized loss on derivative financial instruments (1,703)
(31,254) Unrealized foreign exchange gain on debt (2,565) - Total
other income (expense) (26,736) 287 Loss before income taxes and
minority interest (26,591) (10,060) Income tax (provision) benefit
(3,780) 44,126 Income (loss) before minority interest (30,371)
34,066 Minority interest 598 (1,482) Net income (loss) euro
(29,773) 32,584 Income (loss) per share Basic euro (0.90) euro 1.87
Diluted euro (0.90) euro 1.14 (2) MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December
31, 2005 and 2004 (Euros in thousands, except per share data) 2005
2004 Revenues euro 513,908 euro 237,212 Costs and expenses: Cost of
sales 484,425 221,595 29,483 15,617 General and administrative
expenses (30,431) (26,920) Sale (purchase) of emission allowances
17,292 - Impairment of capital assets - (6,000) Flooding losses and
expenses, less grant income - (669) Income (loss) from operations
16,344 (17,972) Other income (expense): Interest expense (86,860)
(23,749) Investment income 2,467 2,948 Unrealized foreign exchange
loss on debt (4,156) - Realized gain (loss) on derivative financial
instruments (2,455) 44,467 Unrealized loss on derivative financial
instruments (69,308) (32,331) Impairment of investments - Total
other income (expense) (162,011) (8,665) Loss before income taxes
and minority interest (145,667) (26,637) Income tax benefit 10,847
44,163 (Loss) income before minority interest (134,820) 17,526
Minority interest 17,674 2,454 Net (loss) income euro (117,146)
euro 19,980 Income (loss) per share Basic euro (3.75) euro 1.15
Diluted euro (3.75) euro 0.89 (3) MERCER INTERNATIONAL INC.
BUSINESS SEGMENT INFORMATION For the Three Months Ended December
31, 2005 and 2004 (Unaudited) (Euros in thousands) Rosenthal
Celgar(1) Stendal Total Pulp Pulp Pulp Pulp Three Months Ended
December 31, 2005 Sales to external customers euro 34,135 euro
41,755 euro 47,112 euro 123,002 Intersegment net sales - - 1,629
1,629 34,135 41,755 48,741 124,631 Operating costs 27,034 45,083
38,881 110,998 Operating depreciation and amortization 2,936 3,452
7,083 13,471 General and administrative 1,396 650 2,056 4,102
(Sale) purchase of emission allowances (2,869) - (2,070) (4,939)
28,497 49,185 45,950 123,632 Income (loss) from operations 5,638
(7,430) 2,791 999 Interest expense Investment income Derivative
financial instruments, net Foreign exchange loss on debt Impairment
of investments Loss before income taxes and minority interest Three
Months Ended December 31, 2004 Sales to external customers euro
34,190 euro - euro 41,673 euro 75,863 Intersegment net sales 127 -
885 1,012 34,317 - 42,558 76,875 Operating costs 25,408 - 45,676
71,084 Operating depreciation and amortization 3,585 - 7,711 11,812
General and administrative 2,773 - 2,431 4,688 31,766 - 55,818
87,584 Income (loss) from operations 2,551 - (13,260) (10,709)
Interest expense Investment and other income Derivative financial
instruments, net Loss before income taxes and minority interest
Corporate, Other and Consolidated Paper Eliminations Total Three
Months Ended December 31, 2005 Sales to external customers euro
14,476 euro - euro 137,478 Intersegment net sales - (1,629) -
14,476 (1,629) 137,478 Operating costs 12,097 (2,034) 121,061
Operating depreciation and amortization 289 (581) 13,179 General
and administrative 2,200 1,730 8,032 (Sale) purchase of emission
allowances - - (4,939) 14,586 (885) 137,333 Income (loss) from
operations (110) (744) 145 Interest expense (23,540) Investment
income 873 Derivative financial instruments, net (1,504) Foreign
exchange loss on debt (2,565) Impairment of investments - (26,736)
Loss before income taxes and minority interest euro (26,591) Three
Months Ended December 31, 2004 Sales to external customers euro
13,572 euro (234) euro 89,201 Intersegment net sales - (1,012) -
13,572 (1,246) 89,201 Operating costs 11,498 (1,289) 81,293
Operating depreciation and amortization 616 15 11,927 General and
administrative 646 478 6,328 12,760 (796) 99,548 Income (loss) from
operations 812 (450) (10,347) Interest expense (14,195) Investment
and other income 1,269 Derivative financial instruments, net 13,213
287 Loss before income taxes and minority interest euro (10,060)
(4) MERCER INTERNATIONAL INC. BUSINESS SEGMENT INFORMATION For the
Years Ended December 31, 2005 and 2004 (Euros in thousands)
Rosenthal Celgar(1) Stendal Total Pulp Pulp Pulp Pulp Year Ended
December 31, 2005 Sales to external customers euro 137,193 euro
139,213 euro 176,031 euro 452,437 Intersegment net sales - - 6,308
6,308 137,193 139,213 182,339 458,745 Operating costs 100,180
131,521 151,620 383,321 Operating depreciation and amortization
13,109 10,535 27,262 50,906 General and administrative 6,837 5,935
5,176 17,948 (Sale) purchase of emission allowances (7,271) -
(10,021) (17,292) 112,855 147,991 174,037 434,883 Income (loss)
from operations 24,338 (8,778) 8,302 23,862 Interest expense
Investment income Derivative financial instruments, net Foreign
exchange loss on debt Impairment of investments (Loss) income
before income taxes and minority interest Segment assets euro
344,473 euro 260,461 euro 746,346 euro 1,351,280 Year Ended
December 31, 2004 Sales to external customers euro 140,203 euro -
euro 42,273 euro 182,476 Intersegment net sales 1,949 - 885 2,834
142,152 - 43,158 185,310 Operating costs 98,113 - 46,185 144,298
Operating depreciation and amortization 17,751 - 9,022 26,773
General and administrative 10,733 - 8,560 19,293 Impairment of
assets - - - - Flooding grants, less losses and expenses - - - -
126,597 - 63,767 190,364 Income (loss) from operations 15,555 -
(20,609) (5,054) Interest expense Derivative financial instruments,
net Investment and other income Loss before income taxes and
minority interest Segment assets euro 394,569 euro - euro 810,267
euro 1,204,836 Corporate, Other and Consolidated Paper Eliminations
Total Year Ended December 31, 2005 Sales to external customers euro
61,471 euro - euro 513,908 Intersegment net sales - (6,308) -
61,471 (6,308) 513,908 Operating costs 56,976 (7,913) 432,384
Operating depreciation and amortization 881 254 52,041 General and
administrative 5,920 6,563 30,431 (Sale) purchase of emission
allowances - - (17,292) 63,777 (1,096) 497,564 Income (loss) from
operations (2,306) (5,212) 16,344 Interest expense (86,860)
Investment income 2,467 Derivative financial instruments, net
(71,763) Foreign exchange loss on debt (4,156) Impairment of
investments (1,699) (Loss) income before income taxes and minority
interest euro (145,667) Segment assets euro 21,892 euro 20,644 euro
1,393,816 Year Ended December 31, 2004 Sales to external customers
euro 54,970 euro (234) euro 237,212 Intersegment net sales -
(2,834) - 54,970 (3,068) 237,212 Operating costs 51,184 (3,031)
192,451 Operating depreciation and amortization 2,356 15 29,144
General and administrative 4,532 3,095 26,920 Impairment of assets
6,000 - 6,000 Flooding grants, less losses and expenses 669 - 669
64,741 79 255,184 Income (loss) from operations (9,771) (3,147)
(17,972) Interest expense (23,749) Derivative financial
instruments, net 12,136 Investment and other income 2,948 Loss
before income taxes and minority interest euro (26,637) Segment
assets euro 22,735 euro 28,078 euro 1,255,649 (1) The results of
the Celgar pulp mill are from the date of its acquisition on
February 14, 2005. (5) MERCER INTERNATIONAL INC. RESTRICTED GROUP
SUPPLEMENTAL DISCLOSURE Combined Condensed Balance Sheet As at
December 31, 2005 (Euros in thousands) The terms of the indenture
governing our 9.25% senior unsecured notes requires that we provide
the results of operations and financial condition of Mercer
International Inc. excluding its subsidiaries ("Mercer Inc.") and
our restricted subsidiaries under the indenture, collectively
referred to as the "Restricted Group." As at and during the year
ended December 31, 2005, the Restricted Group was comprised of
Mercer Inc., certain holding subsidiaries and Rosenthal, and the
Celgar mill from the date of its acquisition on February 14, 2005.
As at and during the year ended December 31, 2004, the Restricted
Group was comprised of Mercer Inc., certain holding subsidiaries
and Rosenthal, which was the only member of the Restricted Group
with material operations during this period. We acquired the Celgar
mill in February 2005 and, as a result, its operations for the year
ended December 31, 2004 and financial condition at December 31,
2004 are not included for such periods. The Restricted Group
excludes our paper operations and the Stendal mill. December 31,
2005 Restricted Unrestricted Consolidated Group Subsidiaries
Eliminations Group ASSETS Current assets Cash and cash equivalents
euro 48,790 euro 34,757 euro - euro 83,547 Cash restricted - 7,039
- 7,039 Receivables 41,349 32,966 - 74,315 Inventories 47,100
34,047 - 81,147 Prepaid expenses and other 2,940 2,534 - 5,474
Total current assets 140,179 111,343 - 251,522 Cash restricted -
24,573 - 24,573 Property, plant and equipment 404,151 620,511 -
1,024,66 Other 10,533 4,145 - 14,678 Deferred income tax 24,303
54,078 - 78,381 Due from unrestricted group 46,412 - (46,412) -
Total assets euro 625,578 euro 814,650 euro(46,412) euro 1,393,816
LIABILITIES Current liabilities Accounts payable and accrued
expenses euro 46,867 euro 64,646 euro - euro 111,513 Construction
costs payable - 1,213 - 1,213 Debt, current portion - 27,601 -
27,601 Total current liabilities 46,867 93,460 - 140,327 Debt, less
current portion 342,023 580,596 - 922,619 Due to restricted group -
46,412 (46,412) - Unrealized derivatives loss - 140,625 - 140,625
Other 20,722 6,336 - 27,058 Deferred income tax 1,851 12,593 -
14,444 Total liabilities 411,463 880,022 (46,412) 1,245,073
SHAREHOLDERS' EQUITY Total shareholders' equity 214,115 (65,372)(1)
- 148,743 Total liabilities and shareholders' equity euro 625,578
euro 814,650 euro(46,412) euro 1,393,816 (1) Shareholders' equity
does not include government grants received or receivable related
to the Stendal mill. Shareholders' equity is impacted by the
unrealized non-cash marked to market valuation losses on derivative
financial instruments. (6) MERCER INTERNATIONAL INC. RESTRICTED
GROUP SUPPLEMENTAL DISCLOSURE Combined Condensed Balance Sheet As
at December 31, 2004 (Euros in thousands) December 31, 2004
Restricted Unrestricted Consolidated Group Subsidiaries
Eliminations Group ASSETS Current assets Cash and cash equivalents
euro 45,487 euro 4,081 euro - euro 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 euro 401,321 euro 897,996 euro(43,668) euro
1,255,649 LIABILITIES Current liabilities Accounts payable and
accrued expenses euro 19,615 euro 37,091 euro (164) euro 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 derivative
loss - 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 euro
401,321 euro 897,996 euro(43,668) euro 1,255,649 (7) MERCER
INTERNATIONAL INC. RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations For the Three Months
Ended December 31, 2005 and 2004 (Unaudited) (Euros in thousands)
Three Months Ended December 31, 2005 Restricted Unrestricted
Consolidated Group Subsidiaries Eliminations Group Revenues euro
75,890 euro 61,588 euro - euro 137,478 Operating costs 71,655
49,406 - 121,061 Operating depreciation and amortization 6,467
7,372 (660) 13,179 General and administrative 3,466 4,566 - 8,032
(Sale) purchase of emission allowances (2,869) (2,070) - (4,939)
Income (loss) from operations (2,829) 2,314 660 145 Other income
(expense) Interest expense (8,434) (15,972) 866 (23,540) Investment
income 1,429 310 (866) 873 Derivative financial instruments, net
199 (1,703) - 1,504 Unrealized foreign exchange loss on debt
(2,565) - - (2,565) Total other expense (9,371) (17,365) - (26,736)
Income (loss) before income taxes and minority interest (12,200)
(15,051) 660 (26,591) Income tax (provision) benefit 5,460 (11,389)
2,149 (3,780) Income (loss) before minority interest (6,740)
(26,440) 2,809 (30,371) Minority interest - 927 (329) 598 Net
income (loss) euro (6,740) (25,513) 2,480 (29,773) Three Months
Ended December 31, 2004 Restricted Unrestricted Consolidated Group
Subsidiaries Eliminations Group Revenues euro 34,317 euro 56,130
euro (1,246) euro 89,201 Operating costs 25,408 57,174 (1,289)
81,293 Operating depreciation and amortization 3,600 8,327 - 11,927
General and administrative 3,251 3,077 - 6,328 32,259 68,578
(1,289) 99,548 Income (loss) from operations 2,058 (12,448) 43
(10,347) Other income (expense) Interest expense 233 (11,989)
(2,439) (14,195) Investment income (expense) 598 1,607 (936) 1,269
Derivative financial instruments, net 13,517 (304) - 13,213 Total
other income (expense) 14,348 (10,686) (3,375) 287 Income (loss)
before income taxes and minority interest 16,406 (23,134) (3,332)
(10,060) Income tax benefit 17,198 26,928 - 44,126 Income (loss)
before minority interest 33,604 3,794 (3,332) 34,066 Minority
interest - (1,482) - (1,482) Net income (loss) euro 33,604 euro
2,312 euro (3,332) euro 32,584 (8) MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE Combined Condensed
Statements of Operations For the Year Ended December 31, 2005 and
2004 (Euros in thousands) Year Ended December 31, 2005 Restricted
Unrestricted Consolidated Group Subsidiaries Eliminations Group
Revenues euro 276,406 euro 243,810 euro(6,308) euro 513,908
Operating costs 230,039 210,258 (7,913) 432,384 Operating
depreciation and amortization 23,898 28,143 - 52,041 General and
administrative 19,025 11,406 - 30,431 Gain on sale of emission
allowances (7,271) (10,021) - (17,292) Income from operations
10,715 4,024 1,605 16,344 Other income (expense) Interest expense
(32,352) (57,323) 2,815 (86,860) Investment income 3,742 1,540
(2,815) 2,497 Derivative financial instruments, net (295) (71,468)
- (71,763) Unrealized foreign exchange loss on debt (4,156) - -
(4,156) Impairment of investments (1,699) - - (1,699) Total other
expense (34,760) (127,251) - (162,011) Income (loss) before income
taxes and minority interest (24,045) (123,227) 1,605 (145,667)
Income tax (provision) benefit (1,161) 12,008 - 10,847 Income
(loss) before minority interest (25,206) (111,219) 1,605 (134,820)
Minority interest - 17,674 - 17,674 Net income (loss) euro(25,206)
(93,545) 1,605 (117,146) Year Ended December 31, 2004 Restricted
Unrestricted Consolidated Group Subsidiaries Eliminations Group
Revenues euro 142,152 euro 98,128 euro(3,068) euro 237,212
Operating costs 98,113 97,369 (3,031) 192,451 Operating
depreciation and amortization 17,766 11,378 - 29,144 General and
administrative 13,828 13,092 - 26,920 Impairment of capital assets
- 6,000 - 6,000 Flooding grants, less losses and expenses - 669 -
669 Income (loss) from operations 12,445 (30,380) (37) (17,972)
Other income (expense) Interest expense (10,941) (14,298) 1,490
(23,749) Investment income 3,132 1,306 (1,490) 2,948 Derivative
financial instruments, net 13,242 (1,106) - 12,136 Total other
income (expense) 5,433 (14,098) - (8,665) Income (loss) before
income taxes and minority interest 17,878 (44,478) (37) (26,637)
Income tax benefit 17,235 26,928 - 44,163 Income (loss) before
minority interest 35,113 (17,550) (37) 17,526 Minority interest -
2,454 - 2,454 Net income (loss) euro 35,113 euro(15,096) euro (37)
euro 19,980 (9) MERCER INTERNATIONAL INC. COMPUTATION OF OPERATING
EBITDA For the Quarter and Year Ended December 31, 2005 and 2004
(Unaudited) (Euros in thousands) For the For the Quarter Ended
Quarter Ended(1) December 31, December 31, 2005 2004 Net income
(loss) euro (29,773) euro 32,584 Minority interest (598) 1,482
Income taxes (benefit) 3,780 (44,126) Interest expense 23,540
14,195 Investment income (873) (1,269) Derivative financial
instruments, net 1,504 (13,213) Foreign exchange loss on debt 2,565
- Income (loss) from operations 145 (10,347) Add: Depreciation and
amortization 13,179 11,927 Operating EBITDA(2) euro 13,324 euro
1,580 For the For the Year Ended Year Ended(1) December 31,
December 31, 2005 2004 Net income (loss) euro (117,146) euro 19,980
Minority interest (17,674) (2,454) Income taxes (benefit) (10,847)
(44,163) Interest expense 86,860 23,749 Investment income (2,467)
(2,948) Derivative financial instruments, net 71,763 (12,136)
Foreign exchange loss on debt 4,156 - Impairment of investments
1,699 - Income (loss) from operations 16,344 (17,972) Add:
Depreciation and amortization 52,041 29,144 Impairment charge -
6,000 Operating EBITDA(2) euro 68,385 euro 17,172 (1) The results
of the Celgar mill are not included for the three months and year
ended December 31, 2004, respectively. (2) Operating EBITDA does
not reflect the impact of a number of items that affect the
Company's net income (loss), including financing costs and the
effect of derivative instruments. Operating EBITDA is not a measure
of financial performance under accounting principles generally
accepted in the United States, and should not be considered as an
alternative to net income (loss) or income (loss) from operations
as a measure of performance, nor as an alternative to net cash from
operating activities as a measure of liquidity. Operating EBITDA
has significant limitations as an analytical tool, and should not
be considered in isolation, or as a substitute for analysis of the
Company's results as reported under GAAP. (10) MERCER INTERNATIONAL
INC. COMPUTATION OF RESTRICTED GROUP OPERATING EBITDA For the
Quarter and Year Ended December 31, 2005 and 2004 (Unaudited)
(Euros in thousands) For the For the Quarter Ended Quarter Ended
December 31, December 31, 2005 2004 Restricted Group(1) Net income
(loss) euro (6,740) euro 33,604 Income taxes (benefit) (5,460)
(17,198) Interest expense 8,434 (233) Investment and other income
(1,429) (598) Derivative financial instruments, net (199) (13,517)
Foreign exchange loss on debt 2,565 - Income (loss) from operations
(2,829) 2,058 Add: Depreciation and amortization 6,467 3,600
Operating EBITDA(2) euro 3,638 euro 5,658 For the For the Year
Ended Year Ended December 31, December 31, 2005 2004 Restricted
Group(1) Net income (loss) euro (25,206) euro 35,113 Income taxes
(benefit) 1,161 (17,235) Interest expense 32,352 10,941 Investment
income (3,742) (3,132) Derivative financial instruments, net 295
(13,242) Foreign exchange loss on debt 4,156 - Impairment of
investments 1,699 - Income from operations 10,715 12,445 Add:
Depreciation and amortization 23,898 17,766 Operating EBITDA euro
34,613 euro 30,211 (1) The results of the Celgar pulp mill are not
included for the three months and year ended December 31, 2004,
respectively. (2) Operating EBITDA does not reflect the impact of a
number of items that affect the Company's net income (loss),
including financing costs and the effect of derivative instruments.
Operating EBITDA is not a measure of financial performance under
accounting principles generally accepted in the United States, and
should not be considered as an alternative to net income (loss) or
income (loss) from operations as a measure of performance, nor as
an alternative to net cash from operating activities as a measure
of liquidity. Operating EBITDA has significant limitations as an
analytical tool, and should not be considered in isolation, or as a
substitute for analysis of the Company's results as reported under
GAAP. (11) DATASOURCE: Mercer International Inc. CONTACT: David M.
Gandossi, Executive Vice-President & Chief Financial Officer of
Mercer International Inc., +1-604-684-1099; or Investors - Eric
Boyriven or Alexandra Tramont, or Media - Alecia Pulman, all of
Financial Dynamics, +1-212-850-5600 Web site:
http://www.mercerinternational.com/
Copyright